Super Save Dispostal Inc. v. Moor SPA Incorporated Date:, 2013 BCPC 272

Citation: Super Save Dispostal Inc. v. Moor SPA Incorporated Date: 20130618 2013 BCPC 0272 File No: 23790 Registry: Richmond IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: SUPER SAVE DISPOSAL INC. CLAIMANT AND: MOOR SPA INCORPORATED DEFENDANT REASONS FOR JUDGMENT OF HIS WORSHIP DONDAL YULE Counsel for the Claimant: J. Kitsul Counsel for the Defendant: J. Jachimowicz Place of Hearing: Richmond , B.C. Date of Hearing: May 24, 2013 Date of Judgment: June 18, 2013

Introduction [ 1 ] The Claimant, Super Save Disposal Inc. (Super Save) seeks to recover from the Defendant, Moor Spa Incorporated (Moor) the sum of $3,264.00 plus interest and court costs as liquidated damages for the alleged wrongful termination by Moor of an agreement with Super Save for garbage removal services. [ 2 ] The evidence supports the following finding of facts. Moor had in force an existing Service Agreement for the removal of garbage with Northwest Waste Systems Inc. (Northwest). On January 21, 2011 Mr. Johannes of Super Save made a “cold call” on Moor.

He provided an informal (on the back of a business card) quote to Ms. Galvez. Ms. Galvez spoke with her superior, Mr. Beresford and Mr. Johannes was invited to re-attend the Moor premises the same day. She met with Mr. Beresford who signed a Service Agreement with Super Save that was better in several respects than the existing Service Agreement with Northwest. Mr. Beresford also signed a letter prepared by Mr. Johannes addressed to Northwest indicating that Moor wished to cancel its existing Service Agreement with Northwest and requesting a copy of the most recent valid Service Agreement. Mr.

Johannes knew that Northwest was the existing garbage removal contractor because its bins were on site. He may well also have been told by either Ms. Galvez or Mr. Beresford that Northwest was the current contractor. Mr. Johannes was not shown a copy of the existing Northwest Service Agreement, as otherwise the letters that he sent both to Northwest and to Moor would have been different. Mr.

Johannes forthrightly acknowledges that he was trying to take Moor’s business away from Northwest and he knew from experience that there was likely a narrow “window” in the Northwest Service Agreement during which termination of the Northwest Service Agreement could be lawfully done by formal notice. Mr Beresford was attracted to Super Save’s proposal because it made a difference of something like $30 per month in charges. I accept Mr.

Beresford’s evidence that he was told that the change from one service provider to another was “simple and straightforward” and standard operating procedure which Super Save would take care of. [ 3 ] When Northwest received the cancellation letter from Moor, it immediately contacted Mr. Beresford and arranged a visit. As a result of that visit, Moor signed a new 2 year Customer Service Agreement with Northwest dated January 31, 2011 with service to commence February 1, 2011. Northwest was willing to match the financial terms of Super Save’s Agreement.

Northwest did not threaten Moor with litigation but made it clear that Moor could not just walk away from the existing Northwest Service Agreement then in force. Ms. Galvez then signed a letter dated January 31, 2011 addressed to Super Save but prepared by Northwest advising that Super Save’s services were not required and that Moor would continue to use the services of Northwest as it was currently a party to a legally binding service agreement.

In the meantime, by letter dated January 26, 2011 Super Save advised Moor that if there was an existing agreement in place, the Super Save Agreement would start on the expiry of the current contractor’s agreement and that to prevent complications and “double contracting” Moor should resist any attempt by the current hauler to resign an agreement. That letter, for reasons not explained in the evidence, never actually came to the attention of Mr. Beresford. [ 4 ] Services under the Super Save Agreement were to commence on March 1, 2011.

On March 3, 2011 Moor confirmed that it did not wish to use Super Save’s services. The Service Agreements The Northwest Agreement [ 5 ] The Northwest Agreement dated August 15, 2006, with a service commencement date of August 17, 2006 was for a 5 year term (the Northwest Agreement). Its term thus expired in mid-August, 2011. It provided that the term would be automatically renewed for successive 5 year terms without further action by the parties but could be terminated by the customer providing written notice by registered mail not more than 120 days and not less 90 days prior to any renewal date.

The Northwest Agreement also provided for the right to re-negotiate in specific circumstances where a customer receives a bona fide offer from or enters into a service agreement with a competitor for the provision of the same or similar services.

The Northwest Agreement also provided that in the event of purported termination by the customer prior to the expiration of the agreement, Northwest would have the option to accept the purported termination in which case the customer agreed to pay Northwest as liquidated damages an amount equal to the greater of monthly billings multiplied by 9 or the sum of amounts due to Northwest for the balance of the term. The Super Save Agreement [ 6 ] The Super Save agreement dated January 21, 2011 was for a 2 year term with an effective date expressed to be March 1, 2011 (the Super Save Agreement).

Section 1 of the Terms and Conditions provides that Super Save shall have the exclusive right to provide all non- hazardous solid waste disposal and recyclable collection services during the term of the Agreement.

Section 2 provides that “This Agreement shall constitute a legally binding contract between the Contractor and Customer”. It also provides that if it is discovered that the customer has an existing contract in force with another service provider, then “The effective date of this Agreement shall be the first day after the expiration of the Customer’s Third Party Contract and this Agreement shall remain a legally binding contract between the contractor and the customer.”

Section 2 also provides that “Upon the request of the Contractor, the Customer shall provide a copy of the third party contract within 5 days of the Contractor being advised of the existence of such third party contract. The Customer further acknowledges and agrees that pending the Effective Date of this Agreement, the Customer (1) shall not enter into any other new third party contract; and (2) shall not renew any then current third party contract and, in the case of any then current third party contract still in force and effect, the customer shall take all necessary steps to forthwith give notice to the third party that it is not renewing that third party contract.”

[ 7 ]

Section 3 of the Terms and Conditions provides that “This Agreement commences on the Effective date hereof and continues for 2 years after the date Service begins hereunder and shall be renewed for successive 2 year terms without further action by the parties, but may be terminated at the end of any two year period by the Customer providing not more than 120 days and not less than 90 days written notice prior to the end of such two year period by registered mail … or may be terminated at any time by the Contractor upon not less than 30 days prior written notice by registered mail to the Customer.” [ 8 ]

Section 11 of the Terms and Conditions provides that if the customer purports to terminate the agreement prior to its expiration, the contractor will have the option to accept the purported termination in which instance the “Customer agrees to pay Contractor, as liquidated damages, an amount equal to the greater of (1) the sum of Customer’s monthly billing for the most recent 9 months, or if none, the billing projected by Contractor for the first month, multiplied by 9 or (2) the sum of amounts due to the Contractor for the balance of the entire term remaining on this Agreement.

Customer acknowledges that the foregoing liquidated damages are reasonable in light of the anticipated loss to Contractor caused by the termination and are not imposed as a penalty.” Did Moor breach the Super Save Agreement? Submission of Super Save [ 9 ] Super Save submits that Moor did breach the Super Save Service Agreement. The Agreement was a valid contract for the exclusive provision of garbage removal services.

Although the Agreement called for the commencement of services on March 1, 2011, in view of the subsequently discovered fact of the Northwest Service Agreement in force until mid-August, 2011, the Super Save Agreement alternatively provided that garbage removal services would commence on the expiry of an existing agreement ie. in mid- August, 2011. The letter from Moor dated January 31, 2011 advising Super Save that its services would not be required, which message was repeated in the subsequent letter dated March 3, 2011 constituted breach by Moor.

In addition, Moor failed to give notice of termination of the Northwest Service Agreement within the “window” available under that Agreement and then entered a new two-year customer service agreement with Northwest on January 31, 2011, both in breach of Moor’s obligations under the Super Save Service Agreement. Super Save relies on Super Save Disposal Inc. v. Tristar Cap and Garment ( 2013 BCPC 79 ), Super Save Disposal Inc. v. Dinesesh Mudaliar dba On Time Autobody (PCBC, Richmond Registry File Number 23789 (April 5, 2013) and Johnson v. BFI Canada Inc . ( 2010 MBCA 101 ).

The circumstances in Tristar are very similar to the present case. Tristar entered into a contract with Super Save for garbage disposal services on January 12, 2011 for a 2 year term. The agreement prohibited Tristar from entering into any other new contract or renewing any existing contract and required the customer to take all necessary steps to give notice to any third party of non- renewal. There was an existing service agreement in place with Northwest which apparently expired on June 30, 2011. The effective date of the Super Save Agreement would then have been July 1, 2011.

A letter of purported termination of the Northwest service agreement was sent to Northwest, but it was outside the “window” for lawful termination. Tristar then signed a renewal contract with Northwest on January 24, 2011, giving notice to Super Save that its services would not be required.

Adjudicator Wallace found that Tristar breached its agreement with Super Save by renewing its contract with Northwest. [ 10 ] In the On Time Autobody case, the Trial Record notes simply indicate that On Time Autobody entered into a contract with Super Save, and subsequently entered into a contract with a competitor, which was found to be a breach of the Super Save Agreement. [ 11 ] In Johnson v. BFI Canada , another garbage removal services case, the customer, Top Line Auto Supply Limited (Topline) signed a service agreement with Johnson whilst under contract with BFI.

BFI then successfully persuaded Topline to enter a new agreement with it for an extended 5 year term. Johnson sued both Topline and BFI, subsequently discontinued the action against Topline, and proceeded only against BFI and only for inducing breach of contract. BFI argued unsuccessfully that the agreement with Johnson was void for uncertainty with respect to the effective contract date. At the time the agreement with Johnson was entered into, there was uncertainty as to the existence and/or terms of any existing contract with BFI.

The Court concluded however that there was a valid agreement between Johnson and Topline because the parties intended to form a contract, they executed a contract and they acted upon the contract when a letter was sent on behalf of Topline to BFI ostensibly terminating any existing agreement. (Ultimately, BFI was found not to be liable for inducing breach of contract because its actions were “justified”). Submission of Moor [ 12 ] Moor submits that it did not breach the Super Save Agreement because it was under no obligation to Super Save prior to the “effective date” of the Service Agreement.

Moor relies upon sec.3 of the Terms and Conditions which provides that “This Agreement commences on the effective date hereof.” In the circumstances of this case, the effective date of the Super Save Agreement was mid- August 2011, following the anticipated expiration of the Northwest Service Agreement. Moor relies upon the evidence of Ms. Jordison who, according to my notes, agreed in cross-examination that the “term” of the Super Save Service Agreement was effective either March 1, 2011 or mid-August, 2011 (after expiration of the Northwest Service Agreement).

Thus Moor says that it was under no obligation to Super Save presumably until mid-August, 2011 and was accordingly entitled to change its mind about utilizing the services of Super Save prior to that date. Discussion and Analysis [ 13 ] I do not think Ms. Jordinson was intending by her evidence to agree that Moor had no legal obligations whatsoever to Super Save until mid-August, 2011. That question was not put to her.

She may have been thinking that she was being asked the date from which the two years for the provision of services would run ie. was it from January 21, 2011 when the service agreement was executed or March 1, 2011 the stated “effective date” in the Service Agreement, or mid-August, 2011, the effective date where an existing service contract was in place. I do not conclude from Ms. Jordinson’s evidence that she admitted that Moor had no obligation to Super Save under the Service Agreement prior to mid-August 2011.

[14]

Section 2 of the Terms and Conditions of the Agreement contradicts Moor’s position because it specifically refers to actionsthe customer shall not do “pending the Effective Date of the Agreement”. [15] I agree with and adopt the analysis on this issue in the Johnson case at paras 61-65 and the reasoning of Adjudicator Wallacein the Tristar case on this issue at para 10. [16] Accordingly, I conclude that there was a valid contract entered into between Super Save and Moor and that Moor breachedthat contract by refusing to accept the services of Super Save and by renewing its contract with Northwest and by failing to give notice oftermination of its existing contract with Northwest in the time period permitted for doing so under the Northwest Agreement.

Damages Submission of Super Save [17] Super Save seeks judgment for $3,264 as liquidated damages under sec.11 of the Terms and Conditions of its ServiceAgreement.

Section 11 provides for payment of the amount due for the balance of the entire term of the Agreement. The monthlyservice charge was $136 and Super Save seeks payment for the full 24 months of the 2 year agreement.

Section 11 provides anacknowledgement by the customer that this calculation of liquidated damages is reasonable and is not imposed as a penalty. It is themeasure of the lost revenue under the service agreement. [18] Super Save relies upon the Tristar case (supra), the On Time Autobody case (supra), Directcash ATM Processing Partnershipv. 564024 Alberta Inc. (2006 ABPC 112); 32262 BC Limited v. Cryer Holdings Ltd. (1996 Carswell BC 1957); 32262 BC Limited v. Companions Restaurant Inc. (1995) (BC SC), 17 BLR (2nd) 227 – BCSC, Esson CJBC); 32262 BC Limited v.

See –Rite Optical Ltd. (1998) 1998 ABCA 89 , 9 WWR 442 (Alta CA); and AMT Finance Inc. v. Gonabady (2010 BCSC 278). InTristar (supra) Adjudicator Wallace awarded the amount claimed as liquidated damages but described the amount claimed as being foronly one half of the remaining term of the 2 year agreement. I am advised by counsel that this decision is under appeal based on analleged misunderstanding by the adjudicator as to whether the amount claimed was for half the remaining term or for the full remainingterm.

On the face of the Reasons for Judgment, the amount awarded is for one year of a two year agreement in circumstances where theSuper Save contract was terminated prior to its provision of any services. [19] The brief Trial Record in Ontime Autobody indicates Adjudicator Wallace’s view that payment for the full year of a one yearcontract was not oppressive, again in circumstances where Super Save’s services were never commenced. The award was discounted byan arbitrary amount to reflect prepayment. [20] 32262 BC Limited v. Companions Restaurant Inc. and 32262 BC Limited v.

Cryer Holdings Limited are both cases dealingwith the lease of advertising signs in which the Court awarded as genuine liquidated damages the income stream lost for the balance ofthe term of the lease. [21] DirectCash ATM Processing Partnership v. 564024 Alberta Inc. (supra) also awarded as liquidated damages the lost revenuestream for the balance of the lease of an ATM machine. [22] In AMT Finance Inc v. Gonabady, the lease was for cosmetic surgery equipment.

The lease provided for payment ofliquidated damages consisting in part of the present value of the sum of the rental payments for the unexpired term discounted at 6% perannum. The Court concluded that whether a provision is a penalty or liquidated damages must be determined as of the making of theagreement, but if it is determined to be a penalty, then the Court must further consider whether relief should be granted.

In that case, theCourt held that the remedy clause in the lease was a penalty clause but it was not oppressive or unconscionable compared to the amountsthat would have been payable by the defendant under common law for breach of contract. [23] Thus Super Save submits that on these authorities it is entitled to recover its loss of revenue stream as a genuine measure ofliquidated damages and that where the claim is properly one for liquidated damages, there is no duty upon Super Save to mitigate itsloss.

Submission of Moor [24] Moor submits that provisions for payment of liquidated damages only apply, or are only intended to apply, where servicesunder the contract actually commence to be provided. In this case, Super Save never delivered its bins to Moor’s premises; it neverprovided any garbage removal services; and it was aware as of January 31, 2011 that its services were not required, thus having over 6months’ notice before its services would have commenced. [25] Moor further submits that on a literal

interpretation,

Section 11 of the Terms and Conditions does not apply. The right torecover liquidated damages only applies where the customer “purports to terminate this agreement prior to the expiration of its term”. Moor repeats its submission that the “term” of the contract did not commence until mid-August, 2011. [26] Moor further submits that payment for the entire term of the Service Agreement cannot be a genuine pre-estimate of damages,particularly considering sec.3 of the terms and conditions which allows for customer termination on notice given not less than 90 days’prior to the end of any term.

Moor further submits that Super Save could not identify any actual loss during evidence at the hearing. Ms.Jordinson mentioned several expenses that Super Save could have incurred following execution of the Service Agreement on January 21,2011, but she was unable to confirm that any of those expenses had actually been incurred prior to receipt of the letter dated January 31,2011 from Moor advising that Super Save’s services would not be required. [27] Finally, in Northwest Waste Solutions Inc. v.

Yue Rong Guan dba Yuk Shan Farm et al (2012 BCPC 449), Adjudicator Kahnheld that a liquidated damages provision in a one year contract providing for payment of damages for the full year was a penalty and

instead awarded 4 months’ rent as damages. Northwest had not commenced to provide removal services. (It does not appear that the decision in the Yuk Shan Farm case was drawn to the attention of Adjudicator Wallace in either the Tristar Cap case or the Ontime Autobody case). [ 28 ] Thus, Moor submits that either no damages are payable because Super Save has not demonstrated that it suffered any loss or alternatively sec.11 is unenforceable as a penalty and damages should be confined to the loss of monthly charges for 3 to 4 months only.

Discussion and Analysis [ 29 ] For the reasons given previously, I do not accept Moor’s submission that sec.11 of the Terms and Conditions does not apply because the Agreement did not commence until mid-August, 2011. [ 30 ] With respect to the See-Rite Optical Ltd., Cryer Holdings Ltd. and Companions Restaurant Inc. cases relied on by Super Save, I would distinguish all of them on the basis that what was being provided under the respective leases were signs that were uniquely for the benefit of the customer, rather than something generic such as a garbage removal bin. ( Super Save Disposal Inc. v.

Blazin Auto Limited ( 2011 BCSC 1784 at para 38 ; Super Save Disposal Inc. v. Makhija Holdings Inc. ( 2011 BCPC 249 at paras 9 – 14 ). [ 31 ] In the DirectCash ATM case involving what might be considered to be a generic product, namely an ATM machine, it appears that the customer did not directly argue that the liquidated damages provision in the lease was unenforceable as a penalty. Rather the customer argued that the Plaintiff had a duty to mitigate and failed to do so, but that argument was wrong in law. [ 32 ] I have referred in my recent decision in Housewise Construction dba Segal Disposal v.

Sun Sushi Restaurant Ltd. (PCBC Vancouver Registry File No. 1242020, 17 April 2013) to many of the recent cases in British Columbia regarding the enforceability of liquidated damages provisions in garbage removal service contracts. To that list must now be added the Tristar Cap and Ontime Autobody cases. I respectfully adopt my analysis of the general legal principles applicable to claims for liquidated damages at paras 12 – 13 in the Sun Sushi case.

The question is whether the loss of revenue over the entire two year term of a contract where services were not actually scheduled to begin more than 6 months after notice had been given that the services were not required, is a genuine pre-estimate of damages or whether it is a “threat, something held over the other party in terrorem ”. ( BFI Canada Inc. v. Persia Food Products Inc. ( 2010 BCPC 308 at para 9 ). [ 33 ] As noted previously, it is unclear to me whether Adjudicator Wallace in the Tristar case ordered payment over the full 24 months remaining on a 2 year contract.

On the face of the Reasons for Judgment, he did not do so. The factual circumstances surrounding the entry and purported termination of the service contract are important in determining whether a liquidated damages provision is enforceable and there are insufficient facts set out in the brief Trial Record in the Ontime Autobody case. In the Yuk Shan Farm case the adjudicator concluded that payment for the remaining 12 months of a 1 year term was a penalty.

In Makhija Holdings Inc . , Adjudicator Nordlinger expressed at para 21 a grave concern that a contract with a term of 12 months that imposed a 12 month liquidated damages provision in the event of default may rise to the level of oppression that would result in a finding of a penalty. [ 34 ] In other cases, claims for liquidated damages for lengthy periods of time remaining in a contract have been held to be penalties (see Northwest Waste Solutions Inc v Mu Wen Lin dba Westwood Millwork ( 2012 BCPC 209 – 28 months remaining in a 3 year term); BFI Canada Inc v.

Persia Food Products Inc. ( 2010 BCPC 308 – 43 months remaining); Northwest Waste Solutions Inc. v. 99 Nursery and Florist Inc. 2012 BCPC 79 – 33 months remaining of a 36 month contract). [ 35 ] In my view a claim for service charges for the entirety of a two year contract term is not enforceable as a genuine pre-estimate of damages, particularly in the context of the nature of the contract (the provision of garbage removal services) and where the services were not to commenced until a considerable time in the future and where the innocent party is hard pressed to identify any actual loss, apart from the stream of revenue. [ 36 ] In BFI Canada Inc. v.

Persia Food Products Inc . , Adjudicator Roberts dismissed a claim based upon a liquidated damages provision that he found to be unenforceable as a penalty, noting the right of the customer to terminate the contract on 90 days’ notice prior to the end of a term. In Super Save Disposal Inc. v. Northwest Waste Solutions Inc. and Craftsman Millwork and Design Ltd. ( 2012 BCPC 42 ), Adjudicator Kahn awarded damages for 3 months, citing the entitlement of Super Save to terminate the contract on 30 days’ notice.

The Super Save contract in this case contains the same terms namely termination on notice by the customer not less than 90 days’ prior to the end of a term and termination by Super Save on not less than 30 days’ written notice at any time. I find that it is reasonable to recover damages based on service charges for 3 months. [ 37 ] Accordingly, Super Save is entitled to recover from Moor the sum of $408 as damages, together with Court filing fees of $156 and services fees of $80. Super Save is entitled to Court Ordered Interest on the sum of $408 from January 31, 2011 to the date of judgment.

Judgment accordingly. ____________________________ Justice of the Peace, Donald W. Yule, Q.C.