Court File and Parties
COURT FILE NO.: CV-16-564195 DATE: 20170717 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BONE SAFETY SIGNS, LLC, Plaintiff AND: WORK ZONE SAFETY PRODUCTS INC., Defendant
COUNSEL: Matthew Maurer, for the Plaintiff Barry Yellin, for the Defendant
BEFORE: Monahan, J. HEARD: July 14, 2017
Endorsement
[1] This is a motion for a summary judgment brought by Bone Safety Signs, LLC (“Bone”) in respect of unpaid invoices for goods provided to Work Zone Safety Products Inc. (“Work Zone”).
[2] Bone is a U.S. corporation carrying on business in the State of Georgia as a manufacturer of temporary traffic control products. Work Zone is an Ontario corporation and carries on business as a supplier of temporary traffic control products.
[3] Between April 18, 2016, and July 19, 2016, Bone supplied Work Zone with temporary traffic control products and rendered invoices accordingly (the “Action Related Product”). Work Zone has failed to pay the invoices and Bone brings a motion for a summary judgment in the amount of the unpaid balance totalling $47,301.92 USD.
Facts
[4] Bone supplied Work Zone with temporary traffic control products from 2009 to 2016. Work Zone acted as Bone’s master, non-exclusive distributor in Canada for its products.
[5] In late 2015, Bone advised Work Zone that it would be increasing its pricing effective May 1, 2016. This was confirmed in a follow-up email from Bone to Work Zone on March 21, 2016.
[6] In April 2016, in response to the notice of an impending price increase, Work Zone ordered the Action Related Product. Although the goods were delivered, the invoices for the Action Related Product were not paid by Work Zone.
[7] On August 12, 2016, Work Zone wrote to Bone indicating that they would be returning goods that had previously been purchased from Bone in order to receive a credit that could be applied against accounts receivable owing to Bone. Work Zone indicated that the total return would have a cost value of approximately $65,000 USD. Work Zone attached an itemized list of the products it wished to return. Most of the products on this list were items that had been ordered and received by Work Zone prior to April 2016. There was no indication at this point that any of the products that Work Zone wished to return were defective.
[8] On October 5, 2016, Ben Cohen, the President of Bone (“Cohen”), wrote to Work Zone inquiring as to the status of the product that Work Zone wished to return for credit. He further indicated that once he had a final list he would review it and set up a pick-up of the goods.
[9] David McDonald, an officer and director of Work Zone (“McDonald”), responded by indicating that the items were being returned “due to product failure issues laid out to you last week…regardless of whether they are used or not…”. He further indicated that “the return items are non negotiable”.
[10] Throughout the rest of October there was a series of email exchanges between Cohen and McDonald discussing the basis upon which Work Zone would return products to Bone and receive credit. Throughout these email exchanges, Cohen indicates that he will only grant credit for product that is non-defective and can be resold by Bone. Further, Cohen specifically instructs McDonald not to ship the product in question “collect”. Instead, Cohen indicates that he will arrange inspection of the product at Work Zone’s premises, determine the quantity and value of the return, and arrange the pick-up and delivery.
[11] Although McDonald at various points raises suggestions to the effect that the product in question may be defective, and that he may wish to proceed in the “legal arena”, in the final email exchange with Cohen between October 25 and October 28, 2016, McDonald confirms that the goods are “100%” and that if Bone, upon inspection, determines differently, McDonald will send back additional merchandise to cover the outstanding accounts receivable. In this email exchange, it is further made clear that Cohen would arrange for the goods to be inspected at the Work Zone premises before they were shipped so as to ensure that only products acceptable for credit would be shipped to Bone.
[12] Based on McDonald’s agreement with these arrangements, Cohen indicates that he is prepared to provide Work Zone with a credit note for the full amount of $47,301.92 USD without inspecting the goods in advance, on the understanding that the final amount of the credit will be adjusted based on the results of Bone’s inspection of the goods at Work Zone’s premises.
[13] The credit memo was issued by Bone for the said amount on October 31, 2016, with a cover email indicating that once the returned product is inspected for quality, quantity and value, Bone will contact Work Zone to confirm an agreement with respect to the credit. The credit note also includes a notation indicating that the credit value will be determined by quantity, quality and product value after Bone’s inspection. The note further states that “Upon inspection of returned product an agreed credit amount will be applied to Work Zone Safety Account.” (See Reply Motion Record, Tab V).
[14] Shortly after receiving the credit note, McDonald emailed a Work Zone staff person instructing them to apply the credit reflected on the credit note to the unpaid receivables owed to Bone. (See October 31, 2016 email from McDonald, Reply Motion Record, Tab W). McDonald further instructs his staff to add in a credit for freight and customs, stating that Bone has accepted these additional costs for credit. McDonald included Cohen on this email.
[15] On November 2, 2016, Cohen raised concerns with McDonald’s October 31 email, noting that Bone was willing to authorize a credit on product return based on inspection of the product for quantity, quality and value. Further, Cohen noted that the credit was for the product only and would not include freight, duty or customs. He asked McDonald whether the latter wished to proceed with a product credit only.
[16] McDonald replies on the same day with an email taking the position that Bone is responsible for the shipping and duty costs and further indicating that he has retained counsel who will be filing a motion for damages “based on your actions and failure to address a serious product failure.” He also states that “your product” will be sent “collect to you as we will not pay to warehouse defective product”. He advises Cohen to “proceed with a court filing”, that all future correspondence should be “lawyer to lawyer”, and notes that “this will be a lengthy issue involving damages” and that Work Zone will petition the court to order that Bone post a “sizeable bond for the duration to be awarded in judgment by the court.” (November 2, 2016 email from McDonald, Reply Motion Record Tab Y).
[17] There is further email correspondence in early November 2016 in which Cohen instructs Work Zone not to ship the product back to Bone, as the matter has been referred to counsel. However, on November 10, 2016, McDonald instructs his staff to ship the goods to Bone, and that the costs of shipping will be “added to our counter suit once Bone files bond of assets in Cda.” Bone refused to accept the returned product that was shipped by Work Zone and it was subsequently delivered back to Work Zone.
[18] At this point, legal counsel became involved, with Bone issuing a statement of claim for the cost of the Action Related Product on November 16, 2016, and Work Zone filing a statement of defense and counterclaim on December 22, 2016.
Analysis
[19] The principles applicable to a motion for summary judgment are well understood. In particular, pursuant to Rule 20 of the Rules of Civil Procedure a court may grant summary judgment if it is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defense”. As the Supreme Court of Canada made it plain in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the summary judgment procedure should be interpreted broadly, favouring proportionality and meaningful access to the affordable timely and just adjudication of claims. In particular, when the use of summary judgment powers would enable a judge to fairly and justly adjudicate a claim, it will generally not be against the interests of justice to do so.
[20] In this case, there is uncontradicted evidence on the record that the Action Related Product was ordered by Work Zone in April 2016, that those goods were delivered to Work Zone, and that the invoice for said goods is $47,301.92 USD. Moreover, there is nothing on the record indicating that the Action Related Product was in any way defective. The goods that Work Zone attempted to return in November 2016 were largely goods that had been previously ordered and delivered by Bone. Thus, Bone is prima facie entitled to be paid for the Action Related Product.
[21] Work Zone attempts to avoid a finding of liability for the amounts owing in respect of the Action Related Product based on the credit note issued by Bone on October 31, 2016. They raise various defences based on the credit note, including estoppel by representation and waiver, promissory estoppel, and equitable set off. Work Zone further alleges that Bone was under a duty to mitigate its damages and that it failed to do so by refusing to inspect the goods that were returned to Bone in November 2016.
[22] These defences fail on the basis that Work Zone did not act in accordance with the credit note, nor with the understanding between the parties as to the basis upon which the credit note had been issued. Prior to receiving the credit note, McDonald has stated that the goods were not damaged or defective, that they were “100%”. Moreover, he agreed with Cohen that the actual amount of the credit note would be adjusted based on Bone’s inspection of the product at the Work Zone premises. The credit would be for the product only, and not for shipping, customs or duty.
[23] Immediately after receiving the credit note, Work Zone proceeded in a manner materially different from that agreed to by the parties. In particular, Work Zone indicated that it was not prepared to negotiate the terms of the credit and, instead, that it was shipping the goods directly to Bone, and applying the full value of the credit against the amounts owed to Bone. In addition, Work Zone purported to claim a credit for the shipping costs that it incurred due to its unilateral action. When Bone objected that this was inconsistent with the basis upon which the credit note had been issued, Work Zone indicated that the matter was being referred to legal counsel, that Bone would have to sue Work Zone to collect the money owing for the Action Related Product, and that Work Zone would be filing a counterclaim seeking substantial damages.
[24] When the goods arrived in Georgia, Bone refused to receive them as they had been shipped “collect”. Instead, Bone returned the goods to Work Zone. I find this action on behalf of Bone was entirely reasonable given the fact that they had specifically indicated that they were not responsible for shipping costs, and would not receive and pay shipping on goods sent “collect”.
[25] A party seeking to rely upon defences such as estoppel, promissory estoppel, or waiver, must have relied upon or acted upon a promise or assurance provided to them by another party. Here, Work Zone did not act in accordance with the credit note, nor with the understanding as to the basis upon which it had been issued by Bone. Instead, they elected unilaterally to proceed on a significantly different basis. As such I find no merit to the various defences raised by Work Zone, which all proceed on the assumption that Work Zone acted upon, or relied upon, the credit note.
[26] Accordingly, Bone is entitled to summary judgment for the amount owing on the Action Related Product.
[27] Work Zone also seeks a stay of execution of any summary judgment on the basis that Work Zone has filed a counterclaim in which it is alleging a breach of contract by Bone and losses resulting from such breach. However, in considering whether to grant a stay of execution on this basis, it is relevant to consider the strength of any such counterclaim.
[28] At no time prior to August 2016 did Work Zone indicate a desire to return defective product to Bone. Moreover, when Work Zone raised the question of returning product in August 2016, it was not on the basis that the product was defective. In fact, McDonald expressly stated in October 2016 that the product to be returned was not defective, and that the purpose of the return was to create a credit that could then be applied to reduce the accounts receivable owing to Bone. Thus Work Zone’s current claim that the product to be returned is defective is inconsistent with their own prior statements.
[29] Work Zone has also tendered emails from Hydro One Inc. (“Hydro One”), a customer of Work Zone’s, in which Hydro One expresses various concerns over Bone’s products. Work Zone alleges that as a result of this dissatisfaction, Hydro One severed its relationship with Work Zone in 2016, resulting in significant losses to the latter. However, Work Zone has tendered no evidence to support these claims, and in fact subsequent emails between Work Zone and Hydro One tendered on this motion tend to indicate that the contractual relationship with Hydro One was not severed at the point in time claimed by Work Zone.
[30] A responding party on a motion for summary judgment is required to put its best foot forward. The only evidence in support of Work Zone’s claims regarding losses relating to the Hydro One contract are set out in the affidavit from McDonald, without any supporting or corroborative evidence. Courts have commented on the fact that a self-serving affidavit without supporting evidence, in circumstances where one would expect corroborative evidence and there is no explanation as to why such evidence has not been produced, does not raise a genuine issue for trial. [1] By analogy, the absence of supporting evidence for Work Zone’s counterclaim is relevant to a consideration of the strength of the counterclaim, in the context of Work Zone’s request for a stay of execution.
[31] Accordingly, I would grant summary judgment in favour of Bone in an amount of Canadian funds sufficient to purchase the sum of $47,301.92 USD, plus pre- and post-judgment interest in accordance with the Courts of Justice Act R.S.O. 1990, c. C-43, all of which to be paid within 30 days.
[32] With respect to costs, counsel for Bone has submitted a Bill of Costs indicating that, on a partial indemnity basis, its costs with respect to the summary judgment motion, including fees, disbursements and HST, are $14,692. It incurred a further $4,500 in fees with respect to issuing and pursuing its claim generally, and these costs are not duplicative of costs incurred on the motion for summary judgment. I find these costs to be reasonable, given the range of issues raised by Work Zone, the fact that a number of defences were raised late in the proceeding, and the volume of material that was required to be assembled and tendered by Bone.
[33] Counsel for Work Zone argues that a costs award in the amount claimed by Bone is out of proportion to the amount at issue, which is $47,301.92 USD. However it was Work Zone, by its attempt to unilaterally alter the terms upon which the credit note was issued, and its immediate instruction to Bone to pursue the matter by a legal filing, who made this proceeding necessary. I do not think it is just or equitable for Work Zone to now be permitted to escape the cost consequences of its actions by arguing that the amount at issue is relatively modest.
[34] Accordingly, I would fix costs payable by Work Zone to Bone as $19,192 and direct that such costs be payable within 30 days.
[35] Finally, I would direct the sum of $8,500 that was paid by Bone into court as security for costs be returned immediately to Bone.
Monahan, J. Date: July 17, 2017