ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 09-4026-SR
DATE: 2012-09-26
BETWEEN:
ARESH TARANOM Plaintiff – and – MEHMET FATIH KARAOGLU Defendant
Brian R. Kelly, for the Plaintiff
Defendant, Self Represented
HEARD: September 19,20, 21 & 24 - 2012
The Honourable Mr. Justice James W. Sloan
[ 1 ] In this case the plaintiff Taranom seeks to recover money he alleges he invested as an equal partner in two partnerships with the defendant Karaoglu, known as Tito’s Pizza and Philly Cheese Steak. As an alternative Taranom pleads that Karaoglu misrepresented the facts concerning his investment and has been unjustly enriched. Karaoglu submits Taranom did not invest any money in Tito’s pizza and while he admits to receiving money from Taranom for Philly’s he says it was only as an investment and not as partner and therefore Taranom is not entitled to any money.
ARESH TARANOM’S EVIDENCE
[ 2 ] Taranom is from Iran and immigrated to Canada as a political refugee in June 2004 with five other members of his family.
[ 3 ] Karaoglu is from Turkey and was somewhat established in Canada before June 2004.
[ 4 ] The parties met while working at Morris Car Wash and were drawn together by the fact that they could communicate in a common or similar language.
[ 5 ] After one year in Canada, Taranom returned to Iran to get married. While there he was contacted by Karaoglu who suggested they should go into a Pizza business together.
[ 6 ] Afshin Taranom gave $5,000 to Karaoglu on his brother Taranom’s behalf for Taranom’s one half share to purchase the Tito’s pizza business and for start up costs. His extended family had saved this money by all six of them living in one apartment, being very frugal and from credit card cash advances.
[ 7 ] Karaoglu was to take care of the paperwork and banking because he was more familiar with Canadian customs for those types of things. The profits were to be split equally.
[ 8 ] Both parties worked in the pizza store but Taranom never got paid anything. Taranom worked in the store 60 - 80 hours per week and was, for the first 6 months, helped by his brother Afshin who also never got paid.
[ 9 ] After buying a one half interest in the pizza store Taranom invested another $7,500 which came from his extended family and Afshin’s credit cards bringing his total investment aside from his labour to $12,500.
[ 10 ] At the end of each day Karaoglu would take the cash and credit card receipts and said he was depositing them into the bank account.
[ 11 ] At no time did Taranom ever receive any type of accounting or any financial information from Karaoglu or anyone else with respect to Tito’s pizza.
[ 12 ] After 6 months of not getting paid and being told the business was not making money Taranom suggested that one of them should take over the business. It was decided Karaoglu would run the business and when he sold it he would pay $12,500 to Taranom.
[ 13 ] Karaoglu ran the business for another 1½ years and sold it in the summer of 2007 for $42,500 but never gave any money to Taranom.
[ 14 ] When Taranom asked for his money he was told that the lawyer was still holding on to it. Karaoglu said he was going to Turkey for a couple of months but would pay Taranom when he got back to Canada.
[ 15 ] After returning to Canada, Karaoglu told Taranom he had a new business plan. Although Taranom was sceptical since they had lost money on their first venture he was persuaded by Karaoglu to join him he another restaurant venture called “Taste of Philly Cheese Steak” (Philly).
[ 16 ] Taranom, through his brother’s Afshin Taranom’s (Afshin) ability to borrow money on several credit cards decided to join the venture on the basis that all his and his brother’s money would be paid to them as soon as a bank loan was arranged for Philly.
[ 17 ] Philly opened on or about July 7, 2008 after several weeks of extensive renovations carried on by the parties with some outside assistance. Taranom was there along with his brother 3- 10 hours a day during the renovations but neither received any pay for their work.
[ 18 ] On June 8, 2008 Taranom says he and Karaoglu went to the Kitchener City Hall and registered a business name using the computer for that purpose. Ex. 1 Tab 8 is a credit card receipt for the $60 cost of registration on Afshin’s Amex credit card. Karaoglu denies being present.
[ 19 ] Ex. 1 Tab 3 shows Taranom and Karaoglu being registered as general partners.
[ 20 ] According to the summary of expenses (Ex. 2) paid for by Taranom with supporting documentation set out in Ex. 1, Taranom paid a total of $16,009.58 for materials and injected $25,529.98 in cash plus his $12,500 from his share of the pizza business sale for a total of $54,039.56.
[ 21 ] None of the banking, leasing or buying/selling documents have Taranom’s name on them. They are all in the name of Karaoglu.
[ 22 ] Taranom repeatedly testified that because of his friendship, somewhat common language and culture and the fact that they knew each other’s families he trusted Karaoglu to treat him fairly as an equal partner.
[ 23 ] In fact Taranom trusted Karaoglu to the extent that there are no documents between them dealing with the partnerships or either parties infusion of money into them.
[ 24 ] Karaoglu cross examined Taranom on a document at Ex.3 Vol.1 Tab 10. The document was typed by Karaoglu and is dated May 18, 2006. It states that Taranom had no interest in the Pizza business as of May 18, 2006. Taranom testified that he was asked to sign it and told that he was only witnessing the document. Taranom said he was told by Karaoglu that the document was needed to sell the business.
AFSHIN TARANOM’S EVIDENCE
[ 25 ] Afshin Taranom (Afshin) is the bother of Taranom. His testimony confirmed for the most part what Taranom testified to.
[ 26 ] He confirmed his family’s coming to Canada as refugees, and how Canadian Immigration and the Ontario Government supported them for at least the first year. He confirmed how all six of them lived in on apartment without a car or other essential items so they could collectively save money.
[ 27 ] Afshin testified that he was instrumental in Karaoglu purchase of Tito’s Pizza when his brother was in Iran getting married because he was a friend of one Sharma, the then owner of Tito’s pizza.
[ 28 ] Afshin confirmed he gave Karaoglu $5,000 for a 50% interest in Tito’s pizza which interest he gave/transferred to Taranom when he returned from Iran a couple of months later.
[ 29 ] Afshin confirmed Taranom gave Karaoglu a further $7,500 to cover expenses for Tito’s pizza.
[ 30 ] Afshin confirms that when it was decided that Karaoglu should take over Tito’s Pizza, Karaoglu said he would pay Taranom back his $12,500 investment when he got the money to do so. This was on or about May 18, 2006.
[ 31 ] Afshin confirmed discussions about a second business in early 2008. Despite Afshin’s reservations, he agreed to financially back his brother Taranom since he, Afshin, had access to credit through his credit cards.
[ 32 ] Afshin confirmed meetings where Karaoglu, Taranom and he were present and at all times Karaoglu promised to pay Taranom back for the money he was injecting into Philly as soon as he arranged for a business loan and that Karaoglu and Taranom were equal partners.
[ 33 ] Afshin recalls Karaoglu telling them that Taranom should not go on any ownership papers because he did not have a good credit rating and it might jeopardize their ability to get a business loan.
[ 34 ] Afshin confirmed that all three of them, along with a fourth somewhat “professional” contractor, substantially renovated the Philly leased premises and that neither he nor Taranom got any payment for their construction work.
[ 35 ] Afshin recalls a meeting at the TD Bank in or about February 2008 where he gave Taranom about $10,000 and Taranom gave the money to Karaoglu who deposited it into his account for Philly. Afshin got the money as a cash advance from his Scotia Bank Visa card. (See Ex. 1 tab 4.)
[ 36 ] A refund cheque from Amex dated April 2, 2008 in the amount of $2,418.98 payable to Afshin was also given to Karaoglu who endorsed the back of the cheque and cashed it. (See Ex.1 Tab 22).
[ 37 ] Afshin gave another cheque to Karaoglu through Taranom dated May 9, 2008 for $1,750.00. (See Ex. 1 Tab 12)
[ 38 ] Afshin confirmed all of the cash advances, and construction expenses set out in Ex. 2 with back up documentation set out in Ex. 1 were on his credit cards and that all the money was paid through his brother Taranom to Karaoglu for the Philly restaurant and that all the construction material, furniture and appliances purchased were only for the Philly restaurant.
[ 39 ] Almost all of the cash advances and construction expenses on Ex. 2 took place between April 1 and June 9, 2008.
[ 40 ] On numerous invoices the place where the product was to be shipped to, is the Philly name and address. (See Ex. 1 Tabs 14, 15, 16, 17 & 18)
MEHMET FATIH KARAOGLU’s EVIDENCE
[ 41 ] Karaoglu’s version of the events leading up to and the purchase of Tito’s and Philly’s differs greatly from that of Taranom.
[ 42 ] Karaoglu states that he made Taranom a partner at the request of Taranom’s father. Karaoglu agreed to this and made Taranom a partner however Karaoglu states that Taranom did not contribute any money to the partnership whatsoever.
[ 43 ] Karaoglu said they were equal partners and they were to work hard together to try to make the business work and that they should contribute equal money to the partnership and take equal money out.
[ 44 ] Karaoglu said he invested approximately $20,000 between November 15, 2005 and May 18, 2006.
[ 45 ] When asked why he didn’t ask/make Taranom contribute money h is reply was that he was stupid.
[ 46 ] Karaoglu said Taranom did almost no work in the business from November 15, 2005 to May 18, 2006 but still Karaoglu says he allowed Taranom to come to the store every day and take cash out of the till of approximately $110.00.
[ 47 ] When asked how why he would allow this to happen his reply was that he was stupid .
[ 48 ] While the stories of why Karaoglu took over running Tito’s in May 2006 differ, that is what happened. On May 18, 2006 Karaoglu typed a document and asked Taranom to sign it which he did. (See Ex. 2 Vol. 1 Tab10). It tries to state that Taranom has no further interest in the Tito partnership after that date.
[ 49 ] Taranom’s evidence on this point was that he was being asked to witness a document that he was told was necessary to allow Karaoglu to try to sell Tito’s pizza.
[ 50 ] Karaoglu says that the cash withdrawal of $3,813.14 shown on his RBC bank account on March 6 2008 may have been to pay some money back to Taranom for his interest but this makes no sense if Taranom did not invest any money in the first place. When asked why he would do this his reply was that he was stupid .
[ 51 ] Karaoglu says he never promised to pay anything to Taranom when he sold Tito’s pizza.
[ 52 ] With respect to the alleged Philly partnership, and after Taranom said he wanted to invest in it, Karaoglu said he would not put Taranom’s name on any paper.
[ 53 ] However Karaoglu testified that they agreed Taranom would invest money and get a percentage of the profits but Taranom was not going to work in the store.
[ 54 ] Karaoglu admits that Taranom invested at least $33,654.97 into the Philly business .
[ 55 ] From July 7 to July 27, 2008 Taranom would come to Philly and Karaoglu would give him or he would take about $150 from the till each day. Karaoglu would take a similar amount. There are no records of any of these transactions. At $300 per day this would amount to in excess of $100,000 per year and Karaoglu admits that he continued to take cash out of the till on a daily basis after July 27, 2008.
[ 56 ] Karaoglu testified that sometime on July 27, 2008 or shortly thereafter Taranom demanded $70,000 or the entire Philly business. Karaoglu refused saying that the deal was they would work together to make the business grow.
[ 57 ] Karaoglu also said that Taranom and Afshin and their father threatened to kill him if he did not pay the $70,000. It appears that charges were laid without respect to the threats but were resolved by as peace bond without a hearing.
[ 58 ] On cross examination Karaoglu stated that it was always his intention to pay back Taranom from the profits but Karaoglu stated that the Philly business, which four years later is still in operation, is not profitable.
[ 59 ] Karaoglu testified that his matrimonial home is in his wife’s name and that he does not contribute anything to the household expenses and that he has no idea whether or not there is still a mortgage registered against the matrimonial home.
[ 60 ] Despite Karaoglu’s examination for discovery where he stated on page 5 that Taranom did not advance any money to Philly he now admits he lied and that Taranom advanced by his figures $33, 694.97 in cash and or purchases of product for Philly.
[ 61 ] Also on cross examination when asked how the profits of Philly were to be divided Karaoglu stated that Taranom was to get 30% a figure that he later admitted he simply pulled out of the air.
FINDINGS
[ 62 ] There is no doubt there was some kind of a business venture between Karaoglu and Taranom.
[ 63 ] Karaoglu’s evidence is not believable on numerous points including:
a) At Philly’s, Karaoglu allowed Taranom to take $150 out of the till each day from July 7 - 27, 2008 yet Karaoglu says Taranom did no work to assist in renovating the premises and did not work there and was not a partner.
b) At Tito’s, Karaoglu allowed Taranom to come into the store unannounced and take approximately $110 out of the till each day between November 15, 2006 and May 18, 2006 even though Karaoglu states Taranom was not a partner, did not work at the store and did not invest any money in the store.
c) He was unable to produce any reasonable business records detailing monies from any source particularly his that were invested into either Tito’s or Philly’s.
d) Karaoglu did not challenge any specific items produced by Taranom showing payments by cash & cheque of $25,529.56 and credit card receipts for product of $16,009.58 for a total investment in Philly by Taranom of $41,539.14.
e) Karaoglu expects this court to believe he does not know whether or not his matrimonial home has a mortgage on it.
f) Karaoglu, when he finally admits there was a partnership/investment by Taranom in Philly cannot explain what it was and simply pulls the figure of 30% out of the air and states that that was to be Taranom’s share.
g) While admitting that Taranom was a partner (he was to share in the profits), Karaoglu did not produce any profit and loss statements and even if he had since he admits substantial cash was always taken out they certainly could not be relied on.
h) While initially stating in his pleading that Taranom did not purchase items for the Philly store of a value of “anything near $22,000” and that Taranom did not contribute any cash money to Philly he now at trial admits that Taranom contributed cash and goods of at least $33,694.97.
[ 64 ] While the court is bothered by the lack of business records, on the evidence before it I can come to no other conclusion than that Taranom was a partner/investor in both the Tito’s and Philly ventures.
[ 65 ] In fact on the evidence before me which I accept, Karaoglu could not have purchased Philly and renovated the premises without obtaining significant money fromTaranom.
[ 66 ] Where the evidence of Taranom and Karaoglu differ I prefer the evidence of Taranom which was for the most part is confirmed by his brother Afshin.
[ 67 ] With respect to the Tito business and specifically the alleged agreement at Ex. 3 Vol. 1 Tab 10 I prefer the explanation of Taranom and Afshin. I find that they were asked to “witness” the document for Karaoglu and were told that it was to assist him to sell Tito’s.
[ 68 ] It makes more sense that Karaoglu would get control of the business for no money up front and would defer the payment to Taranom until after he was able to sell Tito’s for a profit.
[ 69 ] I find that Karaoglu took an unfair advantage of Taranom and has been unjustly enriched as a result.
JUDGMENT
[ 70 ] There shall therefore be judgment for the Plaintiff Taranom for $12,500 (Tito’s) and $41,539.14 (Philly’s) for a total of $54,039.14 which under the rules shall be reduced to $50,000 plus PJI from January 20, 2009 at the rate of 2.5% plus costs.
[ 71 ] If the parties are unable to agree on costs Mr. Kelly shall forward his brief submissions on costs to me by October 3, 2012. Mr. Karaoglu shall forward his brief response to me by October 8, 2012. Mr. Kelly shall then forward his reply, if any, to me by October 12, 2012. Cost submissions may be sent to my attention by email, care of Kitchener.Superior.Court@ontario.ca or by delivering same to my chambers in Kitchener.
[ 72 ] While not part of this judgment this court is very disturbed by the evidence and innuendo that the parties to this court action who are immigrants to this country would unabashedly cheat the Canadian taxpayers who supported them and allowed them to come to Canada. By cheating significantly on their taxes to the point of paying little or no tax they leave it up to others to fund our governments and medical and judicial systems etc. While Karaoglu admitted to such behaviour he also implicated Taranom in the scheme of taking significant cash receipts out of the till and not declaring them as income. Perhaps a criminal investigation should be undertaken!
J. W. Sloan J.
Released: September 26, 2012
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: ARESH TARANOM Plaintiff – and – MEHMET FATIH KARAOGLU Defendant
REASONS FOR JUDGMENT
J. W. Sloan J.
Released: September 26, 2012