Case Name:

City Water International Inc. v. Polex Manufacturing (Canada)Ltd.

BetweenCity Water International Inc., Claimant, and

Polex Manufacturing (Canada) Ltd., Defendant

[2011] B.C.J. No. 681

2011 BCPC 84

File No. 23079

Registry: Richmond

British Columbia Provincial CourtRichmond, British Columbia

Adjudicator B.J. Wallace

Heard: January 28, 2011.Judgment: February 24, 2011.

(22 paras.)

Counsel:

Counsel for the Claimant: Matthew Riddell, Esq.

Appearing for the Defendant: Luke Kwong.

REASONS FOR JUDGMENT

ADJUDICATOR B.J. WALLACE:--

The Claim and Defense

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1 The Claimant seeks from the defendant, the sum of $3,792.94, being the balance said to beowed under a rental agreement and a service agreement for water filtration equipment, plusdamages under the rental agreement from the defendant's failure to return the equipment to theclaimant. The claimant also seeks interest, and costs on a "substantial indemnity" basis. Theclaimant also seeks an order for the recovery of the equipment.

2 The defendant says that the rental agreement was a "rent-to-own" agreement, so that on theconclusion of the five-year term, the equipment belonged to the defendant and no longer to theclaimant. As a result, the defendant says it owes nothing further to the claimant.

3 The defendant says in the alternative, that it would have returned the equipment to the claimantwhen requested, had it been satisfied the agreement was a pure rental agreement, but that theclaimant did not provide a legible copy of the contract until it served this claim on the defendant.

4 Finally, the defendant says that the claimant has breached the service agreement by failing toprovide the required semi-annual service of the equipment and, as a result, the rental agreement isterminated.

Facts

5 On October 2, 2003, the parties signed two agreements for water filtration equipment - a rentalagreement and a service agreement both with five-year terms. Allan Mah, who was general managerof the Defendant at the time, says the Claimant's sales representative, Wayne Neudorf, told him therental agreement was a "rent-to-own" agreement, so that on payment of rent for five years theequipment would be owned by the defendant.

6 The Claimant installed the equipment under the agreements, on September 18, 2003. Thedefendant made quarterly payments under the agreements for the initial five-year term, untilSeptember 2008.

7 The defendant says, supported by a photograph of the maintenance record affixed to theequipment, that it was last serviced in September 2007.

8 On June 11th, 2008 the defendant gave notice by telephone that it no longer required theservice under the contract after September 2008. In that conversation the defendant was told it wasnot a rent-to-own contract. The defendant requested a copy of the agreements, but what it receivedwas illegible.

9 In the next month or so, the defendant made further unsuccessful requests by email for copiesof the agreements and advised the claimant it no longer wished the maintenance service and wouldnot pay its invoice for the period beyond September.

10 On October 8, 2008, Mr. Kwong noted on a copy of his email exchange with the claimant,

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"Donavan called and advised account is now closed."

11 Seventeen months later, on March 1, 2010, the claimant invoiced the defendant for $3,792.94,the amount of this claim. By far the largest part of the claim is for the "lost" equipment. However,there is no evidence the claimant ever asked for the return of the equipment or designated a locationat which the defendant was to return it.

12 The Notice of Claim was filed on May 18, 2010.

Rental Agreement

13 Section 1 of both the rental agreement and the service agreement provide that they cannot becancelled by the customer.

14 Section 8 of the rental agreement provides,

... this Agreement will be automatically renewed for new successive terms of oneyear each upon the expiration of the Term ... unless the customer notifies theLessor in writing at least six months prior to the expiration of the Term. ...

15 Section 4 of the service agreement is to the same effect.

16 Section 9 provides,

In the event either party elects not to proceed into the Renewal Period or being inthe Renewal Period elects to cancel this Agreement, Customer shall, at its ownrisk and expense, immediately return the equipment to Lessor or its designatedagent, in the same condition as when delivered, ordinary wear and tear excepted,at such location as Lessor shall designate.

Section 13 provides,

Customer shall have no right, title or interest in the Equipment other than theright to maintain possession and use of the Equipment for the full Term. ...

Section 23 provides,

... This Agreement contains the whole of the agreement between the parties andthere are no collateral agreements or conditions not specifically set forth herein,and no modifications, amendments or variations shall be effective or binding

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unless agreed to in writing. ...

Analysis

17 It is clear from section 13 of the rental agreement that the agreement was a pure rentalagreement and not "rent-to-own" as submitted by the defendant. In the face of the "wholeagreement" provision at section 23, the evidence of an oral modification of the agreement by thesales agent at the time it was entered is insufficient to change the clear terms. Similarly, Donavan'sapparent forgiveness of the defendant's obligations in October 2008 is of no effect.

18 The rental agreement requires six months written notice to avoid the automatic renewal forone year. I find that term clear and not so onerous as to be unconscionable. The defendant's noticewas given less than six moths prior to the end of the term. It gave written notice even later. I findthat the defendant is liable for the payment for the one-year automatic renewal period of $206.55.

19 With respect to the service agreement I find that the claimant is in breach for failing to servicethe equipment. As servicing is the sole purpose of the agreement, it is a fundamental beach andterminates the agreement. The claim for $180.00 for service in the renewal term is dismissed. Thedefendant did not seek the return of its service payments for the last year of the initial term.

20 The largest claim is for $3,000.00 for lost equipment. However, the equipment was not lost.The defendant had it and the claimant knew it did. The rental agreement requires the claimant todesignate a location for delivery of the equipment. It did not do so, nor did it seek to retrieve theequipment from the defendant. The claim for the value of the equipment is dismissed.

21 The defendant says it has the equipment. The claimant is entitled to retrieve the equipmentfrom the defendant or to have the defendant return the equipment to it. In the event the equipmentcannot be retrieved or returned in the same condition as delivered, normal wear and tear excepted,the defendant is to pay the claimant the sum of $3,000.00, the agreed value of the equipment.

Order

22 The claim is allowed in the amount of $206.55, and the defendant is to return the equipment tothe claimant. There will be no order for costs or interest.

ADJUDICATOR B.J. WALLACE

cp/e/qlrds/qljxr

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