Borgo Upholestry Ltd. v. Canada (Attorney General)

Borgo Upholestry Ltd. v. Canada (Attorney General) Court Supreme Court Date 2003-02-12 Citation 2003 NSSC 32 Docket SH 144283 Judge/Registrar/Adjudicator LeBlanc, Arthur J. (Honourable Justice) (SC) Document Type Decision Relations Library Sheet - Borgo Upholestry Ltd. v. Canada (Attorney General) - 2003 NSSC 32 - 2003-02-12 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: Borgo Upholstery Ltd. v. Canada (Attorney General), 2003 NSSC 32 Date: 20030212 Docket: SH 144283 Registry: Halifax Between: Borgo Upholstery Ltd. and Neil John Funnell Plaintiffs v. Attorney General of Canada Defendant Judge: The Honourable Justice Arthur J. LeBlanc Heard: June 11, 12, 13, 14, 15, 2001; December 11. 12, 13, 2001 in Halifax, Nova Scotia Last Written Submission: October 8, 2002 Counsel: Kevin C. MacDonald, for the Plaintiffs G. Michael Owen, for the Defendant By the Court: [1] This is an action for breach of contract brought by the plaintiff Borgo Upholstery Limited (“Borgo”) as assignee of Neil Funnell, carrying on business under the name Canuck Office Furnishings, against the defendant, the Attorney General of Canada. Borgo seeks payment for several hundred chairs supplied to the federal government pursuant to a contract between the Crown and Canuck Office Furnishings. Funnell was joined as a plaintiff on October 21,1998. The defendant pleads the fitness for purpose and merchantability provisions of the Sale of Goods Act. FACTS AND EVIDENCE [2] In 1996, Commander D.J. Gallina (“Gallina”) was Commandant of the Canadian Forces Naval Operations School in Halifax. Concerned about the state of the classrooms at the school, he set up a committee to consider how to improve instructor training, classroom facilities and technology. Captain Mark Tijssen (“Tijssen”) chaired the committee, whose mandate included upgrading the furniture. The committee set up a “model classroom”. Once the Department of National Defence secured the necessary funding and with a view to replacing the old desks and chairs, the committee drew up specifications for a sled-based chair. Although the School could buy a few chairs directly, the large number of chairs necessary to re-equip the classrooms made it necessary to put out a tender through Public Works and Government Services Canada (“Public Works”) in compliance with Federal Government procurement policy. [3] The specifications for a new classroom chair were based on those of the DSI 402 chairs used in the model classroom. The School passed the specifications on to Maritime Forces Atlantic, Formation Logistics, which acted as a go-between for the School and Public Works. Formation Logistics sent the specifications to Public Works, which drew up a Request for Proposals (“RFP”). Public Works issued the RFP on December 20, 1996. It stated a closing date of February 7, 1997, which was later amended to February 11. The RFP required delivery, F.O.B. destination, by March 15, 1997. The RFP also called for desks to be supplied, but this did not form part of the contract as it was eventually awarded and is irrelevant for the purposes of this decision. [4] The office chair specifications contained in the RFP and eventually incorporated into the Contract specified the distance between armrests, the type of steel to be used in the frame of the sled base, the upholstery to be used in the seat, the type of endcaps to be used on the frame, the length of the arms and, significantly, the thickness of the foam padding for the back and seat. As Funnell pointed out in cross-examination, nothing in the specifications stated the size or configuration of the frame, nor the location of the seat on the frame. [5] Public Works received a number of bids. Two were immediately rejected as being non-compliant with the RFP. Canuck’s bid was the first acceptable bid and the next lowest bid offered a DSI chair. Canuck’s was the lowest compliant bid. However, Gallina and Tijssen had reservations about the form and content of the Canuck bidding documents. Gallina testified that the chair in the picture Canuck had supplied did not look satisfactory and the terms of the warranty were unclear. The bid contained the specifications for the unmodified and modified Borgo chairs. He felt that the Canuck submission was “shoddy”. He said he had difficulty locating Canuck’s office, and could only reach the company through a cell phone number. He told Lila Zwicker (“Zwicker”), the Customer Services Support Officer at Formation Logistics, and Allan Keith (“Keith”), the Public Works team leader for the Information Technology Division, about his concerns. Tijssen, too, felt that the Canuck bid was a “sloppy” submission that provided insufficient information. [6] Margot Campbell, the contracting officer at Public Works who was handling the RFP, sought clarification of the terms of the warranty. She also had to ensure that it was a modified version of the chair, not the basic version, that had been offered in the tender. The basic Borgo chair would not comply with the requirements of the RFP. Canuck confirmed that it had offered a modified Borgo chair. In letters dated February 24, 1997, both Funnell and Borgo confirmed that the chair on offer was a modified version of the basic Borgo 7002SB. [7] Once Public Works had its questions answered, Keith decided the Canuck bid complied with the requirements of the tender. Campbell said Public Works needed the School to give technical approval of the bid. Keith said they continued to wait for DND approval before awarding the contract. [8] No one from the School or from Public Works viewed a sample chair before the contract was awarded. Gallina testified that he had no opportunity to view a chair. In cross examination, after being directed to a letter offering a chance to view the chair, he said this referred to the original Borgo chair. Tijssen said it would have held up the process because Borgo would have to manufacture a sample chair, as the chair was not an off-the-shelf model, but rather was being made to the School’s specifications. He could not recall why he did not push harder to see a sample chair. Funnell said that there was an offer to view the chair, although one would have to be manufactured. [9] On March 10, 1997, Canuck agreed to provide 787 chairs (later increased to 806) for $110.99 each. Delivery would be F.O.B. the Borgo Plant in Ontario, with a delivery date of March 27, 1997. The contract incorporated standard terms and conditions from the Public Works Standard Acquisition Clauses and Conditions (SACC) Manual. The contract set out the specifications in the following words: Chairs, Classroom Chair, Complete with the Following Specifications: a. Armchair, Sled Base, 19.5 to 23 Inches Between Armrests; b. Oval Tube Frame, 1.5 Inch - 16 Gauge Steel, Tube Endcaps Installed, Chair Frame Colour: Black c. Fabric Upholstery, Polypropylene or Comparable Highest Durability - Fabric: Select by Elite Canada; Colour: Silver (#60) d. Hard Urethane Capped Arms - 8.75 Inches Long; Colour: Black e. Molded Polyurethane Foam Padding; Back, 3 Inches Thick - 1.5 Lb/psi Density and Seat, 3.5 Inches Thick - 2.2 Lb/psi Density; f. Floor Protective Pads on Skids [10] The specifications had been prepared by Petty Officer Second Class (PO2) Ellis (“Ellis”) who was assisting Tijssen on the Technical Committee (ITAT). Ellis acknowledged that the specifications had been taken from the DSI chair in the model classroom and from the specifications included in the brochure. [11] The RFP indicated that delivery would be “F.O.B. Destination”. However, the Contract stated that delivery would be “F.O.B. Plant”. Campbell and Zwicker testified that the change to F.O.B. Plant was done to preserve the funding for the project by ensuring that all the chairs were delivered by March 31, as Gallina was concerned that procurement of the chairs after this date would mean a loss of the funding and there was no certainty that the funds would be available in the next fiscal year. [12] Campbell said she expected all the chairs to be ready when the inspection was carried out. Keith said the chairs should have been rejected if they were not all ready by March 31. Gallina, Tijssen and Ellis said they knew not all the chairs would be ready on March 27, but were prepared to go ahead anyway. Zwicker, too, was aware that not all of the chairs would be ready. [13] Tijssen and Ellis were assigned to travel to the Borgo plant in Mississauga, Ontario, on March 27, 1997, to inspect and accept the chairs. Zwicker said that before Tijssen and Ellis went to the Borgo plant, she referred them to Jim Williams, a technical officer, for technical support to tell them how to inspect the chairs. [14] On March 27, 1997 Tijssen and Ellis went to the Borgo factory in Mississauga, Ontario. They met Alessandro Spassiani (“Spassiani”), Borgo’s president, and Mandeep S. Kalra (“Kalra”), an employee. According to Tijssen they spent less than two hours at the plant. After a tour of the facilities, they counted 266 chairs that were boxed and ready for shipment. Tijssen and Ellis removed chairs from boxes at random in order to inspect them. [15] Tijssen said he tested at least two chairs and described his method. Sitting in a chair, he leaned back and rocked it left to right, though not forward. He also measured the chair to confirm that it met the specifications. Tijssen said he “walked” the chairs back and forth. He said he never thought of sitting on the front edge of the chair, although on cross-examination he agreed that he could have done so. He agreed on cross-examination that there was no rush to complete the inspection. He noticed no difficulty with the chairs at the plant. He found the chairs to be solid and well made, and said they fit his back. He was concerned about the large number of chairs that had not yet been assembled. Ellis also tested at least one chair, sitting in the back of the chair and moving from side to side. Tijssen and Ellis also saw the parts for other chairs waiting to be assembled. [16] Kalra, the Borgo employee who showed Tijssen and Ellis around the plant, recalled them removing chairs from boxes, measuring and testing them in a “rough” manner, and sitting on the chairs. He estimated that they spent ten to 15 minutes inspecting four or five chairs. Spassiani said Tijssen was concerned that the chairs would tip backwards, and estimated that they spent 15-20 minutes inspecting at least three chairs. He recalled Tijssen trying to pull chairs apart, saying students would be using them. [17] Tijssen said he then phoned Nancy Waller, a Customer Service Support Officer at Formation Logistics, told her how many chairs were ready, and reported that he was satisfied with the chairs. In order to preserve the funding, he agreed that he had accepted all the chairs at the plant on March 27. Spassiani said that before Tijssen and Ellis left the plant, they asked for an invoice, which he gave them. Tijssen said he asked for an invoice for all of the chairs ordered. This was to hurry the payment of the invoice. He said they did not comment on the condition or quality of the chairs. [18] On April 7, 1997, Borgo and Canuck delivered 274 chairs to the School, and 42 more on April 9. Gallina said Tijssen soon informed him that an instructor had sat on one and flipped forward, nearly hitting his head on the desk. When he sat on a chair himself, Gallina noticed the same tipping. He consulted a safety officer, who advised that people sitting in the chairs should sit toward the back of the chair. Eventually he ordered the chairs removed and the old chairs were put back in their place. [19] Tijssen said when the chairs were delivered, and people began to complain that they tipped forward, he was advised by a safety officer, Chief Petty Officer Second Class (CPO2) J.A. Park (“Park”), to sit on the back of the chair and to tell the students to do the same. He found the chair stable when sitting on the back, but he fell forward when he sat on the forward edge. He informed Gallina that the chairs did not meet the CGSB specification, based on his own observations from pushing down on the front of a chair with his hand. Based on this evaluation, he decided to have the chairs tested by an independent laboratory. Tijssen said the “two-finger” test that made the Borgo chairs tip did not tip the DSI chair. [20] A number of instructors and other School personnel testified about their experience with the Borgo chairs. Among the witnesses who described how the Borgo chairs tipped forward when they sat in them were English teachers Wayne Prince and Ian Robb, CPO2 Melvin Antle, linguistic co-ordinator Helene L’Heureux-Ferguson and maintenance manager Lee Joudrey. Joudrey said he told Tijssen that the chairs were a risk to the personnel and should be removed. L’Heureux-Ferguson described the forward movement as “abrupt” and “instantaneous”. [21] In reply to the School’s complaints about the chairs flipping forward, Funnell went to the School and looked at the chairs. He suggested that a wedge installed on the front of the sled base could improve the chair’s stability. He said he had no concerns about the chairs’ stability, and did not notice it tipping when he leaned forward on the seat. However, he said, he wanted to keep a big customer happy, and so he suggested a modification to address the defendant’s concerns. [22] Funnell hired installer Eric Caines to attach the wedges to the chairs. Caines said DND personnel saw him sitting in the chair, but did not seem to be paying much attention. He did not sit in a chair in front of a desk. L’Heureux-Ferguson said she sat in a modified chair and it still tipped; she said it was not much better than the unmodified version. Mr. Caines claims that he sat in the chair before it was modified and did not find it posed a danger. [23] The chairs were subsequently removed from the school and stored by the defendant. Public Works issued a stop work order on April 15, 1997. On April 16, 1997, Funnell wrote to Keith. He stated, in part: The stability of the 7002SB Sled Base Arm Chair can be improved by using a PVC Black Wedge, with a number 3 Self Tapping Screw attached to the front leg(s) of the chair(s). Our Service technician will retrofit the 7002SB Sled base Arm Chairs on site, by using a Boring Jig. This work will be performed the week of April 21, 1997. The remaining 490 #7002SB Sled Base Arm Chairs will be retrofitted at the plant using the above procedure and will be shipped Friday, April 18, 1997, via Knightline Transport and will be ready for installation Monday, April 21, 1997. The number of chairs completed on March 31st, 1997 was 456. [24] The School had a Report prepared on the forward stability of the chairs, dated April 16, 1997. This report was prepared by the Nova Scotia Innovation Corporation (InNOVAcorp). Neil Richter, Manager of InNOVAcorp’s Environmental Simulation Lab, testified as an expert and he concluded that, although the addition of the wedges to the chairs “did improve the forward tipping stability somewhat, they are still well below the requirements of the standard and therefore are unsafe.” [25] Public Works issued a second stop-work order on April 16, 1997. On April 30, Keith wrote to Funnell: ...[T]he chairs ... are a safety hazard even with the modification and are not acceptable and thus the Crown has no intention of paying for a product it can not use. Canuck has two options: One modify the present chair so that the frame is appropriate to the size of the cushions, or Two provide a new chair. In either case both options must meet the CAN/CBSB-44.2200-M90 Paragraph 9.7. “Stability Test Vertical Force”, and the item description of the Contract. [26] Funnell replied that the testing was “all very interesting, but totally irrelevant” and said the chairs were made to the government’s own specifications. He continued: In response to [Margot Campbell’s] faxed request of Feb. 17, 1997 we faxed back confirmation that it was possible to view the proposed chair, as per item 4). No response to this suggestion was ever received. These chairs underwent rigorous testing by your representatives at the factory, and these official representatives signed and accepted these chairs at the factory in Mississauga on or about March 27, 1997. [27] Public Works terminated the contract on May 12, 1997, citing Paragraph 02(2) of General Conditions DSS 9329. Keith stated: As you are aware the chairs which you delivered are not fit to be used because they pose a safety hazard for anyone who sits in them. Notwithstanding the fact that this defect has been brought to your attention you have failed to replace those chairs that have already been delivered with chairs that are properly designed to function as any chair should. Therefore pursuant to paragraph 05 of DSS 9329 the contract has been terminated. [28] After the contract was terminated, the School removed the chairs and put them in storage. Funnell said the chairs were in storage between May 1997 and November 4, 1997, when he had 314 chairs shipped back to Borgo at Borgo’s expense. Kalra saw the chairs when they arrived at the plant. He said many were scratched and damaged, and about 25 per cent were not in boxes. Some were wet, which Kalra said was due to the way DND stored them. A number of chairs had be repaired and repainted. It was necessary to replace the fabric with fabric of a different colour. [29] Borgo refurbished and stored these chairs, as well as the rest of the original order (totalling 804) until they were resold. Spassiani said the chairs were resold in small lots to several purchasers. One of these purchasers was the Diversified Group, with which Borgo has a relationship. EXPERT EVIDENCE [30] The paintiffs presented evidence from Michel Comtois, president of Micom Laboratories, which specializes in office furniture and material testing. Comtois used a testing standard known as BIFMA X 5.1 1993 (“BIFMA standard”). In tests using the BIFMA standard, force is applied to the “lateral middle” of the seat, halfway between the two sides. It is not centred fore and aft on the seat. A chair would pass if it took more than 10.6 pounds of pressure to lift the rear from the ground. It took 18 pounds to lift the modified Borgo chair. No direct vertical force is applied to the front of the seat. [31] The defendant’s expert was Neil Richter, Manager of the Environmental Simulation Lab for the Nova Scotia Innovation program (InNOVAcorp) in Dartmouth. He stated that his lab conducts “test tailoring” for standards that do not answer the questions that need to be answered about products. This involves modifying existing tests. Mr. Richter tested two Borgo chairs, one with the retrofitted wedge and one without. He compared them to a test chair whose stability was not in question. He said he used the CGSB 44.200 standard (“CGSB standard”), which includes a vertical force test, because the usual standards applicable to sled base chairs did not include tests for forward tipping stability under a vertical force. The InNOVAcorp tests involved lowering a 150-pound steel bar onto the seat. An acceptable chair would have to “sustain a vertical force of 120 lbs or 530 Newtons applied over a 15 cm diameter area at the maximum radial dimension of the front of the chair without tipping.” The Borgo without the wedges tipped at 35 pounds; the Borgo with wedges tipped at 50 pounds. By comparison, the control chair, a DSI402 model, only tipped at 140 pounds. The report concluded that, although adding the wedges “did improve the forward tipping stability somewhat, they are still well below the requirements of the standard and therefore are unsafe.” [32] Mr. Comtois said the CGSB standard applies to posture chairs, not sled chairs such as the Borgo 7002SB. He said, “[t]here are no vertical force tests for forward stability for any standards that covers sled based chairs in Canada and in the [United] States”. The BIFMA standard is the accepted standard for a sled-based chair. Mr. Comtois also expressed concerns about the accuracy of the dynamometer used by the defendant’s expert. He said a 2,000 pound machine might lose accuracy in the lower range of weights. However, he could not say that the machine used by the defendant’s expert was inaccurate, only that it was a concern he would want to check. He also said there was a possibility of error in the calibration standard Mr. Richter used. The plaintiffs say Mr. Richter conceded, once it was explained to him, that there was a vertical component to the plaintiff’s forward stability test. [33] The paintiffs added Mr. Richter’s evidence should be given little weight, as he had limited experience testing chairs and conceded the possibility of error. Mr. Comtois, in contrast, has more experience and qualification in testing chairs and used the accepted standard test. Mr. Comtois admitted that his own lab does testing for which it does not have any specific accreditation and that the equipment he used to test the chairs is also used to test other materials. [34] Mr. Richter said the BIFMA standard for sled chairs was under review because it did not test for vertical force applied to the front of the chair. He said the BIFMA standard would not be appropriate to answer the question he was trying to answer, that is, the stability of the chair with a person sitting with their weight forward. The defendant says Richter’s tests do address this question, and his conclusions are supported by common experience. [35] Further, the defendant says the contract does not specify a standard which the chairs are to meet, and that Mr. Comtois did not impeach or undermine Mr. Richter’s methodology, equipment or methods. On the last point, the plaintiffs say their expert impeached Mr. Richter’s methods by pointing out that he applied a test standard designed for a posture chair on a sled base chair. [36] I conclude that the plaintiffs’ test failed to answer the question that needed to be answered. It was clear when the witnesses sat in the chair on the very front of the seat, it tipped forward easily. Even without contrary expert evidence I would have found it difficult to accept the opinion of the plaintiffs’ expert. In fact, without any expert evidence from either party it would not have been difficult to make a finding that the chairs were in fact very tippy and unsafe. The plaintiffs did not claim that Mr. Richter’s conclusions were in error, only that there was a possibility of error. The BIFMA test may be the industry standard for a sled-based chair, but it was nevertheless inadequate to establish the stability of the Borgo chair when a person sat on the front edge. FINDINGS OF FACT [37] Based upon the evidence adduced at trial, I make the following findings of fact: 1. I find that the parties varied the terms and conditions stated in the request for proposals by changing delivery to F.O.B. Plant. I also find that the defendant agreed to inspect the chairs at the Borgo plant in Mississauga, Ontario. I find that despite the failure of the plaintiffs to have available a chair for the defendant’s inspection prior to the acceptance of the offer, the terms of the proposal as submitted were varied to provide for acceptance on March 27, 1997. 2. I find that despite efforts of Cdr. Gallina and Capt. Tijssen to have the defendant reject the Canuck proposal due to the incompleteness of the tender documents, such efforts were not motivated by any personal bias against Canuck, but were for the purpose of seeing that they would be provided with quality chairs. 3. I find that the defendant’s personnel did not view a modified Borgo chair prior to March 27, 1997. Despite the fact that the chairs were only available for viewing on that date, the defendant made no real effort to have one made before accepting the Canuck tender. 4. I find that the Borgo modified chair was available to Canuck and other distributors and was based on the Borgo SB 7002 chair. The specifications for the Borgo modified chair were prepared by PO2 Ellis. They provided for thicker cushioning on the seat and back of the chair, but did not specify the location of the seat cushion on the tubular frame. I find that Canuck was not asked or consulted about the effect of changes to the standard Borgo SB 7002 on the stability of the chairs. 5. I find that the defendant’s representatives inspected the chairs by selecting several chairs for a thorough inspection. The inspection did not involve sitting on the forward portion of the chair. They inspected by sitting at the back of the chairs and measuring them as against the specifications. They failed to sit on the front portion of the chairs to determine if they were satisfied with their forward stability. 6. I find that after the inspection they requested an invoice from Borgo for the entire order, although only a portion of the chairs ordered were ready and available for shipment. Captain Tijssen and PO Ellis accepted the chairs and requested an invoice despite this being contrary to government policy. I find that as a result of acting in the manner it did, the defendant is unable to claim as a defence that the plaintiffs did not have the entire quantity of chairs ready as required by the contract. 7. I find that once they were delivered to the defendant the chairs tipped forward when a person sat on the forward part of the seat. 8. I find that the chairs were taken out of service and the old chairs were put back into service as a result of the Borgo chairs’ tendency to tip. 9. I find that the efforts by Canuck’s representatives in offering to attach a wedge to the front portion of the modified chairs was a recognition that the chairs as manufactured by Borgo were indeed unsafe for use as classroom chairs. 10. I find that the test of the chairs by Mr. Comtois did not address the vertical stability of the chair. I accept the opinion evidence of Mr. Richter that the modified Borgo chair and the modified Borgo chair with the addition of the wedge was unsafe due to its lack of vertical stability, requiring the chairs to be taken out of service. I find that the remediation proposed by Canuck was not sufficient to make the chairs safe. 11. I find that Canuck, not Borgo was a party to the contract with the defendant, and that Borgo received an assignment of the proceeds pursuant to an assignment dated November 24, 1997. 12. I find that although the defendant in these proceedings is referred to as the Attorney General of Canada, this includes officials and personnel of the Department of National Defence (DND) and Public Works and Government Services Canada. 13. I find that the fact that, although Borgo and the other entities involved in the disposition of the chairs were “related” companies, the losses sustained by Borgo in their disposition were compensable losses. ISSUE [38] By conducting an inspection of the chairs at F.O.B. destination, namely, Borgo’s plant, and accepting the chairs as fit for the purpose, did the defendant waive its right to claim for defects in the forward stability of the chairs once the chairs were further inspected after their actual delivery to the defendant? ANALYSIS Sale of Goods Act, s. 17 [39] The defendant says the chairs failed to meet the implied conditions of fitness for purpose and merchantability under ss. 17(a) and (b) of the Sale of Goods Act, R.S.N.S. 1989 c. 408, as amended. Section 17 states: Subject to this Act and any statute in that behalf, there is no implied warranty or condition as to the quality or fitness, for any particular purpose, of goods supplied under a contract of sale, except as follows: (a) where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgement and the goods are of a description that it is in the course of the seller’s business to supply, whether he be the manufacturer or not, there is an implied condition that the goods shall be reasonably fit for such purpose, provided that, in the case of a contract for the sale of a specified article under its patent or other trade-name, there is no implied condition as to its fitness for any particular purpose; (b) where goods are bought by description from a seller who deals in goods of that description, whether he be the manufacturer or not, there is an implied condition that the goods shall be of merchantable quality, provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed; (c) an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade; (d) an express warranty or condition does not negative a warranty or condition implied by this Act, unless inconsistent therewith. Fitness for Purpose: s. 17(a) [40] The elements to be proven under s. 17(a) were set out by Palmeter, A.C.J. in Sound Images Inc. v. Solar Audio and Recording Ltd., [1995] N.S.J. No. 91 (N.S.S.C.) at paragraph 17. The complainant must prove: (a) that it made known to the defendants the purpose for which the goods were required; (b) it relied on the defendant’s skill or judgment; (c) the goods are of a description it is in the course of the defendant’s business to supply; and (d) the goods are not fit for the purpose for which they were required. [41] The plaintiffs have not argued that the defendant did not inform them of the purpose for which the chairs were required. The contract referred to “classroom chairs”. Funnell agreed on cross-examination that this would mean the chairs were intended to be used alongside a desk. I find that the ps were informed of the purpose for which the defendant required the chairs. The plaintiffs have also not claimed that it was not in the course of their business to supply classroom chairs. I find that it was in the course of the plaintiffs’ businesses to manufacture (in the case of Borgo) and supply (in the case of Funnell and Canuck) classroom chairs. I am satisfied that Funnell had the background and experience in the furniture field to know the importance of stability in a sled based chair. [42] The plaintiffs do maintain that the chairs were fit for the purpose for which they were required. They say the chairs met the industry standard testing requirement and that they have been resold. They take this position despite the fact that they saw the chairs tip forward and despite their attempt to improve the stability of the chairs by adding the plastic wedges on either side of the front portion of the base of the chairs. If, as Mr. Funnell maintains, the chairs were stable, there would not have been any need to offer the addition of the wedge. Stability or the lack thereof would not have been a factor. I find, based upon expert evidence of tests tendered by the defendant and upon testimony and observation in the courtroom, that the chairs were indeed unfit to be used as classroom chairs to be placed behind desks, due to their tendency to tip forward easily when pressure was placed on the forward edge. The tests performed by Borgo’s expert failed to answer the question that demanded to be answered. For the reasons set out above, I prefer the opinion of Mr. Ritcher. [43] This conclusion is bolstered by the evidence of School personnel who used the Borgo chairs before the wedges were installed, including Ms. L’Heureux-Ferguson, who recounted sitting in one after the wedges were installed and finding little improvement. The plaintiffs argue that the tipping problem only occurred when someone sat at the forward edge of the chair. This may be true, but it was sufficient to make the chair unsafe. The defendant says the plaintiffs adduced no evidence to rebut the witnesses’ experiences and observations, and that the witnesses are uninterested parties. The plaintiffs argue that Joudrey and Antle, two of the defendant’s witnesses, were on the committee that drew up the specifications and thus are not “uninterested”. [44] Based on the expert evidence adduced by the defendant, and the descriptions given by witnesses who sat in the chairs, I conclude that the chairs were indeed unfit for the purpose for which they were intended. [45] As a result of these conclusions, the question of the buyer’s reliance upon the seller’s skill and judgment, and whether any such reliance was displaced by the inspection, will be the decisive issue under s. 17(a). Reliance [46] The defendant maintains it relied on the plaintiffs’ skill and judgment to supply a stable and safe chair. It must be remembered that the chairs were not bought “off-the-shelf”, but were modified versions of a standard chair. Neither the Request for Proposals nor the contract specified the configuration of the frame. It was an implied condition that the chairs would be reasonably fit for classroom use. It was reasonable to assume, as a result, that the chairs that were manufactured to fulfil the contract would have a reasonably stable base. I also am mindful that, given the defendant’s frequent inquiries to determine the specifications of the thickness of the cushion and the distance between the bars, the defendant was making it amply clear to Mr. Funnell it wanted a compliant chair. Though they had not provided the sled base specifications, it is clear that the competence and expertise of Funnell and the supplier (manufacturer) would be relied upon. [47] One of the leading cases on fitness for purpose is Grant v. Australian Knitting Mills Ltd, [1936] A.C. 85 (P.C.). The appellant bought woolen underwear containing a chemical irritant that caused acute dermatitis. He alleged that the retailer breached the implied condition of fitness. The Court agreed. Lord Wright said, at 99: It is clear that the reliance must be brought home to the mind of the seller, expressly or by implication. The reliance will seldom be express: it will usually arise by implication from the circumstances.... [48] More illumination on the problem of reliance may be found in Medway Oil and Storage Company Ltd. v. Silica Gel Corporation (1928), 33 Com. Cas. 195 at 196-197, where Lord Sumner stated the following propositions: (a) The buyer's reliance is a question of fact to be answered by examining all that was said or done with regard to the proposed transaction on either side from its first inception to the conclusion of the agreement to purchase. (b) The section does not say that the reliance on the seller's skill or judgment is to be exclusive of all reliance on anything else, on the advice, for example, of the buyer's own experts or the use of his own knowledge or common sense. Indeed it would never be possible to be sure that the element of reliance on the seller entered into the matter at all unless the buyer made some statement to that effect. It follows that the reliance in question must be such as to constitute a substantial and effective inducement which leads the buyer to agree to purchase the commodity. (c) This warranty, though no doubt an implied one, is still contractual; and, just as a seller may refuse to contract except upon the terms of an express exclusion of it, so he cannot be supposed to consent to the liability which it involves unless the buyer's reliance on him, on which the liability rests, is shown, and shown to him. The Tribunal must decide whether the circumstances brought to his knowledge showed this to him as a reasonable man or not; but there must be evidence to bring it home to his mind before the case for the warranty can be launched against him. [49] The defendant puts forward several cases elaborating on these principles. In Buckley v. Lever Brothers Ltd., [1953] O.R. 704 (H.C.), for instance, the plaintiff was injured by a clothespin that shattered under normal use. Following Australian Knitting Mills and Medway, Wells J. found the seller liable under the implied condition. [50] In Bezanson v. Kaintz (1967), 61 D.L.R. (2d) 410 (N.S.T.D.) the defendant, a Christmas tree dealer, cancelled a contract to buy trees from the plaintiff, claiming that his customers were returning the plaintiff’s trees because they were substandard. The defendant was entitled to receive trees which were “reasonably fit for the purposes for which they were intended”. He had trusted to the plaintiff’s knowledge and was entitled to damages for breach of the implied condition. [51] In Corbett Construction v. Simplot Chemical Company Ltd., [1971] 2 W.W.R. 332 (Man. Q.B.) the plaintiff bought fertilizer pellets from the defendant, intending to impregnate them with diesel oil and use them as explosives. Told of this purpose, the defendant replied that it did not produce “explosive fertilizer”, but would supply the fertilizer it had. In order to show reliance it was not sufficient for the buyer to tell the seller its purpose; the purpose must be made known so as to show that the buyer “relied on the seller’s skill and judgment”. Where the goods are intended for a special purpose, or are required in a special form, the purpose must be disclosed to the vendor so that “he undertakes to supply goods which are suitable for the object required”. [52] In Alcraft Industries Inc. v. Zeta Oilfield Rentals Ltd. (2000), 192 Sask. R. 188 (Q.B.) the defendant bought two custom-built water heaters from the plaintiff. Within days, the lower tubes in the heaters became plugged with scale and erupted, extinguishing the heaters. Rothery J. concluded that the implied warranty of fitness for purpose applied. Though the defendant knew the plaintiff was not an engineering design company and that the heaters were not a registered design, the plaintiff held itself out as a company that could build custom heat exchangers and design specialty equipment. The discussions between the parties showed the plaintiff’s reliance on the defendant’s skill and judgment. [53] The defendant provided a set of specifications that did not describe every aspect of the chair. The plaintiffs held themselves out as being capable of manufacturing and supplying a “classroom chair”. However, it was not sufficient to simply meet the defendant’s specifications if the chair was unstable and unsafe, as I have found that it was. While the buyer’s reliance on the sellers’ skill and judgment was not total, given the relatively detailed specifications contained in the contract, it was still a “substantial and effective inducement” that led the buyer to purchase the goods. The fact that the defendant specified certain features of the chairs did not oust its reliance on the plaintiffs. The buyer relied on the seller to provide a safe and stable classroom chair. However, this does not end the matter. I must go on to decide whether that reliance was displaced by the inspection by Tijssen and Ellis at the Borgo plant. Was Reliance Ousted by the Inspection? [54] Several decisions suggest that an inspection by the buyer means he is not relying upon the skill and judgment of the seller, thus ousting the implied warranty of fitness. In Conary v. Harvey Hooper Lobsters Ltd. (1982), 38 N.B.R. (2d) 670 (Q.B.) the plaintiff was a lobster dealer and the defendant was a lobster pound operator. The defendant stopped payment on some lobsters, alleging that they were diseased. Because the defendant had randomly inspected the lobsters when they were delivered, Hoyt J. found that he had not relied upon the seller’s skill or judgment, commenting at paragraph 19: While it might seem anomalous to say that the defendant would have been in a better position if he had not inspected at all, the inspection demonstrates, as might be expected in dealing with such fragile goods, that the buyer would inspect to the extent it felt necessary and not rely on the seller. [55] Hoyt, J. also found that the lobsters were not diseased at the time of the inspection but that the defect arose after delivery. The court held that the risk passed to the buyer at the time of delivery. [56] In Fermes Semence Ouellette Ltee v. Mallais (1991), 120 N.B.R. (2d) 361 (Q.B.), Ouellette bought potatoes from Mallais. Mallais said the potatoes were of “good quality”. When Ouellette resold the potatoes, they turned out to be diseased, injured and rotten. Ouellette absorbed the loss, but sued Mallais. The defendant argued successfully that the plaintiff’s inspection of the potatoes when they were delivered to its warehouse indicated that it was relying upon its own skill and judgment, rather than that of the seller. [57] In Sound Images, supra, the plaintiff chose not to physically inspect a used recording console, though it was urged to do so. Having chosen not to inspect, “if the goods were not up to the expectations of the plaintiff, then it must accept what it got.” [58] However, where the defect complained of is not patent or obvious, the effect of the inspection becomes arguable. In John MacDonald & Co. Ltd. v. Princess Mfg. Co. Ltd., [1926] 1 D.L.R. 718 (S.C.C.) the plaintiff bought 66 webs of cloth after examining a sample by the method customary in the trade. The buyer’s customers complained that the cloth lacked strength. Tests established that the cloth’s strength was “utterly inadequate”. Rinfret J. said, at 724, Neither inspection of the sample nor of the bulk, so far as concerned defects not discoverable on reasonable inspection, excluded the implied warranty that the cloth must answer its usual commercial description and be merchantable and saleable under that description. Here it was not. [59] In Murray v. Reeves Supply Co., [1928] 2 D.L.R. 873 (N.S.S.C.) the defendant bought potatoes from the plaintiff on several occasions over several months before complaining of poor quality. Harris, C.J. thought it unlikely that an experienced merchant such as the defendant had not inspected the potatoes as they were delivered. There was evidence that, seeing how the defendants were storing the potatoes, the plaintiff had warned them that they might not keep under those conditions. There were no defects that would not have been revealed by the defendants’ examination and thus no implied warranties. [60] In Gagnon v. Geneau, [1951] 1 D.L.R. 516 (N.B.S.C.A.D.) the defendant bought a cow from the plaintiff after telling him he wanted a “good milk cow”. He saw the cow in the plaintiff’s truck and it looked like a good cow. There was little opportunity for effective examination, though he tried to milk the cow, without success. The plaintiff suggested that this was because the cow had spent the day in the truck. As it turned out, the cow was unsuitable for milking. The inspection could not have revealed the latent defect. The implied warranty applied. [61] In Steele v. Maurer (1976), 73 D.L.R. (3d) 85 (Sask. Q.B.); varied on other grounds, (1977), 79 D.L.R. (3d) 764 (Sask. C.A.), the plaintiff ordered bull semen from the defendant Maurer, who in turn ordered it from the other defendant, Western Breeders. Western supplied the wrong semen. Western argued that Maurer, who was liable to the plaintiff under the Sale of Goods Act, could not recover from it because he ought to have noticed the error from an inspection of the markings on the containers. The Court found that the markings which would have helped him were obscured by frost, and those that were visible were uninstructive. Maurer could rely on Western’s contractual undertaking as to the description and quality of the goods, since he did not make a thorough examination. The fact that he had not done so did not preclude him from claiming damages for a defect that was not patent or obvious. [62] Other decisions leave the effect of the inspection unclear. In Borys v. Kern Hill Co-op Ltd. (1979), 1 Man. R. (2d) 260 (Co. Ct.) the plaintiff ordered custom-built sofa and chairs from the defendant. She inspected the sofa before delivery. Shortly after delivery she advised the defendant that she was not satisfied and pointed out deficiencies in the furniture. The defendant was prepared to repair the furniture, but the court found it had “numerous faults or deficiencies which could be corrected only by totally rebuilding the furniture by dismantling it down to the frame” (para. 6). Although the plaintiff had inspected the sofa before delivery, “she relied on the defendant’s skill and knowledge in providing custom made furniture which was reasonably fit for use by the plaintiff, who was a fairly heavy and chubby person who had specified firmness as a specific requirement for the cushions” (para. 8). The plaintiff was entitled to damages equal to the full purchase price because the repairs which the defendant offered to perform could not have made the furniture fit for its intended use. [63] The question I must answer is whether the inspection indicates that the defendant was no longer relying on the plaintiffs’ skill and judgment. The plaintiffs say Ellis and Tijssen carried out an “extensive inspection” and determined that the chairs met the requirements in the contract and were suitable for the intended purpose. Thus, they say, the defendant made the determination on its own, without relying on the plaintiffs. The defendant says reliance can be found in the facts that the chairs were a modified model, not bought off-the-shelf, and that no configuration was specified for the frame. Most importantly, the defendant says the defect would not have been evident from the inspection because it was not done in a classroom setting. [64] I conclude that the defect in the chairs was one that ought to have been evident on the inspection Tijssen and Ellis carried out. I do not agree with the defendant’s argument that the chairs needed to be inspected in an actual classroom setting before their instability would have been evident. Tijssen and Ellis stated that their inspection was not restricted in any way. It simply did not occur to them to do the one inspection – sitting on the forward edge of the chair – that would have revealed the defect. This was not a latent defect that could not have been revealed by any inspection that they could have done, as was the case with the cow’s failure to milk in Gagnon, supra or the weakness of the cloth in MacDonald, supra. There was nothing hidden about the instability of the chairs. I also conclude that Tijssen and Ellis had the opportunity to consult with a technical officer, Mr. Williams as to the manner of inspecting the chairs. The failure of the defendant to properly prepare its designated personnel to thoroughly inspect the chairs cannot fall on the plaintiffs. It is likely that a proper inspection performed by a trained or competent inspector would have revealed the defects in the chairs at the Borgo plant. Merchantability: s. 17(b) [65] The elements to be proven under s. 17(b) were set out by Palmeter, A.C.J. in Sound Images Inc., supra at paragraph 17. The complainant must prove: (a) the goods were bought by description; (b) from a seller who deals in goods of that description; and (c) the goods were not of marketable quality. [66] The defendant says the chairs were not of merchantable quality and the defect - lack of forward stability - was not evident from the inspection carried out by Tijssen and Ellis, since the chairs were not in a classroom setting. The inspection was not done in an environment that was representative of the purpose for which the chairs were intended. Once the chairs were in such an environment, the defect was obvious. Since the examination at the plant would not reveal the defect, and the plaintiffs did not expressly disclaim liability for a breach of the implied conditions, the plaintiffs are liable. [67] The plaintiffs say there was no breach of the implied condition of merchantable quality because the defendant inspected and accepted the chairs at the Borgo plant. Further, the chairs were obviously of merchantable quality, as they were all resold. In the alternative, the buyer’s examination of the chairs should have revealed a defect if one existed. [68] According to Fridman, in The Sale of Goods in Canada (4th Edn.) at 213: the implied condition as to merchantable quality is inoperative where the defect rendering the goods unmerchantable is patent and the buyer knows or ought to have known of it as a result of an examination made by him, thereby exonerating the seller of any liability as respects the quality of the goods. But the proviso does not apply where no examination that the buyer could or would normally have made would have revealed the defect. [69] A failure to identify defects which ought to have been revealed by the inspection eliminates the implied warranty if the defect is patent. In the case of a latent defect the quality of the inspection is irrelevant. The issue, then, is whether the defect is one that ought to have been revealed by any inspection that the buyer “could or would normally have made”. [70] In Australian Knitting Mills, supra, the underwear was unmerchantable because the defect rendered them unfit to be worn next to the skin. The appellant could not have detected, “and had no reason to suspect, the hidden presence of the sulphites...”. Lord Wright held (at 99-100) that whatever else “merchantable” may mean: it does mean that the article sold, if only meant for one particular use in ordinary course, is fit for that use; merchantable does not mean that the thing is saleable in the market simply because it looks all right; it is not merchantable in that event if it has defects unfitting it for its only proper use but not apparent on ordinary examination: that is clear from the proviso, which shows that the implied condition only applies to defects not reasonably discoverable to the buyer on such examinations as he made or could make. [71] In Thornett & Fehr v. Beers & Son, [1919] 1 K.B. 486 the buyers made a cursory inspection of some barrels of glue, without opening any, though they were invited to open them. This ousted the implied warranty of merchantable quality. [72] In Trencon Distributors v. Domar S.A. (1992), 66 B.C.L.R. (2d) 395 (B.C.C.A.) the buyer bought washer/dryer units from a Spanish manufacturer. The size and performance of the machines, and their electrical connections, were unsuitable for the Canadian market. These characteristics went to fitness, which was not discussed. The court approached the problem as one of merchantability. The fact that the units were subject to excessive vibration, sometimes leading to ruptured hoses and flooding, went to quality. The buyer examined the goods, but this was a latent defect and so the implied warranty of merchantable quality applied. The manufacturer attributed the vibration to North American detergents or the failure of users to clean the filter, but the trial judge rejected this, holding that such use or misuse ought to have been foreseen by the manufacturer. [73] The defendant cites Hidi v. Blundell, [1997] B.C.J. No. 1087 (B.C.S.C.), where the court found an airplane that was not airworthy to be unmerchantable. The plaintiff had seen the airplane before he bought it. Maczko, J., wrote at para. 41 that “the language ... does not exclude defects which would have been revealed by a reasonable examination, but only those defects which would have been revealed by the examination actually performed by the buyer.” [74] I conclude that the defendant, having had a reasonable opportunity to examine the goods, lost the ability to rely on the implied condition of merchantability. Since the defect was a patent one, there was nothing to prevent the defendant’s inspection from revealing it, as per Australian Knitting Mills, Thornett and Trencon, supra. Usage of trade: s. 17(c) [75] The defendant says there is an implied warranty or condition of quality or fitness for a particular purpose arising from usage of trade in that chairs are supposed to be stable. While the defendant provided no authority or argument on this point, I conclude that any such warranty or condition was ousted by the defendant’s inspection. Sale by Sample: s. 18 [76] The defendant argues that this was not a sale by sample, as there was no sample to view before the request for proposals was issued, and, in any event, the defect was not apparent upon examination at the plant. However, I have concluded that the defendant could have viewed a sample. Had it done so, and then found that the bulk of the shipment did not correspond to the quality of the sample, it might find a remedy under s. 18 of the Sale of Goods Act. But, having had a reasonable opportunity to inspect a sample chair before the contract was made and having failed to do so, the defendant cannot now rely on this provision. Fundamental Breach [77] The defendant says the plaintiffs fundamentally breached the contract by providing chairs that were not stable or fit for their intended purpose and were not “ready-to-use” when they arrived, since a retro-fitted wedge was necessary on each chair. The defendant says it was a fundamental term that the goods be “ready-to-use”. The plaintiffs say the chairs met the contract specifications and were accepted; therefore there was no fundamental breach. The defendant got what it contracted for. If the chairs were properly used, there would be no problem with stability. They also argue that, having agreed to the installation of the wedges, the defendant cannot argue fundamental breach. [78] In Alcraft Industries, supra, where the defendant bought defective custom-built water heaters from the plaintiff, Rothery J. concluded that there was a fundamental breach. The plaintiff’s estimates for repairs were not convincing, and the heaters were flawed in design so that even with the repairs they would not operate in the manner required and contracted for by the defendants (paras. 38-40). [79] In Rivtow Equipment Ltd. v. Watt (W.J.) Construction Ltd. (1989), 73 Sask. R. 160 (Q.B.) the defendant bought a used tree delimber from the plaintiff. The seller made repairs to the machine before and at the time of delivery. Two days after delivery the machine caught fire and was destroyed. The defendant stopped payment and pleaded fundamental breach. Barclay J. concluded at para. 23 that, although the machine as delivered was defective in a minor way, the doctrine of fundamental breach should not operate in the case at bar, as it has not been established that these defects were so flagrant as to make the machine delivered to the defendant not the machine it agreed to purchase. I am of the view that, if the machine is not essentially different in character from that which the parties contemplated, defects in the equipment do not amount to a fundamental breach. [80] The Court cited G.H.L. Fridman, Sale of Goods in Canada, at 222-223 to the effect that, for fundamental breach to operate, the goods delivered must not just be defective in some way, shape or form; they must be suffering from such a ‘congeries of defects’ as to make the thing it delivered not the thing bought by the buyer. The breach must be of a flagrant nature.... It must go to the root of the contract. [81] I cannot conclude that the plaintiffs fundamentally breached the contract. While the chairs were seriously defective and indeed unfit for the purpose for which they were intended, this does not automatically constitute defect so flagrant as to make the chairs “essentially different in character from that which the parties contemplated”, to quote the Court’s words in Rivtow Equipment, supra. “Normal Use” [82] The plaintiffs say the defendant’s arguments as to merchantable quality and fitness for purpose should fail because sitting on the very front edge of the chair is not the normal use of the chair, and that when “properly used” the chairs function in a satisfactory manner. [83] In Yachetti et al. v. John Duff & Sons and Paolini, [1942] O.R. 682 (Ont. H.C.) the plaintiffs contracted trichinosis after undercooking sausages they bought from the defendant. There was no breach of the implied warranties because the plaintiffs had not used the sausage in the intended manner and did not inform the defendant that they intended to make an “abnormal use” of the sausages; the normal use would be to eat after cooking, and it appeared that the plaintiffs ate it only partially cooked. The same result was reached in Heil v. Hedges [1951] 1 T.L.R. 512 (K.B.), on similar facts. Mr. Justice McNair stated at 515 that “the implied condition must be applied in relation to pork which is not only cooked but properly cooked according to accepted standards.” [84] With respect, I do not find these decisions resemble the situation I must address. The sausages in Yachetti, supra and Hedges, supra were perishable meat that needed preparing before they could be eaten. The chairs the plaintiff contracted to deliver were to be ready to use. In any case, I cannot find that sitting in a particular manner is an “improper” use for a chair, as the plaintiffs suggest. Bad Faith [85] The plaintiffs say the defendant made efforts to avoid awarding the contract to Canuck and dealt with the plaintiffs in bad faith. After the wedges were installed, the plaintiffs say, it was clear that the defendant did not want the chairs fixed, but wanted out of the contract. The defendant says Gallina and Campbell had concerns about the “confusing and contradicting material and information” supplied by the plaintiffs, “being two different warranties, two sets of specifications, written notations.” The defendant says the delivery arrangement was changed from FOB destination to FOB plant in order to accommodate Canuck; that the contract was not terminated on the day of delivery even though not all the chairs were ready as required by the contract; and that Canuck was allowed to change the delivery date at least twice. The plaintiffs say that, in fact, there was no expectation that all the chairs would be ready by March 27. Before the contract was awarded, Funnell notified Campbell that Canuck could only deliver 400 chairs by that date, and the rest in April. [86] As I pointed out above, I find that Gallina and Tijssen’s efforts to have the Canuck proposal rejected were not due to any personal bias against Canuck, but rather resulted from concerns about real and potential problems with the Canuck bid. I have also concluded that the chairs were indeed unstable and unsafe, that Canuck’s remediation efforts were an acknowledgment of this defect, and that the chairs remained unsafe after the wedges were installed. As such, I see no merit in the argument that the defendant’s personnel acted in bad faith either before or after the wedges were installed. Place of acceptance [87] The defendant argues that it reserved the right to reject the chairs up to the time they were finally accepted once an inspection was carried out after final delivery. The RFP provided that the defendant could reject the chairs up to the time the final inspection was carried out, after all of the chairs had been delivered. Clause 2(d) of a solicitation amendment (amending the RFP) provides: Inspection to occur on completion of the installation. All deficiencies MUST be actioned within a pre-approved time limit. [88] However, this provision was changed when it was decided to change the place of inspection to the Borgo Plant. The contract as issued by the defendant provides as follows: Delivery The contractor shall make the complete shipment available for inspection by the consignee or their representative and for transport on or before March 27, 1997, at the plant, Mississauga, Ontario. The Contractor shall make the shipping arrangements to coincide with the completion of the inspection by the consignee’s representative. Inspection The goods are subject to inspection and acceptance by the consignee at plant, Mississauga, Ontario. [89] The contract also states that it prevails over the RFP. Given the provision of the contract it is clear in my mind that the defendant intended to inspect and accept the chairs at the Borgo plant. In addition, Ms. Zwicker advised in an e-mail dated March 13, 1997, that acceptance “includes viewing the goods to ensure the chairs are ready for shipment and inspecting a [random] sampling of the goods to ensure the product being supplied meets the specifications of the contract” [emphasis in original]. Despite the fact the sled base of the chairs was not included in the specifications prepared by the defendant, it is abundantly clear that the defendant greed to inspect and accept the chairs at the Borgo plant. DAMAGES [90] The plaintiffs claim damages of $62, 821.61 plus pre-judgment interest. They say a number of the chairs were damaged while in storage (in the defendant’s possession), that they incurred costs to ship 314 chairs back to the Borgo plant, and that they were then forced to find a buyer for 804 chairs (the entire original order minus two retained by DND). In addition, it was necessary to store the chairs in a rented trailer and to insure them against loss, damage or theft during the period prior to their sale. The plaintiffs claim the following damages: Contract price $95,720.00 Less Selling price of chairs $56,280.00 Plus Mitigation Costs $15,614.25 Plus Storage Costs $5,450.49 Plus Return Freight $2,316.87 TOTAL $62,821.61 [91] The plaintiffs also claim pre-judgment interest at a rate of six per cent. [92] Funnell said the chairs were stored between May 1997 and the date they were picked up, November 4, 1997. He did not try to resell the chairs when he received the notice of termination. He had to ship them back to Borgo, as he had not paid Borgo for them. Borgo paid the shipping cost. Funnell said his company was not in a position to pay for the chairs, and that it would be easier to re-sell them in Toronto. Although there was an exchange of correspondence between Funnell and the defendant after May 1997 until they were finally removed, I find that this period does not constitute a delay which is attributable to the plaintiffs. [93] Mandeep Kalra saw the chairs when the were returned in November 1997. He said 25 per cent of them were not in boxes. They were wet. He claimed that this was due to the manner in which they had been stored by DND. A number of the chairs were scratched, and some had to be repaired and repainted. They were then stored in trailers, and were eventually sold. [94] When the chairs were returned, Spassiani said he examined them and found quite a few to be scratched and damaged. Some boxes were missing or damaged. He had to repaint some chairs, and change the colour of the upholstery. In examining the photos taken by Funnell, it is clear that some of the chairs sustained scratches while they were being stored at the defendant’s premises. The photos also show that all of the chairs were out of their shipping boxes and wrapping plastics. Funnell testified that he made notes of the chairs that had been damaged and stated that 124 chairs were scratched or scraped. The chairs were re-boxed and placed in two rented trailers until they were sold. They were sold in small lots to a variety of purchasers. Spassiani said he incurred extra expense to paint the chairs, change upholstery, add insurance and to store them. He prepared a summary of the expenses associated with the chairs and their disposal. I accept the evidence of the Spassiani, Funnell and Kalra that a number of the chairs were damaged and it was necessary to repair them before they could be offered for sale. I also find it was necessary to incur costs, such as the payment of commission fees, to find buyers for the these chairs. [95] In a letter dated November 28, 2001 (in evidence as Exhibit 4, tab H), Spassiani provided the following breakdown of the costs associated with reselling the chairs: Chairs Manufactured 806 Chairs re-sold 804 Average re-selling price $70.00 (Total: $56,280.00) Agent commission (5%) per chair $3.50 $2,814.00 Additional cost to prepare chairs for re-sale (10% per chair) $5,628.00 Overhead cost to prepare chairs for re-sale (10% per chair) $5,628.00 Cost to re-box 157 boxes (2 chairs per box) ($5.25 per box) $824.25 Labour costs (salary) $583.63 (Insurance) $66.87 (Other benefits) $69.50 TOTAL ESTIMATED ADDITIONAL COST $15,614.25 [96] The plaintiffs estimated additional costs and overhead of ten per cent each required to prepare the chairs for resale. I find that those were reasonable expenses. [97] Spassiani explained the cost associated with re-stocking, storing and selling the chairs. He stated that all of the chairs were sold for $56,263.61. He engaged different agents to sell the chairs. Commissions were paid based on an industry standard. The average commission was six per cent. [98] On cross-examination, Spassiani said there was a relationship between Borgo and Diversified, who bought a lot of the chairs. Offco, another buyer, is associated with Diversified but not with Borgo. He acknowledged that his company did not supervise the loading of the chairs to return them to the factory, but believed that Canuck did. He said he did not keep a segregated account for the cost associated with the resale and restocking of the chairs. However, he did keep the unloading costs. He did not have an inventory for the damaged chairs, but kept a record of the repairs. [99] The defendant says the plaintiffs have not provided sufficient evidence of mitigation or of damage to the chairs. Funnell did not state how many chairs were damaged or how they were damaged, and there was no evidence from the trucker as to the condition of the chairs when they were loaded for transport in Halifax and unloaded in Ontario. The chairs could have been damaged in transit. The defendant also says evidence of the sale of the chairs is lacking. Many were sold to companies connected to Borgo, and Mr. Spassiani gave no real explanation as to why the undamaged chairs had to be sold at such a reduced price. Although I agree that Borgo did not keep a detailed record of the expenses involved in the repairs, storage, handling, insuring, repainting, re-upholstering, and other costs associated in the eventual sale of the chairs, I accept Mr. Spassiani’s estimate of overhead costs incurred in the disposal of the chairs and the costs associated with the repairs of the chairs. [100] The plaintiffs say they do not have to establish that the chairs were not damaged in transit. Mr. Funnell made notes of the damage and took pictures showing chairs stacked in a warehouse. He testified that tar was dripping from the roof onto the chairs. Kalra testified that when the chairs arrived at the plant many were unboxed and wet, but the box of the truck was dry. The defendant refers to Funnell’s notes as “a few scribbles”. [101] With respect to mitigation, the plaintiffs say they were forced to sell non-standard chairs made to specific government specifications, and were incurring storage costs. Offco Liquidators were buying chairs. It was reasonable to expect volume discounts and discounts to reflect the fact that the chairs had been returned. Under the circumstances, they say, Borgo got a reasonable price for the chairs. CONCLUSION [102] I find that the plaintiffs are entitled to recover from the defendant for the contract amount representing the full contract price agreed to be paid by the defendant for 806 7002 SB office chairs less the amount recovered by the defendant in the re-sale of the chairs. The plaintiffs shall also recover the costs associated with loading, unloading, transporting, insuring, repainting, refurbishing, boxing, storing and selling the chairs. [103] I refer to Dor-Val Mfg. Ltd. v. Valley Stationers Ltd. [1997] N.S.J. No. 512 (N.S.S.C.). This decision involved an assessment of damages where the defendant refused to accept and pay for furniture it had purchased from the plaintiff. Saunders J. (as he then was) allowed the plaintiff’s claim in its entirety, and stated as follows, at para. 27: ... While of course there is never a burden upon a plaintiff to prove mitigation of damages, I have no hesitation in finding that it did. I accept Mr. Goldsmith’s evidence, find that the plaintiff fulfilled its duty to mitigate and that the prices obtained in re-selling what they could are fair and reasonable under the circumstances. The defendant has failed to make any case proving that the plaintiff failed to mitigate the loss. [104] The defendant did not offer any evidence which would allow me to make a finding that the plaintiffs failed to mitigate the loss resulting from the defendant refusing to pay the contract price. DISPOSITION [105] In Dor-Val Mfg. Ltd., supra, in dealing with the measure of damages to be awarded, Saunders J. stated, at para 33: This is a simple case. The common law applies. The defendant promised to pay the plaintiff $77,000 for goods it ordered. The defendant failed to accept those goods. Dor-Val is entitled to recover from Valley such damages for breach of contract as to put itself in the same position it would have been in had the contract been honoured. [106] I am satisfied that the plaintiffs made reasonable efforts to mitigate the loss by selling the chairs. The burden is on the defendant to prove that the plaintiffs failed to properly mitigate the loss. Despite the fact that a substantial number of chairs were sold to Offco, I find that there was no evidence offered by the defendant that the plaintiffs were acting in any manner other than reasonably to mitigate the loss. [107] The plaintiffs shall recover from the defendant the following: Original contract price $ 95,720.00 Less net amount recovered in the sale $ 56,280.00 Plus Mitigation Costs $ 15,614.25 Plus Storage Costs $5,450.49 Plus Return Freight $2,316.87 TOTAL $62,821.61 [108] The Plaintiffs shall also recover simple interest at the rate of 6 %. Pursuant to the Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50, s. 31(1), as amended, pre-judgment interest against the federal government is determined according to the provincial statute law in the province where the cause of action arose. In Nova Scotia the governing statute is the Judicature Act, R.S.N.S. 1989, c. 240, s. 41(i): see Matheson (D.W.) & Sons Contracting Ltd. v. Canada (A.G.) (2000), 187 N.S.R. (2d) 62 (C.A.) at para. 39. I am satisfied that this is a reasonable rate. [109] I will hear the parties on costs if they are unable to agree, and ask counsel for the plaintiffs to contact the Scheduling Office to arrange for the appearance date suitable to the counsel for the defendant. J.