T-3534-81
Champlain Ship Supply Ltd. (Plaintiff)
v.
The Vessel Felicia V and the owners and all
others interested in the Vessel Felicia V and
Western Marine Corp. (Defendants)
Trial Division, Walsh J.—Montreal, February 8
and 9; Ottawa, February 28, 1983.
Maritime law — Contracts — Action for account — Dispute
over price charged by ship chandler for goods supplied to ship
— Whether assignment of debt to bank disqualifies plaintiff
from initiating proceedings — Whether incumbent on plaintiff
to substantiate every item — Price to be established on quan
tum meruit basis — Fairness and competitiveness of prices
implied condition of contract — As action not for damages but
for account, interest awarded only at rate allowed by Interest
Act — Federal Court Act, R.S.C. 1970 (2nd Supp.). c. 10. s. 3
— Civil Code of Lower Canada, arts. 1203, 1204, 1233(1) —
Interest Act, R.S.C. 1970, c. I-18, s. 3 — Federal Court Rules,
C.R.C., c. 663, R. 1716(1).
Practice — Parties — Action by ship chandler on account
for supplies furnished to ship — Plaintiff having assigned
accounts receivable to bank — Whether plaintiff proper party
to sue — General assignment of debts in course of normal
relations with bank — Plaintiff not in financial difficulty —
Letter from bank to defendant Western Marine not constitut
ing demand for payment to bank rather than to plaintiff —
Defendant could have raised issue by conditional appearance
— Bank could have been joined as co-plaintiff — While no
formal reassignment of claim by bank to plaintiff bank
manager testifying that no objection to plaintiff continuing
action — R. 1716(1) applicable — Cheque given as result of
judgment to be made payable jointly to plaintiff and bank to
protect defendant from double jeopardy — Federal Court
Rules, C.R.C., c. 663, R. 1716(1).
Evidence — Burden of proof — Action on account by ship
chandler — 600 items supplied — Plaintiff able to produce
substantiating invoices from its supplier for only 125 —
Defendant arguing prices exorbitant — Nature of business
such that difficult to produce invoice showing cost of items to
chandler — Invoices not deliberately destroyed — Plaintiff
need not produce purchase invoices for every item — Court
hearing evidence as to difficulty of establishing prices — Even
reference would not yield accurate result and would be enor
mous, unjustified expense — Case to be decided on equitable
basis and on balance of probability.
The plaintiff, a ship chandler, furnished supplies to the vessel
Felicia V in Montreal pursuant to requisitions from Western
Marine Corp. The defendant refused to pay the account,
claiming that the prices had been inflated. The plaintiff sues for
full payment, claiming interest at the rate of 18% on invoice
value. In addition to contesting the prices, the defendant raised
the following arguments: (1) The plaintiff is not the proper
party to bring these proceedings, having assigned its accounts
receivable to The Royal Bank of Canada. (2) It is incumbent
upon the plaintiff to substantiate each and every item queried.
Held, the plaintiff's action should be allowed in part. While
the agreement evidencing the general assignment of the plain
tiff's debts in favour of the bank as general and continuing
collateral security gives it the right to institute proceedings to
recover those debts, the plaintiff still has the required interest
to bring the present proceedings, and since the bank has no
objection to the plaintiff continuing the action, Rule 1716(1)
applies so as not to invalidate the action initiated by the
plaintiff. Although the burden is on the plaintiff to prove its
case, this does not require that the plaintiff establish the cost of
acquisition of every item, especially when many of the invoices
cannot reasonably be produced. In view of the unsatisfactory
and incomplete evidence as to price, the issue must be dealt
with somewhat summarily on an equitable basis, on balance of
probability. The prices, not determined by the contract, must
be established on a quantum meruit basis, and it is at least an
implied condition of the contract that the prices will be fair and
competitive. As for the rate of interest claimed by the plaintiff,
in the absence of any agreement between the parties on that
matter, and since this is an action for account and not for
damages (where the commercial interest rate can be awarded),
the plaintiff is only entitled to interest at the rate allowed by
the Interest Act.
CASES JUDICIALLY CONSIDERED
APPLIED:
Robillard c. Vincent (1941), 79 Que. S.C. 204;
O'Dwyer v. Banks, [1953] 2 D.L.R. 204 (Alta. S.C. App.
Div.).
DISTINGUISHED:
Canadian Terrazzo and Marble Co. Ltd. v. B. Kaplan
Construction Co. Ltd. et al., [1966] Que. S.C. 505; Bell
Telephone Co. v. The "Mar-Tirenno" et al., [1974] 1
F.C. 294 (T.D.).
CONSIDERED:
James v. Radnor County Council (1890), 6 T.L.R. 240
(Q.B.D.).
COUNSEL:
Laurent Fortier for plaintiff.
Gerald P. Barry for defendants.
SOLICITORS:
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for plaintiff.
Gasco, Linteau, Grignon & Barry, Montreal,
for defendants.
The following are the reasons for judgment
rendered in English by
WALSH J.: This is an action by plaintiff, a ship
chandler in Montreal, for supplies furnished to the
vessel Felicia V in Montreal in October 1980 for a
total invoice value according to the statement of
claim of $74,987.60, of which the amount of
$46,846.32 was paid in January 1981, leaving a
balance of $28,141.28. Plaintiff also claims inter
est at the commercial rate not less than 18% on the
total invoice value from the time of delivery to the
partial payment in January 1981 and on the bal
ance owing from that date which was calculated as
amounting to $6,076.50 at the date of institution
of the proceedings on July 6, 1981. Defendant
Hamilton Marine Transport Limited, owner of the
vessel, disputes the amount claimed as being gross
ly exaggerated, pleads the Interest Act [R.S.C.
1970, c. I-181 and also pleads that plaintiff has no
standing in the present action having assigned its
claim and notice of such assignment having been
given to defendant. Plaintiff received requisitions
for deck and engine stores from Western Marine
Corporation acting on behalf of defendant by
letter dated October 10, in which defendant also
stated that the Master had been requested to make
the necessary requisitions for provisions. Plaintiff
had had previous dealings with Western Marine,
providing supplies to the vessel Ionian Skipper in
August of 1979 and to the Felicia V in September
1979 on instructions from Western Marine. No
prices had been quoted prior to delivery but the
invoices were paid for these deliveries upon presen
tation. It is conceded by defendant that the sup
plies were delivered on time, the quantities and
quality being satisfactory, the only dispute being
with respect to the price.
On October 25, 1980, plaintiff invoiced defend
ant Western Marine Corporation an amount of
$74,317.60 broken down as follows:
Provision invoice no 1400 amount: $ 21,751.24
invoice no 1403 amount: 1,696.65
Bonded Store invoice no 1401 amount: 1,197.50
Cabin invoice no 1402 amount: 5,716.62
Deck invoice no 1404 amount: 11,838.59
Engine invoice no 1405 amount: 32,084.71
Custom ch invoice no 1407 amount: 32.29
Total: $ 74,317.60
On November 12, 1980, said defendant wrote that
it found the prices to be exorbitant. It enclosed
what it referred to as "corrected invoices" in
which, inked beside plaintiff's detailed prices are
the prices which defendant considers proper total
ling $46,784.83 which it states it is prepared to
pay after the corrections are applied less 5% own
er's discount. Plaintiff replied on November 24
saying that it could not understand how defendant
judged 80% of its prices to be higher than other
suppliers as it had supplied vessels of many other
shipowners, charging exactly the same prices with
out any complaint. It added that some of defend
ant's suggested prices would be below plaintiff's
actual cost. It points out the difficulty in compar
ing prices since much depends on quality of items
such as raincoats or chipping goggles for which it
supplies only top quality, and also high pressure,
heavy duty, or stainless steel pipes upon requisi
tion. Defendant replied to this on December 30,
1980, calling attention to certain items in which
the discrepancy between the prices charged and
the costs in the United States were extraordinary.
The letter concludes that the price of beef rounds
can now be considered as having been correctly
priced and that in view of the fact that prices in
Canada are slightly higher than in the United
States the owners will pay another 10% of the
amount already paid or about $4,800. This is a
settlement offer and not binding but is at least an
admission that some of the prices which defendant
sets forth for some items in making its calculations
were too low.
Plaintiff's representative apparently then met
with Captain Charitos of Western Marine Corpo
ration in New York, and as a result writes on
January 14, 1981, explaining that in plumbing
fittings it has a discount of 50% and another 25%
resulting from its being direct distributors and that
it is therefore prepared to change the prices
charged on heavy pipe reducers, pipe bushings and
pipe nipples, which were based on the full retail
prices so as to allow a discount of 45% which
amounts to $1,579.04. Plaintiff makes a further
allowance of $300 for items such as Tide, chipping
goggles, and other items. As a result it submits a
revised claim as follows:
Total amount of order: $ 74,317.60
Less 5% Owner's discount except invoices 1401,
1407 3,654.39
Less your New discount 1,879.04—
Less your advance payment 46,846.32—
Final Balance to be Paid 21,937.85
Plaintiff explains the fact that when proceedings
were brought the amount claimed was $28,141.28
resulting from his refusal to now allow the 5%
owner's discount, and adding $1,500 for services
rendered such as rental of two seaway wires used
by defendant vessel at a cost of $670 for which
defendant had not previously been billed.
Before going into any evidence as to the
accounts it is necessary to dispose of legal argu
ments raised by defendant. It was only after the
conclusion of the proof by both parties with
respect to the agreements and accounts that
defendant invoked a legal issue, which it had
however pleaded, that plaintiff is not the right
party to bring these proceedings having assigned
its accounts receivable to the bank. Plaintiff had
on September 22, 1978, in the course of its normal
relations with its banker, The Royal Bank of
Canada, signed a general assignment of debts in
favour of the bank on the standard form of the
bank used for these purposes. Clause 2 of the
agreement reads in part:
The undersigned agrees that the debts shall be held by the
Bank as general and continuing collateral security for the
fulfilment of all obligations, present or future, direct or indi
rect, absolute or contingent, matured or not, of the undersigned
to the Bank.
Clause 3 authorizes the bank to collect, and if
necessary sue for such debts and give valid and
binding receipts and discharges therefor as if the
bank were the absolute owner thereof. Clause 5
specifies however that "All moneys received by the
undersigned from the collection of the debts or any
of them shall be received in trust for the Bank."
During its normal commercial operations plaintiff
deposited any receipts from customers with the
bank which receipts would reduce any indebted
ness to the bank as a result of its line of credit.
There is no suggestion that plaintiff was at the
time of this indebtedness by defendant to it in
financial difficulties or that the bank was not
satisfied with the normal commercial relationship.
However, when defendant was disputing its
account the bank did write a letter to defendant
Western Marine Corporation on April 10, 1981,
which reads:
Please find enclosed an explanatory letter regarding an
invoice of $21,937.85 due our subject customer.
Since we hold a general assignment of debts in this affair, we
therefore ask you to take the immediate steps in order to rectify
this matter.
This hardly constitutes a demand to pay the
amount of the invoice (which in any event is for
less than the amount for which the present pro
ceedings are taken) to the bank rather than to
plaintiff. The explanatory letter referred to is a
typewritten form apparently used by the bank in
such instances advising of the general assignment
of debts on September 22, 1978, registered in the
City of Montreal on August 19, 1979, and
continuing:
The Bank is empowered to receipt and fully discharge this
claim against you. In pursuance of the said assignment you will
therefore please pay to the Royal Bank of Canada, 1870 Notre
Dame Street West, Montreal, P.Q. H3J 1M6 Branch the sum
of $21,937.85 value received and charge to the account of the
above named party plus six months interest at 21% ($2,303.47).
There is no doubt that as a result of it defendant
could have paid this amount to the bank if it were
willing to and by so doing discharge its debt at
least to this extent to plaintiff, but I am not
convinced that this prevents plaintiff from bring
ing the present action to collect the debt. This is an
issue which could properly have been raised by
defendant by means of a conditional appearance or
even at a later stage of proceedings by the parties
by setting forth an issue in law to be decided by
the Court. Plaintiff itself could have remedied the
situation by seeking an amendment so as to join
The Royal Bank of Canada as co-plaintiff. I have
no doubt that such an application would have been
granted. Paragraph (1) of Rule 1716 [Federal
Court Rules, C.R.C., c. 663] reads as follows:
Rule 1716. (1) No action shall be defeated by reason of the
misjoinder or nonjoinder of any party; and the Court may in
any action determine the issues or questions in dispute so far as
they affect the rights and interests of the persons who are
parties to the action.
Paragraphs (2), (3) and (4) would permit the
Court on its own motion to require the bank to be
joined as a co-plaintiff, and the bank would no
doubt have had no objection, but unfortunately
this would require notification to the bank, an
amendment of the statement of claim and other
routine procedures and could not conveniently be
made at the conclusion of the trial. The present
manager of the branch of The Royal Bank of
Canada with which plaintiff deals testified that
with respect to assigned accounts of this sort in
most cases it is the client which collects the
amounts and only exceptionally does the bank
itself demand payment. The letter sent in the
present case is normally used when the accounts
are in arrears. After in this manner it has notified
the debtor, as in the present case, debts are nor
mally paid to the bank. She distinguishes however
the transfer of a debt and the purchase of a debt,
pointing out that this was not a debt purchased by
the bank from plaintiff. She suggested that by
such a letter the bank helps the client in the
collection of the amount of the debt. I am left with
the general impression that for a client which is
not itself in financial difficulty the bank is quite
content to have the client collect the account and
deposit it in the normal way with the bank, and
that the bank would not be anxious itself to insti
tute proceedings, especially with respect to a con
tested or disputed account in which all the evi
dence would have to be made by its client in any
event. Defendant referred inter alia to the case of
Canadian Terrazzo and Marble Co. Ltd. v. B.
Kaplan Construction Co. Ltd. et al.,' but the facts
in that case were substantially different. It dealt
with the assignment of a specific account of the
debtor to the bank and not with a general assign
ment. It refers to the assignment as having been an
absolute transfer and points out that unless the
debtor has been specifically relieved by the bank of
the notice of assignment which has been served on
it, it can be exposed, if the assignor's action is
upheld, to paying the same debt twice over. In that
action the bank was joined as a mise-en-cause and
the amended declaration required the payment be
made jointly to plaintiff and the bank, but the
Court found that this did not improve the situation
because at the date of the amendment the bank
itself had lost any right to sue, its action having
become prescribed by passage of time. That is not
the case in the present proceedings.
In the case of Robillard c. Vincent 2 the judg
ment states at page 205:
[TRANSLATION] ... plaintiff assigned his claim to the Banque
Canadienne Nationale as a guarantee for advances made by it.
' [1966] Que. S.C. 505.
2 (1941), 79 Que. S.C. 204.
The debtor is owner of the thing pledged until it is sold or
otherwise disposed of. It remains in the hands of the creditor
only as a deposit to secure his debt (art. 1972 C. C.).
Sometimes also the transfer only having taken place as a
guarantee is really a pledge and does not transfer the ownership
of the claim (Planiol et Ripert (1931) v. 7, n. 1107, p. 417).
Plaintiff therefore does have the required interest to bring
the present proceedings.
The quotation from Planiol et Ripert [Traité pra-
tique de droit civil français] referred to in this
judgment continues [at pages 417-418]:
[TRANSLATION] The distinction can be delicate because it is
necessary to determine the real intention of the party under
terms which perhaps interpret them wrongly and not to weaken
them. The judges of fact whose appreciation is paramount take
into account various stipulations contained in the act: thus the
establishment of a price or at least the extinction of the debt of
the transferor permit distinction between a real transfer or a
giving in payment and a simple pledge. [Footnotes omitted.]
While some common law jurisprudence was also
referred to there are some differences in the law
relating to assignments. I prefer to rely -on the
jurisprudence in the present case which originates
in the Province of Quebec.
I find some support for my views however in the
case of O'Dwyer v. Banks in the Appellate Division
of the Alberta Supreme Court 3 in which the judg
ment states at page 208:
If the situation continued as it existed when the application was
launched, I have no doubt there was ample authority to substi
tute the assignee as plaintiff, and that this was the proper thing
to do. But on the hearing of the application in Chambers, it
appeared that since the commencement of the action the bank
had cancelled the assignment from the plaintiff in its favour
and had reassigned to him all moneys payable under the
contract with defendant as well as all other things referred to in
the assignment. Moreover, the bank asserts that the action was
commenced by the plaintiff, with its knowledge and consent,
and it ratifies and confirms all things done or caused to be done
by plaintiff in the proceedings. It consents, on terms, to be
joined as plaintiff if it is necessary so to do in order to
effectively continue the proceedings.
It seems to me no good purpose can be served by substituting
the assignee as plaintiff. As matters now stand, the plaintiff has
the whole beneficial interest in the subject-matter of the action.
The assignee has divested itself of any interest it ever had in the
proceedings or in the moneys which may become payable under
the contract with the defendant. Of course, the assignee should
have been named plaintiff when the action was commenced, but
3 [1953] 2 D.L.R. 204 (Alta. S.C. App. Div.).
no action is now defeated by reason of misjoinder or non-joind-
er of parties, and where it appears that the assignee has no
longer any interest in the matter, its presence before the Court
may properly be dispensed with: see Taylor v. Equitable F. &
M. Ins. Co., 13 A.L.R. 58, and Wm Brandt's Sons & Co. v.
Dunlop Rubber Co., [1905] A.C. 454. The plaintiff will have
the right to continue the action, and if so advised may amend
the statement of claim by pleading the re-assignment.
While it is true that in the present case there has
been no formal reassignment of the claim by the
bank to plaintiff it is evident from the testimony of
the manager that the bank has no objection to
plaintiff continuing the action so paragraph (1) of
our Rule 1716 applies.
To protect defendant from any possibility of
double jeopardy I will direct however that any
settlement cheque made as a result of the judg
ment rendered in the proceedings herein may be
made out jointly to plaintiff and to the bank and
that such a cheque will represent full satisfaction
of the amounts claimed.
I may add that from the practical point of view
it is unthinkable that at this late stage of the
proceedings the action should be dismissed on a
ground which could so readily have been remedied
at an earlier stage. The only result defendant could
obtain by dismissal of plaintiff's action on the
ground of absence of capacity to sue would be with
respect to costs. The time spent by the parties and
by the Court and the costs incurred on the trial of
this action would be wasted only to have The
Royal Bank of Canada commence identical pro
ceedings requiring repetition of the same proof.
Defendant raised a second legal objection relat
ing to burden of proof. Perhaps as many as 600
different items were supplied by plaintiff to
defendant vessel and covered by the invoices in
question, which plaintiff has produced and testi
fied to be accurate and fair. During lengthy dis
covery and demands for production of documents
plaintiff was only able to produce substantiating
invoices from its supplier for about 125 of them
and some of these invoices are suspect. Plaintiff s
accounting records were not kept in good shape at
the time and its accountant was dismissed in about
January 1981 because he was six months behind in
his work. Plaintiff's president Simon Tounissidis
testified that the other officers of the company are
his brother and their respective wives. Although
the company has been in business for some years it
is a relatively small company. Craig Bishop, direc
tor of the Canadian Ship Suppliers Association
testified that there are nine members of the Asso
ciation in Montreal out of 15 or 20 ship chandlers.
Certain conditions have to be fulfilled in order to
qualify with respect to trucks for delivery, inven
tory, and so forth. Plaintiff never sought member
ship in it as far as he knows.
Plaintiff, being a small supplier, according to
Mr. Tounissidis' evidence could not keep a very
large inventory of supplies and in order to obtain
the merchandise requisitioned for a ship, often on
very short notice, had to go to wholesalers, dis
tributors, or even retailers to obtain same. Often a
very small item may require a great number of
phone calls to find who has it in stock and then a
trip to pick it up. Some items come in various
grades and quality which greatly affect the prices.
Some small items of pipe fittings, bolts, and so
forth may be bought in quantity and kept on hand
for several years before a few of them are used to
fill the requisition for the ship in question. Invoices
for the original purchase would not be retained nor
would they be retained for groceries purchased
from a retail store, for example. Unless a ship
chandler has an extraordinarily good filing system
therefore, and keeps on hand tens of thousands of
invoices, there is no way that he can produce or be
expected to produce an invoice showing what he
paid for any given specific item supplied to a ship.
It is in the light of this background that the nature
of the evidence to be furnished by plaintiff must be
considered.
The defendant takes the position that when
defendant's account is queried he must be in a
position to substantiate each and every item in it,
relying heavily for this proposition on an old Brit-
ish case of James v. Radnor County Council. 4
This involved an action by a High Sheriff against
the County Council to recover his charges as a
returning officer at an election. The Council con
tested it as being unreasonable and excessive.
Plaintiff called on defendant to deliver particulars
of the charges objected to. Defendant had objected
to all the charges as unreasonable and the Court
held that it was unheard of to order a defendant to
give particulars of the items it disputed as it had
the right to dispute all of the items and put
plaintiff to the proof thereof.
Defendant referred to a number of cases most of
which dealt however with spoliation or destruction
of documents and held that in this case the pre
sumption must be against him who destroyed the
evidence which might have corroborated his case.
It is going too far however on the facts of the
present case to suggest that the purchase invoices
of plaintiff were deliberately destroyed, or that it
cannot make a valid claim unless it can substanti
ate the price it charged defendant for any item by
the production of its purchase invoice.
Articles 1203 and 1204 of the Quebec Civil
Code read as follows:
Art. 1203. The party who claims the performance of an
obligation must prove it.
On the other hand he who alleges facts in avoidance or
extinction of the obligation must prove them; subject neverthe
less to the special rules declared in this chapter.
Art. 1204. The proof produced must be the best of which the
case in its nature is susceptible.
Secondary or inferior proof cannot be received unless it is
first shown that the best or primary proof cannot be produced.
While the burden is on plaintiff, as always, to
prove its case I do not consider that this requires
that for each and every item for which defendant
is invoiced, plaintiff must establish what its cost of
acquisition was and substantiate this by an invoice,
when many such invoices cannot be produced.
4 (1890), 6 T.L.R. 240 (Q.B.D.).
Conversely defendant chose to make its own
estimate of what plaintiff should have charged for
each and every item and to reduce the claim
accordingly, paying only this amount. In support
of this it produces estimates of two American ship
chandlers one in New Orleans and one in New
York for engine requisition list prices in the
United States. This is far from the best proof as to
what any item should have cost in Canada, since
even allowing for the differences in exchange, such
items are normally less expensive in the United
States where the sales volume is much greater.
Defendant called a witness Craig Bishop (already
referred to) secretary-treasurer of Clipper Ship
Supplies Ltd., another ship chandler, in Montreal,
a very fair witness, who testified in generalities
with respect to prices on plaintiffs invoice.
Defendant suggested, that, given time, this witness
could have made a detailed examination item by
item of plaintiff's invoices and established the
appropriate price for it at the time in question.
Quite aside from the difficulty in establishing what
is an appropriate price, as Mr. Bishop himself
admitted, it is not desirable that this evidence
would be that of a competitor of plaintiff, even
though he is also, as has been stated, a director of
the Canadian Ship Suppliers Association and for
merly director of the International Ship Suppliers
Association and appears to be a very frank witness.
In any event at an early stage in the proceedings
the Court refused to hear evidence attempting to
establish an appropriate price to charge for each
one of the over 600 items involved, stating that if it
was eventually concluded that this was necessary
or possible it could be the subject of a reference.
After hearing evidence as to the difficulty of
establishing an appropriate price for any given
item since the mark-up depends on the nature of
the item, the difficulty of obtaining it, whether it is
purchased wholesale so that the chandler benefits
by a substantial discount, or is purchased in a store
at a full retail price, the quality of the item, the
quantities involved and other factors, I have
reached the conclusion that even a reference could
not lead to any completely accurate result, and
would merely waste an enormous amount of time
for the referee or the Court, resulting in enormous
expenses for all parties and is entirely unjustified
by the amount in issue, so that the matter can only
be dealt with in a general way on the basis of
evidence given with respect to certain items used
as examples and the evidence of Mr. Tounissidis,
Captain Charitos and especially Mr. Bishop as to
the practice of the trade and appropriate mark
ups. This is a Court of equity (see section 3 of the
Federal Court Act [R.S.C. 1970 (2nd Supp.), c.
10]) and in view of the impossibility of obtaining
any fully accurate figures the issue must be dealt
with somewhat summarily on an equitable basis.
The issue will not be determined on the basis of
burden of proof but rather on balance of probabili
ty. Subsection 1233(1) of the Quebec Civil Code
provides that proof may be made by testimony of
all facts concerning commercial matters. This tes
timony must be largely relied on in the present
case. Defendant quite properly points out that a
contract of this sort is not the same as a normal
contract of sale since there is no prior agreement
as to the price, which must nevertheless be reason
able and established on a quantum meruit basis. It
is not sufficient therefore for a plaintiff to say
"This is my invoice and I swear that all the prices
that are in it are proper and reasonable." Neither
is it appropriate, however, for defendant to estab
lish its own set of figures based in part on informa
tion obtained from some United States suppliers,
without any evidence as to prices in Canada, and
to say that "This is the right price and all I am
prepared to pay." Defendant takes the position
that in view of the fact that the burden is on
plaintiff it was not required to establish proper
prices itself, but in order to refute the plaintiff's
evidence it was necessary for it to provide evidence
to some extent, as was in fact done, within the
limits permitted by the Court, with respect to
certain specific items used as examples.
I turn now to the necessarily unsatisfactory and
incomplete evidence as to price which was submit
ted to the Court, and, while it may be said that it
is not illegal nor improper for a commercial enter
prise to charge excessive prices nor make excessive
profits, if it makes a practice of doing so it will
eventually be forced out of business by competi
tion. On the other hand when there is no prior
agreement as to the price, which there cannot be
when there is such a wide diversity of items to be
obtained and provided for the ship on its arrival, it
is at least an implied condition of the contract that
the prices charged will be fair and competitive
with those charged by other ship chandlers or
similar to the prices charged by the ship chandler
in question to other customers. Plaintiff does pub
lish a price list for the grocery items and produced
its list for the months of October and November
1980, claiming that defendant had this list, but
Mr. Charitos denied ever having received it. In any
event it is not these items which are principally in
dispute, plaintiff claiming $21,751.24 for them
which defendant reduces to $17,585.54 less 5% or
$16,706.26. Plaintiff's invoice for cabin supplies is
for $5,716.62 which defendant reduced to
$3,609.80 or $3,429.31 after the 5% reduction. For
deck supplies the invoice is for $11,838.59 which
defendant reduces to $9,997.56 or $9,534.74 after
the 5% reduction. It is in the engine room supplies
that the biggest discrepancy incurs. Plaintiff's
invoice is for $32,084.71 which defendant reduced
to $9,057.87 or $8,604.97 after applying the 5%
discount. It will be noted that the total of defend
ant's figures does not reconcile with the amount of
$46,784.83 which defendant paid and contends is
the total amount due after the 5% owner's dis
count. However these were taken from rough fig
ures made by defendant on a copy of plaintiffs
invoices and may have been revised slightly
upwards in making the said payment. In requisi
tioning the supplies by the letter of October 10,
1980, Captain Charitos said:
We expect that your prices are most competitive and the
quality of all items supplied first class.
This comment, indicating that the price would be
competitive forms part of the contract. If on the
one hand plaintiff in a contract of this nature must
charge competitive prices, on the other hand
defendant cannot somewhat inconclusively deter
mine what it should pay and limit its payment to
that amount. Although there are many errors in
plaintiff's figures and certainly some prices which
are totally unacceptable, the defendant's figures
are not free from error, and in fact one such error
at least has been admitted in connection with the
price attributed by defendant for beef rounds in
Canada, and this and other considerations con
cerning differences between Canadian and Ameri-
can prices induced defendant to at least offer an
additional $4,800 which offer plaintiff did not
accept. It is of interest to note that defendant, if
not satisfied with them, had at least accepted
without question plaintiff's invoices on two previ
ous occasions, and in fact commenced dealing with
plaintiff because it considered its prices better than
those of its competitors in Montreal including
among others, Clipper Ship Supplies Ltd. This
does not establish however that plaintiff's prices
were right in connection with the present supplies
for, as it was pointed out in argument, a ship
chandler, or for that matter anyone in a competi
tive business, may quote low prices to obtain a new
client and then once the connection is established
make up for it by charging excessive prices on a
subsequent occasion.
[Editor's Note: A number of pages of the judg
ment herein have been omitted. In those pages the
testimony was reviewed and comments made on
the credibility of the witnesses. His Lordship then
dealt with the problem of determining an appropri
ate base figure upon which a ship chandler's mark
up should be applied and noted the similarity of
this business to cost plus contracts in the construc
tion industry as to the lack of incentive, other than
to remain competitive, to seek out the lowest prices
from suppliers if the mark-up is to be applied to
whatever prices are paid. Since completely accu
rate figures could not be obtained, it was necessary
to deal in generalities.]
Appraising the evidence as a whole to the best of
my ability I believe that judgment should be ren
dered in favour of plaintiff for $12,000.
The only matter remaining to be resolved is the
question of interest. In its action plaintiff claimed
interest at the rate of 18% on invoice value from
the time of delivery on the invoice of $74,987.60
until January 1981 when payment of $46,846.32
was made and on the balance to the date of
institution of the proceedings on July 6, 1981,
including this interest calculated to amount to
$6,076.50 in its claim. Plaintiff's invoices contain
no special provisions respecting interest and indi
cate that the sales are made on cash terms. Evi
dence however indicated that it is not unusual for
payment to be delayed for some three months and
plaintiff would have been satisfied had defendant
paid the amount of its invoice in full in January
when it made the part payment without interest.
During the argument plaintiff's counsel indicated
that it would be satisfied if interest ran on the
amount awarded from the date of this initial pay
ment. It was also stated at that time that there was
agreement that the prime rate in 1981 was 19%
and in 1982, 15%. In the bank's notice of assign
ment given to defendant in April 1981 six months'
interest at 21% was claimed amounting to
$3,303.47. If payment had been made in full to
plaintiff, including the amount now allowed by the
judgment, in December of 1980 when the part
payment was made it would have been deposited
by plaintiff in reduction of its indebtedness to the
bank pursuant to its general assignment of
accounts receivable and hence reduce whatever
interest plaintiff would have been paying to the
bank from that date. There is a strong equitable
case therefore for the payment of interest in excess
of the unrealistic rate, in the light of current
conditions of 5% provided by the Interest Act.'
The same argument would apply however to any
action on an unpaid account. Reference was made
to jurisprudence established in admiralty matters
in the case of Bell Telephone Co. v. The "Mar-
Tirenno" et al. 6 which has been applied in subse
quent judgments of this Court. In that case Addy
J. states at page 311:
5 R.S.C. 1970, c. I-18, s. 3.
6 [1974] 1 F.C. 294 (T.D.).
It is clear that this Court, under its admiralty jurisdiction,
has the right to award interest as an integral part of the
damages suffered by the plaintiff regardless of whether the
damages arose ex contractu or ex delicto.
Although the words "ex contractu" are used the
statement also refers to "an integral part of the
damages suffered". The action related to damage
to a telephone cable caused by a ship. At page 312
the judgment states:
... interest in these cases is not awarded to the plaintiff as
punitive damages against the defendant but as part and parcel
of that portion for which the defendant is responsible of the
initial damage suffered by the harmed party and it constitutes a
full application of the principle of restitutio in integrum.
Interest was allowed at the prime bank rate as part
of the damages. Although the Federal Court has
jurisdiction for these proceedings, being an admi
ralty matter, they represent an action for account
and not for damages and failure to pay the full
amount of an account cannot be assimilated to
damages or constitute a tort justifying the pay
ment of commercial rate interest from the time at
which expenditures were incurred to repair the
damages. I do not think that this jurisprudence can
extend this far in contravention of the Interest Act,
and in the absence of some agreement between the
parties as to interest payable on unpaid invoices.
In the present case however the sum of $35,000
was deposited in Court payable to the Receiver
General of Canada on July 9, 1981, as security for
satisfaction of the judgment. It is not going too far
to suggest that this sum will belong to plaintiff to
the amount of the judgment with accrued interest
on that amount earned by the said sum from the
time of its deposit.
There is documentary evidence establishing that
although the pleadings refer to the initial payment
as having been made in January 1981, a bank
draft for $46,846.32 was telexed to plaintiff in
December and a cheque issued in its favour in
payment on December 18, 1980.
Plaintiff is entitled to interest on the amount of
$12,000 from December 18, 1980 to July 9, 1981,
and to whatever interest will have accrued on
$12,000 deposited as security from that date to
date of payment.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.