COURT FILE NO.: CV-18-610565-0000 DATE: 20241114 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BizTech Institute Inc., Plaintiff AND: Star Medical Equipment Ltd., Defendant

BEFORE: C.J. Brown J.

COUNSEL: Teodora Obradovic, for the Plaintiff Yelena Goren, for the Defendant

HEARD: January 30, 2024 to February 2, 2024

REASONS FOR DECISION

Overview

[1] The plaintiff, BizTech Institute Inc. (hereinafter “BizTech” or “the plaintiff”) brings this action for damages as against the defendant, Star Medical Equipment Ltd. (“Star Medical”), arising from the purchase of ultrasound equipment from the defendant on January 12, 2017.

[2] It is the position of the plaintiff that the two pieces of ultrasound equipment were defective from the time of purchase and installation, required numerous attendances by the defendant service technicians regarding various problems, but never functioned properly for purposes of use in its sonography training programs.

[3] It is the position of the defendant that the plaintiff College began to fail to meet its accreditation requirements, and enrolled more students than it was capable of handling, failed to hire competent staff and attempted to mitigate its loss and shift the blame away from administrative and program deficiencies by alleging that the equipment was defective.

[4] Based on the evidence adduced at trial, both viva voce and documentary, the submissions of counsel, and the applicable law, I find the plaintiff to have established its case, for the reasons enumerated below.

Background

[5] BizTech is a private career college registered under the Private Career Colleges Act, S. O. 2005, c. 28, Sched. L. As a private college, BizTech offered several educational, vocational and training programs to the public. One of those programs was the Cardiovascular Sonography Technologist Program (“CST Program”), which focused on training students to become Registered and Licensed sonographers in Ontario. The CST program at BizTech was approved by the Superintendent under the Private Career Colleges Act and was accredited by the Canadian Medical Association from November 2, 2016 until November 26, 2018. The plaintiff lost accreditation on December 5, 2018, when the decision to remove accreditation was communicated by the accreditation body to the plaintiff. The plaintiff is again accredited and continues to offer two approved and accredited sonography programs today.

[6] For purposes of the CST program, the plaintiff sought to purchase ultrasound equipment to supplement the one used and that it owned, a Philips ultrasound machine.

[7] The sonography program involves three parts: the theoretical portion; the functional portion; and a clinical placement which is akin to an apprenticeship in an actual ultrasound clinic with patients.

[8] The owner and principal of the plaintiff, Harpal Dharna, spoke, inter alia, with the principle of Star Medical Equipment Ltd., Hamoon Choheili, regarding purchase of ultrasound equipment for the CST program. Star Medical specializes in the sale of new, used and manufacturer-refurbished diagnostic imaging equipment, including ultrasound equipment. The principals of the plaintiff and defendant had previously transacted business, the defendant having sold to the plaintiff, BizTech, the used Philips ultrasound machine mentioned above. Mr. Dharna made it known to Mr. Choheili that the ultrasound equipment he sought to purchase would be used for educational and training purposes for the CST program at BizTech.

[9] The plaintiff maintains that they relied upon the defendant with respect to the choice of ultrasound equipment. The plaintiff CEO, Mr. Dharna, relied on the defendant, Mr. Choheili, to recommend the best equipment for the educational institution, given Mr. Choheili’s familiarity with various brands of ultrasound equipment.

[10] The defendant distributed and serviced a number of ultrasound machines, inter alia, from GE, Philips, and also Alpinion, a Korean manufactured ultrasound machine, for which the defendant was the sole distributor in Canada. The principal of the defendant, Mr. Choheili, provided the principal of the plaintiff, Mr. Dharna, with quotes for a number of ultrasound machines. He advised Mr. Dharna that with the Alpinion, he could obtain a 25 % to 30% discount for the equipment as it was to be used for educational purposes. He also advised that others of his clients had used the Alpinion equipment successfully for educational as well as clinical purposes. The plaintiff had made it known that they wanted to obtain the best possible price for the equipment and, as a result, chose the Alpinion ultrasound equipment with the educational discount.

[11] On January 12, 2017, BizTech and Star Medical entered into a purchase agreement for two Alpinion machines: the ultrasound F01337, a cardiac system and F01588, a general ultrasound system. The Purchase Agreement stated that the ultrasound equipment was sold with a two-year full standard warranty from the date of installation for all non-accidental damage.

[12] It now appears that the two ultrasound machines had been in the defendant’s inventory, the F01337 from its shipping date on February 21, 2016 and the FO1558 from its shipping date on March 27, 2016.

[13] The equipment was delivered to BizTech on February 24, 2017. The equipment cost $58,647 and, with leasing by a financing company, the plaintiff also paid $10,273 in financing costs and interest.

[14] It is the position of the plaintiff that there were issues with the Alpinion ultrasound equipment from shortly after the time that it was delivered and installed, through November 2018 when the plaintiff ultimately removed the equipment from the laboratory to a storage area due to its faulty functioning. It is the position of the plaintiff that the issues with the equipment, noticed immediately after installation included software and hardware issues, noise production, which interfered with the consistency and the accuracy of diagnostic information, overheating, poor spatial contrast and temporal resolution for diagnostic images, and arbitrary shut-downs and restarts of the equipment. It is the position of the plaintiff that the source of the defects was the equipment itself and Star Medical’s response to the issues. The plaintiff maintains that Star Medical was never able to correct the issues.

[15] As a result of the defective equipment, several of the BizTech students from the March 2017 cohort required additional training on ultrasound equipment given that the equipment purchased by the plaintiff from the defendant was continually having issues with functioning and therefore was not usable for its intended purpose, ie. training students, and the plaintiff only had the one other used Philips machine. As a result, Mr. Dharna arranged to have these students trained at two operating clinics for the functional part of the program, for which he paid the operating clinics for their training the total amount of $40,450. This training was part of the functional portion of learning to use and manipulate the ultrasound machines, and not the third, clinical placement portion of the program.

[16] To mitigate its damages, the plaintiff purchased replacement ultrasound machines from another medical equipment provider, CCE Medical Equipment, on July 9, 2018 for a total of $97,745.

[17] In this lawsuit, BizTech alleges breach of the implied condition of fitness for purpose and merchantability under the Sale of Goods Act. The plaintiff submits that the Purchase Agreement’s warranty does not displace or exclude the implied conditions that are provided for in s. 15 of the Sale of Goods Act. Under the purchase agreement, BizTech submits that defects with the equipment fell under the scope of the warranty, and given Star Medical’s failure to honour the warranty, BizTech is equally entitled to its damages for breach of that contract in the total amount of $109,370, comprising the cost of the equipment purchased from the defendant, leasing and financing fees and the cost of retraining the students on properly functioning machines.

[18] The plaintiff lost accreditation on December 5, 2018, when the decision to remove accreditation was communicated by the accreditation body to the plaintiff. The plaintiff is again accredited and continues to offer two approved and accredited sonography programs today.

[19] It is the position of the defendant that the ultrasound equipment purchased by the plaintiff from the defendant was not defective and was fit for its purpose. It is the position of the defendant that technicians from the defendant, as well as a technician from Korea, where the Alpinion ultrasound equipment is manufactured, all came to service the equipment, but found nothing wrong with its functionality.

[20] The defendant maintains that the plaintiff did its own due diligence in terms of selection of ultrasound equipment and did not rely on the defendant.

[21] The defendant further maintains that there were no complaints from the plaintiff about the machines until one year after they were sold to the plaintiff. However, the Service Reports produced by the defendant indicate that they attended at the plaintiff College at numerous times within the first few months for purposes of servicing and upgrading the equipment.

[22] It was the position of the defendant that the issues arose due to the plaintiff’s failure to properly use and maintain the ultrasound equipment, which had damaged the equipment by accident such that the defendant would not honour the warranty under the Purchase Agreement.

[23] It is further the position of the defendant that the plaintiff knew that it would lose its accreditation and would no longer need the equipment, so attempted to obtain a full refund. However, the plaintiff has made it clear that the action is not about accreditation or the loss thereof. The plaintiff does not seek damages for the loss of accreditation for the sonography program. Indeed, the plaintiff purchased replacement equipment from another equipment provider well before it lost its accreditation, and there was no evidence to establish that the accreditation was lost solely as a result of poor equipment.

Witnesses

[24] The following witnesses testified on behalf of the plaintiff.

Harpal Dharna

[25] Mr. Dharna owns the plaintiff private college, BizTech, which offers numerous programs, including business, accounting, information technology and health sciences, including sonography training.

[26] All instructors at BizTech were licensed sonographers.

[27] Mr. Dharna is a chartered professional accountant with a BSc and MA in electrical engineering. He majored in computer software controls and communications. He also worked for 15 years as an IT consultant.

[28] BizTech purchased ultrasound sonography equipment from Star Medical in 2017. In February 2017, Mr. Dharna began to receive complaints from the plaintiff's instructors and students regarding problems with the equipment. BizTech called on numerous occasions in the first few months to have the defendant service the equipment. While the defendant contends that there were no service calls between March 2017 and March 2018, Mr. Dharna disagrees, even if there are no service records that were produced, other than the six in evidence.

[29] As of March 2018, the equipment was no longer being used to train students, and was put in storage. The ultrasound cardiac system ceased functioning completely.

[30] While he stated that the only service people who he was aware of who serviced the equipment were Mr. Tarmohamed and Mr. Choheili, he stated that a third person, whose name he did not know, had attended on one occasion. Mr. Harito in his testimony stated that he had attended BizTech on one occasion in 2018, but only to observe and not to service the equipment.

Zafar Bajwa

[31] Zafar Bajwa was an ultrasound sonographer for 24 years. He was also a licensed physician in Pakistan. He was employed with the plaintiff as Program Director for Sonography Programs and the Director of the Diagnostic Cardiac Sonography Program.

[32] He had experience working with Toshiba, GE, Samsung, Philips and Alpinion ultrasound equipment.

[33] BizTech purchased two Alpinion ultrasound machines from the defendant in January 2017, while Mr. Bajwa was employed at BizTech. He was trained on the Alpinion equipment by the defendant Star Medical technicians. The equipment was not used by the BizTech instructors or students until all instructors were trained on it.

[34] After the equipment was installed, the defendant came on numerous occasions to address issues that arose with its functioning. He would report problems experienced by his instructors and students to the director of the program at that time, Bhupinder Singh, who would report the issues to Mr. Dharna. He stated that there were no written records of complaints, but that the plaintiff was a small organization and reporting was verbal to his director and on up to the CEO.

[35] He stated that there were issues with resolution and quality of images, among other things.

[36] The ultrasound equipment purchased from the defendant was finally removed from the laboratory and put into storage, after they experienced continual issues with proper functioning of the equipment.

Atif Moin

[37] Atif Moin is a licensed sonographer who owns a number of diagnostic clinics.

[38] He explained that sonography training at the College involves two parts, theoretical and functional, after which the students would complete clinical placement at an actual sonography clinic, somewhat like an apprenticeship.

[39] He stated that he was involved with the plaintiff in conducting functional training as the students had not been properly trained on ultrasound machines and were not ready for clinical placement. He advised Mr. Dharna that he would do this training for a fee. He charged $18,700 for training and assessment.

Ishaq Bukhri

[40] Ishaq Bukhri is an ultrasound sonographer who does ultrasound and cardiac diagnostics and owns several cardiac labs. He also provided placements for the plaintiff’s students in 2018. He trained nine students and charged $21,750. The fee also included rental of machines to the plaintiff, because they only had one proper, functioning ultrasound machine, the used Philips.

Hon Lam Choi

[41] Hon Lam Choi, the plaintiff’s expert, was a licensed sonography professional who had worked, inter alia, as an application specialist for GE. In the context of his work, he had also worked on Canon, Philips, Siemens, Samsung and Alpinion ultrasound machines. He explained that the Alpinion, which is the subject of this action, has controls and nuances very similar to GE and other manufacturers, as Alpinion had hired engineers from Samsung who used to work for GE. Thus, the Alpinion controls and terminology are very similar.

[42] He confirmed that from the time of delivery of the subject Alpinion machines in January 2017 and his inspection and report dated March 21, 2021, there were several Service Reports. He stated that his inspection was consistent with the issues that he was advised had existed prior to the equipment being put out of service.

[43] He fully tested and inspected the equipment and assessed it for suitability for general and cardiac training. From his analysis of the machines, he concluded that the Service Reports from 2017 and 2018 and the accounts of the issues experienced by the plaintiff exactly matched the results of the inspection that he did.

[44] He concluded that the initial installation process was not completed properly by Star Medical. Based on his inspection, he concluded that the Alpinion ultrasound machines were deficient and not properly functioning. The Alpinion ultrasound system FO1337 was unable to load software, while the Alpinion ultrasound system FO1588 would freeze intermittently during his inspection and produced multiple error messages. The quality of the imaging produced by ultrasound FO1588 vary between different applications from poor quality images to high quality. Based on the errors and issues experienced during his inspection, he concluded that while the air filters on the Alpinion ultrasound machines were not well maintained, the problems were related to outdated windows, hard drive and driver settings. Because the ultrasound machines were deficient and had improper settings, he concluded that the Alpinion ultrasound machines were not suitable for training and educational purposes for a diagnostic medical sonography program.

[45] The following witnesses testified on behalf of the defendant.

Hamoon Choheili

[46] Mr. Choheili is the owner of the defendant, Star Medical.

[47] He is not a sonographer and does not train students in sonography. He is a Field Service Engineer.

[48] It is the position of Mr. Choheili that Mr. Dharna of BizTech approached him to purchase two ultrasound machines in the summer of 2016. He gave Mr. Dharna information regarding the ultrasound machines and Mr. Dharna returned in January 2017 to purchase the subject ultrasound equipment. It is the position of Mr. Choheili that BizTech knew what they wanted and had done their due diligence. The defendant just sold the plaintiff the equipment and installed it.

[49] He stated that the defendant does two inspections after receipt of the equipment by them, including a regular manufacturer’s inspection to confirm that the equipment has not been damaged and is working properly when it is received, and a second inspection prior to delivery to the purchaser. There were no records prepared for these inspections.

[50] Mr. Choheili maintained that the equipment sold to the plaintiff was not defective, and that each time he sent a service technician to look at the equipment after complaints from the plaintiff, they found no issues or errors in the equipment. He stated that if they had been satisfied that there were issues with the system or that it was defective, they would have replaced it.

[51] Mr. Choheili stated that, in his opinion, the plaintiff’s instructors were inexperienced and unable to teach students, which likely led to the problems it claimed to be experiencing with the equipment.

[52] Mr. Choheili stated that he believed that the plaintiff had continued to use the equipment after March 2018 because it did not have other equipment and did not purchase other equipment until July 2018. He conceded in cross-examination that he was guessing that it continued to use the equipment, but did not know this for a fact.

[53] While Mr. Choheili maintained that the plaintiff had submitted retraining invoices from Messrs. Moin and Bukhri under false pretenses, conducted unlawful and improper training not permitted by Accreditation Canada and/or that the invoices were not real, in cross-examination, he admitted that the invoices were real and were not submitted under false pretenses.

[54] While Mr. Choheili maintained that Mr. Harito had been detained against his will by the plaintiff when Mr. Harito went to the plaintiff’s facility, he admitted in cross-examination that Mr. Harito, in his affidavit, did not say anything about being detained or forced to sign something by the plaintiff, and that he was not there with Mr. Harito at the time.

[55] While Mr. Choheili stated that the ultrasound equipment had a resale value when the plaintiff abandoned it, he adduced no evidence to provide such a value at trial.

Bhupinder Singh

[56] From 2014 to 2018, Bhupinder Singh was the Program Director of the Cardiovascular Sonography Technologist Program at BizTech. He was responsible for designing and implementing the program to meet the requirements of the Ministry of Training for Colleges and Universities and the accreditation body. He stated that it usually takes one and one-half years to obtain accreditation.

[57] He assisted Mr. Choheili in obtaining ultrasound equipment for use in the laboratories. They purchased two Alpinion ultrasound machines, which were delivered to BizTech on February 24, 2017. He arranged for the defendant to attend at BizTech for installation and training on the machines, and sometimes signed the service reports when the defendant came, although this was usually done by instructors.

[58] Despite the email which he sent to Mr. Dharna on October 5, 2018, which listed the problems that he had observed with the equipment, at trial, he denied that he wrote the email and disagreed with its contents. He denied that there were any problems with the Alpinion equipment He further disagreed that the defendant continually gave excuses regarding the problems, although he does recall that a technology specialist came from Alpinion in Korea, but states that this was for specialized training, software updates and to determine whether the Alpinion was appropriate for use in educational institutions.

[59] In his affidavit, Mr. Choheili stated that he left BizTech in October 2018. In testimony, he stated that he could not remember if he left in October or November 2018. He stated that he became Program Director of the Diagnostic Medical Sonography Program at Canadian All Care College the following year.

Leonardo Faundez

[60] Mr. Faundez was retained as an expert on behalf of the defendant, to review and critique the report of Mr. Choi.

[61] As regards the report of Mr. Choi, he was of the opinion that Mr. Choi made improper assumptions, could not comment on the functioning of the machines in 2017 and 2018, as Mr. Choi was not there for their installation in 2017 and was not provided with service logs thereafter. Further, the machines had not been used for four years and “it did not make sense” to perform assessments after four years of non-use.

[62] He commented that Mr. Choi did not use the standard assessment with phantom or test objects. He was of the opinion that the Choi assessment was incomplete as Mr. Choi had scanned himself rather than using test phantoms, although he agreed that test phantoms can be unreliable and that other test objects can also be unreliable. He stated that he did not take issue with Mr. Choi scanning himself, but that would only be part of a proper assessment.

[63] He stated that he believed dust in the filters may have come from use between 2018 and 2021, but also agreed that it could come from the fact that dust was never cleaned out of the filters when the machines stopped being used in 2018.

[64] He did not know if noise from the ultrasound machines may have affected presets differently and stated that if he had been present to examine the machines, he may have come to a different conclusion.

[65] He stated that it was possible that a machine would turn on one day and load certain presets, but, in an assessment or training demonstration, that things may not operate properly.

[66] He took issue with the fact that one would be able to assess machines in 2021 and assuming the machines had not been used between 2018 and 2021, that one could attribute problems to the time of installation and first use.

[67] In cross-examination, he admitted that he was not a service engineer or application specialist for Alpinion. He did not know whether Alpinion’s engineers came from Samsung and GE, but did admit that its basic controls on the keyboard are the same as or similar to Samsung, GE and Philips, and that the controls for spatial, contrast and temporal resolution were also similar.

[68] He did not view, inspect or evaluate either of the subject ultrasound machines and never saw them. He was instructed to base his report on the Choi Report and to challenge Mr. Choi’s assessment of the machines. He did not conduct his own assessment on the machines.

Shahbakram Mavandadi

[69] Shahbakram Mavandadi is a sonographer. He is not a service engineer nor an application specialist.

[70] He was asked to review and critique the report of Mr. Choi and to determine whether it was possible for Mr. Choi to assess if the software and hardware were functioning properly. He opined that this was not possible. He further stated that from pictures he saw, he concluded that the machines were not well maintained or properly serviced.

[71] After reviewing the Choi report, he stated that there were concerns about the assumptions made by Mr. Choi in preparing his report. Also based on his expertise as a sonographer, he disagreed with the quality and reliability of Mr. Choi’s analysis and most of his conclusions.

[72] He criticized Mr. Choi’s use of self scanning, stating that it is extremely difficult to self scan while adjusting the image on a machine with one hand. However, in cross-examination, he conceded that a sonographer routinely takes images by manipulating controls with one hand and scanning with the other.

[73] He stated that in his opinion it was difficult to assess equipment in 2021 that was installed in 2017.

[74] He did not see or examine the ultrasound machines in issue, and did not ask to see them. He admitted in cross-examination that if he had had the opportunity to see the equipment, he may have come to a different conclusion regarding the functioning of the equipment. He stated that had he gone to see the machines and produce his own images, he would have been in a better position to determine the ability of the machines to get better spatial, contrast and temporal resolutions.

Arben Harito

[75] Arben Harito is an application specialist for Alpinion. He is not a service engineer. He stated that application specialists do not perform service on the equipment.

[76] Mr. Harito first attended at BizTech to observe the subject equipment on April 8, 2018. He watched the plaintiff’s instructors and students use the equipment. He did not use the equipment himself and does not recall if he did any diagnostic testing. He did not do any troubleshooting. He stated that based on his observations, he did not find anything wrong with the machines. He did not observe the machines on any other day in 2017 or 2018. He does not know one way or the other whether there may have been problems on any other day.

[77] He did not prepare a service report and did not perform any service.

Riyaz Tarmohamed

[78] At the material time, Mr. Tarmohamed was service manager and a senior service engineer for Alpinion with the defendant. He was not a sonographer.

[79] He explained that a sonographer uses ultrasound machines to prepare images that can be used to diagnose conditions in the body. He further stated that sonographers use education and training to determine whether an image is of sufficient quality to be used for purposes of diagnosis. He explained in cross-examination that while he stated in his affidavit that the equipment was functioning as expected and producing acceptable quality images, he was speaking from an engineering standpoint and was basing his statements on what plaintiff sonographers had said to him.

[80] The subject equipment was shipped to the defendant from the manufacturer, Alpinion, as follows: F01337 - February 21, 2016; F01588 - March 27, 2016, and was in the defendant’s inventory prior to being sold to the plaintiff.

[81] There were no records of internal servicing on arrival from the manufacturer and pre-sale to the plaintiff. He stated that the practice of Star Medical was to inspect all equipment upon receipt and to report any non-conformities. He would have checked, serviced, updated and inspected the machines when they arrived, and prior to delivery to the plaintiff one year later. There are no records of servicing or inspection or of any re-inspection before delivery of the equipment to the plaintiff one year later.

[82] He stated that at delivery, he would turn the machines on and make sure they were working. The service report is prepared as a record of what the defendant did at a service visit. In this case, there are six reports from time of delivery to the plaintiff through 2018.

[83] He stated that Alpinion has nothing to do with the machines after delivery, other than if there is a problem.

[84] He reviewed all of the service reports that had been produced at trial. The service reports are as follows:

1. 24/02/17 - He stated that he attended at BizTech for installation of the Alpinion E Cube 7 ultrasound machines and training of sonographers. He delivered the machines but did not do training, as the sonographers were not present at the time.
2. 6/03/17 - He returned to do basic training, but only trained one sonographer for one hour. The service report that he completed, however, indicates by the code that he did “Service”.
3. 16/03/17- He wrote “installed all option codes after continuous waveform (CW) hardware update.” Mr. Tarmohamed stated that he may not have correctly indicated the code on the service report. He stated that he also verified the functionality of the machines and did some software upgrades. He used the “Service” code rather than the “Upgrade” code and may not have used the proper codes, but always handwrote on the Service Report the work performed in detail. This attendance was three weeks after delivery.
4. 31/03/17 - He stated that he completed two hours of training with other sonographers. He found that the equipment was functioning normally while he was there. Mr. Tarmohamed stated that altogether a total of three hours was spent on what he indicated was “training”.
5. 01/03/18 - He performed service on both the Philips and Alpinion F01337 machines. The Service Report noted to “Check Alpinion for colour Doppler getting worse with heat”. He also serviced the E Cube 7 and upgraded the software to 4.2.0. He found excessive dust on the intake filter and stated that clogged air filters will result in damage to electrical components and that when the system overheats, it can cause many different issues. He verified its functionality.
6. 04/04/18 - Mr. Tarmohamed noted that he set up User and Admin passwords on the two Alpinion machines.

[85] There was also a visit on April 8, 2018 by Mr. Harito, but no Service Report was produced for this visit.

[86] As can be seen from the Service Reports that are available, within three weeks of delivery and installation of the equipment, the defendant had to return to perform a functionality check and upgrade the equipment.

Credibility

[87] In general, I found the witnesses to be fairly straightforward in giving their testimony.

[88] However, I found Mr. Choheili to be very defensive and argumentative. He would attempt to avoid answering questions that would hurt his case or put his case in an unfavourable light. I found his testimony to be problematic. I do not find him to be credible and find his testimony to be unreliable.

[89] I also found Bhupinder Singh to be evasive. He denied having authored the October 5 email, although it came from the same email address as the others which he admitted were authored by him. Mr. Singh became defensive in response to questions about the email. I do not accept the defendant’s theory that the plaintiff accessed Mr. Singh’s emails and drafted the October 5 email themselves. I do not find Mr. Singh’s testimony at trial to be credible or reliable and do not accept it.

[90] I found Mr. Tarmohamed’s evidence to be problematic. Based on his own testimony that he did not accurately indicate the Codes on his Service Reports, I do not find them to be reliable as evidence.

[91] Moreover, only six service reports are produced at trial. No service report was prepared or produced with respect to Mr. Harito’s attendance on April 8, 2018. It is not clear whether others may also have been omitted or simply not prepared. As already indicated, the parties’ record-keeping was poor and not reliable.

[92] I have taken the foregoing into account in rendering this decision.

[93] The relationship between the parties deteriorated to the extent that by April 11, 2018, the defendant purported to terminate the Warranty contained in the Purchase Agreement. Mr. Choheili advised Mr. Dharna that he would no longer honour the two-year warranty in the Purchase Agreement which was, at that time, still in force.

Analysis

[94] It appears from the testimony of the plaintiff that BizTech provided information regarding various machines and sought suggestions and advice regarding comparable ultrasound machines for educational use from the defendant.

[95] I accept the plaintiff’s evidence that he was not a sonographer and had no medical training, such that he always took Bhupinder Singh, the Sonography Program Director at BizTech, with him when he met with the defendant and discussed the purchase of equipment for the sonography programs.

[96] While the defendant argues that the plaintiff did not rely on the defendant with respect to advice regarding ultrasound machines or the college program, I find that the plaintiff did rely on the defendant’s knowledge and expertise, even if it did some due diligence or research itself.

[97] While the defendant argues that there were no written complaints regarding the two subject Alpinion machines, I accept the plaintiff’s evidence in this regard. The plaintiff has not produced written complaints from its instructors and students regarding the issues experienced with the sonography machines. The complaints were oral and were communicated to the defendant orally through the plaintiff’s reporting channels at the institution, namely students to instructors to program director, who communicated with the CEO, Mr. Dharna. The plaintiff is a small institution and such communication is understandable.

[98] It is of note that neither party had any significant records. Their record-keeping seemed, on both sides, to be lacking, unprofessional and not businesslike.

[99] While the defendant states that there are no issues with the equipment and no internal error logs, which are only available to the defendant with special access codes, the plaintiff failed to produce any documentation to establish this or any screenshots showing the absence of internal error logs. I reject the defendant’s allegations regarding the plaintiff’s failure to produce the internal error logs for the sonography equipment. I find that the internal error logs or internal diagnostic tests within the equipment are only accessible by the defendant service team, and are not accessible by the plaintiff. Moreover, the defendant has never produced any such error logs themselves. While the defendant maintains that there were never any such error logs, it has not produced any screenshots that would indicate whether there were or were not error logs generated in the equipment when it serviced the equipment. The defendant did admit that this would be possible to do, but did not do so.

[100] I am satisfied that the equipment was not functioning properly. Had it been functioning properly, the plaintiff would not have ordered new ultrasound equipment in July 2018 and would not have expended money in the interim to lease equipment. Further, it would not have requested that Messrs. Moin and Bukhari train its students on ultrasound equipment and paid them for said training.

[101] BizTech incurred additional costs to send its sonography students to other facilities to complete their functional training on properly functioning sonography machines. This aspect of their training has nothing to do with the clinical placements with actual diagnostic clinics open to the public, which was a separate requirement for sonography students after having completed their theoretical training and the functional training on sonography machines. As part of its accreditation requirements, BizTech is required to partner with diagnostic sonography clinics to provide students with clinical training in an actual clinical setting with patients.

[102] The BizTech instructors held the required professional certifications in cardiac and vascular sonography to train their students. The instructors were able to properly use ultrasound equipment. They received training on the Alpinion equipment from the defendant. However, I am satisfied that the equipment in question in this action was defective and was never properly corrected such that the problems persisted.

[103] The plaintiff sonography program was still accredited as of March 2018; it lost accreditation in November 2018. It has again received accreditation for its program. The issue of accreditation or the reason it was lost is not an issue to be determined in this action and, therefore, I will not deal with it further herein.

[104] The plaintiff’s expert, Mr. Choi, reported that the complaints about the equipment made by the plaintiff matched what he found on inspection of the equipment. The independent evidence came from his inspection and was consistent with the service reports from 2017 and 2018 regarding driver/software errors.

[105] The plaintiff’s expert had experience with sonography equipment manufactured by GE, Siemens, Philips and, to a lesser extent, with Alpinion. He indicated that a number of engineers from GE had gone to Alpinion, and had taken their knowledge of the GE equipment to Alpinion, such that the equipment and controls for the Alpinion was very similar to GE and other machines manufactured by other manufacturers. He first tested the subject equipment in 2021.

[106] The defendant’s expert never tested the equipment, never saw the equipment and only commented on the plaintiff expert’s report. They were retained to challenge the plaintiff’s expert’s report and assessment, as admitted by Mr. Faundez.

[107] I have read the expert reports and the transcripts of various experts’ testimony. Based on the plaintiff’s expert’s report, his qualifications and experience, and his responses to cross-examination questions at trial, I find his expert report to be more reliable and persuasive than the reports of the defendant’s expert witnesses.

The Law

The Sale of Goods Act

[108] The basic principles of contractual interpretation include, inter alia, the following:

1. Contracts must be interpreted with a view to ascertaining the objective intentions and reasonable expectations of the contracting parties with respect to the meaning of the contractual provision: Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60.
2. The contract must be read as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of contract formation: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.
3. Words must be read in light of the surrounding circumstances, known as the “factual matrix”. The factual matrix consists of “objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.
4. Commercial reasonableness and efficiency are crucial considerations in interpreting a contract. This entails an objective analysis: Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60. Courts should interpret contracts so as to accord with sound commercial principles and good business sense and avoid commercial absurdity: Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673.
5. Effect must be given to all terms of the contract. Where there are apparent inconsistencies between different terms of the contract, the court should attempt to find an interpretation which can reasonably give meaning to each of the terms in question. The question to ask is whether conflicting or inconsistent terms can be reconciled or interpreted as a whole rather than choosing between the two: 956126 Alberta Ltd. v. JMS Alberta Co. Ltd., 2020 ABQB 718.

[109] I am satisfied that this was a contract for sale of goods to which the Sale of Goods Act is applicable. The subject goods, namely the ultrasound machines, were sold by the defendant to the plaintiff for money consideration, as defined in the Act.

[110] The defendant raised the argument that the plaintiff is not the owner of the equipment, but rather the leasing/financing company, National Leasing, is the owner pursuant to the Financing Agreement, and leases the equipment to the plaintiff. The defendant argues that because the plaintiff was not the “buyer” of the equipment under the SGA, there are and can be no implied terms.

[111] This issue was never addressed at trial or in closing arguments by the plaintiff in argument by the plaintiff. It is addressed by the defendant in one paragraph of the defendant’s 97-page Written Closing Submissions. I do not consider this argument to be significant or determinative.

[112] While the Sale of Goods Act permits parties to contract out of the implied provisions of the Act, this must be done by express agreement. In this case, the parties did not contract out of the provisions and protections of the Sale of Goods Act including implied conditions as to the quality or fitness in sections 14 or 15 of the Act: see Hunter Engineering Co. v. Syncrude Canada, [1989] 1 S.C.R. 426.

[113] In order to contract out of the implied provisions of the Act, including both implied warranties and conditions, this must be done explicitly: Gregorio v. Instras-Corp (1994), 18 O.R. (3d) 527 (C.A.).

[114] In this case, the Purchase Agreement contained the following warranty:

2 years full standard warranty from the date of installation *the warranty is for non-accidental damages only. Warranty. The equipment is sold with above warranty. Seller makes NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OF TRADE, OR SAMPLES PREVIOUSLY SUPPLIED. SELLER SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES INCURRED OR CLAIMED TO BE INCURRED BY BUYER.

[115] The warranty contained in the Purchase Agreement does not expressly exclude the statutorily implied conditions in section 15 of the Sale of Goods Act, which thus continued to apply to the transaction. Further, there is no evidence that the issues experienced with the equipment were caused accidentally by the buyer and thus the standard warranty is applicable.

[116] This interpretation gives the words of the agreement their ordinary and grammatical meaning, furthers the commercial purpose of the parties’ transaction and honours their intentions. There is no ambiguity, and the defendant led no evidence of a contrary intention as regards the form of warranty.

[117] In determining whether there is an implied condition as to fitness for a particular purpose, three factors must be considered, as follows: the course of the seller’s business; knowledge on the part of the seller of the purpose of the goods; and reliance on the seller’s skill or judgement.

[118] In this case, it was in the course of the seller’s business to supply ultrasound equipment, and the defendant had sold ultrasound equipment to the plaintiff previously. The defendant was aware of the use to be put to the ultrasound equipment and was told by the plaintiff that it was for educational purposes. Indeed, the defendant offered the plaintiff an educational discount, available to educational institutions purchasing the Alpinion ultrasound equipment.

[119] While the defendant spent significant time arguing that the plaintiff did not rely on the defendant, and did its own due diligence as regards the various brands of equipment, I do not accept the defendant’s arguments in this regard. Reliance on the defendant’s skill need not be exclusive or total. By selecting a seller whose business is to supply goods of the same description as that which are the subject matter of the contract, the buyer shows his reliance on the skill and judgment of the seller to supply goods that are reasonably fit for the purpose disclosed by the description: Muskoka Fuels v. Hassan Steel Fabricators Limited, 2009 ONSC 78887.

[120] I accept the evidence of the plaintiff that it did rely on the defendant as regards the best equipment for the sonography program. Indeed, the plaintiff would not likely have been well-versed on the equipment purchased, namely the Alpinion ultrasound equipment, as the defendant was the only distributor of Alpinion equipment in Canada, such that it was not as widespread as other brands of equipment in Canada. The defendant, as the sole distributor in Canada, would likely have had the best information regarding the product.

[121] With respect to the Alpinion equipment purchased, I find that the goods were bought by description from the seller, Star Medical, who deals in goods of said description, and were, therefore, a sale by description pursuant to section 14 of the Sale of Goods Act.

[122] An examination of the equipment upon receipt by the plaintiff would not have revealed the defects which are the subject of this action. Merchantable means that the article sold is fit for the purpose intended. In this case, the equipment was not fit for its educational purpose given the excessive repairs and interruptions in business and educational operations experienced by the purchaser, BizTech, and therefore was not merchantable within the meaning of the Act.

[123] As regards damages for the breach of the implied conditions of fitness and merchantability, the defendant adduced no evidence to establish that the equipment retained any remaining value. Accordingly, the plaintiff is minimally entitled to the purchase price pursuant to the agreement for the breach of both implied conditions.

[124] As regards the defectiveness of a product, section 15(2) of the Act may apply in circumstances where the cause of the defects cannot be established. The actual cause of the defect need not be proven. Once other probable causes have been excluded and the buyer proves that the defect was not attributable to anything that he did or failed to do, an inference can be drawn from the evidence that the defect existed at the time the product was delivered: Muskoka Fuels v. Hassan Steel Fabricators Limited, 2009 ONSC 78887, citing Schreiber Brothers Ltd. v. Currie Products Ltd., [1980] 2 S.C.R. 78.

[125] In this case, the defendant did not establish other probable causes that I accepted.

[126] Based on the evidence, I am satisfied that the defects and deficiencies lay with the equipment and not otherwise.

[127] It would further appear from the evidence that the plaintiff acted upon the defects and deficiencies, expending money to train its students on other equipment, leasing equipment and purchasing new equipment in July 2018. The plaintiff would not have expended these monies had there not been defects and deficiencies in the equipment. This would not have made business sense.

[128] It is of further note that Mr. Choi, in examining the equipment for purposes of his expert report, confirmed that the defects complained of by the plaintiff are the same that he found on examining the equipment.

[129] I find that the defendant has breached the implied conditions of fitness for purpose and merchantability in the Act, thus entitling the plaintiff to damages.

[130] Under the Sale of Goods Act, the breach of any condition by the defendant can only be treated as a breach of warranty. The defendant breached the implied conditions under the Sale of Goods Act. The defendant further breached the terms of the Warranty and Purchase Agreement by failing to adequately install and/or repair the equipment, by refusing to perform further diagnostics or repairs to the equipment and by unilaterally terminating the Warranty, prior to expiry of the two-year warranty term set forth in the Purchase Agreement.

[131] Damages for the breach of the implied conditions under the Act are assessed as damages for breach of warranty. Pursuant to the legislation, the measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach.

[132] In this case, I am satisfied that the plaintiff is entitled to the costs of the two pieces of Alpinion ultrasound equipment in the amount of $58,647, the costs of financing the equipment in the amount of $10,273, and the costs of training the students on properly functioning equipment in 2018 in the amount of $40,450, for a total amount of $109,370, payable by the defendant, Star Medical, to the plaintiff, BizTech.

Costs

[133] I strongly urge the parties to cooperate in agreeing upon costs payable in this matter. In the event that they are unable to do so, I would request that they provide me with their bills of costs of no more than three pages in length within 30 days of the rendering of this decision.

C.J. Brown J. Date: November 14, 2024