



COURT OF APPEAL FOR ONTARIO

CITATION: Solea International BVBA v. Bassett
    & Walker International Inc., 2019 ONCA 617

DATE: 20190725

DOCKET: C66182

Feldman, Hourigan and Brown JJ.A.

BETWEEN

Solea
    International BVBA

Plaintiff (Respondent)

and

Bassett & Walker
    International Inc.

Defendant (Appellant)

Geoff R. Hall and Amanda D. Iarusso,
    for the appellant

Assunta Mazzotta and Timothy J. Law,
    for the respondent

Heard: July 2, 2019

On appeal from the judgment of Justice Andra
    Pollak of the Superior Court of Justice, dated October 23, 2018, with reasons
    reported at 2018 ONSC 4261.

BROWN
    J.A.:

I.        OVERVIEW

[1]

The respondent, Solea International BVBA
    (Solea), a trader of seafood products, sold two containers of frozen shrimp
    to Bassett & Walker International Inc. (BWI), a Toronto-based company.
    Solea sourced the shrimp from an Ecuadorian supplier, Castromar S.A. Under the
    terms of its sales contract with BWI, Solea was to deliver the shrimp CIF 
    Cost, Insurance and Freight
[1]
 to the Mexican port of Manzanillo.

[2]

The shrimp arrived at the port and was
    off-loaded on June 13, 2014. By mid-August, BWI still had not been able to pass
    the goods through Mexican customs. Although first assuring Solea that it would
    pay the invoice, ultimately BWI refused to pay Soleas invoice for the contract
    price of the shrimp. The shrimp was returned to Ecuador.

[3]

Solea commenced this action for payment of the
    purchase price of U.S. $228,604.50 plus interest at 8%. BWI initially asserted
    a counter-claim for lost profit, but later abandoned that claim.

[4]

The motion judge granted judgment to Solea for
    the full amount of the purchase price, together with pre-judgment interest. BWI
    appeals. For the reasons that follow, I would dismiss the appeal.

II.       PROCEDURAL
    HISTORY

[5]

Two rounds of summary judgment motions have
    taken place in this proceeding.

[6]

In Round One, Pollak J. granted summary judgment
    to Solea for the contract price: 2016 ONSC 4860. This court set aside that judgment
    on the basis that the parties and the motion judge had failed to consider
    whether the
International Sale of Goods Act
, R.S.O. 1990, c. I.10 (the
    
ISGA
), now titled the
International Sales Conventions Act
,
    S.O. 2017, c. 2, Sch. 8, s. 2,
[2]
and its Schedule 1, the
United Nations Convention on Contracts for the
    International Sale of Goods
(the 
Convention
), applied to the
    transaction: 2017 ONCA 886. On that appeal, the parties agreed that the
ISGA
and its schedule, the
Convention
, applied. This court remitted the
    matter back for a new hearing on the parties competing summary judgment
    motions.

[7]

In Round Two, by order dated October 23, 2018
    Pollak J. again granted Solea summary judgment, ordering BWI to pay the
    Canadian dollar equivalents of US$228,604.50 and US$79,817.40 for the contract
    price and prejudgment interest respectively: 2018 ONSC 4261. The motion judge
    applied a prejudgment interest rate of 8% per annum.

[8]

On the summary judgment motion, BWI took the
    position that it was not required to pay the invoiced purchase price because:
    (i) Solea failed to comply with a term of the contract that required it to
    provide proper import documents, specifically a health certificate and
    certificate of analysis; (ii) by reason of that lack of proper documentation,
    BWI did not accept the shipment on delivery in Mexico; and (iii) Solea accepted
    the return of the shipment to Ecuador.

[9]

The motion judge found against BWI. Based on her
    review of the evidence, she found that:

·

The shrimp was delivered at the Mexican port on
    June 13, 2014;

·

On August 11, 2014 BWI advised Solea that it
    would not pay for or accept the shrimp;

·

The shrimp was returned to the original
    supplier, Castromar, in Ecuador on September 21, 2014.

·

Solea made no representation, promise or
    agreement that it would not require BWI to pay the purchase price if the
    product was returned to Ecuador; and

·

In the arrangement to return the goods from
    Mexico to Ecuador, title to the shrimp was not reconveyed by BWI to Solea and
    BWI was obliged to pay the purchase price.

[10]

The motion judge found that BWI: (i) did not
    declare the contract avoided pursuant to Art. 49 of the
Convention
;
    and (ii) had not established the applicability of either estoppel or unjust
    enrichment as a defence to paying the purchase price.  In the result, the
    motion judge found BWI liable for the purchase price, together with prejudgment
    interest at 8% in accordance with the terms of the invoice.

[11]

The evidence before the motion judge also
    disclosed that: (i) by mid-August 2014, when BWI asked Solea to take the
    containers back, the price of shrimp in Mexico had dropped by approximately 25%
    from BWIs contracted purchase price with Solea; and (ii) the margin on BWIs
    resale deal for the shrimp was about $6,500, which adds context to BWIs
    mid-August 2014 complaint to Solea about the bleeding it was suffering by
    paying demurrage, electricity, and storage charges on the containers stuck in
    the Mexican port, which the evidence indicated were close to US$40,000.

III.      ISSUES
    ON APPEAL

[12]

On this appeal, BWI does not challenge the
    motion judges conclusion that it breached the contract by failing to pay the
    purchase price. BWI advances two discrete grounds of appeal:

(i)

the motion judge committed an error of law by
    concluding that the
Convention
did not impose
    on Solea a duty to mitigate; and

(ii)

the motion judge erred in awarding prejudgment interest at the rate
    of 8% per annum.

IV.     DUTY
    TO MITIGATE

The applicability of Art. 77 of the
Convention

[13]

In her reasons, the motion judge found that [t]he
    duty to mitigate is not relevant to Soleas claim for payment of the purchase
    price of the shrimp. It appears that the motion judge accepted the
    respondents argument that the provisions in the
Convention
on
    mitigation apply only to claims for damages (Art. 61(1)(b)) but not to an
    action for judgment in the amount of the purchase price.

[14]

BWI submits the motion judge erred in law in so
    interpreting the
Convention
, arguing that Art. 77 imposes a duty to
    mitigate in the circumstances.

[15]

Art. 77 appears in Ch. V of the
Convention
dealing with Provisions common to the obligations of the seller and of the
    buyer; section II of that chapter concerns Damages. Art. 77 states:

A party who relies on a breach of contract
    must take such measures as are reasonable in the circumstances to mitigate the
    loss, including loss of profit, resulting from the breach. If he fails to take
    such measures, the party in breach may claim a reduction in the damages in the
    amount by which the loss should have been mitigated.

[16]

Ch. III of the
Convention
deals with
    the obligations of the buyer. Section III concerns Remedies for breach of
    contract by the buyer. Arts. 61(1) and (2) state:

(1) If the buyer fails to perform any of his
    obligations under the contract or this Convention, the seller may:

(a) exercise the rights provided in
    articles 62 to 65;

(b) claim damages as provided in articles
    74 to 77.

(2) The seller is not deprived of any right he
    may have to claim damages by exercising his right to other remedies.

[17]

Article 62 states that the seller may require
    the buyer to pay the price, take delivery or perform his other obligations,
    unless the seller has resorted to a remedy which is inconsistent with this
    requirement.

[18]

The commentary on Art. 77 consistently takes the
    position that the duty to mitigate contained in that article does not apply to
    an action for the purchase price by a seller under Art. 62: see, for example,
    Stephan Kroll, Loukas Mistelis & Pilar Perales Viscasillas,
UN
    Convention on Contracts for the International Sale of Goods (CISG), A Commentary
,
    (Munchen: C.H. Beck, 2011) (the 
CISG Commentary
), at p. 1035; Peter
    Riznik, Some Aspects of Loss Mitigation in International Sale of Goods, 2010
    VJ 267, at p. 270.

[19]

The motion judge evidently regarded Soleas
    action claiming judgment for the amount of the purchase price as a requirement
    by the seller that the buyer pay the purchase price within the meaning of Art.
    62 of the
CISG
.

[20]

The motion judges view finds support in the commentary
    about Art. 62.  For example,
the
CISG Commentary
states,
    at p. 858: Art. 62 grants the seller the right to demand the specific
    performance of any obligation owed to him by the buyer, including the payment
    of the price  Art. 62 adopts, at least in principle, the position of the civil
    law tradition  specific performance is available as of right for any breach of
    any obligation of the buyer, including the obligation to pay the price.
    Professor Jacob S. Ziegel has observed that: Whatever else it is, an action
    for the price is not an action for damages: The Remedial Provisions in the
    Vienna Sales Convention: Some Common Law Perspectives, Ch. 9 in Galston &
    Smit eds.,
International Sales: The United Nations Convention on Contracts
    for the International Sale of Goods
,
(New York: Matthew
    Bender 1984)
, at p. 9-41.

[21]

While Art. 61(b) applies Art. 77s duty to
    mitigate to a claim for damages and not to an action by a seller pursuant to
    Art. 62 to require the buyer to pay the price, the commentary on Art. 62 in
    the
UNCITRAL Digest of Case Law on the United Nations Convention on
    Contracts for the International Sale of Goods
, 2016 (the 
Digest
)
    recognizes that this principle cuts against the grain of common law remedial
    principles stating, at p. 287:

Article 62 entitles the seller to require the
    buyer to perform its obligations. This remedy is generally recognized in civil
    law systems, whereas common law systems generally allow for the remedy (often
    under the designation specific performance) only in limited circumstances.

[22]

The
CISG Commentary
explores this
    tension between Art. 62 and common law jurisdiction remedies in its section on
    The right to demand payment. It states, at p. 859:

The right to demand the specific performance of the obligation
    to pay the price is probably the most controversial part of this provision.
    During the negotiations of the Convention the delegation of the USA proposed
    that the buyer may require payment unless in the circumstances the seller
    should reasonably mitigate the loss resulting from the breach by reselling the
    goods. This would have made the CISG similar to the law in most common law
    jurisdictions. This was in fact also effectively the solution adopted by the
    ULIS, the predecessor of the CISG.

In the end, however, the US proposal and the approach adopted
    by the ULIS were rejected and there is, therefore, no need for the seller to
    mitigate his loss  he is entitled to ask for the payment of the price without
    having to try to sell the goods to a third party. The CISG adopts a pure civil
    law formulation of the rule. In practice, however, it is very likely that in
    the vast majority of cases where the seller has possession of the goods and
    there is a market for these goods, the seller will opt to cut his losses,
    attempt to avoid the contract as soon as possible (Art. 64) and resell the
    goods (maybe even using Arts 85 and 88) rather than seek an order for specific
    performance of the obligation to pay that would have to be enforced in the
    buyers country. In practice, therefore, the theoretical differences between
    the civil law and the common law may not be as important as they may seem.
In
    addition, Art. 28 will often mean that sellers will have to mitigate their loss
    by reselling the goods. There will however be instances where the seller will
    prefer to seek the specific performance of the obligation to pay
. [footnotes
    omitted, emphasis added]

[23]

The reference to Art. 28 in the last portion of
    this extract from the
CISG Commentary
is significant. Art. 28 states:

If, in accordance with the provisions of this Convention, one
    party is entitled to require performance of any obligation by the other party,
    a court is not bound to enter a judgement for specific performance unless the
    court would do so under its own law in respect of similar contracts of sale not
    governed by this Convention.

[24]

As explained in the
CISG Commentary
:
    Art. 28 is a compromise position between the common laws preference for money
    damages in the event of a breach of contract and the civil laws preference for
    performance  To the extent that [Art. 28] applies, it restricts the ability of
    the parties to demand performance: at pp. 370 and 375. The
CISG Commentary
observes in its section on Art. 62: In practice, however, the general
    availability of specific performance under the CISG will be limited,
    particularly in common law jurisdictions by Art. 28: at pp. 858-859. This
    point is picked up in the
Digest
which notes, at pp. 283 and 298, that
    the right to require performance under Art. 62 is limited by Art. 28:

As was the case with the provisions on the buyers remedies,
    the articles governing the sellers remedies operate in conjunction with a
    variety of provisions outside [Section III of Part III, Chapter III]. Thus, the
    sellers right to require performance by the buyer is subject to the rule in
    article 28 relieving a court from the obligation to order specific performance
    in circumstances in which it would not do so under its own law.



The second limitation derives from article 28 of the
    Convention, under which a court is not bound to order specific performance in
    the sellers favour, even if that would not otherwise be required under article
    62, if the court would not do so under its domestic law in respect of similar
    contracts not governed by the Convention.

[25]

In its statement of claim, Solea does not expressly
    seek specific performance of the sales contract. It simply claims $228,604.50
    U.S. dollars or the Canadian equivalent at the date of judgment. The
    commentary on the Convention would permit characterizing Soleas action as one
    by the seller to require the buyer to pay the price within the meaning of
    Art. 62. However, any ultimate characterization of Soleas claim for the
    purpose of determining whether an Art. 77 duty to mitigate applies would need
    to take into account the availability of an Art. 62-based specific performance
    remedy in a common law jurisdiction such as Ontario in view of the limitation
    placed by Art. 28.

[26]

The parties did not address what effect, if any,
    Art. 28 may have on any duty for Solea to mitigate in its Ontario action for
    the purchase price. As a result, the motion judge did not express a view on the
    matter.

[27]

While it would be open to the panel to ask the
    parties to provide further submissions on this point, I do not think it
    appropriate or necessary in the specific circumstances of this case. It is not
    appropriate because: Solea claims a modest amount, utilizing the Simplified
    Procedure; its action is now over four years old; and this is the second trip
    to the Court of Appeal. An end needs to be brought to this action. Further
    submissions are not necessary because this appeal can be decided without
    expressing a definitive view on whether a duty to mitigate under the
Convention
applies to Soleas action.

Mitigation

[28]

Although the motion judge did not make specific
    findings on the issue of mitigation, some of her other factual findings bear
    directly on the issue. As well, the written record enables this court to make any
    necessary additional findings on the issue:
Courts of Justice
Act,
    R.S.O. 1990, c. C.43, ss. 134(1) and (4). Taking BWIs case at its highest by
    assuming (without deciding) that Solea was subject to a duty to mitigate, as I
    will now explain Solea satisfied any such duty.

[29]

BWI argues that Solea failed to establish that
    it took reasonable measures to mitigate its loss. Having returned the shrimp to
    Solea, BWI contends that Solea either resold, could have resold, or should have
    resold the shrimp. As a result, BWI submits that Soleas damages are zero.

[30]

The motion judge found that BWI breached the
    contract by failing to pay the purchase price. Her reasons disclose that she
    found title had passed to BWI upon delivery of the goods at the Mexican port
    and BWIs subsequent problems clearing the goods did not alter the fact that title
    had passed to it. The motion judge reviewed the evidence about the discussions
    between the parties in mid to late August, 2014 following BWIs disclosure that
    it had encountered import problems. She found that:

·

Solea did not make any representation, promise
    or agreement that it would not require BWI to pay the purchase price if the
    product was returned to Ecuador;

·

The arrangement to return the goods to Ecuador
    was not a new transaction in which title to the shrimp was recoveyed to Solea;
    and

·

The bill of lading for the shipment to Ecuador
    named Castromar, the original supplier, as consignee, which led the trial judge
    to find that there was no evidence that title to the shrimp had passed from BWI
    to Solea.

[31]

Those findings of fact take this case out of the
    common situation where at the time of the buyers breach of contract, the
    seller still had title to or possession of the goods that are the subject of the
    contract. On the motion judges findings, when BWI breached the contract in
    August 2014 by refusing to pay the invoice, it had title to and possession of
    the goods, circumstances that limited the reasonable measures Solea could take
    to mitigate its losses caused by BWIs breach.

[32]

The record contains other evidence concerning the
    mitigation issue. An email exchange between the parties on August 13, 2014
    discloses that Solea offered to take the goods back but only if BWI covered
    Soleas related costs, which it estimated to be in the range of
    US$25,000-30,000.  BWI refused.

[33]

Although Solea provided some assistance to BWI
    to arrange the return of the two containers of shrimp to Ecuador, the consignee
    named on the bill of lading for the return shipment was Castromar, the original
    vendor of the shrimp to Solea. The containers containing the shrimp arrived
    back in Ecuador on September 21, 2014 and were returned, empty, to the shipping
    company on October 1, 2014.  Soleas managing director, Adriaan de Leeuw,
    deposed that Solea never received the returned shrimp, never sold the shrimp,
    and was not aware what Castromar did with the shrimp. He also deposed that
    Solea was never aware of or involved in any sale of the shrimp to China, as
    suggested in some email correspondence, or otherwise once the shrimp was
    returned to Ecuador.

[34]

Further, in its commentary on damages in Arts.
    74-77, the Digest notes that some cases have interpreted the article to require
    that the breaching party claiming a reduction in damages under Art. 77, will
    bear the burden of establishing his entitlement to  a reduction in damages;
    see also,
CISG Commentary
, at p. 1036. In this regard, Art. 77
    reflects the common law principle that while it is up to the plaintiff to
    establish what it has lost from the defendants breach of contract, it is up to
    the defendant to show that the plaintiff could have avoided some, or perhaps
    all, of these losses: Angela Swan and Jakub Adamski,
Canadian Contract Law,
3rd ed (Toronto: LexisNexis, 2012), at
§
6.275. Given that onus on BWI, it is significant that it did not
    adduce any evidence about what Solea likely would have fetched on a resale of
    the goods at the material time.

[35]

The findings of fact of the motion judge, taken
    together with the evidence set out in paras. 32 and 33, support the conclusion that
    even if Solea was subject to a duty to mitigate under the
Convention
,
    it took such measures as were reasonable in the circumstances to mitigate its loss,
    including loss of profit, resulting from BWIs breach of contract.
    Notwithstanding those measures, its loss resulting from BWIs breach of the
    contract remains the amount found by the motion judge  U.S. $228,604.50.
    Consequently, I would not give effect to this ground of appeal.

V.      PREJUDGMENT
    INTEREST

[36]

The motion judge found that Solea was entitled
    to interest on the amount owing at the rate of 8% per annum. She reached that
    conclusion based on an interest clause found on the reverse side of Soleas
    invoice and the absence of contradictory evidence or submissions made by BWI
    on this issue.

[37]

BWI argues that it did make submissions on this
    issue before the motion judge. Specifically, BWI contends that the General Terms
    of Sale on the reverse side of the invoice that Solea provided after the
    parties had entered into the sales confirmation did not afford a contractual
    basis for prejudgment interest at the rate of 8%. According to BWI, to apply
    the interest clause in the invoice would amount to a variation of the
    contractual terms to which BWI had not consented. In BWIs submission, the pre-judgment
    rate of interest under the
Courts of Justice Act
should apply.

[38]

I am not persuaded by this submission.

[39]

While the May 12, 2014 Solea sales confirmation
    did not refer to interest payable on the amount billed, there was no dispute
    that the commercial practice for this type of international food commodity
    transaction first involved the formation of a sale contract, followed by the
    approval of other documentation required to perform the transaction. An email
    exchange between the parties on May 14, 2014 confirmed that one required document
    was a commercial invoice.

[40]

On May 31, 2014 Solea sent to BWI by email a
    package of documents, which included an invoice of the same date. Term 11 of
    the General Terms of Sale on the back page of the invoice stipulated a
    minimum rate of interest of 8% on any amount unpaid on the due date, with
    interest otherwise calculated at a rate of 2% on top of the current Euribor
    rate.

[41]

Although Solea sent BWI a package of original
    documents in the middle of June, Solea advised in a June 23, 2014 email that it
    still had the original invoice. Solea inquired whether BWI required the
    original invoice. On June 23, 2014 BWI emailed Solea that it thought it could
    process the invoice by using a copy of it.

[42]

On this appeal, BWI acknowledged receiving the
    front page of the invoice. However, BWI took the position that there was no
    evidence that it had acknowledged receiving the General Terms of Sale on the
    reverse side of the invoice.

[43]

I see no merit in this factual submission.

[44]

First, BWIs affiant, Jose Barajas Andrade,
    swore two affidavits for the motions. In neither affidavit did he take the
    position that BWI was not aware of the General Terms of Sale on the reverse of
    the invoice.

[45]

Second, by June 23, 2014 BWI had confirmed that
    it had received a copy of the invoice, would proceed on the basis of the copy,
    and had approved the acceptability of the invoice as a transaction document.
    The front page of the invoice contained the following language: General Terms
    of Sale: see reverse side. Given the clear disclosure that the invoice
    contained additional terms, BWIs approval of the acceptability of a copy of
    the invoice bearing that language operated to incorporate those terms into the
    contract of sale.

[46]

Accordingly, I see no error in the motion
    judges holding that the appropriate rate of prejudgment interest was the
    contractual rate of 8%. I would not give effect to this ground of appeal.

VI.     DISPOSITION

[47]

For the reasons set out above, I would dismiss
    the appeal.

[48]

Solea is entitled to its costs of the appeal
    fixed in the amount of $8,500, including disbursements and applicable taxes.

Released: KF JUL 25 2019

David Brown J.A.

I agree. K. Feldman
    J.A.

I agree. C.W. Hourigan
    J.A.





[1]

Cost, Insurance and Freight (CIF) means that the seller
    delivers the goods on board the vessel. The risk of loss of or damage to the
    goods passes when the goods are on board the vessel. The seller must contract
    for and pay the costs and freight necessary to bring the goods to the name port
    of destination. The seller also contracts for insurance cover against the
    buyers risk of loss of or damage to the goods during the carriage. When CIF is
    used, the seller fulfills its obligation to deliver when it hands the goods
    over to the carrier in the manner specified in the chosen rule and not when the
    goods reach the place of destination: Incoterms 2010: ICC rules for the use of
    domestic and international trade terms (Paris: International Chamber of
    Commerce, 2010), at p. 105.



[2]

The new title, the
International Sales Convention Act
,
    came into effect on March 22, 2017, upon royal assent.


