1. Case Name:
City Water International Inc. v. A.B.C. Recycling Ltd.
Between
City Water International Inc., Claimant, and
A.B.C. Recycling Ltd., Defendant
[2011] B.C.J. No. 385
2011 BCPC 57
File No. 10-30622
Registry: Vancouver
British Columbia Provincial Court
Vancouver, British Columbia
D.W. Yule J.P.
Heard: January 26, 2011.
Judgment: February 15, 2011.
(12 paras.)
Counsel:
Counsel for the Claimant: M. Riddell.
Counsel for the Defendant: D. Sue-A-Quan.
REASONS FOR JUDGMENT
D.W. YULE J.P.:--
Introduction
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2. 1 The Claimant sues for the sum of $1,917.60 plus taxes alleged to be due as rental and service
payments for the period January 1 to December 31, 2008 for the rental of four water filtration units
plus an additional $1,200.00 for the return of the units at the end of the rental contract. (The original
Notice of Claim sought $300.00 for return of the units but the claim was permitted to be amended at
the hearing to correspond with the evidence given.)
2 The Defendant asserts that nothing is owed on multiple grounds. It says that the units never
operated satisfactorily from the outset and there was a fundamental breach of the rental contract;
alternatively there was a total failure of consideration; alternatively it gave written notice of
cancellation by letter dated November 4, 2003 which brought an end to any extension of the original
agreement.
Background Facts
3 The Defendant signed a written rental agreement and separate written service agreement dated
November 12, 2002 for the rent and servicing of four water filtration units supplied by the
Claimant. The units were installed on or about October 23, 2002 (i.e. before the execution of the
rental and service agreements). The significant terms of the rental and service agreements are:
a) The agreements are for a five year term;
b) The agreements are non-cancellable for any reason;
c) The required quarterly payments are $479.40 plus taxes;
d) Clause 8 of the rental agreement provided that it would be automatically renewed
for successive terms of one year unless the customer notified City Water in
writing at least six months prior to the expiration of the contract to the effect that
the renewal would not be entered into;
e) Clause 9 of the rental agreement provided that if either party elected not to
proceed with the renewal period then the customer must at its own risk and
expense immediately return the equipment to City Water at such location as City
Water shall designate;
f) Section 6 of the service agreement provided that the customer shall pay City
Water a removal service charge of $300.00 (subject to consumer price index) for
each unit of equipment removed by City Water on expiration or termination of
the rental and service agreements.
Evidence of the Defendant
4 Mr. Odenwald gave evidence for the Defendant. In summary, he stated that the filtration
systems were demonstrably unsuitable for drinking within a week or two of the installation. This
was evident by the colour of the water. The water lines for the system ran across his 10 acre site.
The units were disconnected shortly after installation. City Water was promptly told that the units
were unsuitable, that they had been disconnected, and City Water was requested to remove them
many times. Very shortly after installation the Defendant received a notice from the CIT Group
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3. advising that the rental payments under the agreements had been assigned to CIT by City Water.
The Defendant made one or two payments under the rental agreement and then ceased to make
further payments. The Defendant never had the water tested and never asked for City Water to try to
correct the problem. The operations manager, Ron Ramsey principally dealt with the issue. In the
result, the Defendant made no payments under the rental agreement for almost all of the five year
term. For almost all of the five year term the units were not in use but remained on the Defendant's
premises awaiting removal. Although he had limited personal involvement in the matter, Mr.
Odenwald believes that City Water were unresponsive to the Defendant's requests for removal of
the units as unsatisfactory.
5 Because the Defendant was not making rental payments to CIT, CIT ultimately put their claim
in the hands of a collection agency. It is not clear when the collection agency was first involved, but
I conclude that it was probably around November 2003. At that time Mr. Odenwald says that he
sought legal advice and based on that advice he sent a letter dated November 4, 2003 to City Water
advising that the units were totally inadequate and that the Defendant was treating the agreements as
at an end. In November 2003 CIT sent demand letters to the Defendant claiming the entire amount
due under the agreements. By letter dated November 13, 2003 to CIT, Mr. Odenwald requested that
the units be removed from his premises. Between November 2003 and the expiration of the rental
and service agreements, service technicians from City Water periodically attended the Defendant's
premises but were reportedly told that the units did not require servicing because they had been
disconnected and the Defendant wished City Water to remove them. Finally, in 2009, City Water
took steps to collect the amounts now claimed in this action. The units were removed from the
Defendant's premises by City Water on June 8, 2009.
Evidence of the Claimant
6 The Claimant's evidence is in the form of a customer log, service orders, and the viva voce
evidence of two employees, Mr. Lopez and Mr. Rosales. The customer log is intended to record all
communications with the customer. There are several relevant notes. On November 27, 2003 the
customer is reported as refusing to pay CIT but City Water is waiting for the reason for the refusal.
The next note, after a four year gap, is October 25, 2007 in which a City Water employee having
attended the site reports no City Water equipment on site. On January 8, 2008 the customer is
reported as not happy with City Water and wanting to cancel. On September 15, 2008 there is a note
that a cancellation letter dated August 27, 2008 letter has been received. On September 19, 2008
there is a note that the units were never installed and had been sitting in storage for the last three
years. A note dated October 3, 2008 final bills the account for four "lost" units. In June 2009 the
units are again reported to be available for pick up, and as noted City Water did retrieve the units on
June 8, 2009.
7 City Water service records record the following:
a) On April 30, 2003 a technician serviced three of the four units, noting that
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4. one unit was completely shut off;
b) On April 1, 2005 a technician reports that the Defendant does not have the
Plaintiff's coolers;
c) On September 27, 2005 a technician reports no coolers on site and invited
contact with Mr. Ramsey;
d) On July 5, 2006 a technician reports "these people have not had our coolers
for over two years";
e) On October 19, 2007 a technician notes that after talking to three people
for more than 25 minutes, no one knew anything about City Water's
coolers and there was no equipment in location;
f) On December 4, 2008 a technician reported that the customer got rid of
City Water equipment four years ago and again invited contact with Mr.
Ramsey;
g) On June 8, 2009 Mr. Lopez attended and removed the filtration units. Mr.
Lopez was the service technician who attended in October 2007 and
December 2008. He verified the comments on his service order. Mr.
Rosales gave evidence that CIT always advises City Water if a customer
refuses to make payment. Although there was no documentation
evidencing this communication in this case, Mr. Rosales was pretty sure
that CIT would have told City Water about the situation at the Defendant's
premises. Because the Defendant did not make rental payments there was
some refund agreed upon as between CIT and City Water. Because City
Water's contracts are for five year terms, its customers want brand new
equipment and City Water is not able to reuse old repossessed units.
Discussion and Analysis
8 The claim for rent payments in 2008 arises in the first renewal period of the agreement. The
question then is whether the agreement was automatically renewed. That question depends upon
whether the letter dated November 4, 2003 was received by City Water. Counsel for City Water
agreed that if that letter had been received, it was adequate notice to prevent renewal of the
agreement. Thus the question is whether on a balance of probabilities the letter was sent and
received. I accept Mr. Odenwald's evidence that the letter was sent. It is consistent with his having
obtained legal advice around November 2003 and is also consistent with the evidence that CIT was
pressing for payments. It is also consistent with City Water's own log note in November 2003 of an
oral communication that the customer was refusing to pay.
9 City Water argues that Mr. Odenwald's evidence was vague and general, contradicted by some
of City Water's records, and that accordingly City Water's evidence should be preferred. I do accept
that City Water's employees attended at the Defendant's premises and were told what they have
recorded on the service orders. They were therefore given incorrect information by the Defendant's
staff, including by Mr. Ramsey if he was personally involved. Nevertheless the facts are that the
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5. Defendant never made any rent payments for almost all of the original five year term. CIT was
aware of the non-payment of rent by the summer 2003. The November 4, 2003 letter is correctly
addressed to the address of City Water shown on the rental agreement. There is no evidence that the
letter was returned to the Defendant as undeliverable. Mr. Rosales' evidence was that CIT would
communicate with City Water if a customer was refusing to make rent payments because of
dissatisfaction with the equipment. This makes commonsense. Mr. Rosales was surprised that there
was no correspondence between CIT and City Water. That raises the prospect that there was other
documentation with respect to this customer that has gone missing, is no longer available, and in
any event has not been produced. Thus the absence of the November 4, 2003 letter in City Water's
current file is, in the circumstances, not particularly compelling evidence. I find that Mr. Odenwald
was testifying as to his honest belief and inaccuracies in his evidence I attribute to his not being the
person at the Defendant who is primarily involved in these matters and to the passage of time. I
nevertheless conclude that the November 4, 2003 letter was on a balance of probabilities sent and
received, that section 8 of the rental agreement was complied with such that there was no automatic
renewal of the agreement. This disposes of the claim for rental payments.
10 As noted, I find the City Water service records to be accurate. This means that, contrary to Mr.
Odenwald's evidence, three of the four filtration units were still hooked up and operating in April
2003 when they were serviced by a City Water technician. I thus conclude that Mr. Odenwald is
incorrect in his recollection of how immediately after the installation the units were found to be
unsatisfactory and disconnected. In these circumstances I am not satisfied that the Defendant has
established a fundamental breach or total failure of consideration by City Water.
11 I find that the claim of $1,200.00 for removal service charges is proven. Section 6 of the
service agreement provides for such a per unit charge on expiration or termination of the
agreements. The service agreement in section 8 also provides that the equipment is valued at $3,000
per unit. Based on the evidence, these units had barely been used at all. They presumably had a
value to City Water which ultimately went to the trouble of retrieving them. Section 6 stipulates a
flat charge of $300.00 per unit and accordingly the Claimant's claim is allowed at $1,200.00.
12 Although the Claimant has succeeded in recovering a judgment, until the amendment was
granted at the end of the hearing the claim for the removal service fee was a minor part of the claim.
There has been some success by both parties. In the circumstances there will be no costs to either
party.
D.W. YULE J.P.
cp/e/qlrds/qlvxw
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