CITATION: 2020494 Ontario Inc. v RBA Financial, 2015 ONSC 1855
COURT FILE NO.: DV-14-031-00
DATE: 2015 03 20
ONTARIO
SUPERIOR COURT OF JUSTICE
(DIVISIONAL COURT)
BETWEEN:
2020494 ONTARIO INC. c.o.b.
RBA FINANCIAL GROUP
George Corsianos, for the Plaintiff (Respondent)
Plaintiff
(Respondent)
- and -
DAY & ROSS INC.
Todd J. Burke and Jennifer Katsuno, for the Defendant (Appellant)
Defendant
(Appellant)
HEARD: February 27, 2015
REASONS FOR JUDGMENT
MACKENZIE J
[1] The defendant, Day & Ross Inc. (Day & Ross) appeals from the judgment of Deputy Judge I. Latimer, Small Claims Court, dated March 6, 2014.
Day & Ross ask that the judgment of March 6, 2014 be set aside and the plaintiff’s claim be dismissed with costs.
[2] The grounds of appeal as set out in the Notice of Appeal are as follows:
the trial judge erred in finding that Day & Ross is liable to pay to the respondent $18,100;
the trial judge erred in finding Day & Ross had no right of set-off and that the principle of equitable set-off did not apply;
the trial judge erred in finding that Day & Ross had no legal obligation to pay the Shipper, Itzke River Farm Ltd. (the Shipper) the value of a damaged cauliflower load;
the trial judge erred in not finding that there was an implied assignment as between the Shipper and Day & Ross.
Background
[3] Day & Ross is a corporation with offices and terminals throughout Canada including Brampton. It provides a variety of transportation services, including the brokering of loads.
[4] RBA Financial group is a factoring company that purchases invoices and receivables of motor carriers and other corporations for a fee.
[5] Transport MRTC Inc. (MRTC) is a licensed motor carrier having offices in Pierrefonds, Quebec. While MRTC is not a named party in the action, it had involvement with the shipping agreements in issue in the action.
Salient Facts
[6] Between on or about August 15, 2012 and on about September 4, 2012, Day & Ross entered into a series of four agreements with MRTC for transport of general merchandise between various locations in Canada. The total value of the four agreements was $ 18,100. The fourth agreement which is the agreement In issue on this appeal was concluded on or about September 4, 2012. That agreement was for the shipment of a load of cauliflower from the Shipper in Manitoba to Les Fermes Riendeau (LFR) in Quebec. The agreed price for this shipping service was $2,100.
[7] MRTC assigned all four agreements to RBA Financial Group (RBA) which then sent invoices to Day & Ross for the agreed amounts with MRTC, along with copies of the notices of assignment.
[8] In relation to the fourth agreement, Day & Ross did not at the material time have the equipment or capacity to transport the load and thus brokered the load. In the result, Day & Ross retained MRTC to transport the Shipper’s cargo to LFR. The bill of lading for the subject load was not signed by Day & Ross.
[9] In the event, the load of cauliflower was subject to spoilage in the course of its transport from Manitoba to Quebec and was rejected by LFR on or about September 8, 2012.
[10] On or about September 10, 2012 MRTC issued an invoice to Day & Ross for $2,100, which invoice had appended a notice of assignment. The notice of assignment stated that MRTC had outsourced its account receivable in the subject agreement to RBA and directed Day & Ross to make payment of the invoice to RBA. It is not in dispute that the cauliflower load in question was valued at $21,219.25.
[11] Day & Ross attempted to obtain payment of the value of the spoiled load from the insurers from MRTC, but MRTC failed to provide accurate insurance information to Day & Ross.
[12] On or about October 17, 2012, Day & Ross through an employee sent a facsimile message to RBA confirming Day & Ross had placed a claim for the spoiled load against MRTC and requested RBA to provide contact and insurance information for MRTC so that Day & Ross could submit a claim to the insurers for MRTC.
[13] Day & Ross through its employee repeated the request for particulars of the MRTC insurance company for purposes of filing a claim on numerous occasions from October 31, 2012 through November 20, 2012. Among other things, the employee notified MRTC that if Day & Ross did not receive valid insurance information, it would have no choice but to pay its client (the Shipper) directly for the loss and deduct the value of the spoiled load from whatever amount it owed to MRTC under the four shipping agreements.
[14] In the absence of receipt of any insurance confirmation from MRTC, Day & Ross paid the value of the spoiled load to the Shipper and withheld payment under its agreements with MRTC by way of set-off, in order to account for the loss Day & Ross incurred by its payment to the Shipper.
The Position of Day & Ross
[15] Day & Ross submits it has set-off rights against the amount owing to MRTC because Day & Ross had an obligation to pay the Shipper’s claim and is accordingly entitled to contribution and indemnity for such payment from MRTC. Day & Ross further contends that as RBA Financial Group took an assignment from MRTC, RBA Financial Group is in the same situation as MRTC would have been prior to such assignment and accordingly, Day & Ross can claim contribution and indemnity against RBA Financial Group. Day & Ross further argues that it has rights of set-off against all four invoices.
The Position of RBA Financial Group
[16] RBA submits Day & Ross has no set-off rights as alleged because there was no privity of contract between the Shipper and Day & Ross since Day & Ross acted in the circumstances as a load broker. RBA contends that as a load broker, Day & Ross had no obligation to pay the Shipper for property damage caused by the negligence of MRTC because Day & Ross had not negligently chosen MRTC to be the carrier. Further, it submits Day & Ross had no set- off rights when it paid the Shipper’s claim, since at the time of such payment it had not taken an assignment from the Shipper of the claim that the Shipper would have had against MRTC. In the alternative, RBA’s position is that if Day & Ross had any set off rights, it can only set off the amount of the fourth invoice, $2,100.00 against the total amount claimed of $21,219.25.
Analysis
[17] Day & Ross frames the issues in the appeal as follows:
a) Did the trial judge err in fact and law in finding that Day & Ross had no legal obligations to pay the Shipper for the value of the spoiled cauliflower load and that there was no privy of contract between Day & Ross and the Shipper?
b) Did the trial judge err in fact and law in not finding there was an implied assignment as between the Shipper and Day & Ross?
c) Did the trial judge err in fact and law in finding that Day & Ross had no right of set-off and that the principle of equitable set-off did not apply?
[18] Before proceeding in this analysis it is appropriate to recognize the standard of review in appeals. The general principles governing the standard of review in appeals is set out by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235, in the following terms :
The standard of review by an appellate court on a question of law is that of correctness: [paragraph 8, page 16];
The standard of review for an appellate court for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error” [paragraph 10, pages 17 and 18].
[19] The above commentary and extracts were adopted by this court in Clarksburg Contractors Limited vs. Saks et. al, 2012 ONSC 4903, being an appeal from a judgment of a Small Claims Court: see paragraphs 21, 22 and 24, pages 4 and 5.
Was there a legal obligation on Day & Ross to pay the Shipper the value of the damaged or spoiled cauliflower load.
[20] Day & Ross argues that the cases relied upon by the trial judge, in particular Fargo Transportation Services Limited vs. Netco Trucking Limited, 2007 ONSupCtJusSmClCt SC 07-55 39-00, on which the trial judge based his finding that Day & Ross had no legal obligation to pay for the value of the spoiled cauliflower load and there was no privity of contract between Dan Ross and the Shipper, are distinguishable from the present case on the basis that the load broker’s only contractual obligation was to arrange for carriage of the load, in which event that broker would not have any liability to his customer, the Shipper.
[21] However, counsel for Day & Ross distinguishes Netco on the basis that Day & Ross and the Shipper had an existing transportation provider and customer relationship. Counsel contends the fact that Day & Ross in the context of the fourth agreement acted as a load broker only, rather than carrier, did not change the nature of this agreement with the Shipper into a brokerage relationship. On that basis, Day & Ross’ position as noted is that it had a contractual obligation as a carrier to pay the Shipper’s claim.
[22] I am not persuaded this is a compelling or conclusive argument. The trial judge concluded there was:
“no privity of contract between the Shipper and Day & Ross, and accordingly Day & Ross had no legal obligation to pay the claim for the spoiled cauliflower load because the Shipper had no recourse against Day & Ross for the negligence of MRTC in relation to the load. The trial judge further found that until the last trip (fourth agreement), MRTC had proven itself to be a competent carrier so Day & Ross could not be faulted for choosing them to transport the cauliflower load for the Shipper. The trial judge noted that Day & Ross paid the claim for the spoiled cauliflower load to maintain good customer relations with the Shipper. While Day & Ross’ desire to do that is understandable, they should have taken an assignment of the claim that the Shipper had against MRTC. However, Day & Ross did not take an assignment and accordingly it had no set-off rights against MRTC.” See paragraph 38, page 9 of Reasons for Judgment.
[23] In essence, Day & Ross’ position is that in seeking to distinguish the cases (Netco Trucking) on appeal, (in which Day & Ross failed to succeed at trial), it is now in the hearing of the appeal seeking to make new submissions and arguments, basically, to argue the case de novo.
[24] I conclude that the trial judge has made no error with respect to his disposition on the question of law nor did he make any palpable or overriding error for his factual findings in this regard.
Was there an implied assignment as between the Shipper and Day & Ross.
[25] RBA argues there was no evidence before the trial judge of any assignment of legal rights between Day & Ross and the Shipper arising out of the settlement and payment by Day & Ross to the Shipper of the value of the spoiled cauliflower load. RBA contends no evidence had been led at trial about any implied assignment and that this was a new argument put before the appellate court. Again, RBA submits Day & Ross is simply trying to introduce new arguments before an appellate court without any evidentiary basis in the decision under appeal.
[26] Day & Ross’ submission is that its payment of the value of the spoiled cauliflower load to the Shipper is “evidence” that an assignment occurred between the parties. By accepting payment from Day & Ross, the Shipper provided Day & Ross with an implied assignment of any claim against MRTC with respect to the spoiled cauliflower load, emphasis added: see paragraph 40, Day & Ross’ factum.
[27] I accept the submissions and argument of the respondent RBA on this point. I find no factual foundation in the evidentiary record on which a finding by the trial court urged by Day & Ross herein could be based.
Whether Day & Ross had no right of set-off and that the principles of equitable set-off did not apply.
[28] Day & Ross’ position on this issue is premised on the finding by the trial court that there was no implied assignment of the contracted claim between the Shipper and Day & Ross. Counsel submits the trial court erred on this issue on the basis that the evidence before the trial court would support the finding that there was an implied assignment of the subject claim. In this regard, counsel contends Day & Ross had a genuine financial interest in the claim between the Shipper and Day & Ross, since the Shipper was a pre-existing customer of Day & Ross. Although Day & Ross retained MRTC to transport the load, Day & Ross had a direct financial interest in recovering the value of the spoiled cauliflower load.
[29] This line of argument fails. The trial judge found correctly that Day & Ross’ engagement in the fourth agreement was that of a load broker. Further, he found correctly that as a load broker, it was not liable to pay the value of the spoiled cauliflower load. Having so paid the value, it would have no set-off rights in the absence of taking an assignment of the right of action from the Shipper.
[30] Finally, Day & Ross on appeal argues that there are equitable grounds which justify a set-off in the present case. It contends MRTC failed to maintain an appropriate cargo temperature for the cauliflower load and deliver it in safe condition in terms of the contract of carriage (Rate Confirmation).
[31] Day & Ross claims that its loss with respect to that load goes to the heart of the claim of RBA and has a close connection with the agreements and that the September 4th, 2012 agreement is but one of the four agreements, all of which were concluded between the same parties Day & Ross and MRTC.
[32] Day & Ross contends the fact that the subject invoices had been factored by MRTC to RBA does not bar Day & Ross from relying on the defence of equitable set-off; in support; counsel cites the case of Holt and Telford, [1987] 2 SCR 193. Holt and Telford determined that equitable set-off is available where there is claim for a money sum notwithstanding assignment. There is no requirement of mutuality to establish equitable set-off. An individual could (1) set-off against the assignee a money sum which accrued and became due prior to the notice of assignment, and (2) set-off against the assignee a money sum which arose out of the same contract or series of events which gave rise to the assigned money sum or was closely connected with that contract or series of events. I am not persuaded that this statement of the law of equitable set-off is available to Day & Ross in this case.
[33] As noted above, the trial judge recognized the principles of equitable set-off as described in Holt and Telford but indicated in his reasons that Day & Ross had no legal obligation to pay the claim, i.e., the debt enforceable in law, and the fact that Day & Ross did pay the claim was found by the trial judge to be a payment to maintain good customer relations, not the discharge of a legal obligation. Again, in that event it would have been open to Day & Ross to take an assignment of the claim that the Shipper would have had in the ordinary course against MRTC.
[34] I conclude there was no error by the trial court in finding Day & Ross in fact or law had no right of set-off against MRTC and that the principles of equitable set-off did not apply in the circumstances.
Disposition
[35] In the result, the appeal will be dismissed. If the parties are unable to agree as to the quantum of costs payable by Day & Ross I will entertain written submissions by the parties not to exceed four pages in length, “exclusive of supporting materials”, on the following schedule.
by the respondent within 21 days from the date of this Endorsement;
responding submissions by the appellant within 14 days of its receipt of the respondents submissions; and
reply, if any by the respondent within 10 days of its receipt of the responding submissions of the appellant.
MACKENZIE J
Released: March 20 2015
CITATION: 2020494 Ontario Inc. v RBA Financial, 2015 ONSC 1855
COURT FILE NO.: DV-14-031-00
DATE: 2015 03 20
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2020494 ONTARIO INC. c.o.b
RBA FINANCIAL GROUP
Plaintiff
(Respondent)
- and -
DAY & ROSS INC.
Defendant
(Appellant)
REASONS FOR JUDGMENT
MACKENZIE J
Released: March 20 2015