1. Case Name:
City Water International Inc. v. 816580 Ontario Inc.
(c.o.b. Precision Tool & Die)
Between
City Water International Inc., Plaintiff, and
816580 Ontario Inc. O/A Precision Tool & Die, Defendant
[2013] O.J. No. 6201
Court File No. SC-12-007494-00
Ontario Superior Court of Justice
Small Claims Court - Brampton, Ontario
S. Boguski Deputy J.
Heard: July 18, 2013.
Oral judgment: July 18, 2013.
(18 paras.)
Counsel:
M. Riddell, for the Plaintiff.
H. Lukovich, for the Defendant.
REASONS FOR JUDGMENT
1 S. BOGUSKI DEPUTY J. (orally):-- On March 7, 2011, the defendant, Precision Tool and
Die entered into a sixty month term contract with the plaintiff, City Water International Inc. for the
supply and rental of two water coolers.
2 In November, 2011, Precision Tool and Die wrote to City Water giving them written notice of
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2. termination of the contract. City Water argues that this termination was premature as the rental
contract was for a non-cancellable sixty month term. The defendant acknowledged and agreed that
it was a non-cancellable sixty month term by executing the contract, as it clearly and
unambiguously states in plain English in clause #3 that it is a non-cancellable contract. I find that
this is not commercially unreasonable and the court must give effect to that language. See, the Court
of Appeal decision of Kohanski v. St. Paul Guarantee Insurance Co., [2006] O.J. No. 157, at
paragraph 42.
3 On June 8, 2012 City Water rendered an account in the form of a final invoice to the defendant
for the period of July 1, 2012 through to February 29, 2016 in the amount of $3,515.60 as the
defendant had defaulted in making payments in accordance with the terms of the rental contract.
The defendant also advised the plaintiff that they had no intention of making any further payments
in accordance with the terms of the contract, or otherwise.
4 The relevant and applicable part of clause #8 of the rental contract states, "you are in default
under this rental contract if you fail to pay any payment or any other amount due under this rental
contract when due." The evidence clearly indicates that the defendant defaulted in payments.
5 Clause #9 of the rental contract is a provision that states at the beginning of the clause, "if you
are in default under this rental contract, all payments and other amounts due to the end of the term
shall immediately and without notice become due and payable."
6 The defence pleads that the primary reason that it wished to cancel the contract was because the
company was not doing well financially and that the two remaining staff members did not require
the water coolers anymore. The defendant also argued that the amount "seemed high". Being
impecunious is not a defence in law, or a valid reason to cancel the contract.
7 The defendant also says that the evidence supported its contention that City Water failed to
resolve deficiencies contained in the written notice given to City Water pertaining to the lack of
service. I disagree. I find that City Water was most diligent in addressing any concerns and
repeatedly solicited dates for their service technician to service and change the filters which were
not forthcoming and offered by Precision Tool and Die. Aside from one missed service request, I
find that City Water did not fail to resolve the deficiencies in question.
8 The defendant also raised, however, did not press the argument that the early termination fee
and acceleration clause was a penalty and not liquidated damages. I find that the exit fee amount is
calculated by taking the contracted amount of the monthly payments, in this case the quarterly
payments and multiplying it by the number of months remaining in the contract. In this instance,
there was no dispute over the calculation of $3,515.66 and I find that amount to be contemplated by
the contract in these circumstances. Therefore, this amount constitutes as a genuine pre-estimate of
liquidated damages.
9 The amount claimed by the plaintiff is for the balance of obligation remaining on the term of
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3. the rental contract pursuant to clause #9 which is in effect, an acceleration clause. The amount
claimed for is $3,515.60 which is calculated at $79.90 per month for two units, paid quarterly which
means it is billed by the plaintiff once every three months. There was 44 months remaining on the
60 month term rental contract when the defendant defaulted in payments.
10 Therefore, the amount claimed by the plaintiff does not exceed the greatest loss that could
conceivably come from the breach of the contract for non-payment. In fact, the amount claimed by
the plaintiff is the exact same amount that is left owing on the rental contract. I therefore reject the
defendant's submission that the amount claimed by the plaintiff for the balance of obligation
remaining on the rental contract is extravagant and unconscionable. I find that clause #9 of the
rental contract does not constitute as a penalty clause and is in fact, a genuine pre-estimate of
liquidated damages.
11 It is almost, if not completely impossible in the circumstances to specify an exact dollar
amount in the provisions of the contract as there is no way of knowing when a particular leasee may
breach the contract by defaulting in payments. A default in payment could occur in the first, second,
third, fourth or fifth year of the contract so an exact dollar amount cannot be specified in any clause
of City Water's rental contract.
12 I also agree with what Deputy Judge De Lucia held in City Water International Inc. v. Wax
Hair Dressing Inc., [2012] O.J. No. 6252, where he said the following at paragraph 10 in relation to
clause #9 of the plaintiff's rental contract: "I also find that the amount claimed from April 1st, 2010
to June 30th, 2013, in the amount of $1363.05 constitute liquidated damages. They can be readily
calculated by the terms of the agreement and so it does not constitute a penalty provision, but rather
liquidated damages, and in fact the plaintiff will be entitled to what will be called the expectant
damages under the contract number 2. And I also find that the defendant's non-payment constituted
a breach of the contract."
13 The amount claimed by City Water is the exact same amount which is left on the term of the
rental contract and does not exceed the amount that the plaintiff would have received from the
defendant had it made all of its payments in accordance with the terms of the contract. I am at a loss
how the defendant can state that the amount claimed by the plaintiff is extravagant and
unconscionable when the amount being claimed is in fact the exact same amount that was left on the
term of the contract calculated at the monthly rate that was agreed to in writing by both parties.
Therefore, I find that the plaintiff is entitled to be put in the same position they would have been in
had the contract been performed, insofar as money can do it.
14 I further hold that the clause in question is not extravagant, unreasonable and is not
unconscionable or a penalty clause as per the considerations reviewed in Roynat Inc. v. Transport
Training Centres of Canada Inc., [2010] O.J. No. 4111, and Zander Sod Co. v. Solmar Development
Corp., [2011] O.J. No. 1877.
15 It must be remembered that there are strong policy considerations, particularly in a
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4. commercial context favouring the enabling of the parties to set their own value on performance.
There is one thing which more than another public policy requires, it is that people of full age and
competent understanding shall have the utmost liberty of contracting and that their contracts when
entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice.
16 As stated by Justice Boswell at paragraph 96 in Zander Sod Co. v. Solmar Development
Corp., "the usual method of assessing damages may be altered by express agreement between
parties. The common law has long recognized and respected private ordering. In other words,
parties generally enjoy the freedom to contract with one another as they see fit. That freedom
includes the right to agree on a limit of damages or even a fixed sum to e paid in the event of
breach."
17 Lastly, the defendant also submitted that the plaintiff has not mitigated its damages. Even
though not Pleaded in the Statement of Defence I will, nevertheless, address this issue. As indicated
by Justice Echlin at paragraph 23 in G & K v. Damingos Meat Packers Ltd., the concept of a duty to
mitigate is entirely foreign to a claim for liquidated damages and that such duty to mitigate does not
apply in these circumstances.
18 Accordingly, I find that the defendant breached the contract with City Water. City Water is
entitled to judgment in the sum of $3,515.60, minus the payment of $433.60 made by the defendant
after the Plaintiff's Claim was issued. Therefore, I total the judgment to be at $3,082.00, plus costs
fixed at $300.00 and disbursements.
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