Sykon Limited v. M.A.S Medical Supplies, 2015 ONSC 1149
COURT FILE NO.: DC-12-454
DATE: 2015-02-20
CORRIGENDA: 20150302
SUPERIOR COURT OF JUSTICE – DIVISIONAL COURT
RE: Sykon Limited, Plaintiff/Defendant by Defendant’s Claim (Respondent)
AND: M.A.S. Medical Supplies Inc. Defendant/Plaintiff by Defendant’s Claim (Appellant)
BEFORE: Edwards J.
COUNSEL: Jeremy Lum-Danson, Counsel, for the Plaintiff Craig Vander Zee, Counsel, for the Defendant
HEARD: February 20, 2015
REVISED REASONS
The text of the original endorsement has been corrected with the text of the corrigendum (released today’s date)
[1] M.A.S. Medical Supplies Inc. (M.A.S) appeals the Small Claims judgment of Deputy Judge Davis dated July 27, 2012 pursuant to which Sykon Limited (Sykon) obtained judgment on an unpaid invoice in the amount of $11,523 plus pre-judgment interest plus costs.
[2] M.A.S is a distributor of medical products. Sykon supplies medical equipment used in animal surgery. The primary products sold by Sykon to M.A.S. were a laser and smoke evacuation unit.
[3] M.A.S. and Sykon entered into a distribution agreement drafted by M.A.S. on May 16, 2008 (the agreement). The agreement provided for a term of five years unless terminated in accordance with the provisions of the agreement.
[4] In late August and early September 2009 M.A.S. submitted three purchase orders to Sykon for the purchase of two lasers, two smoke evacuation units and four ex-grade viewers (the product). Sykon submitted an invoice (the invoice) to M.A.S. dated October 16, 2009 in the amount of $23,213 for the product requested by M.A.S. The invoice required an upfront payment of 50 percent with the balance due within 30 days of delivery of the product.
[5] The product was sent to M.A.S. on October 26, 2009. It cleared Canada Customs on October 28 and was received in M.A.S’s warehouse on October 29, 2009. Smoke evacuation units were inspected by representatives of the C.S.A. The C.S.A. inspectors made recommendations for modifications to the smoke evacuation units.
[6] The uncontradicted evidence at trial was that the modifications suggested by the C.S.A. were not a pre-condition to any sale that M.A.S. might make to its customers. Sykon had shipped similar smoke evacuations to M.A.S. that required the same modifications recommended by the C.S.A. on October 29, 2009. These modifications were made by M.A.S., thereby allowing the sale of the units to its customers.
[7] On October 15, 2009, M.A.S. paid 50 percent of the invoice amount by a wire transfer to Sykon. The unpaid portion of the invoice owing by M.A.S. to Sykon was $11,523 – the amount which is the subject matter of this appeal.
[8] With payment not made, Sykon made a demand of M.A.S. for payment on December 13, 2009. M.A.S. responded to the demand with an unequivocal statement that it would not pay the outstanding amount until it received replacement parts for a laser unit, which it had previously purchased and sold to a customer.
[9] The laser unit which required a replacement part was not one of the products that form part of the invoice. The particular laser unit which required a replacement part had been previously shipped by Sykon and ultimately sold by M.A.S. to a customer in the Montreal area for which M.A.S. received full payment. This particular laser unit apparently had a burnt wire, which required replacement. There is no evidence to suggest that any of the laser units, which did form part of the product shipped on October 26, 2009 reflected in the invoice, were defective.
[10] On December 17, 2009, Sykon terminated the agreement. The reason cited for the termination was the stated intention of M.A.S. not to pay the outstanding balance of the invoice.
[11] The agreement provides for various methods by which the agreement can be terminated. The Deputy Small Claims Court Judge determined that the agreement had not been terminated in accordance with the provisions of the agreement, but relied on the provisions of section 12, which provides in part:
“Upon termination of this agreement for whatever reason (including summary termination under section 11.1 herein): …” (my emphasis)
[12] Section 11.1 of the agreement referenced in paragraph 12.1 of the agreement, provides for the various methods by which the agreement could be terminated.
[13] The Deputy Small Claims Court Judge, having determined that Sykon had failed to comply with the termination provisions of paragraph 11.1, nonetheless concluded that the termination of the agreement was included in the broader meaning of termination set forth in section 12.1 of the agreement.
[14] The provisions of paragraph 12.1.2 of the agreement provides:
“… termination of this agreement for whatever reason shall not relieve or release either party from making payments or performing obligations that became due prior to the termination or from the confidentiality provisions of this agreement.”
[15] The Deputy Small Claims Court Judge concluded that, given the provisions of paragraph 12.1 and specifically the provisions of paragraph 12.1.2 cited above, M.A.S. was liable for the balance of the invoice for the product which had been delivered on October 29, 2009.
[16] The standard of review for issues of law is correctness – see Housen v. Nikolaisen, (2002) S.C.C. 33. The standard of review for findings of fact is that the findings ought not to be reversed unless it can be established that the trial judge made a palpable and overriding error, see Housen (supra). The palpable and overriding error test can only be met if the findings are clearly wrong or can properly be characterized as unreasonable and unsupported by the evidence – see H.L. v. Canada (A.G.) 2005 SCC 25, 2005 S.C.C. 25 at paragraphs 55-56. The standard of review for findings of mixed fact and law is on a spectrum between correctness and palpable and overriding error – see Housen (supra).
[17] I am not satisfied that the Deputy Small Claims Court Judge erred in law in his interpretation of either section 11 or section 12 of the agreement. While Sykon did not terminate the agreement in accordance with the provisions of section 11 of the agreement, the Deputy Small Claims Court Judge was correct in his interpretation of section 12 of the agreement, and in particular paragraph 12.1.2, pursuant to which M.A.S. was not relieved of its obligation to pay the balance of the invoice.
[18] M.A.S. asserted a counter-claim, arising out of the alleged breach of the agreement. While the damages claimed by M.A.S. in its counter-claim were said to exceed $60,000 and were restricted to the Small Claims Court limit of $25,000, the Deputy Small Claims Court Judge made the following finding with respect to the counter-claim:
“There was no evidence presented of lost (prospective) sales nor some form of historical reconciliation that compares advertising/marketing expenses to net resulting profits earned, nor a timeline to demonstrate the allowance necessary to show the sales/net profits expected after any particular, individual promotional campaign. There is not a statement as to which advertising drive would not have been instituted if the defendant had been put on notice of the intention to terminate.”
[19] The Deputy Small Claims Court findings with respect to M.A.S.’s counter-claim, essentially amounts to a determination that M.A.S. did not meet the onus required to establish its damages. I find no overriding or palpable error with respect to the findings of the Deputy Small Claims Court Judge with respect to the determination of the counter-claim.
[20] The appeal by M.A.S. is therefore dismissed for the reasons set forth above. If the parties cannot agree upon the costs of the appeal, written submissions limited to two pages in length from each side, may be submitted to the court no later than March 10, 2015. If no submissions are received within this time frame, the court will assume that the issue of costs has been resolved between the parties.
Edwards J.
Date: March 2, 2015
CORRIGENDA
- Mark. A. Ross, Counsel, for the Plaintiff, has been changed to Jeremy Lum-Danson, Counsel, for the Plaintiff.