Claim No: 300651
IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Cite as: TK-Mac Construction v. Forbes Chevrolet, 2009 NSSM 3
BETWEEN:
TK-MAC CONSTRUCTION, KENNETH MacPHERSON
and KIMBERLEY McVARNOCK
Claimants
- and -
FORBES CHEVROLET
Defendant
REASONS FOR DECISION
BEFORE
Eric K. Slone, Adjudicator
Hearing held at Dartmouth, Nova Scotia on December 16, 2008
Decision rendered on January 15, 2009.
APPEARANCES
For the Claimant Ian Joyce, counsel
Jacqueline Twohog, articling clerk
For the Defendant Stephen Zatzman, counsel
BY THE COURT:
[1] This case concerns the purchase of a 2005 Sea-Doo Challenger motorcraft (hereafter “the boat”). The Claimants seek a full refund of the purchase price of $21,955.35, on the basis that the boat was unfit for the purpose intended and that there was, they say, a total failure of consideration.
[2] The Defendant maintains that the boat was and is fit for the purpose intended, notwithstanding some of the problems that the Claimants have experienced.
The Parties
[3] The Claimants Kenneth MacPherson and Kimberley McVarnock are spouses. Mr. MacPherson operates a commercial renovation and construction business called TK-MAC Construction. As TK-MAC is merely a business name, it is simply an alter-ego of Mr. MacPherson and its status as a Claimant is superfluous.
[4] The Defendant is a car dealership which, occasionally, also sells used boats.
[5] The transaction in question was actually made in the name of Ms. McVarnock, although the boat was primarily to be used by Mr. MacPherson for business purposes. Apparently Ms. McVarnock had better credit at the time. Nevertheless, I consider for my purposes that she was purchasing, at least in part, as a trustee for Mr. MacPherson and as such they are both properly parties to this claim.
The Transaction
[6] Mr. MacPherson was interested in buying a boat that he could use to promote his business. The idea was to take clients and fellow contractors and employees on cruises of Halifax Harbour and also onto fresh water lakes. The boat in question was sitting out on the Defendant’s lot when Mr. MacPherson saw it on July 22, 2008. One of the salesmen - Jim O’Toole - came out and tried to answer his questions. Mr. MacPherson told Mr. O’Toole that he was not an experienced boater, and was leery about buying a used boat. According to Mr. MacPherson he was told that the boat had “low hours” and that it had recently been maintained.
[7] There was some discussion about a warranty. It appears that there was never any question about whether there was any residual manufacturer’s warranty. There clearly was not as boat warranties are short. The question was whether some form of extended warranty could be obtained. Because boats are a very small part of the Defendant’s business, the salesman did not know much about the available warranties and had to look into it.
[8] It is important to mention that Mr. MacPherson was also purchasing a car from the Defendant at that time. This is significant because it meant that there were things under discussion other than the boat, at any given time.
[9] Mr. O’Toole testified that he told Mr. MacPherson that he was not an expert in boats, but that Mr. MacPherson seemed unconcerned as he had friends who were. Mr. O’Toole says he told Mr. MacPherson that he was free to take the boat to be inspected by an independent source, if he wished. He told Mr. MacPherson that the boat seemed to be in good shape.
[10] On all of the evidence I am satisfied that Mr. O’Toole made no statements that were meant to be authoritative in any technical sense. Obviously he was trying to make a sale, and can be expected to have spoken positively about the boat. I find that he did not present himself as an expert and that anything he said must be viewed as largely sales talk, with the exception perhaps of the statement that the boat had low hours. On all of the evidence there is nothing to indicate that this statement was untrue. Whatever problems the boat may have had, as will be outlined below, did not necessarily stem from an excess of hours of operation.
[11] Eventually a contract for the purchase of the boat was signed. The document used was a pre-printed standard purchase and sale agreement, usually intended for automobiles, and adapted somewhat for this transaction. It is the front and back of a single page, in type that is sometimes small but not the type of illegible “fine print” that one sometimes finds in commercial documents.
[12] The contents of the contract are significant for what it contains and for what it does not. Those parts of the contract that I find significant are:
A. There is a statement on the front of the document which says that “there are no warranties expressed or implied made by the Dealer unless set forth herein and signed by the dealer.” It goes on to say that “no verbal agreement between purchaser and salesperson is binding.”
B. On the back of the document there is a further provision which states that “there are no warranties expressed or implied, made by the Dealer herein, or the manufacturer, on the vehicle or chassis described on the face hereof except in the case of the new vehicle ....” and then that “in the case of a used vehicle ... the applicability of an existing manufacturer’s warranty thereon, if any, shall be determined solely by the terms of such warranty. The Dealer does not warrant the model year or mileage of the used motor vehicle or otherwise unless set out in writing and signed by the Dealer.”
C. The purchaser, Ms. McVarnock, signed an acknowledgment that she had read the conditions on the reverse and agreed that they were incorporated into the agreement.
D. There is no specific line item for an extended warranty, as one would expect where such a warranty is purchased. Mr. MacPherson testified that he knew that they would have to pay for the warranty.
[13] It is undisputed that there was initially some discussion about buying an extended warranty. What is also clear is that the transaction eventually proceeded without one. What occurred in between is a bit murky. Mr. MacPherson believed that the Defendant was still looking into what would be involved. The Defendant was clearly not still looking into it when the transaction was completed.
[14] On all of the evidence I find that it is improbable that the matter of the warranty was still under active discussion. There is no reason to suspect that the Defendant knowingly misled the Claimants about the warranty. The Defendant had every reason to sell one if the Claimants wished to buy one, as they would profit from the sale. I doubt also that Mr. MacPherson expressly rejected an offered warranty out of hand. What must have happened was a miscommunication where the Defendant believed that the Claimant was not interested in the warranty, and the Claimants either forgot about it or naively believed that this could be pursued after the purchase was completed.
[15] In the result no extended warranty was obtained, and the existence of any implied warranties must be considered in light of the disclaimers in the contract.
Boat trouble
[16] The boat was taken on one test run, before the sale was completed. Mr. MacPherson brought along two friends, one of whom was knowledgeable about boats, and they were accompanied by a Forbes employee who had some proficiency with boats. They took the boat to a public launch on Lake Banook and put it through some paces. By all accounts there were no problems.
[17] The deal was completed and Mr. MacPherson took possession of the boat on July 28, 2008. He used it that day on a lake without experiencing any mechanical problems.
[18] On July 31, 2008, Mr. MacPherson launched the boat from Eastern Passage and took it out into the Halifax Harbour, accompanied by one of his associates. The boat started alright, and they got to McNab’s Island without incident. They docked at McNabs and stayed a few minutes before deciding to move on. They then had some trouble starting the boat and Mr. MacPherson called over to Forbes on his cell phone to speak to the salesman. By then the engine had started and they headed up the Northwest Arm. A bit later, the motor suddenly started shaking uncontrollably, and they had to shut it off and row by hand to the nearest shore.
[19] Arrangements were made to tow the boat to the regional Sea-Doo dealership, RV Wheel Estate in Dartmouth. The mechanics there determined that there had been a dramatic failure of the “Supercharger” which, as explained to me, is a device similar to a turbo charger found in some engines. This necessitated a repair costing $1,323.23.
[20] It turns out that at or about this time, the manufacturer of the Sea-Doo, Bombardier, had put out a bulletin advising dealers and owners to replace the Supercharger after 100 hours of use because of the risk of it failing. Even the experts like RV Wheel Estate had been previously unaware that there was such a restriction or that the Superchargers were particularly vulnerable.
[21] Mr. MacPherson was obviously unhappy if not downright spooked by this incident. He immediately wrote a letter of complaint, and asked to be allowed to rescind the contract. Forbes did not agree to anything of the sort, but purely as a goodwill gesture agreed to pay for this repair, less $150 which was the cost of a new battery also supplied at that time. Mr. MacPherson, while not exactly happy, did not press his claim for a refund at that time.
[22] The next time that Mr. MacPherson used the boat, this time out at Hubbards, there was trouble again. He could not start the boat after they had docked. After 20 minutes of futility he had to arrange for a local fisherman to tow them back to where they had launched. The boat was taken back to RV Wheel Estate where the problem was diagnosed as a blown fuse. The total repair bill, mostly for labour to diagnose the problem, was $154.81. The people at RV Wheel Estate considered that the boat was in proper working order after this fuse replacement.
[23] Believing that all was well, Mr. MacPherson took the boat out again from Eastern Passage on the 24th of August, along with a couple of passengers. They sailed around McNabs, into the Northwest Arm, and over to Alderney Landing where they picked up another passenger. They made it past the Macdonald Bridge and into the Bedford Basin, then turned back past the Halifax waterfront and headed back to the Northwest Arm. Just prior to reaching one of the Boat Clubs along the Arm, an engine alarm sounded and the motor started shaking violently - again. Smoke was seen coming from the engine compartment. They turned off the engine and rowed over to the Boat Club where they docked. Mr. MacPherson got out and arranged to get himself back to Eastern Passage to retrieve his boat trailer. Before he returned, he got a call on his cell informing him that the boat had taken on water and was almost completely submerged. He was told that the staff at the Boat Club was going to try to refloat it, which they did. The boat was loaded onto the trailer and taken to Mr. MacPherson’s home. The boat has not been used since. At some point, and it is unclear precisely when, it was brought back to RV Wheel Estate to have the problem diagnosed. It appears that one of the problems was that the exhaust hose had come loose with the result that water got into the engine.
[24] There was testimony from one of the owners of RV Wheel Estate, William Marcus, that it is unusual for one boat to have this many problems in such a short period of time. Nevertheless, each of the problems experienced has been explained, to a point. One of things Mr. Marcus did was to get the entire service history of this boat from Bombardier. This only shows warranty work, but it did not disclose anything of concern. In other words, this had not been a troubled boat that had needed undue repairs while under warranty.
[25] It was Mr. Marcus’s evidence that it will cost under $400 for the vehicle to be repaired and made seaworthy.
[26] The Claimants are understandably spooked and do not want the boat, hence this claim for rescission of the sale and a refund.
Analysis and discussion
[27] Counsel for the Claimant argues that the boat was not fit for the purpose intended, and that there has been a fundamental breach of contract.
[28] The section of the Sale of Goods Act on which one branch of the claim is based is s.17(a), which imports an implied condition of “fitness for the purpose:”
Quality or fitness for particular purpose
17 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 sellers skill or judgement and the goods are of a description that it is in the course of the sellers 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.
[29] The theory is that the Claimants made known to the Defendant the specific purpose for which the boat was required, and that they relied on the Defendant’s skill or judgment that the boat would be reasonably fit for such purpose. If the boat is not fit for the purpose, they would have the right to invoke the condition and rescind the contract.
[30] I do not think the facts of the case fit this section. The type of boat in question is generally quite fit for the purpose. It is not as if the Claimants wanted a boat that could be used to cruise the Harbour and small lakes and were talked into a boat that was inherently too slow or fragile for the purpose. That is the type of situation that s. 17(a) is meant to address. The Defendant here sold the Claimants a sophisticated boat designed and built by a manufacturer that is renowned for its boats. The model of boat in question has been successfully used for this type of purpose thousands upon thousands of times. The issue is that this particular specimen experienced mechanical problems.
Total Failure of Consideration or Fundamental Breach?
[31] The Claimants supplied the court with a great deal of authority to support their position. The concept of fundamental breach is particularly apt, and most often resorted to, as a means to overcome limitations of liability in sales contracts or inadequate warranties.
[32] The leading case in this area appears to be the decision of the Supreme Court of Canada in Hunter Engineering Co. v. Syncrude Canada Ltd. [1989] 1 S.C.R. 426. The definition that is often quoted is that of Wilson J. at paragraph 137 of the case, where she says (quoting Lord Diplock in a leading UK case):
“A fundamental breach occurs ‘Where the event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit which is was the intention of the parties that he should obtain from the contract.’ ..... Fundamental breach represents an exception [to the rule that the remedy is in damages] for it gives the innocent party an additional remedy, an election to ‘put an end to all primary obligations of both parties remaining unperformed.’ It seems to me that this exceptional remedy should be available only in circumstances where the foundation of the contract has been undermined, where the very thing bargained for has not been provided.”
[33] One can conjure up any number of examples where a party receives something that is essentially worthless or fundamentally different from what was promised, and in such instances the principle of fundamental breach seems appropriate.
[34] The applicability of such a remedy to an issue of excessive mechanical problems, is a less clear case.
[35] The Claimants cited an Alberta Provincial Court case that bears some resemblance to the case before me, Meyer v. Denning 2003 ABPC 95. In that case the judge rescinded the sale of a boat, a 16-foot Starcraft motor boat, which had been purchased by the Plaintiffs for $3,200.00 from the Defendant. After only a few minutes in the water it developed problems which were later diagnosed as involving serious rot to the hull, and which would cost between three and four thousand dollars to fix. The Plaintiffs immediately asked for rescission, which the judge allowed, observing that the Plaintiffs had relied on the representation that it was in “good shape” and concluding that “a boat which will not float without repair, the cost of which exceeds the purchase price, is not a boat.” It is clear that the judge in that case gave some weight to the fact that the Plaintiffs had asked for a test drive but were refused that opportunity. On the facts of that case, the boat would almost certainly have failed on the test drive.
[36] Although I do not think the Claimants intended to cite this as a close parallel, I will observe that the facts of that case are quite distinguishable from the case before me. Several elements were present there that are not here. Most notably, the seller was unwilling to allow a test drive (perhaps knowing that the problems would be revealed) and the cost of repair would have exceeded the purchase price.
[37] In the case before me, the Claimants had every opportunity to have the boat checked out, and did participate in a test drive. There is no reason to believe that a mechanical inspection would have shown anything. In fact, with the first two problems being repaired, it did check out. Both times it was declared fit by the authorized service company. There is no evidence of a hidden defect that, had it been known, might have disinclined the Claimants from buying it. Even now, it is estimated that it will cost just a few hundred dollars to winterize the boat and have it ready for the next season.
[38] The case is more analogous to the car cases (either new or used) with which many of us are familiar, where a vehicle experiences more than the expected number of problems with the result that the owner loses confidence that it will ever perform reliably. It is a rare case where rescission is allowed, because most often it is treated as a warranty issue. So long as the manufacturer (or seller) continues to repair the vehicle, that is said to meet its responsibility. Once in a while, a vehicle proves itself so incapable of reliable performance that it could be said that it is “not a car.”
[39] The situation here is complicated by the fact that there is no warranty. Had the Claimants purchased an extended warranty, the repairs would have all been covered and it would have been a tougher argument to make that the boat is “not a boat.”
[40] I have already found that the Claimants could not reasonably have expected that there would be a warranty on this boat, having signed the papers and taken possession of the boat without one having been purchased. As such, the risk of repair costs was assumed by them, if unwittingly.
[41] Even so, the largest repair cost to date has been covered by the Defendant as a goodwill gesture. The actual cost to the Claimants in financial terms has so far been relatively small. The inconvenience and stress has clearly been considerable, but in the final analysis this case comes down to the question of which party legally ought to bear the expense of repairing the boat to the point that there is no doubt that it is shipshape and can be used or (perhaps) sold to someone else in good conscience. I heard no evidence to satisfy me that this boat is inherently defective. It would be too glib to suggest that the Claimants have simply been unlucky, but it is probably fair to say that the events that have occurred were not foreseeable by anyone and they are, to an extent, unexplainable.
[42] In the result, I am not satisfied that the Claimants have shown that there has been any fundamental breach of contract, nor that there has been a total failure of consideration, and for all of the reasons set out above the claim must be dismissed.
Eric K. Slone, Adjudicator