CITATION: Wells Fargo Equipment Finance Company v. Montesi Graphics Inc., 2016 ONSC 6507
COURT FILE NO.: CV-15-536694 and CV-15-536694 00A1
DATE: 20161018
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WELLS FARGO EQUIPMENT FINANCE COMPANY
Plaintiff
– and –
MONTESI GRAPHICS INC.
Defendant
Maya Poliak, for the Plaintiff
Jim Koumarelas, for the Defendant
– and –
KONICA MINOLTA BUSINESS SOLUTIONS (CANADA) LTD.
Third Party
Rebecca S. Studin for the Third Party
HEARD: October 17, 2016
REASONS FOR JUDGMENT
F.L. Myers, J.
The Motions
[1] The plaintiff and the third party each seek summary judgment against the defendant. For the reasons that follow each is entitled to judgment as sought. Accordingly, the defendant is ordered to pay the plaintiff the sum of $203,010.30, post-judgment interest on that sum calculated at the rate of 29% per annum compounding monthly, and costs on a full indemnity basis in the amount of $21,495 inclusive of disbursements and taxes. In addition, the third party claim is dismissed with costs payable by the defendant to the third party on a partial indemnity basis in the amount of $17,500 inclusive of disbursements and taxes.
The Facts
[2] By equipment lease dated September 12, 2014, Konica Minolta financed the purchase by the defendant of a Bizhub Press C1070 printer for use in the defendant’s printing business. The lease secured the cost of the new printer as well as the outstanding amount due by the defendant to Konica Minolta in respect of a prior lease of an earlier printer that was replaced by the Bizhub Press C1070. Under the terms of the new lease, the defendant agreed to pay $8,052.14 every three months for 22 payments over a term of 66 months. Approximately 60% of the amount financed by the defendant related to its outstanding debt on its prior printer.
[3] By assignment dated October 23, 2014, Konica Minolta assigned the lease to GE Canada Asset Financing Holding Company. The plaintiff Wells Fargo is the successor to GE Canada.
[4] The defendant says that it has had nothing but problems with the Bizhub Press C1070 from the day it was installed. Therefore it made no lease payments when they fell due. GE Canada made proper demand in December, 2014. It seized the printer in April, 2015 and has subsequently sold it. The plaintiff has properly accounted for the proceeds of realization and costs of sale in its damages claims.
[5] Before me, the defendant’s counsel properly conceded that it had no defence to the claims of the plaintiff as assignee. It also made no argument to oppose interest being payable as claimed under the terms of the lease agreement. It asked however that any judgment in favour of the plaintiff be stayed pending a determination of the liability, if any, of the third party Konica Minolta for the alleged non-performance of the printer. The defendant does not seek to hold the plaintiff liable for the amount of the third party’s liability. It does not claim a setoff against the plaintiff, qua assignee, based on the equities between the defendant and the third party qua assignor. The terms of the lease and the assignment documentation preclude such claims. The only basis for a stay therefore would be an equitable desire to protect the defendant’s cash flow as it is caught between two competing financial powerhouses. I need not decide the issue however, as I dismiss the third party claim in any event. There is no longer a basis to stay the plaintiff’s judgment even if I was inclined to do so.
[6] The defendant filed evidence supporting its claim that it was in frequent contact with the Konica Minolta through the fall of 2014 concerning the maintenance and repair of the printer. It provided no evidence however that it actually lost any business or incurred any actual costs due to the failure of the printer. Moreover, despite making subjective statements concerning its assessment that the printer often did not work properly, it had no answer at all to the utilization statistics that show that under the defendant’s usage, the printer printed well more than the number of copies set out in its specifications.
The Plaintiff’s Arguments
[7] The plaintiff relies on the lease as well as a separate maintenance contract it entered into with Konica Minolta. It says that it did not realize that its rights under its lease and maintenance contract were limited at the time that it signed the documents. It says that its copy of the lease was an illegible copy of a standard form contract in small print. But it saw on the front pages of both the lease and maintenance contract that both documents were subject to guarantees by Konica Minolta. Therefore, it argued that it can hold the Konica Minolta liable for the problems that it had with the printer. Rather than reading the documents to discern the warranty coverage available (or not available) it argues that the warranty of fitness for purpose applies and has been breached by Konica Minolta. Counsel for the defendant expressly submitted that the defendant is not relying on the Sale of Goods Act, RSO 1990, c.S.1 in which the warranty of fitness for purpose and other warranties have been codified. It relies instead on the other warranty of fitness for purpose. The defendant chose not to favour the court with a factum or any case law. So the source, scope, and applicability of that other warranty asserted remains something of a mystery.
[8] Had the defendant chosen to read the legal documents into which it entered in order to obtain credit of over $100,000, it would have discovered that its rights were indeed severely limited.
The Legal Documents Preclude all of the Defendant’s Claims
[9] Paragraph 1 of the lease agreement provides, in part, “[c]ustomer has chosen the Equipment for the purpose of leasing it from Lessor on these terms or conditions.”
[10] Paragraph 3 of the lease agreement provides, in part, as follows:
Customer will not assert against Lessor any claims by way of abatement, reduction, defense, set-off, compensation, counterclaims, or the like customer might have, whether under any service or maintenance agreement or otherwise at law or equity, including, without limitation, in respect of Konica Minolta’s Customer One Guarantee.
[11] Paragraph 4 of the lease agreement is entitled “OTHER IMPORTANT TERMS” and provides, in part, as follows:
Customer cannot cancel, terminate, or amend the terms of this Lease for any reason whatsoever, including Equipment failure, loss or damage. Customer selected the Equipment and the Supplier. Lessor purchased the Equipment solely in accordance with Customer’s instructions. Customer is leasing the equipment “as is”. Lessor is not responsible for Equipment failure or for the Supplier’s acts, or for any service, repairs or installation. Customer agrees there are no representations, warranties or conditions (express, implied or otherwise) whatsoever from Lessor with respect to the Equipment, including, without limitation, as to the condition, merchantability, design or fitness for any particular purpose.
[12] The defendant argues that the printing volume specifications of the Bizhub Press C1070 are substantially less than the volume of printing that was conducted by the defendant on its prior printer. It seeks to blame Konica Minolta for providing it with the machine that was inadequate for its needs. However, the defendant provides no evidence that it sought any advice from its financier as to the specifications of the machine that the defendant wished to purchase. There is no evidence that anyone from Konica Minolta made any representation concerning the adequacy of the volume specifications for the new machine or at all. In any event, absent evidence of a pre-contractual or negligent misrepresentation by Konica Minolta, the express confirmation by the defendant that it chose the Bizhub Press C1070 and that Konica Minolta purchased it solely on the defendant’s instruction,s as set out in the lease provisions cited above, are a complete answer to the defendant’s argument.
[13] The final words in paragraph 4 of the lease, cited above, put to rest any suggestion that Konica Minolta agreed to be bound by a warranty of fitness for purpose, whether statutory or implied at common law.
[14] As noted previously, Konica Minolta did provide a warranty that is referred to in the lease as its “Customer One Guarantee.” Konica Minolta agreed that, “[i]f within the first two years after installation the equipment cannot be repaired to meet factory specifications, we will replace it with a brand-new equipment model.” Customer One Guarantee also provides:
Konica Minolta Business Solutions (Canada) Ltd. makes no warranties whatsoever, expressed or implied, with regard to the products purchased, leased or rented by customer, the service, the software included with the product or its installation and maintenance and expressly excludes all other warranties, including the implied warranties of merchantability and fitness for a particular purpose
Customer’s exclusive remedy shall be replacement or repair of the product or non-conforming parts at the option of Konica Minolta as provided in this Customer One Guarantee. Konica Minolta shall not be liable for any damages, including, but not limited to damages due to the loss of data or information of any kind, loss of or damages to revenue, profits or goodwill, damages due to any interruption of business, damage to customer’s computers or networks, even if advised of the possibility of such damages. Customer expressly waives its right to special, consequential, exemplary, and incidental or punitive damages or monetary damages of any kind.
[15] The terms of Konica Minolta’s Customer One Guarantee were available on its website. It is obvious that there is no basis to infer or imply a warranty of fitness for purpose into the Customer One Guarantee. Rather, such a warranty is expressly excluded. The one remedy available to the defendant in the event that its Bizhub Press C1070 failed to meet factory specifications was to replace the machine. The defendant never sought this relief.
[16] The assessment of the service requirements and specifications of the Bizhub Press C1070 are set out in the maintenance agreement between the defendant and Konica Minolta. Once again, the defendants chose not to read the document. The defendant’s principal initialed each page and signed the agreement without reading it. Articles 600 to 603 on page three of the four-page agreement provide for the manner of calculating volume or throughput. Articles 903 and 904 provide as follows (emphasis and formatting in the original):
WARRANTY: KMBS WARRANTS THAT THE SERVICES SHALL BE PERFORMED IN ACCORDANCE WITH THE MANUFACTURER’S RECOMMENDATIONS AND SPECIFICATIONS FOR THE EQUIPMENT. KMBS MAKES NO OTHER WARRANTIES WHATSOEVER EXPRESS OR IMPLIED, WITH REGARD TO THE SERVICE, THE SOFTWARE, INCLUDING THE EQUIPMENT OR ITS INSTALLATION, OR MAINTENANCE, AND EXPRESSLY DISCLAIMS AND CUSTOMER WAIVES ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
REMEDY LIMITATIONS: CUSTOMER’S EXCLUSIVE REMEDY FOR BREACH OF WARRANTY SHALL BE REPAIR OF THE EQUIPMENT OR REPLACEMENT OF A NON-CONFORMING PART, AT THE OPTION OF KMBS. THE PARTIES WAIVE THEIR RESPECTIVE RIGHTS TO INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATING TO SERVICES PROVIDED UNDER THIS AGREEMENT. THE PARTIES RESERVE THE RIGHT TO RECOVER CONTRACT DAMAGES ALLOWED VIA THIS AGREEMENT. KMBS’S LIABILITY UNDER THIS AGREEMENT IS LIMITED TO THE COVER DAMAGES ON THE COST OF ALTERNATE MAINTENANCE SERVICES AND/OR CONSUMABLES PURCHASED BY THE CUSTOMER. THE PARTIES AGREE ANY CLAIM MUST BE BROUGHT WITHIN ONE YEAR AFTER THE ALLEGED DAMAGES ARE INCURRED.
[17] Is common ground that Konica Minolta did not charge the defendant for service calls or repairs that it made. Accordingly, the defendant has no damages claim available to it under the maintenance agreement.
[18] The relevant product specifications for the Bizhub Press C1070 were put into evidence by Konica Minolta. Exhibit J to Mr. Pavia’s affidavit shows that the machine is expected to print 55,000 copies per month. Under the applicable measuring conventions set out in the maintenance agreement, large size prints like those typically made by the defendant count as two copies each. The defendant’s print volume statistics are also in evidence. As noted above, even with the defendant’s complaints and maintenance or repair requests, it printed at or above the specified volume each month. There is no evidence of any subjective quality issue with prints produced when the machine was up and running.
[19] The maintenance log kept by Konica Minolta shows that there were a significant number of repair calls particularly in the early days following delivery of the Bizhub Press C1070. Mr. Pavia testified that these machines require ongoing repairs and maintenance. Normal maintenance was provided to ensure that the defendant’s printer continued to perform within specifications. And it did so. The defendant provides no evidence to the contrary.
[20] The defendant makes generalized complaints about the number of times that the Bizhub Press C1070 required repairs. The number of call quickly tapered off however. There were none in February, 2015; four in March; and only one in April, 2015 before the printer was repossessed by the lender. The defendant does not deny that repairs were made under the maintenance agreement and that the machine functioned within specifications as warranted in the lease. That is, Konica Minolta performed its contractual obligations under the terms of both the lease and the maintenance agreement.
Summary judgment
[21] I am satisfied that it is fair and just to resolve these motions summarily. It is unnecessary for me to rely upon the expanded powers in rule 20.04 (2.1). The obligation on the defendant to lead trump or risk losing is well understood. See Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, aff’d. 2014 ONCA 878. Unless the defendant is able to advance claims that are not excluded and precluded by the terms of the contracts that it entered into, it has no entitlement to seek damages against Konica Minolta.
[22] In Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4, the Supreme Court of Canada set out a three-part test for the assessment of the validity of contractual exclusion clauses. It is common ground that the first test is satisfied in this case. That is, the parties agree that by their terms, the exclusion clauses that I have discussed above apply to the circumstances established by the evidence in this case. The defendant claims that the exclusion clauses should not apply because they do not meet the other two tests set out in Tercon. That is, the defendant argues that the exclusion clauses were unconscionable when they were agreed upon and that enforcement of the clauses would violate public policy.
[23] The fact that the defendant chose not to read the relevant contracts makes it somewhat more difficult for it to claim that it was subjected to an unconscionable imbalance of bargaining power or that its lender took advantage of it. People of business are presumed to be aware of the terms of contracts that they sign and to have intended that their company be bound by those terms. Fraser Jewelry (1982) Ltd. v. Dominion, Electric Protection Co, 1997 4452 (ON CA), 1997, 101 OAC 56 (C.A.), at para 30. By failing to even bother to exercise the most basic due diligence to protect itself, the defendant cannot say that its free will was overborne or that it was somehow preyed upon by a powerful banker. There is also no evidence as to why the defendant chose to purchase the particular brand of printer that it purchased and to lease through this financier. There is no indication in the evidence that the Konica Minolta has a monopoly or that there was any shortage of competitive products or competitive financing sources available to the defendant. It also cannot and does not claim that it was new to the business or ignorant as to the terms of Konica Minolta’s agreements. This was not the first time it had financed equipment on similar terms from this same lender. In all, the defendant freely chose to buy a new printer and to refinance its pre-existing debt with Konica Minolta. There is no evidence to support a finding that the exclusionary clauses were unconscionable at the time the parties agreed to them.
[24] Finally, there is no evidence requiring a trial on whether the terms relied upon by Konica Minolta to exclude liability violate public policy. I agree with Patrick Smith, J, in John Deere Financial Inc. v. 1232291, Ontario Inc., 2015 ONSC 7467 at para.78 that “[b]roadly speaking, non-enforcement of an exclusionary clause on public policy grounds requires willful conduct by a party who intends to hide behind the exclusion clause.” Moreover, this is not a case involving very unsophisticated investors being preyed upon by an aggressive salesperson who is alleged to have made negligent pre-contractual misrepresentations in violation of an express order of the Ontario Securities Commission, as was the case in the very recent decision of Singh v. Trump, 2016 ONCA 747. Rather, here, the defendant used sophisticated, high-tech equipment in a high-volume, exacting business. It was in the best position to assess its needs and its borrowing capacity. In light of the fact that the defendant re-financed a very significant amount of outstanding debt that is unrelated to the performance or non-performance of the new machine, its failure to pay anything to its lender since the fall of 2014 is more consistent with a recalcitrant borrower than with a customer who suffered true, measurable losses.
[25] Under the terms of the borrowing documents, Wells Fargo and Konica Minolta are entitled to their costs on a full indemnity basis. Konica Minolta only claims costs on a partial indemnity basis. I have reviewed the costs outlines submitted by both of those parties. The hours and rates charged appear to be reasonable. The defendant’s counsel submitted that the overall fees claimed by Wells Fargo were high but he had no particular areas of concern. Rather, counsel submitted that his client was “in the court’s hands.”
[26] I cannot help but observe that on a summary judgment motion, the failure of the defendant to file a factum despite the mandatory provisions of rule 20.03 (1) was most unhelpful. Putting a client “in the court’s hands” or making submissions of law without legal support provides no assistance to the court in assessing the validity of the arguments made. Moreover, and more fundamentally, in summary judgment motions in particular, the assessment of the facts is keenly important. The Supreme Court of Canada has determined that summary judgment is a substantial alternative dispute resolution process. It is available where the court concludes that it is fair and just to determine the issues on the written evidence before the court. In the absence of a multi-day trial during which counsel weaves a narrative to slowly and thoroughly inculcate the judge with the theory of the client’s case, it is vital that parties provide the judge with a detailed, written statement of the facts with pinpoint citations to all applicable evidence.
[27] The factum is counsel’s first and best opportunity to advocate the client’s case prior to the oral hearing. Equally or even more important, the factum is the judge’s roadmap for the findings of fact that a party asks the judge to make when he or she is back in chambers writing the decision days, weeks, or even months after the oral hearing. The facts need support in the evidence and it is unhelpful at minimum, to expect the judge to plow through thick records to find the snippets of evidence supporting each particular finding that a party asks the judge to make to support the party’s request for or response to judgment. It is counsel’s most basic role to provide the judge with the evidence needed to support any finding being sought. This requires specific references to the evidence in the summary of facts in the factum. Factums that contain submissions on facts without references to the evidence are suspect. The facts asserted must reflect fairly the evidence submitted. Judges must and do ensure that there is admissible evidence to support the findings that they make. When counsel assert facts with no references to the evidentiary support, where do we look? Are we expected to know where in a box of material a particular reference is to be found just by having read through the material once before the hearing some time ago? Factums are required for summary judgment in particular for a reason. Summary judgment motions are often the main event. The parties’ rights may be decided with finality. It is the height of folly to fail to provide a factum or to provide one that does not contain pinpoint references to the evidence supporting every fact submitted.
[28] The absence of a factum in this case, coupled with the defendant’s confession of judgment in favour of the plaintiff and its submissions of grounds for relief that were wholly at odds with the contractual terms that it had not even read, laid bare the defendant’s goal to conserve costs and simply delay the just payment of its debts.
[29] Order to go as set out in paragraph 1 above.
F.L. Myers J.
Released: October 18, 2016
CITATION: Wells Fargo Equipment Finance Company v. Montesi Graphics Inc., 2016 ONSC 6507
COURT FILE NO.: CV-15-536694 and CV-15-536694 00A1
DATE: 20161018
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
WELLS FARGO EQUIPMENT FINANCE COMPANY
Plaintiff
– and –
MONTESI GRAPHICS INC.
Defendant
-and-
KONICA MINOLTA BUSINESS SOLUTIONS (CANADA) LTD.
Third Party
REASONS FOR JUDGMENT
F. L. Myers, J.
Released: October 18, 2016