Nanaimo Shipyard Ltd. v. Keith

2008 BCSC 1150 Nanaimo Shipyard Ltd. v. Keith

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Nanaimo Shipyard Ltd. v. Keith, 2008 BCSC 1150 Date: 20080826 Docket: S055619 Registry: Vancouver Between: Nanaimo Shipyard Ltd. Plaintiff And Julian Keith, Premier Marine Insurance Managers Group (West) Inc. and Coast Claims Service Ltd. Defendants And Premier Marine Insurance Managers Group (West) Inc. and Coast Claims Service Ltd. Third Parties Before: The Honourable Mr Justice Rice Reasons for Judgment Counsel for the Plaintiff: W. Gary Wharton Counsel for the Defendants/Third Parties: J. William Perrett Date and Place of Trial: March 3-6, 10-12, 2008 Vancouver, B.C.

INTRODUCTION [1] This is a claim for payment of the plaintiff's accounts for services in the rescue and repair of the 72 foot Motor Vessel "Breanna" from California, U.S.A. when it ran aground and was damaged in the Gulf of Georgia in August 2005.

FACTS [2] The vessel was cruising in Canadian waters in the morning on August 18, 2005, when it ran aground near the eastern end of the harbour at Nanaimo, B.C. The grounding severely damaged the vessel and placed it in imminent danger of capsizing and sinking with the ebbing tide. Also, with practically a full load of 2,000 gallons of fuel, the danger of a spill with potentially very serious environ-mental damage arose. [3] On board the vessel, and at its helm when the accident occurred, was the vessel's owner, the defendant Julian Keith III, MD, a neonatal physician, and his wife, both of Redding, California. [4] As fortune would have it, the accident occurred only 100 yards offshore from the plaintiff's shipyard in Nanaimo. One of the plaintiff's employees noticed the vessel's grave situation and quickly organized a party to attend and rescue it. Utilizing two barges, the plaintiff's employees were able to secure the vessel and bring it to the shipyard where it was hoisted out of the water by means of a marine railway device generally referred to as a "ways". [5] Dr. Keith was shaken by the event but not unduly traumatized. He contacted his insurer to report the accident, and he began arrangements for removal of his personal property. He stayed overnight to make sure that the yacht was secure and to arrange for meetings the next day with representatives of the shipyard and his insurer.

THE WORK ORDER [6] On August 19, 2005, the day after the rescue, Dr. Keith met first thing in the morning with Randy Tilley, the plaintiff's yard superintendent. Mr. Tilley had already prepared a work order for work in connection with the rescue, which he presented to Dr. Keith. [7] The document was described as WORK ORDER No. 710 (the "Work Order") addressed to Julian Keith with the date 8/19/2005 and a description of the work covered by the Work Order as follows: 1. Assist with the salvage of the M.V. Breanna.

2. Provide tug boat and barge service for above.

3. Provide pumps and equipment as required.

4. Prepare blocks and haul the vessel on ways.

5. Residency fee of $350.00 per day.

6. Lay day fee of $4500.00 per day.

7. Remove and dispose of all fuel and contaminated water. Labour rate $70.00 per hr per man plus 20% mark up on equipment costs and materials overtime 101.05 per hr per man double time 133.00 per hr per man. [8] The second page of the Work Order contained a space for signature and words authorizing the work specified and the necessary materials to be supplied. [9] The third and final page contained "Terms & Conditions of Sale". It confirmed again the authority of the plaintiff to furnish the material and do the work specified, and to charge interest on overdue amounts at the rate of 2% per month (24% per annum compounded monthly). It contained further limitations to liability of the plaintiff while in possession of the vessel. [10] Except for the job of removing the fuel and contaminated water from the vessel, which tasks were completed within the next few days, the specified work had already been completed the day before. There was no authorization, general or specific, to undertake any other work. [11] The Work Order had been drawn by Mr. Tilley early in the morning of August 19, 2005, in consultation with the plaintiff's vice-president and overall manager of the shipyard, Ron van Wachem.

LAY DAY AND RESIDENCY FEES [12] Mr. van Wachem and Mr. Tilley decided in this case to charge, in addition to the price for repairs, a so-called "residency fee" of $350 per day and a "lay day fee" of $4,500 per day. It is the plaintiff's attempt to charge this $4,500 per day that is the main matter of contention in this action. [13] According to Dr. Keith, when Mr. Tilley presented him with the Work Order, he (Dr. Keith) questioned the amount of the lay day fees, which he considered to be extremely high. According to him, Mr. Tilley responded by saying that those fees had been introduced and set high in order to get the insurance companies moving quickly to settle the insurance claim, and that in the end those fees would be settled by negotiation. [14] Mr. Tilley testified that he did not recall making those statements. He testified that the lay day rates at $4,500 per day were typical of the plaintiff's charges. That was not an accurate statement. The plaintiff adduced no evidence of any lay day rates at that amount, or nearly that amount. [15] Mr. Tilley did not discuss the residency fee with Dr. Keith at all. [16] Dr. Keith's insurer was the defendant Premier Marine Insurance Managers Group (West) Inc. ("Premier") and Premier's adjuster was the defendant Coast Claims Service Ltd. ("Coast"), whose representative was David Hart. At Premier's request, Mr. Hart travelled to

Nanaimo. He arrived in the afternoon of August 19, 2005, by which time Dr. Keith had already signed the Work Order. Mr. Hart also discovered when he arrived that the vessel was in the custody of the plaintiff, and that it could not be refloated without significant repairs. [17] Mr. Hart testified that he met with Mr. van Wachem on August 26, 2005, at which time Mr. van Wachem confirmed that there would be no lay day charges on weekends since on those days the workers were off and there was no work being done. He also said that the plaintiff's charges would be negotiable in the end. Under cross-examination, Mr. van Wachem was reminded of his previous testimony on the point at his examination for discovery, which was as follows: Q: #296: Now, you said earlier in your discovery that on most occasions you don't charge either a residency fee or a lay day fee. What was it about this occasion that made you consider charging those fees? A: Because it could sit there for a long time on the ways while somebody decided what to do with it. Q: And that was apparent to you, that ─ it was apparent to you I take it that she was severely damaged? A: That would be one of the issues. The other issue is it takes insurance companies some time also to assess damages and they don't seem to write proper specifications for the most part. Mr. van Wachem confirmed that he gave these answers. [18]

Generally speaking, residency fees are charged (but not always) by the plaintiff as an additional compensation for allowing a customer's vessel to be kept at the shipyard while repair work is being performed on it. Lay day fees, generally speaking, are charged on days when a vessel is at the shipyard but without instructions to the shipyard to proceed with work and repairs. There were statements that indicated various applications and various ways of charging these fees, including no fees charged at all. [19] Mr. Tilley testified at trial that in the past other customers of the plaintiff had been allowed to sign work orders under "protest" or by writing "to be determined" or "to be d" beside the terms in the work order, with the effect that those terms would later be negotiated. [20] Mr. van Wachem testified that neither residency fees nor lay day fees are charged at all on a great many occasions. Mr. Perrett, counsel for the defendants, noted that the plaintiff charged lay day fees rather than residency fees on certain days when work was actually done on the vessel. Mr. Wharton, counsel for the plaintiff, responded by pointing out that not very much work was done on those days. [21] Within the week after the accident, Mr. Hart had the damage appraised and was advertising for bids for the work to be done on the vessel. The plaintiff submitted two bids and another company,

Jenkins Marine, also made a bid. Jenkins Marine won, principally because its bid was $76,000 less than the best of the two bids submitted by the plaintiff. [22] On August 30, 2005, Mr. Tilley advised Mr. Hart that no one but the plaintiff's employees would be allowed to work on the vessel. Mr. van Wachem subsequently advised Mr. Hart that he would agree to Jenkins Marine coming onto the plaintiff's property to do the damage repairs, but Jenkins would have to be responsible for any damage, and Dr. Keith would be charged the lay day fees at $4,500 per day. Neither Dr. Keith nor Mr. Hart on his behalf ever expressly accepted that charge. [23] Then the plaintiff's counsel, Mr. Wharton, demanded that Jenkins Marine provide documents regarding its insurance and WCB coverage before entering upon the premises, and he advised Mr. Hart that the plaintiff required a "hold harmless" agreement from Jenkins Marine. He also advised that the plaintiff required confirmation, again, of the $4,500 lay day rate during the work period as well as of the "no cash, no splash" term. [24] On September 2, 2005, without explicitly accepting Mr. Wharton's demand, Mr. Hart arranged for Jenkins Marine to commence work on the vessel on September 6, 2005. When September 6, 2005, arrived there was a further hold up because Mr. Wharton had still not received the hold harmless agreement. On September 9, 2005, Mr.

Wharton sent an email stating Jenkins Marine could commence work in the plaintiff's shipyard. [25] Jenkins Marine personnel began their repairs on the Breanna on September 12, 2005. That day, Mr. Wharton advised Jenkins Marine that they must complete their work by September 15, 2005, as another vessel was scheduled to use the ways then occupied by the Breanna. Jenkins Marine completed the work on or about September 15, 2005. However, the plaintiff would not allow the defendants to refloat the vessel. It insisted upon waiting until payment was secured. Mr. Wharton had stated "no cash, no splash". [26] Ultimately, the Breanna was refloated on September 21, 2005, but was kept in the marina until November 2005 pending the posting of security for the plaintiff's claim. WAS THERE A CONTRACT ESTABLISHED BY DR. KEITH SIGNING THE WORK ORDER? [27] Mr. Wharton, acting for the plaintiff, submits that Work Order No. 710 should be accepted as evidence of a contract or part of a contract to complete the salvage work and other repairs. That being so, he submits that the parol evidence rule applies. [28] The rule cannot apply unless the written form of the agreement itself establishes a contract. In Ahone v. Holloway (1988), 30 B.C.L.R. (2d) 368 (C.A.), McLachlin J.A., as she then was, explained the rule as follows at p. 372: The parole evidence rule is formulated in Corbin on Contracts (1952),

p. 534, as follows: When the terms of a contract have been embodied in a writing to which both parties have assented as the definite and complete statements thereof, parol evidence of antecedent agreements, negotiations and understandings is not admissible for the purpose of varying or contradicting the contract so embodied. [29] I do not overlook the effect of the parol evidence rule. The rule was recently explained by the British Columbia Supreme Court in ASEAN Technology Partners Inc. v. National Research Council of Canada, 2007 BCSC 1539, as follows at para. 71: The fundamental rule is that extrinsic evidence is not admissible to alter, vary or interpret in any way the words used in the writing where the language of the written contract is clear and unambiguous (G.H.L. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Thomson, Carswell, 2006) at 445. Further, parol evidence may not be admitted where the effect of such evidence would be to contradict the written contract: Hawrish v. Bank of Montreal, [1969] S.C.R. 515, 2 D.L.R. (3d) 600; Bauer v. Bank of Montreal, [1980] 2 S.C.R. 102, 110 D.L.R. (3d) 424; Carman Construction Ltd. v. C.P.R., [1982] 1 S.C.R. 958, 136 D.L.R. (3d) 193. [30] The parol evidence rule does not assist the plaintiff in this case because there is no written agreement for the further repairs. That is because the Work Order specifies only the

items already completed (except for two) and mentions nothing about the further work. There is no evidence that when Dr. Keith signed the Work Order the parties had determined what the repairs would be or the cost. As well, Dr. Keith and Mr. Tilley both understood that the repairs would have to be approved later by the insurer's adjuster. [31] The words lay day and residency fees as such are vague terms requiring definition. The Court in Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co. Ltd, 2000 NSCA 95, 189 N.S.R. (2d) 1, stated at para. 74 that "[t]he terms of a contract must also be sufficiently certain. The question of whether terms are certain asks whether the court can give reasonably definite meaning to what the parties have said." The evidence in this case does not establish a single clear meaning. Dr. Keith admits that Mr. Tilley advised him of the lay day rate of $4,500 per day and that he (Dr. Keith) accepted it. That does not remove the uncertainty as to the existence of an agreement. For one thing, there was Mr. van Walkem's contradiction in stating that lay day fees would not be charged on weekends. I am satisfied also that Mr. Tilley informed Dr. Keith that the figure of $4,500 per day would be negotiable. [32] Dr. Keith's testimony is corroborated by Mr. Hart's testimony of his discussions with Mr. van Wachem and in part by the testimony of other witnesses

knowledgeable in the industry. Mr. Tilley's inability to recall his conversation on the point with Dr. Keith is unfortunate, but I find, nevertheless, that the conversation took place. The discussions had reached the point only of an agreement to agree, which is not enforceable: G.H.L. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Thomson Canada, 2006) at pp. 22-23, 62. [33] I find, therefore, that there was no agreement for Dr. Keith to pay lay day fees of $4,500 per day or residency fees of $350 per day. WAS THERE A LATER AGREEMENT? [34] The plaintiff further submits that later on there was an acceptance of the $4,500 per day lay day fee when the agreement was reached for Jenkins Marine to do the repairs to the vessel. While it is a fact that Mr. Wharton introduced the condition that lay day fees had to be accepted by the defendants, it is equally true that no one for the defendants out rightly accepted the condition, and no evidence was adduced of acquiescence. It was left far from clear whether the defendants, and Mr. Hart on their behalf when they entered the yard to carry out repairs, did so in acceptance of Mr. Wharton's conditions previously stated as to lay day fees. Neither Mr. van Wachem nor Mr. Tilley testified to any such acceptance. All that is known is that Jenkins Marine eventually attended at the shipyard and was allowed in to do the repairs. The plaintiff has not satisfied me on the evidence that the conditions alleged were accepted.

THE STATUTORY AND EQUITABLE REMEDIES FOR THE DEFENDANTS [35] Dr. Keith pleads the whole range of equitable remedies including misrepresentation, duress, undue influence and unconscionability. Of these equitable remedies the one that appears to be closest to viable is unconscionability. None of the others have any merit in my judgment. Unconscionability [36] The material ingredients of a claim of unconscionability are, firstly, proof of inequality in the positions of the parties arising out of ignorance, need or distress of the weaker, which leaves the weaker party in the power of the stronger, and secondly, proof of substantial unfairness of the bargain obtained by the stronger. Once these factors are shown to exist, the burden of proof shifts to the stronger who, in order to preserve his bargain, must prove that the bargain is indeed fair, just and reasonable: Morrison v. Coast Finance Ltd. (1965), 55 D.L.R. (2d) 710, 54 W.W.R. 257 (B.C.C.A.) [Morrison cited to D.L.R.]; Lloyds Bank Ltd. v. Bundy, [1974] 3 All E.R. 757, [1975] Q.B 326 (C.A.) [Lloyds];Harry v. Kreutziger (1978), 9 B.C.L.R. 166 (C.A.) [Kreutziger]. [37] The threshold is whether the transaction seen as a whole is sufficiently divergent from community standards of commercial morality that it should be rescinded: Kreutziger at p. 177. [38] Mr. Wharton disputes that unconscionability is appropriate to the facts of

this case because Dr. Keith, although he was in a somewhat distressed state and short of sleep when he signed the Work Order on the morning of August 19, 2005, was not near to the state of physical and mental weakness that he could not think for himself or act independently. I agree with that, but that does not to my mind disprove an inequality of position. [39] In Warman v. Adams, 2004 BCSC 1305, 17 C.C.L.I. (4th) 123 [Warman], the Court listed factors to consider in determining whether there was an inequality of bargaining power, which include "whether the plaintiff was in necessitous circumstances, and whether those circumstances compelled the plaintiff to enter into the bargain" (para. 8). [40] Dr. Keith's evidence was that he signed the Work Order accepting the lay day fees of $4,500 per day because there was no reasonable alternative, or any alternative that he knew of. The shipyard rescuers arrived just in time to save the vessel from sinking, and once they had taken the vessel and placed it on the ways, there was no way to refloat it until a number of essential repairs were made. Dr. Keith did not sign the Work Order until he asked Mr. Tilley why the lay day fee was so exorbitant. When Mr. Tilley told him that it would be subject to negotiation, Dr. Keith reasonably concluded that there was nothing more he could do. It was clearly evident that the last word on the

matter was with the shipyard, which Dr. Keith could see was in a position to deny release of his vessel until they were paid what they were charging. I find that there was an inequality of bargaining power, with the plaintiff having the advantage. [41] Next to consider is whether the bargain was substantially unfair: Morrison at p. 713; Warman at para. 7; Murray v. Affordable Homes Inc., 2007 BCSC 1428, 61 R.P.R. (4th) 304 at paras. 28-29. The plaintiff submits that it took a calculated risk in accepting Dr. Keith's vessel for repairs in as much as the boat could have sat there on the ways for days upon days at a time when another major contract for repairs had materialized. It would have cost them a lot of money to lose the opportunity. [42] Mr. Wharton, on behalf of the plaintiff, also submits that high lay day fees are a good thing in that they encourage customers of shipyards to marshal their flow of repair work to avoid bottlenecks and idle waiting at certain times. He submits that a vessel such as the Breanna, once hoisted on the ways, must be ready to be worked on immediately, and not hold up the next customer. Otherwise, the shipyard is in a position of having to pay for its overhead costs with no work being done to pay for it. It also suffers the dissatisfaction of other customers impatient to have access to the ways for their repairs. Mr. Wharton suggested that the

result would be a serious loss of business if the shipyard was not allowed to charge what it chose to charge. [43] The argument of Mr. Wharton does not seem to allow for any distinction between regular service work and a stricken vessel in respect of which the shipyard stands to be enriched by the salvage work that fell into its lap. The shipyard also had a reasonable expectation of being selected to do the remunerative repair work. If those sums were not enough to accommodate the less than one week delay while the adjusters valued the loss, the plaintiff has not established this on the evidence. The fact that the shipyard was not selected in the end to do the work goes no further to justify the lay day fees, in my view. It was they who chose to bid $78,000 higher than Jenkins Marine for the work. [44] The plaintiff's concern that the vessel could be tied up for a long time is exaggerated. Dr. Keith and his adjuster had to determine what repairs were needed and covered by insurance, and then get them done. During that time, the plaintiff's ways, occupied by the Breanna, could not be used by any other customer. Certainly, there could have been other work offered that the plaintiff would have had to decline. However, there was no evidence adduced of any customer complaint, or even of any enquiry, that might have led to work necessitating use of the plaintiff's ways occupied by

the Breanna. It is speculation, therefore, that the plaintiff stood to sacrifice any work while the Breanna was on the plaintiff's ways. In any event, the steps needed to process a claim for repairs is and was at the time a known fact of life in all marine insurance claims. The plaintiff must have had these factors in mind when it decided to rescue the vessel in the first place. [45] Indeed, the plaintiff surely appreciated the positive advantages of the salvage. For the few hours of work performed before August 31, 2005, most of it on August 18, 2005, the plaintiff billed over $91,300, which, after subtracting the $27,000 charged for six lay days, still produced a respectable return. [46] Mr. Wharton submits that the amount charged for fees must be tied to the capital costs and current expenses of the shipyard. Mr. Wharton observed that owners of damaged vessels or vessels with limited mobility fare limited availability of shipyards. He also suggested that where no competitive pressures exist, lay day fees can be expected to be charged at a premium in some areas. There was no evidence adduced to support the practice, however, either in fact or in principle. [47] An additional $4,500 per day, which, as will be shown, was far above the usual fees in the industry, was only charged because the shipyard was dealing with a captive customer. There was no evidence to support any claim

that $4,500 per day in lay day fees was justified as fair market value. It was not a price that would likely be acceptable to a reasonable, knowledgeable customer unaffected by extraneous pressure. [48] As to what in this case would constitute a fair market price, unfortunately the evidence was very thin. The several knowledgeable persons who gave evidence spoke anecdotally of amounts charged at various times at various shipyards. Often lay day fees were not charged at all. Almost always they were negotiable, but the amounts varied according to the testimony. [49] The following summarizes the evidence of these individuals: Witnesses: Lindsay: had never seen a $4,500 lay day fee in 25 years of experience. McLaren: Allied Shipyard charges $1,000 per day on their 2,000 ton dock and $500 per day on the smaller dock, both of which were used for large commercial vessels. McAllister: had never seen a lay day fee of $4,500 per day for a vessel of less than 100 feet. The highest charges of which he was aware were at Vancouver Drydock which charges less than $2,800 per day for drydocks with a 25,000 to 35,000 ton capacity. Langill: his experience was with lay day fees of between $10 to $200 per day. He had never seen a lay day fee of greater than $500. Carpenter: had work done on his vessel 20 to 23 times over the years and was never charged a lay day fee. In September 2005, Mr. Tilley

at the plaintiff's shipyard quoted him $350 per day for a lay day fee. Morris: had used the plaintiff's dock and never paid a lay day fee. Moreira: in his 12 years of experience lay day charges ranged from $2 to $6 per foot. [50] Without attaching undue weight to that evidence, it was plain that none of these witnesses had heard of lay day fees as high as $4,500 per day for a vessel of less than 100 feet and the highest charges were substantially less than $4,500 per day. [51] There was no evidence adduced of any other shipyard basing its fees on cost considerations, as opposed to market pricing, and with the exception of a few, there were none that charged one-half or even one-third of $4,500. Mr. Hart testified that he recalled a previous repair done by the plaintiff that he adjusted in which the lay day fee was $130 per day. Indeed, the plaintiff admitted that it had not charged $4,500 to anyone else in recent history and regularly negotiated fees much lower than $4,500. [52] Admitting the great uncertainty with respect to what would have been a fair lay day fee, I am at least confident that $4,500 would not likely have been nearly the charge if the Breanna had been capable of reaching another marina either on its own or with help. The evidence generally shows that lay day fees of half of $4,500 would be very high and indicates for the most part a much lower range of normal

charges. It is enough at least for me to have some confidence in finding that a fair lay day fee would not be more than $350 per day. In my view, $4,500 per day was an unfair bargain. Business Practices and Consumer Protection Act ("BPCPA") [53] Dr. Keith further submits that the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 (the "BPCPA") applies to this transaction because it was a consumer transaction as defined in the BPCPA. It involved a vessel owned and used for pleasure and not for commercial or business purposes: BPCPA s. 1; Langley Toyotatown a division of 414067 B.C. Ltd. v. Barham, [1997] B.C.J. No. 1603 (QL) (S.C.); 32262 B.C. Ltd. v. Saeid Pourdana and Others, 2001 BCSC 1488. [54] There is an advantage to Dr. Keith if the BPCPA applies. Once Dr. Keith, being a consumer, alleges that the plaintiff has engaged in an unconscionable or deceptive act or practice, the plaintiff bears the burden of rebutting those allegations by proving that it did not engage in unconscionable or deceptive acts or practices: BPCPA, ss. 5, 9. [55] Dr. Keith submits that pursuant to the BPCPA, he is a consumer and the plaintiff in supplying services to him as an individual and not for business purposes was a supplier under the BPCPA, s.

1. Dr. Keith submits further that it is how the consumer makes use of his personal property that defines a consumer transaction, not the nature of the services supplied by the supplier. [56] The plaintiff submits that the work and services provided by the plaintiff do not fall under the definition "consumer transaction" as per s. 1 of the BPCPA because it was a commercial shipyard, not engaging in transactions of a personal, family or household nature. Dr. Keith was advised throughout, it is submitted, by an experienced marine adjuster. No case authority was cited in support. [57] With respect, I agree with the defendants and I disagree with the plaintiff. It is not whether the provider of services is a commercial operation. It is whether the purchaser is an individual purchasing for primarily personal, family or household purposes. The three words "personal, family or household" are disjunctive, and although the Breanna was a very large item, I would expect most people to think of it as personal, and for family or household purposes as opposed to commercial use. [58] I find that the BPCPA applies in this case. I find that the plaintiff has failed to disprove on a balance of probabilities that it engaged in unconscionability. [59] Dr. Keith submits that the plaintiff having committed an unconscionable act ought to be forced to disgorge all of its profits made in connection with the transaction. In my view, with the reductions that I propose to order, the net amount to the plaintiff does not seem to me to be too much. The plaintiff will not be unjustly rewarded or punished for its conduct. It is fair after all that the shipyard be compensated for the rescue and for holding the vessel for part of the time at a reasonable charge.

QUANTUM MERUIT [60] The plaintiff is entitled to a fair reward for its rescue of the Breanna based on quantum meruit. In Rafal v. Legaspi, 2007 BCSC 1944, Fisher J. stated at paras. 29-30: Where one party "confers a benefit on another party by part performance of services under a contract and that other party accepts such services", the party conferring the benefit may "recover reasonable remuneration for services rendered under a contract, despite the fact that a contract may not exist or has been abandoned": Wise, The Manual of Construction Law, (Toronto: Carswell, 1994) at 3-58. Obtaining quantum meruit relief is "not dependent on the existence of a valid contract. Rather, it is a discreet cause of action separate and apart from claims granted in contract or tort, which contemplates a remedy for unjust enrichment or unjust benefit": Consulate Venchers Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324 at ¶95, citing Deglman v. Guaranty Trust Co. of Canada, [1954] S.C.R. 725 at 734-35. Quantum meruit will be available if the services in question were furnished at the request or with the encouragement or acquiescence of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services: Fridman, Restitution, 2d ed. (Toronto: Carswell, 1992) at 290-92; Nicholson v. St. Denis (1975),

57 D.L.R. (3d) 699 (Ont. C.A.), leave to appeal to S.C.C. refused, [1975] 1 S.C.R. x. See also Bond Development Corp. v. Esquimalt (Township), 2006 BCCA 248, 268 D.L.R. (4th) 69, leave to appeal to S.C.C. refused, [2006] 2 S.C.R. vi; Palethorpe v. Bogner (1997), 35 B.C.L.R. (3d) 128 (C.A.). [61] The Work Order, as I have said, did not constitute a contract for the ongoing work, and the claims for lay day and residency fees are disallowed. Instead, the plaintiff will be entitled to a combined return of a specified amount per day from August 18, 2005. I do not believe that for the purpose of the work actually specified in the Work Order, the exclusion of lay day and residency fees affects the outcome. Virtually all of the work was done before any lay day fees were payable. [62] I would allow on a quantum meruit basis $350 per day as a fair return to compensate the plaintiff for the defendants' use of the plaintiff's facilities until September 15, 2005. The evidence satisfies me that Dr. Keith would have made arrangements to move the vessel at that time but for the plaintiff's claim of a possessory lien.

MISCELLANEOUS CHARGES Moorage and Other Expenses [63] With reference to several authorities, it is submitted on behalf of Dr. Keith that where a party keeps possession of a chattel having worked upon it, the party cannot add a charge for the use of its premises during such possession in addition to the charges for the repairs. The plaintiff seems to have claimed what it refers to as "moorage expenses" together with expenses to refloat the vessel. They are contained in the plaintiff's invoices No. 5-1903, No. 2970 and No. 06755 with a total claim for these costs of $17,208.55. [64] Dr. Keith submits that as the plaintiff held possession of the vessel until security was posted for all of its claims, it is precluded from charging for the use of the premises. Accordingly, he submits that the plaintiff may not also charge for mooring or otherwise for the use of the premises: Somes et al. v. The Directors of the British Empire Shipping Company (1860), 8 H.L. Cas. 338, 11 E.R. 459; Heriteau et al. v. W.D. Morris Realty Ltd., [1943] O.R. 724, [1944] 1 D.L.R. 28 (H.C.J.); Rudd's Heavy Equipment Repairs Ltd. v. Blackstone Paving Ltd., [1985] B.C.J. No. 1392 (QL) (Co. Ct.). [65] I accept that argument, and the plaintiff's claim to these expenses is dismissed. Disposal of Fuel [66] The plaintiff charged Dr. Keith $3,600 for disposal of fuel, and then took the fuel, polished it and used it

for its own purposes without telling Dr. Keith. It was argued, not too seriously I hope, that this conduct is within the definition of "disposal" in that it relieved the defendant of something he had to get rid of anyway and would not be using again because in the end the vessel was a total loss. The conduct did not approximate disposal. It constituted conversion, for which the plaintiff must now pay Dr. Keith according to the fair market value of the fuel. It was calculated that the fuel taken (2,000 gallons x 3.79 litres per gallon) had a net value after deduction for polishing of $.99 per litre. The total value is $7,504.20. I would have likely found otherwise with respect to this charge if the plaintiff had been candid with Dr. Keith and made an offer that was reasonable to both parties. Preserving and Starting Engines [67] The defendants argue that the time taken by the plaintiff's employees for preserving and starting the engines of the vessel, a total of 133 hours, was excessive. Mr. Hart testified that from his experience the time to complete the task should not have exceeded 16 hours. I agree that the plaintiff exceeded a reasonable time in managing this task. I do not accept the plaintiff's testimony to the effect that the delays were justified by its dealings with the distributor of the engines, Finning. I will reduce the time allowed for preserving and starting the engines to 30 hours at $70 per hour. The reduction then on the claim will be for 103 hours at $70 per hour.

INTEREST [68] The interest clause in the "Terms & Conditions of Sale" of the Work Order provides that: "This account is payable when rendered, or if credit has been approved by Nanaimo Shipyard Ltd., is payable in full 30 days from the date of invoice recorded on the reverse side hereof. Overdue amounts accounts shall be subject to a credit charge equal to interest calculated at the rate of 2% per month (24% per annum compounded monthly). [emphasis in original] [69] Section 4 of the Interest Act, R.S.C. 1985, c. I-15, states that: 4. whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent. [70] Dr. Keith submits that the stated rate in the Work Order is confusing because 2% per month is not the same as 24% per annum compounded monthly, and Dr. Keith could not by viewing that clause know the interest rate. [71] The plaintiff refers to the decision in Prince Albert Co-operative Association Ltd. v. Rybka, 2006 SKCA 136, [2007] 4 W.W.R.

23. In that case, the interest clause stated "[i]nterest charged on overdue accounts is: 2% per month or 24% per annum (26.8% effective rate)" (para. 4). The Court held at paras. 23-25: The requirements of s. 4 have been fully canvassed in Bank of Nova Scotia v. Dunphy Leasing Enterprises Ltd.; McHugh v. Forbes; Upper Yonge Ltd. v. Canadian Imperial Bank of Commerce; and Tower Paint & Laboratories Ltd. v. 126019 Enterprises Ltd. In Dunphy, the issue was whether s. 4 applied, inter alia, to a debenture that provided for interest on its outstanding balance "at the rate of 24% per annum, calculated and payable monthly, both before and after maturity and default, and interest on overdue interest at the rate aforesaid". The Court held that s. 4 did not apply because the interest provision contained a stated annual rate and a stated annual rate is not a rate per month even if the terms of the loan agreement require interest to be calculated and paid monthly. In McHugh, supra, the question was whether s. 4 applied to a promissory note bearing interest at "the rate of 28% per annum, calculated daily, not in advance, by way of consecutive monthly instalments of $490.00 on account of interest only". The Court concluded that although the note required interest to be paid monthly, the rate or percentage of interest was expressed on a yearly basis and therefore s. 4 did not apply. A similar

conclusion was arrived at in Tower Paint, supra, where the credit agreement provided: TERMS: Net 30 days: A service charge will be added each month on the overdue portion of the previous months [sic] balance at the rate of 1.5% per month (18% per annum). In the instant case, the credit agreement provides for a stated annual interest rate of 24% per annum, and, for the reasons given in Dunphy, supra, McHugh, supra and Tower Paint, supra, s. 4 does not apply to the parties' credit agreement. It also follows that in order to give meaning to the words "26.8% effective rate", the entire interest phrase must be read constructively. The respondent's submission on this issue fails. [footnotes omitted] [72] Several other authorities are helpful in determining whether the interest clause in a given case complies with s. 4, including Smith v. Canadian Tire Acceptance Ltd. (1994), 19 O.R. (3d) 610, 118 D.L.R. (4th) 238 (Gen. Div.) [cited to O.R.], aff'd (1995), 26 O.R. (3d) 95 (C.A.), leave to appeal to S.C.C. refused, [2006] 3 S.C.R. xiii. In that case, the clause providing for interest charges stated a "rate of 2.4% per month calculated on the previous months [sic] balance (a rate of 28.8% per annum)" (p. 613). The Court stated at p. 620: In order to describe a nominal rate of interest a lender must explain when the interest payments are calculated and payable. This is a question of

contractual interpretation. The contracts must be construed in their entirety. There is no special form which such wording must take for it to be interpreted as a nominal rate, so long as interest may clearly be said to be calculated and payable monthly from the words of the agreement. Counsel for the moving party, in his factum, referred the court to Kellison, The Theory of Interest, 2nd ed. (1991), pp. 17-18: In this section, we consider situations in which interest is paid more frequently than once per measurement period. Rates of interest and discount in these cases are called "nominal". Various terms are used in practice to describe situations in which interest is paid more frequently than once per measurement period. Among these are "payable", "compounded", and "convertible" The three terms are often used interchangeably. However, they do have different connotations to some users The reader is cautioned not to rely on such connotations when encountering these terms, but to ascertain exactly how the interest is computed and paid. See also Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1991), 3 O.R. (3d) 123, 79 D.L.R. (4th) 154 (C.A.); Nedco (1975) Ltd. v. Eades Electric (B.C.) Ltd. (1981), 33 B.C.L.R. 127 (C.A.); Movsesian v. Saswan Construction Inc. (1991), 7 B.C.A.C. 232, [1991] B.C.J. No. 3470 (QL) (C.A.). [73] The Court in Smith found that where the

agreements are clear in specifying that interest was calculated and payable monthly and that there would be a compounding of interest on overdue accounts with an interest component, the Court would accept that it was satisfactory. The Court also considered the argument that the nominal rate of interest does not adequately represent the true annual rate of interest because it does not incorporate the effect of compounding. The Court concluded that the nominal annual rate was an equivalent annual rate of interest within the meaning of s. 4 of the Interest Act. [74] In Bank of Nova Scotia v. Dunphy Leasing Enterprises Ltd. (1991), 120 A.R. 241, [1992] 1 W.W.R. 577 (C.A.), aff'd [1994] 1 S.C.R. 552, similar to the discussion in Smith of the different terms that may be used, the Alberta Court of Appeal noted that there is a distinction between calculation of interest and compounding of interest, stating at para. 101 that "[w]hen a debt instrument provides for interest to be both calculated and payable monthly, no interest compounding is involved. Compounding may arise if the debtor fails to make the required interest payments" [emphasis in original]. The Court also noted that these items are frequently used interchangeably. The interest clause stated a "rate of two percent (2%) per month. That is twenty-four percent (24%) per annum". (pp. 127-28). [75] The defendant refers to Nedco,

supra. In Nedco, the Court of Appeal noted that in practice, the respondent was charged interest at 2% per month, but compounded. The Court also noted that counsel agreed that compounded, the rate amounted to 26.8% per annum. The Court found s. 4 had been complied with and the practice of charging compound interest was irrelevant. [76] The defendants submit that the interest clause in the present case is distinguishable in that it purports to be compounded and therefore is a confusing rate. However, the cases are not concerned for the purposes of s. 4 with confusion of terms a long as there is a nominal interest rate stated. The evidence in this case does not show there would be any compounding except in the case of default. What is required is to have the nominal annual interest rate, which is stated in this case. A nominal annual interest rate is an equivalent rate within the meaning of s. 4 of the Interest Act: Smith at p.

630. The interest clause in this case complies with s. 4 of the Interest Act and the plaintiff is entitled to interest at the rate charged.

CLAIMS AGAINST COAST AND PREMIER [77] The plaintiff pleads that the defendants Coast and Premier acted beyond their authority, wrongfully interfered with the contract between the plaintiff and Dr. Keith, failed to provide proper repair specifications and failed to provide information or make decisions in a timely manner. Substantially, those allegations sound either in the tort of interference with contract or, alternatively, in the tort of breach of warranty of authority. To establish the tort of interference with contractual relations, the plaintiff must prove the existence of a valid and enforceable contract, that the defendants knew of the contract, that the defendants, by unlawful (wrongful) means, caused the breach of the contract, that the defendants intended to bring about a breach, that the plaintiff did breach its contract as a result of the interference of the defendants and that the plaintiff suffered damages as a result of the inference: Verchere v. Greenpeace Canada, 2004 BCCA 242, 29 B.C.L.R. (4th) 75. The plaintiff has not proven these elements on the evidence in this case. [78] With respect to breach of warranty of authority, the plaintiff refers to Alvin's Auto Service Ltd. v. Clew Holdings Ltd., [1997] 9 W.W.R. 5, 157 Sask. R. 278 (Q.B.), in which the Court stated at paras. 21-22: The elements of a breach of warranty of authority cause of action are

identified in Bowstead on Agency, 13th ed. (London: Sweet & Maxwell, 1968), p. 397: (1) Where a person, by words or conduct, represents that he has authority to act on behalf of another, and a third party is induced by such representation to act in a manner in which he would not have acted if such representation had not been made, the first-mentioned person is deemed to warrant that the representation is true, and is liable for any loss caused to such third party by a breach of such implied warranty, even if he acted in good faith, under a mistaken belief that he had such authority. (2) Every person who professes to act as an agent is deemed by his conduct to represent that he is in fact duly authorized so to act, except where the nature and extent of his authority, or all material facts known to him from which its nature and extent may be inferred, are fully known to the other contracting party, or the professing agent expressly disclaims any present authority. The plaintiff need not have entered into a contract as a result of the inducement. It is sufficient if he or she acts to his or her detriment because of the warranty. [79] In this case it is not clear whether Coast and Premier had authority to act on behalf of Dr. Keith, but assuming they did, it does not appear that any liability arises since the evidence does not support the finding of a contract. In fact the

plaintiff does not plead anything more, vis-à-vis dealings with Coast and Premier, than that they represented themselves as agents. There is no allegation that Coast or Premier entered into a contract for the lay day charges with the plaintiff. That claim is therefore dismissed. Insofar as the plaintiff's claims are framed as tort duties, a duty that is allegedly owed must be proven. I find that there was no duty, but if there was a duty, no breach has been proven. The defendants Coast and Premier acted at all times according to their contractual obligations as Dr. Keith's insurers, and agent of the insurers. CANADA SHIPPING ACT, 2001 [80] It was argued on behalf of the defendants that the consumer protection principles of the Canada Shipping Act, 2001, S.C. 2001, c. 26, could be applicable as well in support of the defendants. The submission is that the Court may exercise jurisdiction under the Canada Shipping Act, 2001, s. 142(1) and Article 7 of Schedule 3, to annul or modify the effect of Work Order No. 710, and that the Court has the jurisdiction, whether or not the pleadings mention it. [81] The jurisdiction of the Court under Article 7 of Schedule 3 to the Canada Shipping Act, 2001 for this purpose is not expressly limited in terms of or limited to contracts for salvage operations, but arguably it also applies to other contracts or agreements evidenced as clearly for salvage operations. Equally, it is arguable that this is not a salvage case but one dealing wholly with post-salvage issues that may be as well determined by the common law principles and the BPCPA. It is not necessary or advisable in my view to exercise the jurisdiction and I do not propose to invoke the Canada Shipping Act, 2001.

CONCLUSION [82] The plaintiff is denied its claim for lay day fees and residency fees entirely, but instead, is awarded $350 per day on the basis of quantum meruit as fair compensation for use of the plaintiff's facility for each day from and including August 18, 2005, until September 15, 2005. [83] The plaintiff is entitled to all of its other amounts invoiced but not otherwise dealt with in these reasons. The plaintiff's claim for moorage expenses and expenses to refloat the vessel, an amount of $17,208.55, is dismissed. The amount for preserving and starting the engines will be reduced by $7,210, which leaves the plaintiff a reasonable amount to charge for this task, and finally, the amount will also be reduced by the value of the fuel as I have determined it to be -- $7504.20. [84] The plaintiff will be entitled to the rate of 24% per annum compounded monthly. [85] The claims against Coast and Premier of interference with contractual relations, breach of warranty of authority and breach of tort duties are dismissed. [86] The plaintiff shall forthwith release its security taken in respect of this action upon receipt of full payment of all sums owing pursuant to this judgment. [87] The defendants shall have their costs, subject to the right to make submissions, at Scale B. "The Honourable Mr. Justice Rice"