Super Save Disposal Inc. v., 2014 BCPC 92

Citation: Super Save Disposal Inc. v. 517395 BC Ltd. Date: 20140521 2014 BCPC 0092 File No: 89158 Registry: Kelowna IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: SUPER SAVE DISPOSAL INC . CLAIMANT AND: 517395 B.C. LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE R.R. SMITH Appearing for the Claimant: Janine Jordison Appearing for the Defendant: Russ Johnson Place of Hearing: Kelowna , B.C.

Date of Hearing: March 31, 2014 Date of Judgment: May 21, 2014 I. Introduction [ 1 ] In May 2006 the claimant contractor garbage disposal company had a written garbage removal contract with the defendant customer company doing business as Super 8 Lake Country. In January 2010 the defendant terminated the agreement, claiming they were overcharged for services. The claimant believed the defendant wrongly terminated the contract and the claimant sued for liquidated damages based on a formula provided in the contract for early termination. The total claim is for $7,887.49.

The defendant counterclaimed for $2,968.20 in overpayment. II. The Facts [ 2 ] A fine print contract term allowed the contractor to get out of the contract at any time with giving 30 days’ notice. The customer could not get out of the contract at any time prior to the expiry of the three years. Furthermore, the contract was automatically renewed for a further three years if the customer did not take the initiative of giving 60 days’ advance notice of wanting out of the contract at the end of the three years.

The automatic renewal clause read: “shall be renewed for successive three year terms without further action by the parties, but may be terminated at the end of any three year period by the customer by not less than sixty (60) days written notice prior to the end of such three (3) year period (registered mail), or may be terminated at any time by the Contractor upon not less than (30) days prior written notice to the Customer (registered mail)”. [ 3 ] Another term of the contract allowed the contractor to unilaterally change the fees at any time, but only for one of six particular reasons:

a) Changes in fuel costs

b) Changes in disposal facility costs

c) Changes in transportation costs due to change in location of disposal facilities

d) Extra charges for over-weight and over-volume loads

e) Consumer Price Index adjustments published by Statistics Canada to reflect percentage increase in the local consumer price

f) Rate adjustments in an amount in excess of the Consumer Price Index, with the customer’s consent upon notice from the contractor at least 30 days prior to the effective date of the adjustment. The customer’s consent may be evidenced by the practices and actions of the parties. [ 4 ] Another term of the agreement dealt with the contractual remedy available to the contractor if the customer attempted to terminate the agreement prior to the expiration of the three year term.

A liquidated damages formula primarily required the customer to pay the greater of an amount equal to the last nine months prior to the termination or the months outstanding under the contract. [ 5 ] The Consumer Price Index increases were as follows: 2006 2.0% 2007 2.2% 2008 2.3% 2009 0.3% [ 6 ] The agreement was effective May 17, 2006. The agreed monthly charge was $132.00. [ 7 ] The customer acknowledges that when he signed the contract, he knew he was locked into the agreement for three years.

He felt it was unfair that the customer could not get out of the agreement for three years in circumstances where the contractor could get out

at any time with giving 30 days’ notice but he knowingly agreed to this term of the contract because he felt his options were limited given as it appeared to be boilerplate standard contract wording for such contracts. [ 8 ] On paper, the monthly service fees seemed to be all inclusive, including fuel costs. A rate adjustment was allowed for any changes in fuel costs above the cost at the time of the signing of the agreement. With the very first invoice of May 31, 2006 the contractor, without giving notice, added a “Temporary Fuel Surcharge”.

This appears not to be added as a result of any change of fuel costs, but rather, to be the full amount of all fuel costs.

This pattern of invoicing continued with all subsequent invoices and the customer never questioned that this “Temporary Fuel Surcharge” seemed to be a permanent paying of all fuel costs. [ 9 ] Between May 2006 and January 2010, according to the Diesel Fuel Price Index, the price went up and down (with a significant spike upward between November 2007 and October 2008) but coincidentally the January 2010 price was close to the May 2006 price. [ 10 ] Curiously, the June 30, 2006 invoice seemed to justify increases for reasons never agreed upon in the contract.

That invoice added at the bottom: Please accept this as notification of a price adjustment effective July 1 st . Due to the increase in costs of driver’s wages and insurance, the increase commodity price of steel along with the shortage of welders, we have no choice but to pass these additional charges onto our customers . There was no contractual authority for unilaterally passing these alleged costs onto the customer without the customer’s consent. Without such consent, the contractor could only address such increases based on the Consumer Price Index formula.

The contractor relied upon the contractual term stating, “The Customer’s consent may be evidenced by the practices and actions of the parties.” The customer continued paying the increased monthly fee with no protest communicated to the contractor. The customer claims he did not protest because he was initially unaware of the increases and he did not pay any attention to them. The practices and actions of the parties indeed may evidence consent, but it also may evidence improper notice. Proper notice allows the customer to make an informed decision on whether to continue the contract based on the increased fees.

Proper notice is also in the context of the customer understanding their choices in circumstances where the contract does not expressly state the customer can get out of the contract early if they don’t consent to the increases. [ 11 ] The contractor did provide proper notice for an increase in tipping fees at the local landfills commencing November 1, 2006. The tipping fee increase was up from $50 per tonne to $55 per tonne. This resulted in a fee increase of $5 each week or $20 per month, with the first increase showing on the November 30, 2006 invoice.

This increase was justifiable under the contract given the picking-up frequency was weekly. [ 12 ] The next notice of rate increase was given with the May 31, 2007 invoice effective July 1, 2007, based on “rising transportation costs.” The contract only allowed this type of claimed increase if there was a change in the location of disposal facilities and that was not the case. The only other justifiable increase for rising transportation costs was to be based on the consumer price index and for 2007 that amount was 2.2%. The increase charged by the contractor was 8.82%.

The increase was four times the amount allowed under the contract. In addition to increasing the monthly service fee by $14.20, the contractor also increased the monthly fuel surcharge by 8.86%.

The May 2007 diesel price of May 2007 was actually lower than the May 2006 diesel price according to the Department of Transportation Monthly Diesel Fuel Price Index, so these increases were not justified unless the customer consented. [ 13 ] The November 30, 2007 invoice provided the next rate increase notice, claiming “a price adjustment as a result of inflation and general transportation costs.” The increase for both the monthly fee and the fuel surcharge was 15%.

Again the consumer price index for 2007 would only allow a 2.2% increase on the monthly fee, so that increase was seven times what the contract allowed unless the customer consented. The Fuel Price Index for November 2007 was up 13.6% from May 2006 so most of the increase in fuel surcharge was justified. [ 14 ] The December 31, 2007 invoice is the one occasion where there was a rate decrease. It seems to have made a 1% correction in the increase the month prior.

Both the service fee and the fuel surcharge decreased by 1%. [ 15 ] The June 30, 2008 invoice gave notice there would be another fee increase effective July 31, 2008 for “a change due generally to increased transportation costs including the recent Carbon Tax initiative”. The July 31, 2008 invoice reflected a 3.53% increase and the fuel surcharge made a 17.9% increase. The increase in the monthly service fee was not justified without consent of the client, but a significant increase in the fuel surcharge was justified.

The Diesel Fuel Price index shows the price was sharply up to $1,29 per litre. [ 16 ] The November 30, 2008 invoice gave notice of a rate increase based on Consumer Price Index increases. The monthly service amount increased 2.79% or $5.77. The 2008 Consumer Price Index increase was only 2.3%. The bigger problem is that they had already had an increase calculated in July 2008, so it was the second time that year for such an increase.

As a result, the contract did not allow this increase without the consent of the client. [ 17 ] On May 17, 2009 the automatic three year extension of the contract applied given the customer had not given timely notice of intending to end the contract. [ 18 ] The November 30, 2009 invoice gave notice of another price adjustment due to “transportation and equipment costs.” The December 31, 2009 invoice showed an increase in monthly service fees of 10%. The 2009 consumer price index only increased 0.3%. Any increase above 0.3% required the consent of the customer.

Equipment costs should have been the responsibility of the contractor and not the customer because no such category in the contract authorized any such increase unless the customer consented. [ 19 ] On January 12, 2010 the defendant customer gave written notice that he was terminating the contract effective after the last load

on January 28, 2010. [ 20 ] On February 1, 2010 the claimant contractor invoiced $141.75 as a Bin Removal Fee. On February 11, 2010 the contractor’s statement indicated an outstanding balance of $532.20 for past invoices. They subsequently charged $6,305.04 as liquidated damages for breach of contract represented the remaining 27 months of the contract at $222.40 per month. III. Analysis [ 21 ] Between May 2006 and January 2010 the monthly service fee increased from $132 per month to $262.71 per month which is nearly a 100% increase.

The Consumer Price Index during that same window of time increased less than 7% so the increases were more than 14 times the Consumer Price Index percentage. [ 22 ] Between May 2006 and January 2010 the fuel surcharge increased from $23.76 per month to $27.80, which is a 17% increase. The price of diesel, according to the monthly index, had its ups and downs but ultimately showed no significant change (the cost of diesel increasing only $.008). [ 23 ] It is trite law to state that parties are bound by the terms of their agreement. [ 24 ] A rule of

interpretation of contracts is that contract ambiguities are construed against the drafter of the document, especially if the application of other rules of construction fails to resolve the issue. [ 25 ] The contractor can’t modify the contract without consideration.

Promising to do what one is already contractually obligated to do is not consideration which provides support for modification. ( Western Surety Company vs Hancon Holdings Ltd , 2007 BCSC 180 at par 30 ). [ 26 ] This contract allows the contractor to unilaterally change the monthly fees charged, but only in amounts consistent with changes in the Consumer Price Index. For the contractor to make extra contractual fee increases, the consent of the customer is required. The contract states, “The Customer’s consent may be evidenced by the practices and actions of the parties.” [ 27 ] The contractor’s

interpretation of the contract (as evidenced by this court action) is that if the consumer does not consent to the increase, the consumer still has no contractual capacity to get out of the contract until the expiry of the three year term. That

interpretation makes the requirement of getting the customer’s consent meaningless. Some meaning should be applied to requiring the customer’s consent. The only reasonable

interpretation is an implied term that if the customer does not consent to increases larger than the Consumer Price Index percentage, the consumer can then get out of the contract upon giving reasonable notice. [ 28 ] This begs the question of when the customer’s consent may be evidenced by the practices and actions of the parties. Again the contractor submits that the customer paying the increased amounts showed consent to the increased fees.

That may be correct provided the contractor gives clear notice of any increase and the parties understand that if the customer doesn’t consent, they can then get out of the contract upon giving reasonable notice. It is informed consent that is required. [ 29 ] The contract requires some important notices be given by registered mail. I don’t think that kind of formal notice is needed for a fee increase, but it isn’t sufficient notice to simply put a small print notice on the bottom of an invoice where advertisements are located on all of their other invoices.

Such notice may never be brought to the attention of the business owner. The better practice is to have some separate written notice. [ 30 ] The bigger problem with this contract is that even if notice is given, the customer is left with believing they still can’t get out of the contract even if they don’t consent to the increase. It is impossible for the client to give informed consent to the fee increases (higher than the Consumer Price Index percentage) without the parties understanding the consequences of not giving that consent.

This is the implied term referenced earlier, namely, if the customer doesn’t consent, the contract will be terminated in 30 days. Due to this implied term not being expressed, little weight can be given to inferring the customer gives informed consent to paying the increase. Otherwise the requirement of getting consent from the customer is meaningless. [ 31 ] If the contractor intends to vary the contract to no longer require the consent of the customer to make these fee increases, then new consideration must be made by the contractor.

A pre-existing contractual obligation is not legal consideration for the modification of the contract. The contract does allow for rate increases above the Consumer Price Index percent provided the customer consents. If the contractor wants to justify the increases based on implied consent, then it must be informed consent, based on proper notice and a proper understanding between the parties that if the customer does not consent, the contract will be ended by the contractor in 30 days.

In those circumstances, the customer’s consent may be evidenced (implied) by the practices and actions of the parties. [ 32 ] I find that initially, the customer did consent to the various fee increases, primarily because he believed nobody else was available to do the garbage removal for them. At some point that changed. Over the 3 ½ years, the customer became frustrated with all of the fee increases being unilaterally applied and he learned that other service providers would do it for much less. He wanted out of the agreement.

He seemed unaware of the fine print automatic three year renewal term of the agreement, thinking he had completed the three year term and then wrongly thinking the extended contract thereafter was simply on a month to month basis. [ 33 ] The November 30, 2010 invoice made reference to yet another 10% fee increase. Clearly the customer did not agree with or consent to this increase as is evidenced by his subsequent conduct.

The customer looked more closely at the original contract and became convinced that he was overcharged with unjustified fee increases and he did not pay the November 30, 2010 or the December 31, 2010 invoices which totalled $506.34. [ 34 ] On January 12, 2010 the customer wrote to the claimant contractor advising that he was terminating the contract effective after the January 26, 2010 services. On January 27, 2010 the customer faxed a letter to the claimant contractor advising that if they didn’t

remove their bin before February 1, 2010, the customer would be charging a $5 per day storage fee for the bin which would be offset against the final invoice. This makes it clear the client was not consenting to fee increases. It also makes it clear the customer understood he still owed some money to the contractor. [ 35 ] The contract implies that fuel costs were included in the monthly fee given it expressly states that changes in that fuel cost can result in a rate adjustment.

I find that the practices and actions of the parties show that from the beginning, the Temporary Fuel Surcharge was to be in addition to the monthly service charge in spite of the ambiguous wording of the contract in this regard. [ 36 ] It is arguable that the customer never consented to fee increases. However, in his evidence, he indicated he felt he had no better alternative.

From this, I infer that he reluctantly consented to the fee increases prior to November 30, 2009. [ 37 ] I find that the November 30, 2009 notice of fee increase was given but the amount of fee increase wasn’t known until the December 31, 2009 invoice, which revealed that it was a 10% increase. This means the notice was effective December 31, 2009 and had a 30 day window thereafter for the customer to respond. The 2009 Consumer Price Index percentage increase was only .3% so the 10% increase applied by the claimant was more than 30 times the CPI amount.

This meant that the consent of the customer was required before it could be applied. Clearly the customer was not consenting. The contractor had two choices; they could not apply the increased amount or they could continue applying the increased amount knowing that the client could now legally terminate the contract. The latter is what happened and the customer was justified in terminating the contract. As a result of the contractor proceeding with the increases without the customer’s consent, the contractor lost the right to collect the liquidated damages they subsequently claimed.

The contractor also lost the right to charge the $141.75 fee for the bin removal (assuming they ever had that right under the contract). [ 38 ] The client ought to have paid his November and December 2009 fees at the November rate of $238.85 for a total of $ 477.70. [ 39 ] The counterclaim must fail given the customer reluctantly consented to the earlier fee increases. Had he not consented, his counterclaim would have been valid. IV. Results [ 40 ] Judgment in favour of the claimant for $477.70 (representing the November and December 2009 fees without increase).

There will be no award of costs given the claimant was not successful with the more contentious portions of the claim regarding liquidated damages. [ 41 ] The counterclaim is dismissed without costs. ---------------------------------------------------- R.R. Smith, P.C.J.