Chung v. Seo, 2018 BCSC 981

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Chung v. Seo, 2018 BCSC 981 Date: 20180615 Docket: S164131 Registry: Vancouver Between: Dae Shik Chung c.b.a. Geolica Vision Plaintiff And Isaac Kippum Seo c.b.a. 22/7 Fashion Lens a.k.a. Chocolens Defendants Before: The Honourable Mr. Justice Steeves Reasons for Judgment Counsel for the Plaintiff: Diego A. Solimano Counsel for the Defendants: Joelle Walker Place and Date of Hearing: Vancouver, B.C. June 9, 2017; March 14, 16, 2018 Place and Date of Judgment: Vancouver, B.C. June 15, 2018 Table of Contents Paragraph Range A. INTRODUCTION [ 1 ] - [3] B. BACKGROUND [4] - [20] C. ANALYSIS [21] - [53] (

a) Was there an agreement that the defendant would take the plaintiff's inventory in satisfaction of the plaintiff's debt? [27] - [32] (

b) Unjust enrichment [33] - [53] D.

SUMMARY [54] - [57] A. INTRODUCTION [1] In an application filed September 13, 2016 the plaintiff seeks

summary judgment in the amount of $80,962.40, among other orders. The claim involves payment for an inventory of cosmetic contact lenses, which the plaintiff says the defendant received from the plaintiff but did not pay for. The claim was filed May 6, 2016 and is in debt and unjust enrichment. [ 2 ] The defendant has filed two other applications. In a counterclaim, filed June 30, 2016, he seeks $16,299.28 as a debt against the plaintiff for failure to pay for lenses received from the defendant. In the defendant's second application, filed June 9, 2017, he seeks the dismissal of the plaintiff's application on the grounds that the issues raised by the plaintiff cannot be determined by

summary disposition. [ 3 ] The applications were heard on June 9, 2017. As a result of the conflicting

interpretations given by the parties with respect to their affidavit evidence, I directed cross-examination on the affidavits. This has been completed, I have reviewed the transcripts of the examinations and there have been further written and oral submissions. B. BACKGROUND [ 4 ] The plaintiff Dae Shik Chung operates Geolica Vision.

[ 5 ] The defendant Isaac Kippum Seo operates 22/7 Fashion Lenses (also called Chocolens). [ 6 ] Both parties supply cosmetic contact lenses to optometrists and non-medical speciality stores. The lenses have the affect of changing how eyes look such as the colour and by adding special effects. There are expiration dates for these lenses after which they cannot be sold. [ 7 ] In 2012 the plaintiff became a distributor of cosmetic contact lenses from a supplier in Korea, Geo Medical.

On September 30, 2014 the plaintiff ceased importing lenses from Geo Medical but had about 60,000 items in inventory. [ 8 ] In or about October 2014 the defendant became the distributor for Geo Medical. Geo Medical directed the defendant to coordinate with the plaintiff the sale of the latter's inventory. The parties agreed for a period on a process to sell the inventory. [ 9 ] The plaintiff relies on a handwritten logbook as a record of all the transactions he had with the defendant. Specifically, the plaintiff relies on the unit prices recorded in the logbook.

The defendant says he agreed to this at the beginning in deference to the plaintiff being a Korean elder. The defendant now questions the accuracy of the information in the logbook. This is discussed below. [ 10 ] In early March 2016 the parties exchanged a number of emails. These commenced with a demand from the defendant to the plaintiff that the latter pay six invoices each dated "9/2/15", totalling $31,925. The plaintiff accepted he owed $10,863 to the defendant and then he changed this number to $11,294. [ 11 ] The plaintiff was having financial difficulties because of other litigation.

He proposed turning over all his inventory to the defendant with a negotiated price. The defendant replied that the inventory expiration date was "looming". The parties disagreed about differences in invoices but agreed to meet to discuss them. The plaintiff says they agreed that he owed the defendant $10,863 (or $11,294); the defendant disagrees. [ 12 ] According to the plaintiff, the parties also discussed payment of the amount owing using his inventory of lenses held by the defendant.

The plaintiff says there was an agreement that the defendant would sell the inventory and "to make it simple" it would be moved to the defendant's premises. In contrast, the defendant says that, at a meeting on March 15, 2016, he agreed to take the plaintiff's inventory as payment for what the plaintiff owed him. The plaintiff says there was no such agreement and he is entitled to be paid for the inventory or it should be returned. [ 13 ] The plaintiff gave the defendant an inventory list on March 20, 2016 and there is an email from the defendant saying he received the list.

Approximately 40,883 pieces of the plaintiff's inventory were delivered to the defendant's storage at the end of March 2016. The defendant sold pieces of the plaintiff's inventory in 2016 and 2017, and sales continue. These sales took place only at the request of the plaintiff or Geo Medical. Items from the plaintiff's inventory have been used with items from the defendant's inventory to complete orders sold by the defendant. [ 14 ] On March 27, 2016 the defendant advised the plaintiff that he was considering liquidating all products with a 2016 expiry date.

The plaintiff replied by asking that his inventory not be thrown out and he would take it back for the purposes of a tax loss. The defendant was also asked to get the plaintiff's consent before any liquidation. [ 15 ] On April 1, 2016 the defendant advised the plaintiff that Geo Medical told him to "stop all affiliations with you" and forwarded to the plaintiff the message he received from Geo Medical. The plaintiff replied the same day that this did not mean that the defendant could take over the inventory for free. The plaintiff requested its return "right away".

Also on April 1, 2016, the plaintiff sent a demand to the defendant for return of the inventory by April 4, 2016, with a list of the items. [ 16 ] The inventory was not returned and the plaintiff sent an invoice to the defendant in the amount of $90,962. The plaintiff says this was based on the agreed cost of the lenses in the inventory taken from his logbook. The plaintiff also set off the debt he acknowledges of $10,863, for a net amount he says is owed by the defendant of $80,962.

In his submissions the plaintiff changed his acknowledged debt to $11,294. [ 17 ] This amount was not paid and the plaintiff's demand for payment of $80,962 is now his claim in this action. It is admitted by the defendant that it has not paid any money to the plaintiff for items sold from the latter's inventory since March 26, 2016. [ 18 ] The defendant retains 31,050 items from the plaintiff's inventory of 40,883 that was delivered in late March 2016. Of the former number, 26,600 items have expiration dates in 2016 and 2017 and 4,550 items have expiration dates in 2018.

About 10,000 items have been disposed of by the defendant. A small number of items (about 850) have been co-mingled with the defendant's inventory but accounted for in the above numbers. [ 19 ] According to the defendant, the expiry dates for the lenses have passed and they cannot be sold. As well, one type or certain styles of GK Lenses are not popular and are difficult to sell.

According to the defendant the amount of $4,500 is owed to the plaintiff. [ 20 ] At my direction the plaintiff was given the opportunity in June 2017 to inspect the inventory held by the defendant in order to review the numbers and the expiry dates. This is discussed below. C. ANALYSIS [ 21 ] As can be seen above, each party bases its claim on debt and unjust enrichment. The plaintiff claims $80,962.40 in damages and the defendant counterclaims for damages of $16,299.28. [ 22 ] There is no claim in conversion by the plaintiff for the inventory held by the defendant.

This is of some significance because the plaintiff says the defendant should have returned the inventory to him. Conversion would be the cause of action to achieve that result but, again, it has not been plead. On the basis of the pleadings I am unable to order return of the inventory to the plaintiff.

[23] There are no written contracts between the parties about what was to happen with the plaintiff's inventory and at what price.More specifically, there is no written contract that describes the sale by the defendant of the plaintiff's inventory. The defendant does saythere was an oral agreement in March 2016 that he would take over the plaintiff's inventory in consideration of the debt owed by theplaintiff to the defendant. And there are a number of other oral and email exchanges at issue. As is often the case in these circumstancesthere are obvious problems with proving what was said.

The plaintiff relies on his logbook for unit prices but that record is disputed (anddiscussed below). [24] In his application of June 9, 2017, the defendant says that the plaintiff's application cannot be adequately considered in asummary proceeding. There are certainly difficulties reconstructing the dealings between the parties on a

summary basis and throughaffidavits. That was the reason for the direction to have cross-examination on affidavits. [25] Some difficulties remain but I conclude that this matter can now be dealt with as a

summary application by the plaintiff, as canthe defendant's counterclaim. The defendant's application filed June 9, 2017 is dismissed or, at least, overtaken by the order to cross-examine on affidavits. [26] I will proceed by considering whether the parties agreed in March 2016 that the defendant would take the plaintiff's inventoryin exchange for the debt owed by the plaintiff. I will then consider the issue of unjust enrichment as plead by both parties. (

a) Was there an agreement that the defendant would take the plaintiff'sinventory in satisfaction of the plaintiff's debt? [27] The defendant says that there was an agreement in March 2016 between the parties that he would take the plaintiff's inventoryto satisfy the debt owed by the plaintiff to him. The plaintiff says there was no such agreement. [28] The purported agreement followed the plaintiff's failure to make payment on invoices from the defendant in September 2015and demands for payment in February and March 2016.

As well, previously, in August 2015, Geo Medical had advised the defendantthat it would no longer accept orders from him for the plaintiff that did not meet the minimum order quantity. [29] The evidence is that it was the plaintiff's idea to move his inventory and customers to the defendant. Initially the defendant didnot agree. However, at a meeting on March 15, 2016 it became clear that the plaintiff could not pay his debt and, according to thedefendant, he agreed to take the plaintiff's inventory.

As can perhaps be seen (and discussed further below), the valuation numbers arenot at all clear (especially from the plaintiff's point of view) but one calculation is that transferring the inventory rather than paying hisdebt to the defendant would have been to the advantage of the plaintiff. [30] I accept that the defendant understood from the conversation he had with the plaintiff that the latter's inventory would be movedto the defendant to satisfy the plaintiff's debt. The defendant did this to settle a business issue and also as something of a favour to theplaintiff as a Korean elder.

The plaintiff now says there was no oral or any kind of agreement. [31] As to what he said at the material time, March 2016, I conclude that the plaintiff did not make a legally binding promise totransfer his inventory to the defendant in satisfaction of his debt. What appears to have happened is that the plaintiff needed a way out ofhis financial problems and he said just enough to accomplish that at the time. The defendant took the plaintiff's words and conduct to bea promise. However, the plaintiff did not intend that result although he did leave something of an impression that he agreed with thedefendant.

And, perhaps out of deference, the defendant did not insist on a clear statement of agreement. [32] An impression is not a legally binding promise and I conclude that there was not an enforceable agreement between the partiesthat the plaintiff's inventory would be transferred to the defendant as satisfaction of the debt owed by the plaintiff to the defendant. As atechnical matter I also note that the defendant's claim is not in contract or agreement. His claim of an agreement may have been includedas the claim in debt in any event but it is not necessary to decide that issue. (

b) Unjust enrichment [33] There is the next question of what, if anything, is payable or owed between the parties as a matter of unjust enrichment or debt. [34] The elements of unjust enrichment are well established (Charrington v. Mayhew's Perma Plants, (BC CA),[1990] 5 W.W.R. 208 (B.C.C.A.), at pg. 5): … in Sorochan v. Sorochan (1986) (SCC), 5 W.W.R. 289 at 295, Dickson, C.J.C. has outlined three requirements thatmust be met "before it can be said the unjust enrichment exits. These include: (

a) an enrichment (

b) a corresponding deprivation; and (

c) an absence of any juristic reason for the enrichment." [35] Each party says that the other has been unjustly enriched. The plaintiff says that the defendant has been enriched by the value ofthe plaintiff's inventory without paying for it. The defendant says the plaintiff owes more than the inventory is worth. [36] A first consideration here is the value of the inventory and an important part of that valuation is the expiration dates of theitems in the inventory.

The plaintiff's valuation assumes that all of the inventory is marketable but it is not seriously in dispute that 95%of the inventory expired in 2016 and 2017. The remaining 5% will expire in 2018 or later. When the plaintiff purchased his inventory heassumed the risk of the expiry dates and, significantly, there is no evidence that the defendant took on that risk when he took possession

of the inventory. In addition the plaintiff agreed on cross-examination that he has no records to substantiate his claims as to the expiry dates. In fact, throughout, the plaintiff ignores the expiry date issue and assumes all of the inventory remains marketable. [ 37 ] At my direction the plaintiff was given the opportunity to inspect the inventory held by the defendant. This took place in June 2017. Unfortunately, the plaintiff did not complete the inspection because a person accompanying him was not "comfortable to stay there".

In a subsequent cross-examination the plaintiff said some boxes were not complete and some boxes were not the standard size. But he ultimately agreed that he had the opportunity to inspect the lenses he gave to the defendant in March 2016, that the defendant had organized them by expiration date, that he had the opportunity to count the boxes and that the defendant said each box held about 250 items. Nonetheless, and unfortunately, the plaintiff completed only a cursory observation and not anything that can be described as an inspection.

Photographs taken by the plaintiff during his inspection were not helpful in understanding the number of items or their expiry dates. [ 38 ] Another dispute between the parties relates to international currency changes. International business in Korea is conducted in US dollars and, therefore, changes in the American currency rate have to be accounted for in order to calculate the cost of importing. The defendant advised the plaintiff that these changes had to be included but the plaintiff did not include them.

According to the plaintiff there was no agreement about increasing the prices to reflect a change in American currency. However, as the defendant testified, he was the supplier and he had the unilateral right to change the price of his products to reflect changes in his costs as he did with other customers.

In any event the plaintiff asked the defendant to send an email with the necessary information about currency changes so he (the plaintiff) could raise the prices for his customers as well. [ 39 ] From this I conclude that any change in price because of currency changes was not a surprise to the plaintiff and, indeed, he was considering passing the cost on to his customers.

In any event it is not clear to me that changes in currency rates was actually part of the valuations of either party. [ 40 ] Overall, I conclude from this that the plaintiff has been given every opportunity to prove his claim of the number of lenses and their expiry dates. He has not been able to prove his claim because of his own failings and not because of anything done by the defendant. [ 41 ] A further difficulty for the plaintiff is his reliance on his logbook for the unit prices he says were agreed to by the defendant. There are a number of entries that have the defendant's signature.

However, a number have only the plaintiff's signature and some contain no initials or signatures. [ 42 ] The defendant testified that he agreed to use the logbook "because of the elder/junior relationship" with the plaintiff and the plaintiff had family ties with the manufacturers. However, he was nonetheless hesitant, it was contrary to his business practice and he felt pressured into agreeing with it. The defendant also commented that, in the beginning, he deferred to the judgment of the plaintiff regarding the transactions in the logbook as being correct.

However, in his evidence of July 14, 2017, he stated: "[n]ow that I look at them I believe that many of them are incorrect. There are things that don't make sense." In a similar vein, the plaintiff agreed in cross- examination that the defendant did not agree to some of the prices listed in the logbook. [ 43 ] From this I conclude that the plaintiff's accounting of the unit price for the lenses is, for the most part, unreliable. As above, the plaintiff insists on using his logbook for the unit price and he declined the opportunity to inspect the inventory and produce any specific and reliable information.

Overall, I find that the defendant's calculation of the numbers of items and their expiry dates is to be preferred to that of the plaintiff. [ 44 ] With the above in mind what, then, is the valuation of the inventory for the purposes of the plaintiff's claim and the defendant's counterclaim? Put another way, what is the reliable information that goes to the issue of enrichment? [ 45 ] As above, the plaintiff's valuation is based on his logbook entries and it is quite unreliable for quantity and expiry dates.

It must be discounted by a significant amount. [ 46 ] The defendant used his invoices with his suppliers to calculate the amount of money owed by the plaintiff. This is not a perfect method of calculating cost because it uses gross estimates of volumes of products. It also makes assumptions about how many items are in boxes.

However, I accept the evidence of the defendant that he was following the usual business practice in his industry and to actually count the items would have been impractical as well as counter to the industry practice. [ 47 ] For the above reasons the calculation of the damages in this case cannot be a precise figure. However, I conclude that the defendant's calculation is the more reliable approach. [ 48 ] Between November 2014 and January 2015 the defendant provided the plaintiff with lenses valued at $16,444.80.

Some of these were orders placed by the defendant to Geo Medical on the plaintiff's behalf for lenses provided to the plaintiff from the defendant's inventory. The plaintiff paid $9,820 to the defendant leaving a balance of $6,624.80 owing. [ 49 ] The defendant continued to order or provide lenses to the plaintiff up to August 2015.

The value of these orders is $15,480.30, invoices were sent by the defendant for this amount (and the previous amount owing) but they were not paid by the plaintiff. [ 50 ] The total of $6,624.80 and $15,480.30 is $22,105.10. [ 51 ] From this it is necessary to deduct some valuation of the inventory held by the defendant that is marketable because the date of use has not yet expired. In the defendant's application response (filed June 2, 2017) he estimates this amount as being "approximately" $4,500.

This is calculated on the basis that only 5% of the inventory (valued by the plaintiff as $90,962.40) is marketable. [ 52 ] This would result in net damages of $17,605.10. However, the defendant's counterclaim is for $16,299.28 (with no apparent explanation of this calculation). I conclude that, in these circumstances, the defendant is not entitled to more than he claimed.

[ 53 ] The debt owed by the plaintiff to the defendant is $16,699.28. The defendant has been deprived of that amount and there is no juristic reason for that deprivation. D.

SUMMARY [ 54 ] The plaintiff's claim for $80,962.40 is based on unreliable information about expiry dates of cosmetic lenses and is denied. [ 55 ] The defendant's counterclaim for $16,299.28 is allowed. It is based on invoices received from the common supplier of lenses for both parties. [ 56 ] The defendant's application that this matter cannot be decided by

summary application is denied. [ 57 ] The defendant has been substantially successful and he is entitled to his costs at Scale B. "STEEVES J."