Court File No. SC- 11-113648-00

ONTARIO

SUPERIOR COURT OF JUSTICE
TORONTO SMALL CLAIMS

WAFFLE WORLD LTD.

Plaintiff

-and-

LAWRENCE GOODMAN

BEFORE: Deputy Judge Catharine M. Buie

COUNSEL: Denise Cooney for Waffle World Ltd.

Philip Viater for Lawrence Goodman

HEARD: August 8, 2012, December 10, 2012, May 6, 2013

PLACE & DATE OF JUDGMENT Toronto, June 10, 2013

JUDGMENT

PRELIMINARY MATTERS

[1] On December 10, 2012, day 2 of the trial, after a contested adjournment, the parties on consent choose the date of May 6, 2013 as the next trial date. At the time the date was chosen.

In choosing the date, the court and the parties took into consideration,that Mr. Goodman was a “snowbird” and did not want to return from Florida, Ms. Cooney’s articles would end on May 3, 2013 and that Mr. Vitater may be involved in a two week trial. Mr. Vitater indicated that he would arrange to have someone attend on his behalf. Mr. Goodman consented to the same and the May 6 date.

[2] On May 6, 2013, Mr. Goodman appeared by himself. He had not notified Ms. Cooney that he wanted an adjournment, nor did he provide any material from Mr. Viater. Given that he had agreed to this date, given that everyone had known on December 10, 2012 that Ms. Cooney’s articles would have already concluded, that Mr. Viater’s absence had been contemplated on December 10, 2012 by Mr. Viater and Mr. Goodman, that it would be many months before another date could be scheduled and that there was the strong possibility that Ms. Cooney would no longer have carriage of this file, I directed that the trial would continue.

FACT’S & FINDINGS

[3] The Plaintiff Waffle World Ltd. herein called “Waffle World” supplies Waffle Mix and commercial waffle machines to restaurants across Canada.

[4] In 2009, “Waffle World” was concerned that it would no longer be the distributor for Tasty Fair Canada and was looking to source waffle mix and commercial waffle machines.

[5] Lorne Solish, President of “Waffle World” felt that this might be an opportune time to create a prototype of a commercial waffle maker and arrange for its manufacturing.

Mr. Solish and Mr. Goodman met through their wives who were co-workers.

[6] After a discussion, the parties agreed that Mr. Goodman who held himself out as having business connections in China would source a manufacturer who at the outset would produce a prototype based on agreed specifications and after obtaining “Waffle World’s” approval would arrange for its manufacture and delivery to Toronto. It was expected that a prototype would be produced in 6 months and the units themselves within a year.

[7] Under the terms of the Contract, (Exhibit 1, Tab 1), Mr. Goodman was to receive a consulting fee of $3,000 and $4,500 towards expenses. The remaining monies would be used to pay for the manufactured goods. The price of the commercial units was fixed at $150 per unit with 100 units being produced and 250 Consumer Grade Waffle Irons at the cost of $10 per unit.

[8] On March 16, 2009 pursuant to the Agreement (Exhibit 1, Tab 1), Waffle World Ltd. paid $25,000 to Lawrence Goodman which was duly cashed. (Exhibit 1, Tab 2)

[9] On April 6, 2009, the parties entered into an Amending Agreement increasing the products being ordered. (Exhibit 1, Tab 3)

[10] On April 4, 2009 Waffle World gave a further $7,812.50 to Lawrence Goodman which was duly cashed. (Exhibit, 1 Tab 4, Tab 5). And on April 15, 2009 gave a further $7,812.50 by way of a direct deposit into Lawrence Goodman’s TD Account. Exhibit 1, tab 5).

[11] On September 8, 2009, Waffle World gave a further $6,000 to Lawrence Goodman which was duly cashed. (Exhibit 1, Tab 6).

[12] On September 30, 2009, both parties signed and agreed to an addendum setting out manufacturing and design specifications for the Waffle Units. (Exhibit 1 Tab 7).

[13] On September 22, 2009, Mr. Goodman sent an email to Mr. Solish acknowledging that “Waffle World” does not have the agreed upon products and that he was going to China to try to resolve the situation ( Exhibit 1 Tab 12) having earlier said that “Waffle World’s “ prototype had been shipped to Europe in error.

There was no evidence that the above prototype was ever sent to Toronto from Europe.

[14] On September 30, 2009, Waffle World gave a further $3,500 to Lawrence Goodman which was duly cashed (Exhibit 1, Tab 8).

[15] By September 30, 2009, approximately 5 months after the parties had entered into the original Agreement, “Waffle World” had paid the sum of $50,125 to Lawrence Goodman. The testimony of Mr. Solish, which was not challenged, was that Mr. Goodman required all of the money “up front”.

[16] By November 19, 2009, “Waffle World” still had not seen a viable prototype and the unit proposed by Lawrence Goodman (“ Prototype 2”) was in the words of Mr. Solish “ we went through our checks and balances and found the baker to be at best an average household waffle baker. So I will wait for the prototype we ordered” ( Exhibit 1, Tab 13). Mr. Goodman testified that while this unit did not meet the specifications, he felt that it could have been adapted. However, I prefer the evidence of Mr. Solish on this point. It was not a viable prototype and did not meet the contract specifications.

[17] By November 2009, the situation was becoming urgent. Mr. Solish needed to obtain viable commercial waffle makers. He began his own search and in January 2010 located a company in Cleveland, Ohio which was able to produce a viable prototype. The units arrived in June 2010.

[18] By April 12, 2010, a year after contract was signed, “Waffle World” still had not seen a prototype. Mr. Solish, at the request of “Waffle World’s” auditors was requesting from Mr. Goodman receipts to support the monies which it had paid to Mr. Goodman (Exhibit 1, Tab 14) as well as the contract with the Chinese Manufacturer.

[19] At the same time, “Waffle World”, having been advised by Mr. Goodman that a Prototype had been shipped was also requesting the tracking number in order to track the shipment and its arrival date. (Exhibit 1, Tab 14. )

Mr. Goodman did not supply that information, nor the receipts supporting monies paid to him nor the contract. Mr. Goodman testified that he had the contract at his home, but did not have it translated nor did he produce it as part of this action.

[20] Mr. Solish on May 6, 2013 testified that he still had not received the prototype and in April 2010 he was unable to locate the shipping company. There was no corresponding evidence from Mr. Goodman as to the whereabouts of the prototype or the efforts which he made to locate the same.

ISSUES

[21] “Waffle World” is seeking the following:

a) Reimbursement of all monies paid, $50,125. But in order to bring this action within this court, it is forgoing $25,125 to comply with the monetary limitation.

b) Pre and Post Judgment Interest; and

c) Its costs and disbursements.

FINDINGS/ CREDIBILITY

[22] Over the 3 days during which this trial took place, I had the opportunity to closely observe and listen to Mr. Solish and Mr. Goodman.

[23] I found Mr. Solish to be a very credible witness and in weighing the testimony of Mr. Solish over that of Mr. Goodman the court accepts the evidence of Mr. Solish.

I found Mr. Goodman to be less than forthright when he gave his evidence and his explanations for lack of documentary evidence were not satisfactory.

FINDINGS/ LEGAL

[24] The Agreement required the production of a prototype and upon approval by “Waffle World” the manufacturing and shipping of the commercial & domestic waffle makers to Toronto.

[25] Ms. Cooney urges the Court to find that there has been a total failure of consideration entitling “Waffle World” to rescind the contract and to recovery all monies paid. She urges the court to recognize that “Waffle World” has paid the sum of $50,125 to Mr. Goodman and has received nothing in return. .

[26] Ms. Cooney’s position is supported. In the case of M.F.C. Bankcorp Ltd. v. Aqua Plan Inc. (1999), 2 B.C.L.R. (3d) 87, , Bauman J. quoted from Halsbury’s Laws of England, 4th ed. (London: Butterworths, 1998), as follows:

“ Both parties rely upon various statements from Halsbury’s Law of England, 4th ed. (London: Butterworths, 1998). For the defendant, this statement, in particular, is stressed:

(i) In general

When money is recoverable. Where the plaintiff pays money to the defendant under an ineffective contract, he may be able to recover that money in restitution. This is the case not only in respect of contracts which are void or ineffective ab initio, because the parties never reached agreement, or by reason of initial impossibility of performance or mistake, or on some other ground, but also to contracts which are valid when made, but which are later avoided for breach or misrepresentation, or by reason of subsequent impossibility or frustration. The cases will be considered in two groups: (1) where there is a claim of total failure of consideration; and (2) where the contract is illegal or void.

(ii) Total failure of consideration

Effective total failure. A complete failure of consideration in a contract occurs when one of the contracting parties fails to receive the benefit or valuable consideration which springs from the root, and is the essence, of the contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract. Where the plaintiff has paid money in pursuance of a contract but becomes entitled to rescind that contract on the ground of total failure of consideration, he may recover the money.”

[27] It was not made clear to the Court why the prototype which was sent in error to Europe in 2009 was not forwarded to Toronto. It was not made clear as to the whereabouts of the other prototype which Mr. Goodman testified had been sent in April 2010. However, it is clear, a prototype in accordance with the contractual specifications was not produced and the units were not manufactured and delivered to Toronto.

[28] I also turn to the case of Driver v. Hrabok (c.o.b. Creative Glass and Mirror), 2008 SKPC 74 (para 27), a decision of Mr. Justice Scott, D.C. wherein he stated:

“Where a party seeks to recover an advance payment, that party will succeed if they have received no benefit under the contract, or there has been a “total failure of consideration” (Waddams, The Law of Contracts, 5th ed., at 599).” The claim for a return of money paid by an innocent party to the party in breach could be met with a defence that the plaintiff had received some value under the agreement and that there did not exist a “total failure of consideration” (McCamus, Essentials of Canadian Law, 2005, at 965-966).

In this case, “Waffle World” did not receive any benefit for which it bargained and paid..

[29] Judgment against Lawrence Goodman in the amount of $25,000.

Pre Judgment Interest from January 1, 2010 at the fixed rate of 5% pursuant to the Courts of Justice Act, R.S.O 1990 c.43, section 128 and section 130. And Post Judgment Interest at the fixed rate of 5% pursuant to section 129 and section 130.

Section 128 (1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order. R.S.O. 1990, c. C.43, s. 128

Section 129 (1) Money owing under an order, including costs to be assessed or costs fixed by the court, bears interest at the postjudgment interest rate, calculated from the date of the order.

Section 130. (1) The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129,

(a) disallow interest under either section;

(b) allow interest at a rate higher or lower than that provided in either section;

(c) allow interest for a period other than that provided in either section.

Idem

(2) For the purpose of subsection (1), the court shall take into account,

(a) changes in market interest rates;

(b) the circumstances of the case;

(c) the fact that an advance payment was made;

(d) the circumstances of medical disclosure by the plaintiff;

(e) the amount claimed and the amount recovered in the proceeding;

(f) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and

(g) any other relevant consideration. R.S.O. 1990, c. C.43, s. 130.

Costs

Ms. Conney submitted a well-documented Brief of Costs. It appears that while an Offer to Settle was not made to the Defendant, Ms. Cooney on the basis of partial indemnity seeks the following:

Fees $7,434.

HST on Fees $966.42

Disbursements $1181.51

HST on Disbursements $125.64

Costs normally follow the event and the court does not see a reason not to award costs

Section 131. (1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid. R.S.O. 1990, c. C.43, s. 131 (1).

Section 29 of the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 29; 2006, c. 21, Sched. C,

s. 105 (2) states the following “An award of costs in the Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed or the value of the property sought to be recovered unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding”.

Based upon the foregoing and the evidence produced by the parties at trial, I accept the submissions of Ms. Cooney and award the following:

Fees $7,434.00

HST on Fees $ 966.42

Disbursements $1,181.51

HST on Disbursements $ 125.64

Total $9,707.57

Date: June 10, 2013 Catharine M. Buie