SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-16218

DATE: 2013-08-19

RE: Glesgo Dry Cleaners Limited and 1374214 Ontario Ltd, plaintiffs

AND: Accord Systems Inc. and Ahmad Hassan, defendants

BEFORE: Mr Justice Ramsay

COUNSEL: Mr J. Barry Eakins for the plaintiffs; Mr C. Argiropoulos for the defendants

HEARD: 2013-08-16 at Hamilton

ENDORSEMENT

[1] This is an action for breach of contract with a counterclaim for negligent misrepresentation.

[2] The plaintiff corporation sold a dry cleaning business to the defendant and claims that it has not received the agreed purchase price. The defendant corporation claims that it has paid the full price but for $20,000, and counterclaims for damages for misrepresentation as to the condition of the boiler.

[3] The plaintiff corporation is owned by Sam Altoum. The defendant is owned by Ahmad Hasan. I find it easier to refer to the respective owners as plaintiff and defendant.

[4] My first task is to determine the agreed purchase price. A written agreement of purchase and sale, carefully drafted by a trained lawyer, provides for a selling price of $300,000, of which $280,000 was paid upon closing (April 15, 2009) and $20,000 was to be paid in 3 months. The defendant gave a promissory note for the $20,000. In the written agreement, the parties agree that the writing is the whole agreement. However, both parties say that there was an oral agreement for an additional payment, to be made in a reasonable time.

[5] According to Mr Altoum, the bank was not willing to advance more than $280,000 and would not lend that amount if the defendant also owed more than $20,000 more. Accordingly, the contract provided in writing for a $300,000 purchase price and the parties agreed orally on an additional amount. The plaintiff says that the additional amount was $360,000, resulting in a true agreed purchase price of $360,000. The defendant says that the additional amount was $30,000, resulting in a true agreed price of $330,000.

[6] Mr Dika, an employee and friend of Mr Altoum, testified that he overheard Altoum and Hasan discussing a purchase price of $360,000.

[7] The plaintiff and the defendant agree that after closing the defendant paid the plaintiff additional money. They agree on the amount to within $500. I conclude that $31,000 was paid.

[8] The factual matrix bears some examination. A year before the purchase, the parties signed a written agreement with a $360,000 purchase price. The agreement did not go ahead because the defendant was having some health problems. He asked to cancel the agreement or put it on hold and the plaintiff agreed. They took up the negotiations again in the autumn of 2008. On January 8, 2009 the plaintiff’s lawyer submitted a draft that provided for a $360,000 purchase price. On February 27, 2009 the parties signed the final draft that provided for a $300,000 purchase price.

[9] In these circumstances, taking as given that $300,000 was not the real intended purchase price, I think it much more plausible that the parties agreed on the same purchase price that they had already accepted. I also think it more plausible that the misleading written contract was for Mr Hasan’s benefit. I can think of a benefit to Mr Hasan: the bank would think that he was borrowing money to pay $300,000 for a company that, in their opinion, was worth about that. I can think of no benefit to Mr Altoum in misstating the purchase price, especially when he was not being paid the full amount at once. It does not appear to have been motivated by a desire to have unrecorded cash. Many of the later payments were not made in cash. They were made by cheque and credit card, all of which are recorded. I conclude that Mr Altoum was doing Mr Hasan a favour by agreeing to a misleading written document. There was no reason for him to give any further consideration. He was selling one of several locations that he had. While he wanted to concentrate on the newer and potentially more lucrative locations, he was in no hurry to sell. When negotiations had broken down during the course of events, it was because Mr Altoum refused to go lower than $360,000.

[10] I was impressed with Mr Altoum as a witness. I do not hold it against him that he made an error in his affidavit on the motion for summary judgment. When the error was brought to his attention, he corrected it. Nor do I hold it against him that he was unsure of the name of the payee of a $12,000 cheque given by Mr Hasan. The parties agreed that this portion of the amount owing would be taken care of by Mr Hasan paying $12,000 to one of Mr Altoum’s creditors. There was no attempt to deny that Mr Hasan had made the payment. The matter has no implications for Mr Altoum’s credibility as far as I am concerned.

[11] I do not find Mr Hasan’s story so plausible. I reject it.

[12] I find that that the agreed purchase price was $360,000. The defendant paid $280,000 on closing and $31,000 shortly thereafter. He owes, then, $49,000 on account of the purchase price. In addition, he agreed to pay $500 a month as long as he used the plaintiff’s business name. He used it for six months. That is another $3,000.

[13] The plaintiff concedes that the defendant is entitled to deduct amounts for half a month’s rent and a piece of equipment that was promised, but not delivered. In sum, he is entitled to judgment for $49,240.66.

Counterclaim

[14] The defendant claims for the proceeds of the first day of operations, April 15, 2009 amounting to not quite $680. He testified that his debit machine was in place, but not working. He says that Mr Altoum did not have time to configure it until the end of the day, so they agreed that they would use Mr Altoum’s machines that day, change over to the new machines in the evening, and the proceeds of the day would be given to the defendant. The plaintiff says that he was to have that day’s receipts. The written agreement says that the deal will close at 5 pm on April 1, 2009. The parties later agreed to delay closing until April 15. No writing exists to confirm the exact terms of the change. I have no reason to believe that the terms changed in any respect other than the date. The changeover was to occur, then, at 5 pm on the new closing date. The plaintiff was entitled to the proceeds of the day. As to whatever was taken in from 5 pm to closing, I have no proof. I also have no evidence about what cash was taken in and, presumably, kept by the defendant.

[15] The defendant also claims for damages caused because the boiler failed. I do not accept that a great deal of damage occurred. I accept the plaintiff’s evidence that the first he heard of a leaky boiler, apart from a small problem that he fixed in April 2009 shortly after closing, was when the defendant called him on July 13, 2009, a day before the promissory note was due. The plaintiff went down to the shop and found that a valve had been left open improperly. He suspects that the defendant raised the matter because he did not want to pay the promissory note. I think he is right.

[16] Moreover, the written agreement is very specific about what warranties, representations and covenants the parties were making on subjects such as this. On the subject of assets such as the boiler, the plaintiff warranted that he owned them and that the defendant would have quiet possession of them. He did not say anything about what condition they were in. It was patent that this was a used boiler. The defendant had the opportunity to inspect it before agreeing to buy it. I find that he agreed to take it as it was. I reject the defendant’s contention that he did not understand that there were no warranties on the equipment. He was a shrewd bargainer and he was represented by a lawyer. I think he knew what he was getting, which was a nine-year-old boiler that might have to be replaced at some point. I do not believe that Mr Altoum told Mr Hasan that he would stand by the equipment for two years. The written contract required Mr Altoum to stand by the warranties of ownership and quiet possession for two years. That is where Mr Hasan got the figure of two years from.

[17] Finally, I note that the amount claimed to replace the old boiler with a new boiler was inflated by the defendant. He claims about $28,000, the price of a five year lease. This amount includes about $8,000 as the cost of borrowing. But the defendant withheld payment on the $20,000 promissory note, so he did not have to borrow. Furthermore, it would be inconsistent with the agreement to buy a business with a used boiler and then to expect the plaintiff to pay the cost of a new boiler.

[18] The counter claim is dismissed.

[19] The plaintiff is entitled to judgement for $49,240.66. As to $20,000 he is entitled by the terms of the note to pre-judgement interest at a rate of 4.75% p.a. from July 15, 2009. As to the remainder, he is entitled to pre-judgement interest at the rate fixed by law from November 20, 2009.

[20] The parties may make brief written submissions to costs on or before September 3 next.

J.A. Ramsay J.

Date: 2013-08-19