373215 BC INCORPORATED CLAIMANT AND: DWAYNE CIULKA DEFENDANT ORAL, 2015 BCPC 445

Citation: 373215 BC Incorporated v. Ciulka Date: 20151124 2015 BCPC 445 File No: 17740 Registry: Nelson IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: 373215 BC INCORPORATED CLAIMANT AND: DWAYNE CIULKA DEFENDANT ORAL REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE R. HEWSON Appearing for the Claimant: Sylvia Hamilton Appearing in person: Dwayne Ciulka Places of Hearing: Nelson and Castlegar , B.C.

Dates of Hearing: July 27, October 28 and November 24, 2015 Date of Judgment: November 24, 2015 [ 1 ] These are reasons for judgment with respect to Nelson Court File Number 17740. [ 2 ] This is a claim by 373215 BC Incorporated for $25,000. plus filing fees and service fees, for breaches of contract. Sylvia Hamilton represented the Claimant. The Claimant says that on September 21, 2012, she entered into a contract with the Defendant for the purchase of a property and a business.

She says that one term of the contract was that he pay a deposit in the amount of $20,000, and that another term of the deposit was that he lease the property on terms, including a monthly lease payment of $2,125 plus taxes. [ 3 ] The Defendant, Dwayne Ciulka, replies that on January 17, 2013, the Claimant took back possession of the business and the property and locked him out. As a result, he says that the contract was frustrated and he suffered losses of $25,000, plus filing fees.

He seeks that amount in his counterclaim. [ 4 ] Both parties were self-represented on this trial. [ 5 ] The business in question is a restaurant called Drifters, in Meadow Creek, B.C., north of Kaslo. BACKGROUND [ 6 ] Dwayne Ciulka testified that he had always dreamed of running his own restaurant. In August 2012 he went to Drifters for dinner. Ms. Hamilton, the owner and operator of the restaurant, spoke to him and offered to sell him Drifters.

He had bad credit as a result of a business failure in 2009, but she said that she would help him. [ 7 ] In short order, a contract of purchase and sale was prepared with the assistance of a realtor. Mr. Ciulka did not seek legal advice, although he did discuss the contract with his friend Sheila. The parties signed the contract on September 21, 2012. The terms of the contract called for a purchase price of $240,000, with a deposit of $20,000 payable to the seller by personal cheque post dated October 31, 2012. The terms of the contract provided that the deposit was nonrefundable.

The completion date was April 1, 2013. An addendum to the contract provided that Mr. Ciulka agreed to take over the operation of the restaurant on October 1, 2012 and that he would pay a base rent of $2,125 plus taxes per month. [ 8 ] Ms. Hamilton received the base rent up to and including January, 2013. [ 9 ] Mr. Ciulka took over operation of the restaurant, and provided Ms. Hamilton with a cheque post-dated to October 31, 2012. He testified that at first the business went fairly well, but he could not get a debit machine because of his bad credit.

All non-cash revenue was processed through the debit machine owned by Ms. Hamilton and deposited into her bank account. Mr. Ciulka did not have a business bank account and paid for supplies and payroll in cash. He contacted Ms. Hamilton, and asked her not to cash the deposit cheque. [ 10 ] By November, Mr. Ciulka was financially stretched to the point that he sold his daughter’s motorcycle. He decided to close the restaurant for the winter, in order to go to the oil fields and try to make enough money to pay his expenses. [ 11 ] Also in November, Ms. Hamilton entered the restaurant to repair a leaky roof.

She found the restaurant in disarray. She managed to contact Mr. Ciulka through a third party, and he arranged for the third party to clean up the restaurant. [ 12 ] On January 9, 2013, Mr. Ciulka left a message on the restaurant’s Facebook account, to say that the restaurant was closed for the winter. On January 11, 2013, Ms. Hamilton says that Mr. Ciulka phoned her and told her that he would not be completing the sale. [ 13 ] On January 17, 2013, Ms. Hamilton returned to Meadow Creek and took back possession of the restaurant. Mr.

Ciulka was denied entry because she used different locks. [ 14 ] On January 18, 2013, she deposited the cheque that Mr. Ciulka had given her. The cheque was returned and was not honoured by the bank upon which it had been drawn. [ 15 ] The restaurant reopened on January 26, 2013. [ 16 ] Mr. Ciulka says that Ms. Hamilton voided the contract when she entered the restaurant without his permission and retook possession of the business on January 17, 2013. He said that he put a stop payment on the $20,000 cheque after she locked him out of the business.

LAW [ 17 ] The largest part of the Claimant’s claim relates to the $20,000 deposit. [ 18 ] The B.C. Court of Appeal considered the law with respect to deposits in a case called Williamson Pacific Developments Incorporated v. Johns, Southward, Glazier, Walton and Margets , [1997] B.C.J. No. 1109 . In that case, the seller sold property to a purchaser at a price of $537,500. The purchaser paid a deposit of $45,000. The agreement of purchase and sale described the deposit as nonrefundable.

The transaction failed to close on the completion date. [ 19 ] The chambers court judge said that whether or not a purchaser is entitled to the return of a deposit depends upon the terms of the contract. The general rule is that, in the absence of an agreement to the contrary, if the contract does not complete because of the default of the purchaser, the deposit becomes the property of the seller, because it is a guarantee of performance. The chambers court

judge’s ruling was upheld on appeal. [ 20 ] In Tang v. Zhang , 2013 BCCA 52 , the Court of Appeal confirmed that Williamson Pacific was the law, and summarized the general principles with regard to deposits: 1. On a general level, the question of whether a deposit or other payment made to a seller in advance of the completion of a purchase is forfeited to the seller upon the buyer's repudiation of the contract, is a matter of contractual intention; 2. Where the parties use the word "deposit" to describe such a payment, that word should in the absence of a contrary provision be given its normal meaning in law; 3.

A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and is not dependent on proof of damages by the other party. If the contract is performed, the deposit is applied to the purchase price; 4. The deposit constitutes an exception to the usual rule that a sum subject to forfeiture on the breach of a contract is an unlawful penalty unless it represents a genuine pre-estimate of damages.

However, where the deposit is of such an amount that the seller's retention of it would be penal or unconscionable, the court may relieve against forfeiture, as codified by the Law and Equity Act ; 5. A contractual term that a deposit will be forfeited "on account of damages" on the buyer's failure to complete does not alter the nature of a deposit, but may be construed to mean that if damages are proven, the deposit will be applied against ("on account of") them.

If no damages are shown, the deposit is nevertheless forfeitable, subject always to the expression of a contrary intention. [ 21 ] In this case, the contract of purchase and sale was marked as Exhibit 1. The contract provides explicitly that the deposit is nonrefundable. Like the deposit in the Williamson Pacific case, it was a guarantee of performance. [ 22 ] The Defendant says that the contract was voided when the Claimant retook possession of the property and locked him out on January 17, 2013. However, by that time, he had already posted a message on the restaurant’s Facebook page, and he had already told Ms.

Hamilton on January 11 th that he did not intend to complete the transaction. In other words, the Defendant repudiated the contract. [ 23 ] The Defendant had no just reason to cancel the cheque, and there will be judgment for the Claimant for $20,000, representing the amount of the deposit that was denied to her. The Registrar will assess interest at the court ordered interest rate. [ 24 ] The Claimant makes a number of other damage claims. She claims the amount of $12,900 for the lease payments in February and March 2013. By that time, she had taken back possession of the restaurant.

There is nothing in the evidence to indicate why two months’ rent at $2,125 per month would result in a claim for $12,900. That part of her claim is dismissed. [ 25 ] The Claimant claims $264, on account of electrical costs to January 22, 2013. There was little evidence on this part of her claim. I am not able to find, on a balance of probabilities, that this part of her claim has been proven and it is dismissed. [ 26 ] The Claimant claims $2,832 on account of outstanding inventory. There is insufficient evidence to find in her favour, on a balance of probabilities.

This part of her claim is dismissed. [ 27 ] The Claimant claims $7,930 on account of operating expenses until April 1, 2013, including hydro, telephone, propane, taxes, liquor license and interest. Again, there is insufficient evidence of the basis of this part of her claim for it to be established on a balance of probabilities and it will be dismissed. [ 28 ] The Claimant is entitled to her filing and service fees which totalled $176. [ 29 ] Accordingly, there will be judgment for the Claimant in the amount of $20,176, plus interest. The Honourable Judge R. Hewson