Water Shed v. Mitchell Contracting Ltd.

Water Shed v. Mitchell Contracting Ltd. Court Small Claims Court Date 2014-04-16 Citation 2014 NSSM 23 Docket 425102 Judge/Registrar/Adjudicator Slone, Eric K. (Adjudicator) Document Type Decision Decision Content Claim No: 425102 IN THE SMALL CLAIMS COURT OF NOVA SCOTIA Citation: Water Shed v. Gerald Mitchell Contracting Ltd., 2014 NSSM 23 Between: THE WATER SHED Appellant v. GERALD MITCHELL CONTRACTING LTD. Respondent BEFORE: Eric K. Slone, Adjudicator Hearing Held at: Dartmouth, Nova Scotia, on April 15, 2014 Decision Rendered: April 16, 2014 Held Appearances: For the Claimant Stephen Burke, owner For the Defendant Gerald Mitchell, owner BY THE COURT: [1] The Claimant digs wells. The Defendant is a house builder. [2] For some years the parties had a mutually satisfactory business relationship; namely the Claimant drilled wells for homes the Defendant was constructing. Because the Defendant has been a very active builder, this translated into a lot of business for the Claimant. [3] In about 2012, for reasons that are not germane, the Defendant decided to switch well drilling companies. The state of the account at the time was that the Claimant was owed somewhere between $12,000 and $16,000 for wells drilled or other services provided but not paid for. Eventually, the Claimant tired of waiting and commenced this claim. [4] All of the outstanding invoices were eventually paid, but the Claimant persisted with the claim and seeks interest and costs. [5] The Defendant resists paying interest because, Mr. Mitchell contends, the parties had a long‑standing practice where wells were drilled for homes under construction, but not paid for until the home actually sold. Depending on the circumstances, this created delays of months and even as much as a year or more. [6] Mr. Mitchell also testified that he often allowed the Claimant to drill wells on home sites, despite the fact that it was not necessarily timely from his point of view. He says he did this because the Claimant wanted to keep his crews busy. [7] The pattern of long delays between work being done and payment was corroborated by records placed in evidence by the Defendant's accounting employee. [8] The Claimant generated invoices after the fact to support his claim to charge 2% per month on outstanding invoices. Mr. Burke acknowledged that there was no written agreement whereby the Defendant ever agreed to pay interest, at that rate or any other. [9] In order for a party to charge interest, or to enforce any other payment terms, there must be an agreement that allows it to do so. In the absence of any agreement, a party coming to court can ask for prejudgment interest to be added to the debt. Under the Small Claims Court Forms and Procedures Regulations, the rate of interest allowable is 4% per year. 16 An adjudicator may award prejudgment interest at a rate of four percent per annum in the same circumstances in which prejudgment interest may be awarded by the Supreme Court. [10] However, no interest will be allowed if there is an agreement that is inconsistent with the charging of interest. [11] In the case here, the evidence is to the effect that the invoices which the Claimant was interested in collecting involved homes that have not yet sold. The Defendant decided to pay them, notwithstanding the potential argument that the Claimant should be prepared to wait. [12] Clearly there was never any agreement that interest would be chargeable at 2% per month on outstanding accounts. This flies in the face of the longstanding pattern of conduct. The Claimant cannot simply impose such a payment term after the fact. This aspect of the claim is disallowed. [13] As to whether the Claimant should be allowed interest at the statutory rate of 4%, the court has a discretion. Interest may be declined if it is not seen as warranted. Also, the time frame for the calculation of interest may depend on various factors, which may affect how much interest is awarded. [14] Here, the outstanding invoices that were the subject of claim, as filed, were dated in late 2012 and early 2013. It was consistent with the longstanding business arrangement that payment might not be made for some time, if the home did not sell. The breakdown of the business relationship did not alter the agreement. The only thing that changed was the attitude of Mr. Burke, who was no longer prepared to be so tolerant, having lost the ongoing business. [15] In my view, that is not a sufficient reason to award interest. The Claimant has been paid for the work, albeit more than a year after the work was done. This is consistent with past practice. I therefore decline to award any interest. [16] It does appear, however, that the Claimant had to commence this court proceeding in order to get his invoices paid. As such, the cost of filing of $193.55 should be borne by the Defendant, and the order will reflect this. Eric K. Slone, Adjudicator