Claim No: SCCH - 468798
IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Cite as: Maschera Skin Care Inc. v. Lawton’s Drug Stores Ltd., 2018 NSSM 2
BETWEEN:
MASCHERA SKIN CARE Inc.
(amended to replace Kathy MacGillivray)
Claimant
- and -
LAWTON’S DRUG STORES LTD.
Defendant
REASONS FOR DECISION
BEFORE
Eric K. Slone, Adjudicator
Hearing held at Halifax, Nova Scotia on January 8, 2018 Decision rendered on January 11, 2018
APPEARANCES
For the Claimant self-represented
For the Defendant Michelle Chai Counsel
BY THE COURT:
[1] The Claimant, Kathy MacGillivray, sues the Defendant Lawton’s Drug Stores Ltd. (“Lawton’s) for the cost of some product stands or racks that she had manufactured and delivered to Lawton's as part of her business.
[2] The Claimant developed a line of collagen gel facemasks, which are typically sold through drugstores, spas or other outlets.
[3] Sometime before 2014, which date is not clearly established, through her company Maschera Skin Care Inc. (“Maschera”) the Claimant began to sell product to Lawton's, which product was displayed on existing shelves in the stores. The product was circulated throughout the Atlantic provinces. In or about mid-2014, the Claimant met with the category manager for Lawton's, Jake Rafuse, who recommended that she develop a custom stand to display the product on the floor in the stores. As was testified to by a number of witnesses, and as is commonly observed, there are many products in drugstores and other places that are displayed on custom stands or racks. Many of them are cardboard cutouts, which may be seen to have little enduring value. However, in the case here, after her discussions with Mr. Rafuse, the Claimant designed and had manufactured in China a custom display stand which contained both metal and acrylic materials. According to her testimony, although this was not supported by any documentation, the stands cost her $320 each. I was not told the precise number of stands manufactured, but it was at least 32, as that is the number supplied to Lawton’s.
[4] According to the evidence both of the Claimant and of Mr. Rafuse, who is no longer employed by Lawton's, there was a verbal agreement or
understanding that the racks would be supplied to Lawton's but would continue to be owned by the Claimant. Both of them stated that their understanding was that if any store wish to retire a stand, or if Lawton's as a whole discontinued purchasing the product, the racks would be offered back to the Claimant who would have the opportunity to either pick them up, or instruct them to be disposed of.
[5] When the racks were delivered, they were fully stocked with product, and sales documentation was created that listed all of the products according to their various numbers or other designations. The invoice for the products and the associated racks was dated July 23, 2014, and on the face of it does not differentiate between the stand itself and the product that it contained. However, the Claimant has clearly established to my satisfaction that the price charged per stand, namely $267.60, was strictly the price for the products and included nothing for the stand itself. As already noted, the stands cost her $320.00 each, and it can hardly be inferred that there was anything in the price charged to Lawton’s that reflected the stand itself. Nevertheless, looking at the invoice itself one would not necessarily conclude anything concerning the ownership of the stand.
[6] Over the next three years the relationship continued, but was not without its difficulties. In particular, it was at times challenging for the Claimant to supply sufficient product to keep the racks filled. This was explained by the Claimant, and it is logical, that because she was manufacturing the product oversees she would have to order them in fairly large quantities, and could not necessarily afford to make an order of, say 1000 units, to fill Lawton's order of 100 units. This led to delays in her filling of orders from Lawton’s.
[7] According to the Defendant’s witnesses, this led to racks in some stores beginning to look depleted, which led to some managers making the decision to pull the racks off the floor and stocking the products only on their shelves.
[8] In mid-2017, the Claimant sold her business, but not her company, to someone in Prince Edward Island. The purchaser did not plan to continue to keep product in Lawton's, but was planning only to make it available through spas. The understanding between the Claimant and her purchaser was that she would pass on the racks which would have to be retrieved from Lawton's, which racks could be placed in the spas that this purchaser was planning to use.
[9] When the Claimant got in touch with Lawton's to inform them that she was terminating the relationship and needed her racks back, she came to learn that approximately 17 of those racks could no longer be located. They had been disposed of by the various stores.
[10] It is the value of those racks that the Claimant seeks to recover in this claim.
[11] The position of the Defendant is that the racks were sold to them, and paid for as reflected in the invoice dated July 23, 2014. And although they were willing to return any racks that they found, they say that this was a courtesy only and they do not have any responsibility to compensate the Claimant for missing racks.
[12] There was a significant difference between the evidence of Jacob Rafuse, the former Category Manager for cosmetics, and the current category manager, Lisa Whynot. According to Mr. Rafuse, although inexpensive stands such as cardboard would probably be disposed of, his understanding was that sales reps would always be given the opportunity to pick up their display materials. He stated that in his email communication with stores, he would have made this clear and that the Claimant’s stands were not simply throw-away property.
[13] Ms. Whynot insisted that it was not the policy of Lawton's to return product stands. She stated, and I quote her approximate words "Lawton's never contacts a vendor before throwing away a stand. I would expect to see something in writing were it otherwise."
[14] Although Mr. Rafuse is no longer with Lawton's, and there was some innuendo to the effect that he might have left under a cloud and as such harbours some animus against Lawton's, I found his evidence to be straightforward, non-interested, and credible. On the other hand, I found Ms. Whynot to be somewhat self-serving and slightly glib in her testimony. I prefer the evidence of Mr. Rafuse. I am satisfied that the Claimant had a verbal understanding with Mr. Rafuse, who had the ostensible (if not actual) authority to bind Lawton's, to the effect that the racks would continue to belong to the Claimant. It is unfortunate that he appears not to have left behind a paper trail that his successor could pick up upon, but that is Lawton's problem and not the problem of the Claimant.
[15] It may be the counsel of perfection that all agreements or understandings with a large company such as Lawton's should be in writing, but the reality on
the ground is that, particularly with small vendors such as the Claimant, much of their involvement is with a person such as Mr. Rafuse and that verbal understandings are common.
[16] It is accordingly my finding on the evidence that there was an understanding, legally binding on both parties, to the effect that the product stands or racks were being provided to Lawton's pre-loaded with product, and that Lawton's was paying only for the product and the stand itself remained the property of the Claimant.
[17] This result seems to me more consistent with the inherent probabilities. These were expensive racks. A small company such as the Claimant would think twice or more about spending $320.00 for a display rack, and providing it for Lawton's to be dealt with as it saw fit. I have no doubt that Lawton's does not make a practice of buying stands from its suppliers, but surely store managers and others are capable of making a distinction between a cardboard cutout and an expensive acrylic and metal display unit. According to the evidence, a number of stores did keep the units intact and off the floor, even though storage space was likely a premium and it was inconvenient to do so.
[18] The Claimant pointed out that Lawton's, through its parent company Sobey's, prides itself on being ecologically responsible. It is difficult to see how it could be ecologically responsible to toss any of these stands in the garbage.
[19] Although the Claimant sought the full price of the stands, in fact her losses were only to the tune of 75% of the cost, because this was the amount that she was obliged to refund to her purchaser when she was unable to supply the full
amount of stands called for by the transaction. Also, although 17 stands were missing, the Claimant had a stand on hand and only had to reimburse the purchaser for 16 of them. Accordingly, in my view she has incurred damages in the amount of 16 X $320 X 75% = $3,840.00.
[20] Her claim, though not pleaded as such, is really one for the tort of conversion, and the measure of damages in tort would be the actual loss and not necessarily be original cost of the material.
Corporate vs. personal claim
[21] The Claimant did not seem to have a good understanding of the distinction between herself personally and her company. She kept insisting that she was the owner, and therefore she made the claim in her personal capacity. However, the law makes a distinction between individuals and the companies which they create. A corporation is a distinct legal entity. In my view, the Claimant has misconceived this claim as one that she could personally bring, when in fact it ought to have been brought in the name of the company. One of the defendant’s grounds of defence was this distinction.
[22] I believe that justice requires that the Claimant be permitted to have the company name substituted as the Claimant. The Small Claims Court must be more forgiving in cases such as this. In another court, this might be a reason to dismiss the claim, but in claims where there are self represented parties we must be more flexible. Ms. MacGillivray may be a sophisticated business person, but her grasp of the legal concepts is rudimentary and there is no
prejudice (other than the loss of a technical defence) to the Defendant if the substitution is made.
[23] The name of the Claimant will be amended to become Maschera Skin Care Inc.
[24] Accordingly, there will be judgment in favour of Maschera Skin Care Inc. for $3,840.00 dollars plus $199.35 as the cost to issue the claim.