2012 QCCQ 191, 2012 QCCQ 191

Netpak Packaging Inc. c. Chef Woo inc. 2012 QCCQ 191 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-22-181717-110 DATE: January 20, 2012 ______________________________________________________________________ BY THE HONOURABLE ARMANDO AZNAR, J.Q.C. ______________________________________________________________________ NETPAK PACKAGING INC. Plaintiff v. CHEF WOO INC.

Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff, a corporation offering packaging services, claims from Defendant, the sum of $44,918.89 for the sale and delivery of goods namely printed packaging sleeves. [ 2 ] Defendant contests Plaintiff's action alleging that:

a) Plaintiff's claim relates only to merchandise that was not delivered to Defendant;

b) All the merchandise that was delivered to Defendant by Plaintiff has been paid for;

c) The amount of Plaintiff's claim is excessive and exaggerated;

d) Plaintiff did not deliver the merchandise within the delays specified and agreed to in the purchase order (Exhibit P-1a);

e) Following the late delivery of the merchandise purchased by Defendant, it lost the client for which the merchandise had been ordered. [ 3 ] In support of its action, in paragraphs 2, 3 and 4 of the amended motion to institute proceedings, Plaintiff alleges the following: « 2. Plaintiff is claiming outstanding amounts following the sale and delivery of goods, the whole as more fully appears from: a. a copy of a purchase order dated July 19, 2010, filed as Exhibit P-1a; b. a copy of invoices filed as Exhibit P-1b; c. a copy of a letter of demand dated November 15, 2011 filed as Exhibit P-1c. 3.

In December 2010, an agreement was reached between the Plaintiff and the Defendant (the ''Agreement'') the terms and conditions of which appears in a draft Memorandum of Understanding and a series of e-mails, the whole more as fully appears from a series of e-mails between Chef Woo Inc. and Netpak Packaging Inc… Exhibit P-2 and P-2a; 4.

Defendant failed to honour the Agreement the whole more as fully appears from a copy of a detailed statement as at April 14, 2011… Exhibit P-3. » [ 4 ] Defendant contests Plaintiff's allegations in regards to the conclusion of the agreement refered to in paragraphs 3 and 4 of the amended motion to institute proceedings. Its position is that no such agreement was ever concluded between the parties. [ 5 ] From the evidence adduced at trial, the Court retains, amongst others, the following facts. [ 6 ] At all times pertinent to the present case, Mr.

Alexander Hankewicz was in the employment of Defendant as "purchasing manager''. In fact, he was employed by Defendant from June 6, 2010 until November 2, 2010 at which time, his employment was terminated. [ 7 ] According to the testimony of Mr. Hankewicz, while acting as "purchasing manager'' of Defendant, he had full authority to negotiate and issue purchase orders on behalf of Defendant.

[ 8 ] According to Mr. Hankewicz, in the spring of 2010, in its normal course of business, Defendant usually dealt with an other supplier of packaging sleeves namely, a company know as Quad Com. [ 9 ] At this time, according to Mr. Hankewicz, it appears that Defendant was worried about the financial position of Quad Com and the impact this could have on its capacity to fulfill Defendant's needs. [ 10 ] Mr. Hankewicz testified that he was then requested by Mr. Raj Daniel, president of Defendant, to find another sleeve packaging supplier. At that time, Mr.

Greg Shore, marketing vice-president of Defendant, introduced him to Mr. Joe Gentile, a consultant acting for Plaintiff. [ 11 ] After some discussion and negotiation, on behalf of Defendant, Mr. Hankewicz placed an order with Plaintiff requesting the preparation and sale of 3 million packaging sleeves the whole for the price of $95,700.00 (Exhibit P-1a). The purchase order bearing number 500714 is dated July 19, 2010. [ 12 ] On the purchase order, it is mentioned that the ''due date'' for the delivery of the goods is August 9, 2010. Mr. Hankewicz testified that the ''due date'' was negotiated by him with Mr.

Gentile, representing the Plaintiff. However, he also stated that the normal time given to a supplier for the delivery of the ordered goods is usually six weeks. [ 13 ] In the present case, Mr. Hankewicz declared that he was under pressure from his superiors to request a two week delivery date from Plaintiff. He did acknowledge that the order placed with Plaintiff was for a supply that was to last approximately four months. However, he did not expect delivery of the totality of the shipment requested from Plaintiff within the delivery due date mentioned in the purchase order.

In fact, for this date, he was expecting a delivery equivalent to Defendant's needs for one month. [ 14 ] According to Mr. Hankewicz, the order placed by him on July 19, 2010, was based on Defendant's computerized inventory forecast that was issued in July 2010. [ 15 ] Mr. Hankewicz left for his summer holidays during the first week of August 2010 and was back to work by the second week. He declares that, upon his return to work, he was informed by Mr. Raj Daniel that the inventory forecast released in July 2010 was erroneous and that purchase orders issued by Defendant were to be reduced by 50%.

No other purchase orders were to be issued until further notice. [ 16 ] As Mr. Daniel, president of Defendant, was not present at the hearing, he did not testify. Mr. Hankewicz's testimony on these facts is uncontradicted. [ 17 ] In conformity with Mr. Daniel's instructions, Mr.

Hankewicz declares that he contacted Defendant's suppliers including Plaintiff and requested that a delay of shipment for any undelivered inventory, until further notice. [ 18 ] During the third week of August, Defendant issued its new forecast of inventory needs which confirmed that they were to be decreased by ½ in comparison to the July forecast. In this regard, the Court recalls that the purchase order placed by Defendant (Exhibit P-1a) with Plaintiff was in fact based on the July forecast. [ 19 ] As requested by Mr. Daniel, Mr. Hankewicz declares that he contacted Mr.

Gentile, the consultant acting for Plaintiff, during the second week of August 2010. He asked Mr. Gentile to suspend delivery of any additional material to Defendant until further notice. [ 20 ] According to Mr. Hankewicz, Plaintiff complied with his request but Mr. Gentile did express concern that Plaintiff could not, indefinitely, hold back the delivery of the inventory prepared for Defendant. He also wished to be informed as to the date at which the material prepared by Plaintiff for Defendant could be shipped. [ 21 ] Mr.

Hankewicz declared that during this period, all new shipments of inventory to Defendant were to be authorized by Mrs. Christine Mutzke, financial controller of Defendant. [ 22 ] According to Mr. Hankewicz, during this period, Mrs. Mutzke systematically refused to take calls from suppliers requesting information on shipping dates as well as payment for supplies prepared at the request of Defendant. [ 23 ] Mr. Hankewicz stated that during the weeks that followed, he did tell Plaintiff, and more particularly, Mr. Gentile, that he was trying to get authorisations from Mrs.

Mutzke regarding shipping and payment but to no avail. [ 24 ] As Mrs. Mutzke was not present at the hearing and did not testify on these issues, Mr. Hankewicz testimony was not contradicted. [ 25 ] Mr. Hankewicz testified that he never asked Plaintiff to cancel the order issued by Defendant on July 19, 2010. According to him, the order had been executed by Plaintiff in good faith pursuant to Defendant's instructions who had every intention of using the ordered supplies in due time. It was therefore, in his view, not appropriate to cancel the purchase order. [ 26 ] Mr. Hankewicz declares that Mr.

Gentile informed him that all the merchandise ordered by Defendant in the purchase order had been printed by Plaintiff by the end of July 2010 and early August 2010. [ 27 ] Mr. Hankewicz's employment was terminated by Defendant on November 2, 2010 as is confirmed by his testimony as well as by a letter sent to him by Defendant dated November 2, 2010 (Exhibit P-5). For Defendant, the letter was signed by Mr. Hari Pathmanathan, responsible of human resources. [ 28 ] According to Mr. Pathmanathan, Mr. Hankewicz's employment was terminated by Defendant because it was dissatisfied with his services.

Defendant blames Mr. Hankewicz for alleged mistakes, which mistakes are contested by Mr. Hankewicz. [ 29 ] Mr. Hankewicz's testimony, for the most part, was corroborated by that of Mr. Joe Gentile, the consultant working for

Plaintiff. [ 30 ] According to Mr. Gentile, sometime before July 2010, Mr. Greg Shore, marketing vice-president of Defendant, contacted him and informed him that Defendant was worried about the capacity of its main supplier, Quad Com , to deliver the packaging material ordered from it for the benefit of an important client. Mr. Shore asked him to help Defendant resolve the problem and he refered him to Mr. Hankewicz, Defendant's packaging manager. [ 31 ] According to Mr.

Gentile, once an order is placed with Plaintiff, it will take between four to six weeks for the material to be printed, folded and shipped to the client. However, the printing part of the job is usually done in totality at one time. Subsequently to the printing, much more needs to be performed before the order materials can be shipped which explains the delay of four to six weeks. This is what occurred in regard to the order placed by Defendant. [ 32 ] According to Mr.

Gentile's testimony, once the material is printed in conformity with the client's specifications, if not accepted by said client, it can rarely be utilised by another client unless the needs are identical. [ 33 ] Mr. Gentile confirmed that Defendant's order was printed in totality by the end of July 2010. During the first week of August 2010, the dye cutting of the material was to be performed. Within ten days, the sleeves were then cut and boxed, ready for shipping. [ 34 ] According to Mr. Gentile, during the middle of August 2010, he had a conversation with Mr.

Hankewicz who asked him to hold back on the shipping of the merchandise prepared as the inventory forecasts of Defendant's needs were erroneous. [ 35 ] At that time, Mr. Gentile declares that he accepted to hold back the shipment but advised Mr. Hankewicz that Plaintiff would have to be paid for the job done. [ 36 ] Mr. Gentile also declares that, the week after, he had a conversation with Mr. Raj Daniel, president of Defendant, who acknowledged that Defendant had ordered too much inventory from it's supplier in China and that this inventory was now tied up in the harbour in Montreal. Mr.

Daniel then requested the cooperation of Plaintiff to resolve the matter. [ 37 ] According to Mr. Gentile, at no time did Mr. Daniel say that Defendant was going to refuse delivery or refuse to pay the ordered merchandise because of an alleged late delivery issue.

In fact, the evidence reveals that Plaintiff delivered to Defendant about ½ of the merchandise ordered and that this was paid for by Defendant. [ 38 ] The present litigation concerns the merchandise still in the possession of Plaintiff which Defendant refuses to accept and pay for. [ 39 ] On November 15, 2010, Plaintiff sent Defendant a letter of demand (Exhibit P-1c) requesting payment of an amount of $103,556.50. Following the reception of this letter of demand, discussions were held between the parties.

More particularly, a meeting took place at Defendant's place of business. [ 40 ] According to the uncontradicted testimony of Mr. Gentile, he was present at this meeting as were Mrs. Marie Mattucci, Plaintiff's controller, and Mrs. Christine Mutzke, financial controller of Defendant. [ 41 ] Mr. Gentile testified that, at this meeting, Mrs. Mutzke agreed to accept delivery of the totality of the merchandise prepared by Plaintiff for Defendant following a calendar of delivery and a calendar of payment. [ 42 ] According to Mr. Gentile, Mrs.

Mutzke reiterated that Defendant had every intention of accepting delivery of the merchandise and was willing to pay for it even though it was obvious that Defendant had ordered too much in regard to its real needs. [ 43 ] On this issue, Plaintiff filed as evidence, a letter sent to Defendant on December 7, 2010 (Exhibit P-2) confirming the agreement allegedly arrived at between the parties. The annex to this letter is a Memorandum of Understanding reflecting the terms of the agreement, as Plaintiff understood it. [ 44 ] The Memorandum of Understanding was never signed by Defendant.

However, by an e-mail dated December 17, 2010 (Exhibit P-2a), Mrs.

Christine Mutzke appears to confirm the terms of an ''agreement'' but it is not clear what the terms of the agreement are regarding the merchandise in possession of Plantiff and yet to be delivered. [ 45 ] From the terms of the e-mails exchanged between the parties and considering that the Memorandum of Understanding was never signed by Defendant as well as the fact that the terms of the alleged agreement are not clearly enunciated and agreed to by the parties, the Court cannot conclude that Defendant is bound by the terms of the said Memorandum. [ 46 ] However, Mr.

Gentile's testimony is to the effect that Defendant's representatives never advised Plaintiff that they would refuse delivery of the merchandise on the basis that the delivery "due date'' mentioned on the purchase order had not been respected. His testimony on this issue has not been contradicted either by Mrs. Mutzke or Mr.

Daniel as they did not testify at the hearing, nor by any documentary evidence. [ 47 ] Furthermore, at the appropriate time, Defendant never advised Plaintiff in writing that it considered that Plaintiff had breached the terms of the purchase order regarding the delivery date. [ 48 ] At trial, the only witness that testified on behalf of Defendant is Mr. Hari Pathmanathan, presently chef accountant of Defendant. When the facts giving rise to the present litigation occurred, he was responsible of human resources. [ 49 ] It appears from Mr.

Pathmanathan's testimony that he was not involved in the negotiations that let to the order placed by Mr. Hawkewicz (Exhibit P-1a) nor was he part of the discussions that Defendant's representatives had with Plaintiff's representatives subsequently and more particularly, during the meeting between Mrs. Mutzke and Mr. Gentile which was held at Plaintiff's place of

business. [ 50 ] Mr. Pathmanathan did testify to the fact that the Defendant refused the delivery of the merchandise presently in the possession of Plaintiff because of the late delivery issue. More particularly, according to him, Defendant's client, identified as ''Aldi'' refused to accept delivery of the goods because they apparently had been delivered late. [ 51 ] Mr. Pathmanathan did admit that he was not personally aware of the facts regarding this issue but was informed of them through the examination of Defendant's file.

He also stated that he had been informed of the facts by people who did not testify at the trial. [ 52 ] Mr. Pathmanathan also admitted that Mr. Hankewicz had full authority to place the order of July 19, 2010 and that the inventory forecasts upon which Defendant relied to place the order with Plaintiff were erroneous. [ 53 ] As to why Defendant's client (Aldi) refused delivery of the goods, Mr. Pathmanathan recognizes that he never spoke with any representative of Aldi on this question.

Furthermore, no representative of Aldi was called as a witness by Defendant in order to establish the fact that they did refuse the goods by reason of late delivery. [ 54 ] In view of the preceeding, after analysis and evaluation of the evidence adduced at trial, the Court concludes:

a) That Plaintiff was given a purchase order by Defendant to produce the merchandise stipulated therein for a price of $95,700.00$ (Exhibit P-1a);

b) That the merchandise ordered by Defendant was prepared by Plaintiff and is ready to be delivered;

c) That part of the merchandise prepared pursuant to the purchase order was in fact delivered to Defendant and paid for;

d) That the rest of the merchandise prepared by Plaintiff is presently in its possession and it is willing to deliver it to Defendant upon payment of the balance owed;

e) That the ''due date'' of August 9, 2010 mentioned on the purchase order (Exhibit P-1a) was only indicative of the date at which delivery of the merchandise was expected;

f) That Defendant never made the delivery of the ordered merchandise by the "due date'' mentioned in the purchase order a fundamental and non negotiable condition of the contract;

g) That Defendant has not established that it was agreed between the parties that failure to deliver the merchandise by August 9, 2010 would entitle it, ipso facto, to terminate the contract without obligation. [ 55 ] In fact, it appears from the evidence that the question of the "due date'' of delivery and its alleged non respect by Plaintiff is, in all likelihood, an after thought on the part of the Defendant in order to justify its refusal to accept delivery and pay for the ordered merchandise. [ 56 ] In argument, Plaintiff's lawyer submitted to the Court that the contract between the parties is governed by the law applicable to the contract of sale.

This being so, he refers the Court to articles 1717 and 1734 of the Civil Code of Quebec which stipulate the following: « 1717. The obligation to deliver the property is fulfilled when the seller puts the buyer in possession of the property or consents to his taking possession of it and all hindrances are removed. 1734. The buyer is bound to take delivery of the property sold, and to pay the price thereof at the time and place of delivery.

He is also bound to pay any expenses related to the deed of sale. » [ 57 ] Subsidiairly, Plaintiff's lawyer submits that the contract binding the parties can also be viewed under the light of the law governing the contract of enterprise or services. In this case, he refers the Court to

article 2098 , 2110 , 2125 and 2129 of the Civil Code of Quebec which stipulates the following: « 2098. A contract of enterprise or for services is a contract by which a person, the contractor or the provider of services, as the case may be, undertakes to carry out physical or intellectual work for another person, the client or to provide a service, for a price which the client binds himself to pay. 2110. The client is bound to accept the work when work is completed; work is completed when the work has been produced and is ready to be used for its intended purpose.

Acceptance of the work is the act by which the client declares that he accepts it, with or without reservation. 2125. The client may unilaterally resiliate the contract even though the work or provision of service is already in progress.

2129. Upon resiliation of the contract, the client is bound to pay to the contractor or the provider of services, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the end of the contract or before the notice of resiliation and, as the case may be, the value of the property furnished, where it can be returned to him and used by him. For his part, the contractor or the provider of services is bound to repay any advances he has received in excess of what he has earned.

In either case, each party is liable for any other injury that the other party may have suffered. » [ 58 ] In the present case, considering the work to be performed by Plaintiff in order to prepare and deliver the merchandise ordered by Defendant, the Court is in the opinion that the contract binding the parties is one of enterprise or for services as defined by

article 2098 of the Civil Code of Quebec . [ 59 ] Although, there is no conclusive evidence establishing the fact that Defendant did resiliate the contract, the evidence has established that the work was completed in full by Plaintiff and the merchandise still in its possession is ready to be shipped to Defendant. [ 60 ] This being so, considering that Plaintiff has established that it has in essence complied with the purchase order issued by Defendant and that it is ready and willing to deliver the merchandise in its possession, and considering the applicable law, the Court concludes that Plaintiff's action is well founded in fact and in law and must be granted.

FOR THE FOREGOING REASONS, THE COURT: MAINTAINS Plaintiff's action. CONDEMNS Defendant to pay to Plaintiff the sum of $44,918.89 plus legal interest and the additional indemnity provided for by

article 1619 of the Civil Code of Quebec as of May 4, 2011. THE WHOLE , with costs. __________________________________ ARMANDO AZNAR, J.Q.C. Me Stéphane Nobert ANDERSON, SINCLAIR, AVOCATS LTÉE Avocat de la demanderesse Me Dimitrios Liosis CERUNDOLO & AMIORINO, s.e.n.c. Avocat de la défenderesse Dates of hearing: January 13, 2012.