Date Issued: February 3, 2022

File: SC-2021-005909

Type: Small Claims

Civil Resolution Tribunal

Indexed as: Waste Connections of Canada Inc. v. Smithe Salad Bar Ltd., 2022 BCCRT 128

Between:

WASTE CONNECTIONS OF CANADA INC.

Applicant

And:

SMITHE SALAD BAR LTD.

Respondent

REASONS FOR DECISION
Tribunal Member:	Trisha Apland

INTRODUCTION

1.      This dispute is about a waste disposal contract.

2.      The applicant, Waste Connections of Canada Inc. (WCC), provided waste disposal services to the respondent, Smithe Salad Bar Ltd. (Smithe). WCC says that Smithe breached the parties’ contract by failing to make payments. It also says Smithe terminated the contract outside the allowed cancellation window and so Smithe owes it $5,016.89 in liquidated damages. WCC has abandoned its claim over the Civil Resolution Tribunal’s (CRT) $5,000 monetary limit for small claims.

3.      Smithe says WCC improperly increased the service charges over the contract term but it paid all WCC’s invoices except the $5,016.89 invoice for liquidated damages. Smithe says it does not owe WCC the claimed liquidated damages. Instead, it says WCC owes it reimbursement for alleged overcharges. However, Smithe did not file a counterclaim, which I come back to below.

4.      WCC is represented by an employee. Smithe is represented by its owner.

5.      For the reasons that follow, I find Smithe must pay WCC a total of $5,000 in liquidated damages.

JURISDICTION AND PROCEDURE

6.      These are the CRT’s formal written reasons. The CRT has jurisdiction over small claims brought under section 118 of the Civil Resolution Tribunal Act (CRTA). Section 2 of the CRTA states that the CRT’s mandate is to provide dispute resolution services accessibly, quickly, economically, informally, and flexibly. In resolving disputes, the CRT must apply principles of law and fairness, and recognize any relationships between the dispute’s parties that will likely continue after the CRT process has ended.

7.      Section 39 of the CRTA says the CRT has discretion to decide the format of the hearing, including by writing, telephone, videoconferencing, email, or a combination of these. Here, I find that I am properly able to assess and weigh the documentary evidence and submissions before me. Further, bearing in mind the CRT’s mandate that includes proportionality and a speedy resolution of disputes, I find that an oral hearing is not necessary in the interests of justice.

8.      Section 42 of the CRTA says the CRT may accept as evidence information that it considers relevant, necessary and appropriate, whether or not the information would be admissible in a court of law. The CRT may also ask questions of the parties and witnesses and inform itself in any other way it considers appropriate.

9.      Where permitted by section 118 of the CRTA, in resolving this dispute the CRT may order a party to do or stop doing something, pay money or make an order that includes any terms or conditions the CRT considers appropriate.

Preliminary Issue

10.   As mentioned, Smithe says WCC overcharged it for its services. The CRT discussed with Smithe the option of filing a counterclaim with the CRT, which it declined because it wants more than the CRT’s small claims monetary limit. In its submission, Smithe alleges that WCC overcharged it by $14,140.52 and it intends to file a dispute in the BC Provincial Court (BCPC) for reimbursement of the alleged overpayment.

11.   CRTA section 11(1)(a)(i) says the CRT may refuse to resolve a claim or a dispute within its jurisdiction if it considers the claim is more appropriate for another legally binding process. I considered whether I should refuse to resolve this dispute so it could be heard by the BCPC. However, neither party asked that I refuse to resolve WCC’s liquidated damages claim and there is no suggestion that Smithe has yet filed a BCPC claim for the alleged overcharge. Considering this dispute falls within the CRT jurisdiction and the CRT’s mandate of speedy dispute resolution, I concluded that I should resolve this dispute.

ISSUE

12.   The issue in this dispute is whether Smithe must pay WCC liquidated damages under the contract, and if so, how much.

EVIDENCE AND ANALYSIS

13.   In a civil proceeding like this one, WCC must prove its claims on a balance of probabilities (which means “more likely than not”). I have read all the parties’ submissions but refer only to the evidence and argument that I find relevant to provide context for my decision.

Background Facts

14.   The parties signed a waste disposal service contract on March 29, 2016, which had a service start date of April 4, 2016. WCC is the sole proprietorship of Progressive Waste Solutions, which is the named service provider in the contract. I find nothing turns on the name.

15.   The contract contained the following additional relevant terms:

a.    The initial monthly service rate was $91, plus $21 for “extra lift”, subject to surcharges for extra weight and future rate increases. Additional standard charges included $150 for delivery, $150 for removal, plus some other charges.

b.    Smithe agreed WCC would have the sole and exclusive right to provide waste collection during the 5-year contract term that was effective as of April 4, 2016. The contract would automatically renew with no notice for consecutive 5-year terms.

c.    Either party could terminate the contract at the end of a 5-year term by either party providing written notice to the other party by “certified” mail to the parties’ mailing address not less than ninety (90) days or more than one hundred and eighty days (180) before the end of the then current term (cancellation window). Thus, the initial 5-year cancellation window was between October 6, 2020 and January 4, 2021.

d.    In the event Smithe terminates the contract, other than as provided by the contract, it must pay WCC liquidated damages in an amount equal to the sum of the monthly billings for the most recent 9 months.

16.   It is undisputed that WCC provided the waste disposal services to Smithe that started on about April 4, 2016. Neither party terminated the contract within the cancellation window and so, I find the contract automatically renewed for a second 5 year term ending April 4, 2026.

17.   On February 4, 2021, WCC emailed Smithe to ask how its service was doing and offered to discuss “better rates (discounts)”. Smithe emailed back on February 8, 2021, stating that Smithe would like to terminate WCC’s service “at the end of the term” and asked whether it needed to give any further notice.

18.   On February 11, 2021, WCC replied that their contract term is “valid” until April 2026. It offered Smithe the option to withdraw its contract termination request and honour its current obligations, or, sign a new agreement at discounted rates. Alternatively, it stated that Smithe could exercise its option to terminate the contract early but would then have to pay WCC liquidated damages, plus the outstanding invoice balances.

19.   On March 3, 2021, Smithe emailed that it did not want to renew the current contract and only wanted WCC’s service until April 2, 2021. It complained that the weekly rate had increased significantly over 5 years and alleged the service was unacceptable.

20.   In its March 4, 2021 response, WCC’s account manager explained the contractual obligations and that a significant increase happened back in 2018 due to disposal facility closures and other factors that increased its own costs. Based on Smithe’s decision to terminate the contract, WCC said it had closed the account and would remove its containers.

21.   On March 24, 2021, Smithe entered into a contract with a different waste collection provider, Revolution Resource Recovery Inc. (RRR).

Must Smithe pay WCC liquidated damages under the contract?

22.   WCC says Smithe failed to terminate in the cancellation window as provided by the contract and it is entitled to liquidated damages equal to 9 months of the most recent billings.

 

23.   Smithe says it terminated the agreement 2 months before the 5-year term expiry for poor service and “outrageous and frequent” increases to its charges. It says WCC’s billings were 5 times higher than RRR’s rates under its new contract. As mentioned, it says it is entitled to reimbursement of $14,140.52 for overcharges. I note Smithe provided no supporting evidence about the alleged poor service, so I will not discuss it further here.

24.   As for the liquidated damages, Smithe says WCC provided no service after the 5-year term ended and should not be paid these damages without service. It says WCC is essentially “requesting monetary compensation for their loss of opportunity to extort from [its] client by overcharging…which would have been possible unless the agreement was terminated”.

25.   Liquidated damages are a contractual pre-estimate of the damages suffered by a party in the event of a breach of contract. This means that WCC does not have to provide further services past the termination date to be entitled to payment of liquidated damages. Again, the contract states that Smithe must pay WCC liquidated damages if it terminates the contract other than as provided by the contract. I find Smithe’s February email notice terminating the contract within 60 days of the automatic renewal date fell outside the cancellation window and it triggered WCC’s entitlement to liquidated damages.

26.   In the binding decision Tristar Cap Garment Ltd., v. Super Save Disposal Inc., 2014 BCSC 690, the court discussed enforceability of liquidated damages clauses. In Tristar, the client had improperly cancelled the contract only 3 weeks after the parties signed it and the supplier charged liquidated damages equal to the remaining 2 years on the contract. The court concluded the liquidated damages were equal to the income stream loss over the remaining 2 years and were a genuine pre-estimate of breach of contract damages. The court concluded that the clause was enforceable.

27.   Here WCC’s liquidated damages claim is based on 9 months, which is far less than the remaining 5-year term of the parties’ renewed agreement. The contract states that Smithe acknowledged this measure of liquidated damages is reasonable in light of the anticipated loss caused by a termination. I find 9 months of prior billings is a genuine pre-estimate of WCC’s damages, the clause is enforceable, and WCC is entitled to liquidated damages for the early contract termination.

How much does Smithe owe WCC in liquidated damages?

28.   WCC claims $5,000 in liquidated damages, which I find is less than the past 9 months of billings, based on the submitted paid invoices. I find WCC is entitled to $5,000 in liquidated damages subject to a “set-off” discussed below.

29.   As noted, Smithe did not file a counterclaim. However, without describing it as such I find Smithe argues that it is entitled to a set-off for alleged overcharges. A set-off is a right existing between parties that owe each other money where their respective debts are mutually deducted, leaving the applicant to recover only the residue. The burden is on the party alleging a set-off applies, here that is Smithe: see the non-binding but persuasive CRT decision Recovery Enforcement Inc. v. Selective Food Imports Inc. 2019 BCCRT 652 at paragraphs 9, 22 and 23.

30.   Smithe submitted the invoices for all the billings since the contract start date. They show WCC’s services increased from 1 to 2 times a week in May 2016, which led to a rate increase. The rate dropped down again in May 2020 when service was reduced to 1 time a week. Smithe also submitted a table of the charges and highlighted select months when basic charges or surcharges increased. I agree the service charges and surcharges increased by a substantial amount over the years.

31.   WCC says it was permitted to increase the charges as set out in the contract and the historical increases were due to the fuel, labour, transportation, and disposal cost increases. It also says its costs increased significantly after some “organics facilities” shut down in 2018 as described in its March 4, 2021 email mentioned above. 

32.   The contract states that the basic rate is subject to additional surcharges for extra weight, which means the rates may vary. The contract also states that WCC was entitled to adjust the rates, including by way of separate surcharge, effective immediately and without notice based on an expansive range of factors to allow WCC to maintain a “reasonable profit”. Some of those factors include increases in labour costs, disposal costs, insurance costs, transportation costs, and changes in the market factors, taxes, governmental charges, and the consumer price index.

33.   While WCC did not provide evidence to support the reason for the increases, many of the increases are now several years old. There is no evidence showing that Smithe contested the increases at the billing time and Smithe paid each invoice in full. I find it is not enough for Smithe to now assert years later that the increases were improper. Further, Smithe did not cancel the contract in October 2020, when the cancellation window opened up, and nor did it attempt to negotiate a lower rate. Given these factors, I find Smithe agreed to the charges as billed and continued with the contract. I find Smithe has not proven that WCC overcharged it for its past services and so, I find no basis for a set-off.

34.   I find Smithe must pay WCC the claimed $5,000 in liquidated damages.

35.   Although the parties’ contract included a provision for interest, WCC waived its interest claim. In any event, contractual interest, plus the $5,000 principal, would have brought the claim over the CRT’s small claims limit. So, I have not awarded any contractual interest. While the Court Order Interest Act (COIA) applies to the CRT and is exclusive of the $5,000 monetary limit (unlike contractual interest), COIA interest does not apply where the parties agreed to an interest rate as is the case here. So, I make no order for COIA interest either.

36.   Under section 49 of the CRTA and CRT rules, the CRT will generally order an unsuccessful party to reimburse a successful party for CRT fees and reasonable dispute-related expenses. The CRT’s monetary limit does not include fees or dispute-related expenses. So, following the general rule, I find WCC is entitled to reimbursement of $175 in CRT fees. It claimed no specific dispute-related expenses.

ORDERS

37.   Within 30 days of the date of this order, I order Smithe to pay WCC a total of $5,175.00 broken down as follows:

a.    $5,000 in liquidated damages, and

b.    $175 in CRT fees.

38.   WCC is entitled to post-judgment interest, as applicable.

39.   Under section 48 of the CRTA, the CRT will not provide the parties with the Order giving final effect to this decision until the time for making a notice of objection under section 56.1(2) has expired and no notice of objection has been made. The time for filing a notice of objection is 28 days after the party receives notice of the CRT’s final decision.

40.   Under section 58.1 of the CRTA, a validated copy of the CRT’s order can be enforced through the Provincial Court of British Columbia. A CRT order can only be enforced if it is an approved consent resolution order, or, if no objection has been made and the time for filing a notice of objection has passed. Once filed, a CRT order has the same force and effect as an order of the Provincial Court of British Columbia.