City Water v. Polex Manufacturing Date:, 2011 BCPC 84

Citation: City Water v. Polex Manufacturing Date: 20110224 2011 BCPC 0084 File No: 23079 Registry: Richmond IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: CITY WATER INTERNATIONAL INC. CLAIMANT AND: POLEX MANUFACTURING (CANADA) LTD. DEFENDANT REASONS FOR JUDGMENT OF HIS WORSHIP B. WALLACE Counsel for the Claimant: Matthew Riddell, Esq. Appearing for the Defendant: Luke Kwong Place of Hearing: Richmond , B.C.

Date of Hearing: January 28, 2011 Date of Judgment: February 24, 2011 The Claim and Defense [ 1 ] The Claimant seeks from the defendant, the sum of $3,792.94, being the balance said to be owed under a rental agreement and a service agreement for water filtration equipment, plus damages under the rental agreement from the defendant’s failure to return the equipment to the claimant. The claimant also seeks interest, and costs on a “substantial indemnity” basis.

The claimant also seeks an order for the recovery of the equipment. [ 2 ] The defendant says that the rental agreement was a “rent-to-own” agreement, so that on the conclusion of the five-year term, the equipment belonged to the defendant and no longer to the claimant. As a result, the defendant says it owes nothing further to the claimant. [ 3 ] The defendant says in the alternative, that it would have returned the equipment to the claimant when requested, had it been

satisfied the agreement was a pure rental agreement, but that the claimant did not provide a legible copy of the contract until it served this claim on the defendant. [ 4 ] Finally, the defendant says that the claimant has breached the service agreement by failing to provide the required semi-annual service of the equipment and, as a result, the rental agreement is terminated. Facts [ 5 ] On October 2, 2003, the parties signed two agreements for water filtration equipment - a rental agreement and a service agreement both with five-year terms.

Allan Mah, who was general manager of the Defendant at the time, says the Claimant’s sales representative, Wayne Neudorf, told him the rental agreement was a “rent-to-own” agreement, so that on payment of rent for five years the equipment would be owned by the defendant. [ 6 ] The Claimant installed the equipment under the agreements, on September 18, 2003.

The defendant made quarterly payments under the agreements for the initial five-year term, until September 2008. [ 7 ] The defendant says, supported by a photograph of the maintenance record affixed to the equipment, that it was last serviced in September 2007. [ 8 ] On June 11 th , 2008 the defendant gave notice by telephone that it no longer required the service under the contract after September 2008. In that conversation the defendant was told it was not a rent-to-own contract.

The defendant requested a copy of the agreements, but what it received was illegible. [ 9 ] In the next month or so, the defendant made further unsuccessful requests by email for copies of the agreements and advised the claimant it no longer wished the maintenance service and would not pay its invoice for the period beyond September. [ 10 ] On October 8, 2008, Mr. Kwong noted on a copy of his email exchange with the claimant, “Donavan called and advised account is now closed.” [ 11 ] Seventeen months later, on March 1, 2010, the claimant invoiced the defendant for $3,792.94, the amount of this claim.

By far the largest part of the claim is for the “lost” equipment. However, there is no evidence the claimant ever asked for the return of the equipment or designated a location at which the defendant was to return it. [ 12 ] The Notice of Claim was filed on May 18, 2010. Rental Agreement [ 13 ]

Section 1 of both the rental agreement and the service agreement provide that they cannot be cancelled by the customer. [ 14 ]

Section 8 of the rental agreement provides, ...this Agreement will be automatically renewed for new successive terms of one year each upon the expiration of the Term...unless the customer notifies the Lessor in writing at least six months prior to the expiration of the Term.... [ 15 ]

Section 4 of the service agreement is to the same effect. [ 16 ]

Section 9 provides, In the event either party elects not to proceed into the Renewal Period or being in the Renewal Period elects to cancel this Agreement, Customer shall, at its own risk and expense, immediately return the equipment to Lessor or its designated agent, in the same condition as when delivered, ordinary wear and tear excepted, at such location as Lessor shall designate.

Section 13 provides, Customer shall have no right, title or interest in the Equipment other than the right to maintain possession and use of the Equipment for the full Term....

Section 23 provides, ...This Agreement contains the whole of the agreement between the parties and there are no collateral agreements or conditions not specifically set forth herein, and no modifications, amendments or variations shall be effective or binding unless agreed to in writing.... Analysis [ 17 ] It is clear from

section 13 of the rental agreement that the agreement was a pure rental agreement and not “rent-to-own” as submitted by the defendant. In the face of the “whole agreement” provision at

section 23, the evidence of an oral modification of the agreement by the sales agent at the time it was entered is insufficient to change the clear terms. Similarly, Donavan’s apparent forgiveness of the defendant’s obligations in October 2008 is of no effect.

[ 18 ] The rental agreement requires six months written notice to avoid the automatic renewal for one year. I find that term clear and not so onerous as to be unconscionable. The defendant’s notice was given less than six moths prior to the end of the term. It gave written notice even later. I find that the defendant is liable for the payment for the one-year automatic renewal period of $206.55. [ 19 ] With respect to the service agreement I find that the claimant is in breach for failing to service the equipment.

As servicing is the sole purpose of the agreement, it is a fundamental beach and terminates the agreement. The claim for $180.00 for service in the renewal term is dismissed. The defendant did not seek the return of its service payments for the last year of the initial term. [ 20 ] The largest claim is for $3,000.00 for lost equipment. However, the equipment was not lost. The defendant had it and the claimant knew it did. The rental agreement requires the claimant to designate a location for delivery of the equipment. It did not do so, nor did it seek to retrieve the equipment from the defendant.

The claim for the value of the equipment is dismissed. [ 21 ] The defendant says it has the equipment. The claimant is entitled to retrieve the equipment from the defendant or to have the defendant return the equipment to it. In the event the equipment cannot be retrieved or returned in the same condition as delivered, normal wear and tear excepted, the defendant is to pay the claimant the sum of $3,000.00, the agreed value of the equipment. Order [ 22 ] The claim is allowed in the amount of $206.55, and the defendant is to return the equipment to the claimant.

There will be no order for costs or interest. ___________________ Brian J. Wallace, QC Adjudicator