Nanaimo Shipyard Ltd. v. Keith

The Defendant’s vessel ran aground and was severely damaged near Nanaimo, B.C. The grounding occurred a mere 100 yards from the Plaintiff’s shipyard. The Plaintiff’s employees secured the vessel, brought it to the shipyard and hauled it out of the water. The next day the Defendant was presented with a work order for the work done the previous day. The Defendant signed the work order. The work order included a “residency fee” of $350 per day and a “lay day fee” of $4,500 per day. The Defendant’s insurance company advertised for bids to repair the vessel. The Plaintiff bid but was not successful and the repair contract was given to another company. The main issue in the case was whether the Plaintiff was entitled to charge the “lay day fee” and “residency fee”. On this issue the Court found as a fact that the Plaintiff had advised the Defendant that the residency fee would be negotiable. The Court also found that the terms were vague with no clear meaning. Accordingly, the Court held that there was no agreement to pay the lay day or the residency fees. The Court also considered whether the agreement was unconscionable. The Court noted that unconscionability required, first, proof of inequality in the positions of the parties arising out of ignorance, need or distress and second, proof of substantial unfairness of the bargain obtained by the stronger. Once these factors are shown, the burden of proof shifts to the stronger party who must prove that the bargain is fair, just and reasonable. Applying this test, the Court held that there was unconscionability. The Court also found that there was unconscionability under the Business Practices and Consumer Protection Act of British Columbia. Although the unconscionability invalidated the signed work order, the Court held that the Plaintiff was entitled to be paid for its work and the use of its facility on a quantum meruit basis. Claims by the Plaintiff against the underwriters of the Defendant for interference with contractual relations and breach of warranty of authority were dismissed.