REASONS FOR DECISION

kristjanson j.

[1] This is an appeal by Jerome Van Vliet and High Spruce Farms, a sole proprietorship owned by Mr. Van Vliet, from the trial decision of Small Claims Court Deputy Judge Aitchison dated August 29, 2018. The trial judge granted judgment to the plaintiffs/respondents on appeal, Dutchmaster Nurseries Limited (“Nurseries”) and Dutchman Industries Inc. (“Industries”). The appeal is granted in part with respect to Nurseries and dismissed with respect to Industries.

Background

[2] Nurseries is a wholesale grower and supplier of trees to the commercial sector. Industries sells and rents landscaping equipment. They are separate corporations, both owned by the same shareholders who are all family members. High Spruce Farms was a 100-acre tree farm owned and operated as a sole proprietorship by Mr. Van Vliet. High Spruce Farms was sold in 2016, and Mr. Van Vliet ceased carrying on business.

[3] On November 22, 2016 the plaintiffs commenced a claim in Oshawa Small Claims Court seeking damages for unpaid invoices. Nurseries delivered product and issued invoices to High Spruce Farms in the total amount of $23,232.24 between June 4, 2014 and July 16, 2014. Nurseries issued an invoice to High Spruce Farms on May 27, 2016 for $1977.50. The trial judge found that the invoices were not paid.

[4] The trial judge found that High Spruce Farms and Nurseries had reached a “contra” agreement, in which the parties agreed to offset invoices with products. He found that there was no obligation to contra, but that the parties had agreed to account for two contra payments, one in November 2014 in the amount of $7,124.50, and one in May of 2016, for $8915.70. This created a contra credit with Nurseries in High Spruce Farms’ favour in the amount of $16,040.20. The total owing for the 2014 invoices, minus the contra, is $7,192.04. That is the amount awarded by the trial judge to Nurseries. The trial judge found that $1977.50 of the claim – the value of the 2016 invoice – was statute barred as outside the limitation period.

[5] The trial judge appears to have arrived at his figure by adding up the 2014 and 2016 invoices ($25,209.74), subtracting the contra ($16,040.20), for a total of $9,169.54, and then subtracting the 2014 deficit after applying the contra ($7192.04). The different, of course, is the value of the 2016 invoice, $1,977.50, which the trial judge in error referred to as the “statute-barred” portion of the outstanding invoices. In fact, the $1,977.50 was the only invoice not statute-barred by the limitation period.

[6] The trial judge found as a fact that Mr. Van Vliet and Industries did not have a contra agreement. He found that Industries had issued two invoices in June 2016, in the total amount of $5079.35, those invoices were unpaid, and judgment issued in favour of Industries for this amount plus the contractual rate of interest.

The Issues and Analysis

[7] While several issues were raised, oral argument focused on the following:

(a) Did the trial judge err in law in failing to apply the limitation period, and so miscalculating by only finding $1977.50 of the 2014 invoices were statute barred?

(b) Did the trial judge err in applying the contra credit?

(c) Did the trial judge err in fact or law in failing to apply a credit for items identified by not taken by Nurseries or Industries on the wind-up of High Spruce Farms?

(d) Did the trial judge err in finding that there was no contra agreement with Industries?

The Standard of Review

[11] The correctness standard applies to pure questions of law. The standard of palpable and overriding error applies to questions of fact and, absent an error in principle or extricable question of law, to questions of mixed fact and law: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.

Issue #1: Did the trial judge err in law in failing to apply the limitation period, and so miscalculating by only finding $1977.50 of the 2014 invoices were statute barred?

[8] The Limitations Act, 2002, S.O. 2002, c 24, Sch B, establishes a basic limitation period of two years after a claim is discovered. For contractual obligations, this is presumed to be the first day on which there is a failure to perform the obligation once a demand for the performance is made (sections 4-5). The terms of most of the invoices were Cash on Delivery; some were noted as contra. The judge found that the items ordered by High Spruce Farms were delivered by Nurseries, and invoices were rendered at the time of delivery. He specifically found that there was no running account. He found as a fact that all the invoices were unpaid.

[9] The trial judge recognized that there was a two-year limitation period, as he specifically found $1977.50 of the claim to be statute-barred. The claim was not commenced until November 2016. As set out above, the trial judge allowed the Nurseries’ Claim for all the 2014 invoices, and in fact disallowed the claim for $1,977.50 – the only claim that fell within the limitation period. He held “I do think that some of the charges in 2014 are statute barred. There is no running account here.” He did not explain why only some of the 2014 charges were statute-barred, given that the claims were based on 2014 invoices rendered with a demand for payment, and his finding that there was no running account. The defendants were self-represented at trial.

[10] In November 2016 the plaintiffs commenced a claim based on invoices totaling $23,232.24 for invoices rendered between June 4, 2014 and July 16, 2014 as well as the 2016 invoice. They credited High Spruce Farms for contra accepted for payment in the amount of $16,040.20 between 2014 and 2016. However, in the action they sought to enforce the remaining claim for $7,192.04, based on 2014 invoices and thus statute- barred. The trial judge erred in calculating the statute-barred portion of the claim as $1977.50 rather than $7,192.04. This is a legal error, and the trial judge was incorrect in his approach.

[11] The plaintiffs pleaded unjust enrichment in the alternative. The trial judge found that unjust enrichment was not made out, holding: “And if there were no contract and no invoices at all on the basis of unjust enrichment, I’d be giving judgment to the Plaintiff.” To succeed in an unjust enrichment claim, the plaintiff needs to establish three elements as set out in Garland v. Consumers' Gas Co., 2004 SCC 25 (S.C.C):

(1) an enrichment of the defendant;

(2) a corresponding deprivation of the plaintiff; and

(3) an absence of juristic reason for the enrichment.

In law, a contract and an intervening limitation period are juristic reasons for not finding unjust enrichment, as correctly identified by the trial judge. When the limitation period for a breach of contract expires but the party failed to take steps within the limitation period to enforce its contractual rights for that breach, the statutory limitation period will be enforced. Otherwise, the statutory limitation period would be meaningless. The trial judge correctly found that unjust enrichment was not available to Nurseries.

Issue #2: Did the trial judge err in applying the contra credit?

[12] Mr. Van Vliet argues that the May 27, 2016 invoice in the amount of $1,977.50 is not enforceable. He argues that there was no agreement that contra should be applied to the earlier invoices, and the May 26, 2016 contra of $8,915.70 should have been applied to the May 27 invoice, not to any earlier outstanding invoices that were statute-barred.

[13] The trial judge did not find any obligation to apply the contra to any specific invoice, or in any order. There was no palpable and overriding error in the trial judge’s finding. The plaintiffs were entitled to allocate the payments made by the defendants as the plaintiffs saw fit, in the absence of any direction as to how the payments were to be allocated: Colautti Construction Ltd. v. Ashcroft Development Inc., 2011 ONCA 359 at paras. 55-56. The trial judge made no error in fact or law.

Issue #3: Did the trial judge err in fact or law in failing to apply a credit for items identified but not taken by Nurseries or Industries on the wind-up of High Spruce Farms?

[14] Mr. Van Vliet argues that the trial judge was obliged to give credit for the items that the defendants “set aside” for the plaintiffs when he was selling his farm, but that the plaintiffs did not take. Mr. Van Vliet’s evidence is that some representatives of the defendants attended at High Spruce Farms, and one of them “labelled a lot of things he wanted to take, concrete blocks, some carts, and [a representative] said he’d get back to me on the tractor.” He sought to impose an obligation to barter, and to accept these items as contra.

[15] The trial judge found that there was no obligation to barter, and there was no error in this finding. There is no evidence of the value of the blocks and carts, and no evidence of an agreement on the tractor. As a result, the trial judge’s finding there was no agreement to contra any value based on the items was open to him on the facts and the law.

Issue #4: Did the trial judge err in finding that there was no contra agreement with Industries?

[16] The trial judge found as a fact that there was no agreement to contra with Industries. There is no palpable and overriding error in this finding, as it was grounded in the evidence before him. He was entitled to accept the evidence of Industries that High Spruce Farms did not have any product that Industries needed, that Industries did not have contra agreement with High Spruce Farms, and that none of the invoices rendered by Industries indicated “contra.” The trial judge was entitled to accept the evidence of the defendants on this point. The judgment as to the Industries claim stands.

Conclusion

[17] The appeal in respect of the Nurseries claim is allowed in part. The appellants owe the respondents the value of the 2016 invoice in the amount of $1,977.50, plus interest at the contractual rate of 18% per annum from May 27, 2016 until judgment, and post-judgment interest at the Courts of Justice Act rate of 3% from August 29, 2018.

[18] The Order of the Deputy Judge is varied by setting aside judgment for the Plaintiff Dutchman Nurseries Limited of $7,192.04, and instead awarding judgment to the Plaintiff Dutchman Nurseries Ltd. in the amount of $1,977.50, plus pre-judgment interest at 18% per annum commencing May 27, 2016, and post-judgment interest at the Courts of Justice Act interest rate of 3% from August 29, 2018.

[19] While success on this appeal was divided, considering the clear error of law the appeal was justified. I find that Mr. Van Vliet and High Spruce Farms are entitled to their costs of this appeal, with some reduction for the divided success. Reasonableness and proportionality are touchstones in the fixing of costs. The appellants are awarded partial indemnity costs of $2,500.00, inclusive of HST and disbursements. The costs may be set off against amounts owing by Mr. Van Vliet and High Spruce Farms.

[20] This order is effective from the date it is made and is enforceable without any need for entry and filing.

Kristjanson J.

Released: September 8, 2020

Dutchmaster Nurseries Inc. v. Jerome Van Vliet, 2020 ONSC 5341

Case Summary

REASONS FOR DECISION

Background

The Issues and Analysis

The Standard of Review

Issue #1: Did the trial judge err in law in failing to apply the limitation period, and so miscalculating by only finding $1977.50 of the 2014 invoices were statute barred?

Issue #2: Did the trial judge err in applying the contra credit?

Issue #3: Did the trial judge err in fact or law in failing to apply a credit for items identified but not taken by Nurseries or Industries on the wind-up of High Spruce Farms?

Issue #4: Did the trial judge err in finding that there was no contra agreement with Industries?

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 2

Legal Tests 2

Legislation 1