COURT FILE NO.: CV-13-477024 DATE: 20170616 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: SINAN CICEK AND MR. RIGHT PIZZA and CANKURT COCELLI Plaintiffs – and – YASMIN ABDUL-RAHIM MASTER and SHAHIADUZZAMAN MONDOL Defendants
Counsel: Mr. Brian I. Cintosun, for the Plaintiffs Ms. Lucie Molinaro, for the Defendants
Heard: May 15-18, 2017
M.A. SANDERSON J.
Reasons for Judgment
INTRODUCTION
[1] The Plaintiff, Mr. Sinan Cicek (“Cicek”) on his own behalf and on behalf of the corporate Defendant Mr Right Pizza Ltd. (“Mr Right” named in the pleadings as Mr. Right Pizza or the company) as vendor, is seeking payment from the Defendants of $54,500 plus interest, representing the unpaid balance of the alleged purchase price of $100,000 for the purchase and sale of a pizza business/store (“the pizza business” or “the business”) located at 761 Dundas Street West in Toronto. Cicek takes the position that the parties entered into a completed binding contract on July 31, 2012, that he has honoured its terms and that the Defendants have not. [Cankurt Cocelli (“Cocelli”) is also a named Plaintiff. The Plaintiffs contend that since under the contract, the Defendants were to pay $60,000 of the $100,000 purchase price to Cocelli, and since the $60,000 was never paid, Cocelli is entitled to judgment herein for $60,000.]
[2] The Defendants, Yasmin Master (“Master”) and Shahiaduzzaman Mondol (“Mondol”), the alleged purchasers of the business, generally take the position in this litigation that there was no binding contract between Cicek and/or Mr Right, and either Master or Mondol or both. They advance a number of bases for that position, including that as of July 31, 2012, when the “Purchase and Sale Agreement” [Exhibit 2] was signed, the parties did not intend it to be a binding contract. They were never ad idem on important terms. They never agreed what was being purchased and sold.
[3] Alternatively, they submit that if Exhibit 2 is a binding contract, the Plaintiffs breached its terms and failed utterly to fulfill its terms/deliver what they had promised.
BACKGROUND
[4] Between early 2011 and 2012, the Plaintiff Cicek operated the pizza business at 761 Dundas Street in Toronto.
[5] In 2010, with $40,000 he had saved, and $60,000 he had borrowed from Cocelli, Cicek had purchased the equipment necessary to operate the pizza business [including two pizza ovens, a dough machine, cooler, fan, and tables and chairs] for $100,000.
[6] I have accepted Cicek’s evidence that on November 25, 2010, he had caused the company to be incorporated to carry on the pizza business. Cicek was, and is, the sole shareholder.
[7] In December 2010, on behalf of the company, Cicek executed Exhibit 9, a lease (“the lease”) between Mateus Sozinho as landlord, and the company as tenant for 1200 sq. ft. of space at 761 Dundas Street West in Toronto.
[8] Cicek operated the pizza business at 761 Dundas Street West for over a year. He gave evidence that it did well, although the extent of its “success” between May 2012 and February 2013 was a contested issue here.
[9] Cicek said a car accident in February 2012 adversely affected his ability to operate the pizza business. Although his wife helped out, she was unable to work in the store and also care for their small child.
[10] In early May of 2012, Cicek decided to sell the pizza business.
[11] On May 12, 2012, Cicek [on behalf of the company] signed Exhibit 8, a listing agreement with Vanguard Realty (“the realtor”), listing the business for sale for $149,000.
[12] The last page of that document, initialled by Cicek, included the following under the heading “Comments”:
Complete Turnkey Operation. Pizza Store, Very Busy Fast Food and Take Out Restaurant at Dundas/Bathurst. High Traffic Intersection. TTC at Door. Regular Customers. No Franchise Fee. Excellent Opportunity To Be Your Own Boss. Owner Will Provide Training If Required. An Average Weekly Sale is Over $7500. 5 Year Lease plus 3 Options to renew. Current Gross monthly rent $2800 including TMI Monthly.
[13] Cicek denied seeing this “ad” until after he had sold the pizza business to the Defendants. Even then, he said he only looked at the $149,000 sale price.
[14] Exhibit 3, the MLS Listing, includes the same wording as the “Comments” section in Exhibit 8: “Complete Turnkey operation. Pizza Store, Very Busy Fast Food and Take Out Dundas and Bathurst…High Traffic Intersection. TTC at Door. Regular Customers. No Franchise Fee. Excellent Opportunity to be Your Own Boss. Owner will Provide Training if Required. An Average Weekly sale is over $7500. 5 Years Lease plus 3 Options to renew. Current Gross Monthly rent $2800 Including TMI Monthly.”
[15] When the realtor was preparing the listing, Cicek said he provided the lease and a list of the equipment that he had prepared when he bought it.
[16] Cicek said in chief that the realtor did not ask him and he did not provide the information contained in the “Comments” section of the listing.
[17] Cicek denied discussing average weekly sales with the realtor. He said he did not provide the realtor with any information on the [revenues] sales and expenses of the pizza business.
[18] The real estate agent told him, “I have to put this.” Cicek said, “I don’t mind whatever you write.”
[19] Cicek made it clear during his evidence that his first language is Turkish and that his English is very poor. He said that he needed the assistance of translators to conduct business and to give evidence.
[20] On the first day of the trial, his friend Mr. Sukru Koyupinar (“Koyupinar”) (a court certified interpreter) translated Cicek’s evidence from the Turkish to the English language. By the second day, on the consent of all parties, Koyupinar had been replaced as translator, because by then counsel for the Defendants had subpoenaed Koyupinar to give evidence at this trial.
[21] Cicek said Koyupinar translated for him when he was making arrangements to start the business in 2010.
[22] After he was subpoenaed to give evidence, Koyupinar said that he had been present to translate for Cicek in December 2010 when Cicek signed the lease, Exhibit 9, and in May 2012, when Cicek met with the realtor to discuss listing the pizza business for sale.
[23] Exhibit 9 includes an email dated May 9, 2012 from Koyupinar to the realtor, with two attachments: (1) an equipment list [including “two ovens for pizza-making, two shawarma machines, fridge, dough machine, two freezers, one fan…”] and also (2) Answers to Questions posed in a “Restaurant Question Sheet” as follows:
Name of Business: Mr. Right Pizza Ltd. Address: 761 Dundas Street West, Toronto Years in Business: 1 year 5 months Term of Lease: 5 years + 3 times 5 years Renewing Options: Lease rate according to lease $2600. Lease Rate (Gross) $2800. Income $376,000 Annual Gross Sales $376,000 Annual Net Profit $120,000 Current Average Weekly Sales $7,230 approximately …
[24] Koyupinar gave evidence that Cicek must have provided the information in the attachments to Exhibit 9.
[25] In my view, Cicek’s evidence that he did not provide the information was misleading. I find that with Cicek’s knowledge and approval, Koyupinar provided the equipment list and information on the Restaurant Question Sheet to the realtor, knowing it would be included in the MLS Listing.
[26] I found Koyupinar, Mondol and Master to be credible witnesses and generally where their evidence differed from Cicek’s I have preferred theirs.
[27] I accept the evidence of the Defendant Mondol that in May of 2012, he was looking for a small business to purchase and operate. He saw Exhibit 3, the MLS Listing for the pizza business, on the internet. When he read that it had gross average weekly sales of $7500, he thought, “It must be a good store.”
[28] When Mondol went to 761 Dundas Street West, Cicek told him he had to sell the business because of his accident.
[29] I accept Mondol’s evidence that because Cicek did not speak much English, Mr. Tyfun Turhan (“Turhan”) was there to translate and conduct some of the negotiations for Cicek. I find that Turhan made representations on Cicek’s behalf about the sales and expenses of the business that were consistent with the written representations contained in Exhibit 3, the MLS Listing.
[30] In part, since Turhan was not called to give evidence, and since Cicek did not specifically deny Mondol’s evidence on the point, I accept Mondol’s evidence about Turhan’s representations.
[31] Cicek said that at Mondol’s first visit, Mondol told Turhan that he could not afford the sale price of $149,000 mentioned in Exhibit 3. Mondol offered to pay $100,000 for the business [comprised of $50,000 immediately and $50,000 two months later].
[32] Cicek said a month after his first visit, Mondol returned to 761 Dundas Street West.
[33] Cicek said that at some time before July 31, 2012, the Defendants offered $100,000 for the business to be paid as follows: $10,000 down, $30,000 two weeks later and the $60,000 balance in 2-3 months.
[34] Cicek said they agreed that since he owed Cocelli $60,000, the $60,000 payment would be made to Cocelli.
[35] Master and Mondol gave evidence that Cicek told them that he was leaving for Turkey on about August 1, 2012. Mondol said he proposed that they should retain legal counsel. Cicek arranged an appointment with Mr. Cintosun (“Cintosun”).
[36] Cicek, Turhan, Master, and Mondol met with Cintosun on about July 6, 2012.
[37] Mondol gave evidence that they told Cintosun that Cicek was leaving shortly for Turkey.
[38] Mondol said when they met with Cintosun, the Plaintiffs had not yet provided a copy of the lease or proof of the sales and expenses of the pizza business to the Defendants.
[39] I accept Mondol’s evidence that Cintosun told them that he could not do the paperwork in a rush. He would prepare it after Cicek returned from Turkey and after Mondol had received the documents that he had requested [including the lease and proof of sales and expenses].
[40] Cintosun advised the parties that in the meantime, Master should write “a note,” a small contract “in your own hand,” setting out that $40,000 would be paid [before Cicek left for Turkey] and that a future payment of $60,000 would be made [to Cocelli].
[41] The parties agreed that on July 24, 2012, Master paid Cicek $10,000. Exhibit 1 reads as follows: “I, Sinan Cicek, have received $10,000 from Yasmin Master on July 24 th , 2012. This is the first installment for the payment of the purchase of Mr Right Pizza.”
[42] On July 26, 2012, Anna Mattachione [an agent of the Landlord Sozinho] signed a Receipt for Rent, as follows: “I Anna Mattachione (Landlord) have received $7,830.00 in cash which is payment in full of due rent up to and including month of July 2012 by Sinan (Tenant) of Mr. Right Pizza dated July 26 th , 2012.”
[43] Mondol wrote: “When I gave Sinan $40,000 I made Sinan to pay Anna that outstanding balance which is $9,680.00 – $1,320.00 = $8,360.00.”
[44] On July 26, 2012, both Master and Cicek signed the following acknowledgement:
$5,100.00 previous balance July $2,730.00 will be paid $7,830.00 I paid Anna August 1, 2012. Yasmin is responsible to pay the Landlord. When Sinan comes back from Back Home Yasmin will give Sinan $2,730.00 July money back to him.
[45] Cicek, Mondol and Master acknowledged that the parties had agreed that between July 31, 2012 and October, when the additional $60,000 was to be paid, the Defendants would operate the pizza business and pay the rent and utilities.
[46] There is an issue in this litigation about whether the Defendants relied on the information contained in the MLS Listing.
[47] I accept Mondol’s evidence and I find that at the time he first contacted Cicek, he was relying on the information in the Listing.
[48] Cicek said by July 31, 2012 when Exhibit 2, “the Purchase and Sale Agreement,” was signed, the Defendants were not relying on representations in the MLS Listing about revenues of the pizza business. By then, Mondol had already satisfied himself about the revenues of the business. By July 31, 2012, Mondol had already visited the store every day, all day, over a period of two weeks. During that time he had observed the business from opening to closing. He had been there for the counting of the cash at the end of each business day. Mondol knew that sales were down because of Cicek’s accident. Cicek said that Mondol told him that he [Mondol] could look for more clients.
[49] Mondol denied being at the store daily for two weeks before July 31, 2012 and satisfying himself on the sales and receipts of the business before the “Purchase and Sale Agreement” was signed.
[50] Mondol and Master said that when Master signed Exhibit 2 on July 31, 2012, they were continuing to rely on the information in the Listing about sales and receipts of the business and were awaiting receipt of proof of sales and expenses from Cicek.
[51] Mondol said at that time he was still working at Pizza Nova. He said on five or six part-days, from 10 AM to 2 or 3 PM, he had been at 761 Dundas Street West. He said he was there during Ramadan and he could not break fast. He denied witnessing cash close-out, seeing sales data, and/or seeing the books of the pizza business before July 31, 2012.
[52] Cicek said by July 31, 2012, Mondol had seen the lease and had not asked him to arrange an assignment of same.
[53] I accept Mondol’s evidence that by July 31, 2012, a copy of the lease had not yet been provided and he had not yet satisfied himself that the revenues and expenses of the pizza business were as they had been represented in the MLS Listing.
July 31, 2012
[54] The parties agreed that Turhan dictated, Master wrote by hand, and Master and Cicek signed Exhibit 2 on July 31, 2012.
[55] They disagreed on their intentions as to the legal effect of Exhibit 2.
[56] It reads as follows:
Purchase and Sale Agreement
I, Yasmin Master, will operate Mr. Right Pizza from Aug. 1 st 2012 to Oct. 31 st 2012. To date I have paid $10,000 cash and $30,000 cheque (Aug 1, 2012) as the down payment of the purchase of Mr. Right Pizza. The final $60,000 will be paid to Cankurt Cocelli on Oct. 31 st 2012. Total purchase price $100,000.00. I will take responsibility for all utilities or other charges that are dated between Aug. 1st 2012 and Oct. 31st 2012. I also owe Sinan the last month rent of $2,730.00 to be paid Aug. 31 st 2012. I, Yasmin Master, have access to the business bank account in order to make payments for the use of running the business.
[57] Master and Mondol gave evidence that they intended Exhibit 2 only to show their serious intention to purchase the business once the lease, corporate assets and corporate structure had been transferred to them.
[58] Master said she understood Exhibit 2 was only an indicator of good faith, only a promise to purchase the pizza business at some point in the future and to complete the transaction after they had seen the books verifying the truth of the representations contained in the MLS Listing, after Mondol and Master had seen the lease, and after it had been assigned to them.
[59] The Defendants’ evidence was that they understood an assignment of the lease to be an important part of the deal.
[60] I find that Mondol and Master viewed the terms of the existing lease as favourable and relevant to the price they were prepared to pay for the pizza business at 761 Dundas Street West.
[61] In the MLS Listing, the seller had represented, in effect, that 761 Dundas Street West was a favourable location with existing customers with a lease that presented the opportunity to run a business there for almost 20 years.
[62] The MLS Listing was suggestive that Cicek was not selling assets separately, but a “complete Turn Key Operation Pizza Store.” It specifically mentioned the lease term: “5 yrs plus 3 options to renew. Current gross monthly rent $2800 with TMI monthly.”
[63] Cicek’s evidence on whether an assignment of the lease was part of the deal was confusing and contradictory.
[64] Despite mentioning the lease and its terms in the MLS Listing, Cicek said they did not agree on an assignment of the lease as part of the deal. Cicek said the Defendants had not asked for an assignment of the lease. He understood that the Defendants intended to negotiate a new lease directly with the landlord.
[65] Master said they understood that Cintosun would prepare a proper contract after Cicek returned from Turkey, after they had seen the lease, proof of sales [as had been represented to them at the earlier meetings and in the Listing], confirmation of expenses [for utilities etc.]. The formal contract would show a purchase price of $100,000, list the items being sold and purchased, and would make it clear that the lease was being assigned to the Defendants with the consent of the landlord.
[66] I accept that Exhibit 2 was a stop-gap measure dictated by Tyfun Turhan and handwritten by Master.
[67] However, I reject the evidence of Mondol and Master that they did not intend the Purchase and Sale Agreement on July 31, 2012 to be legally binding.
[68] Taken together with the $40,000 down payment, Exhibit 2 indicated that the Defendants were prepared to buy the pizza business for $100,000, and to complete the deal by paying an additional $60,000 on October 31, 2012. I find in the interim before final payment was to be made, the Defendants were to operate the business, use the corporate bank account, collect revenues of the business, and pay all expenses including rent and utilities.
[69] Cicek took the position during his evidence that as of July 31, 2012, he had done everything necessary from his end to complete the purchase and sale of the pizza business.
[70] In saying that by July 31, 2012, he had done everything to complete his end of the deal, Cicek seemed to be suggesting that it was not necessary for him to do anything further to fulfil the terms of the contract, including getting the lease assigned.
[71] Cicek said by July 31, 2012, he had completely turned the business over to the Defendants. On July 31, 2012, no rent was owing. He said, “I gave them all my blank cheques. I gave signed cheques to the landlord.”
[72] Cicek said that he gave the Defendants access to the bank account of the company and the key, and they told him not to come in anymore. They posted a sign “under new management.”
[73] The Defendants denied that Cicek had completely turned the business over to them on July 31, 2012.
[74] They said he never went to Turkey and continued to come frequently to the store, making pizza and running the cash register.
[75] I have found that the MLS Listing made it clear that an assignment of the lease was part of the deal. I have rejected Cicek’s evidence that the lease was not part of the deal. I have found that before and after July 31, 2012, Cicek took no steps to have the lease assigned to the Defendants.
[76] I have found as of July 31, 2012, Cicek/the company was in no position to assign the lease to the Defendants. Neither Cicek nor the company had advised the landlord of the proposed transfer. [At that point, the landlord had clearly not consented to an assignment of the lease in writing, as was required for an assignment under the lease.]
[77] I find that as of July 31, 2012, Cicek had been actively hiding the proposed transfer from the landlord.
[78] I accept Mondol’s evidence that at a meeting he attended with Cicek, Turhan and Anna [an authorized representative of the landlord], Cicek told Anna that he was going back home [to Turkey] and that Mondol, his “cousin,” would be operating the business while he was gone.
[79] Mondol said he didn’t correct what Cicek had said. He did not tell Anna that he and his wife wanted to purchase the business because Cicek had asked him not to tell Anna.
[80] I find that Cicek never obtained the written consent of the landlord to an assignment of the lease [as required under the lease].
[81] Cicek said he did not understand that the Defendants wanted to buy the corporate entity Mr Right Pizza Ltd. because the Defendants never asked for such a transfer.
[82] Cicek said the Defendants never requested access to see the books of Mr Right Pizza.
[83] However, I note the bank account to which Cicek provided access on July 31, 2012 was a corporate bank account.
August-September 2012
[84] I accept Mondol’s evidence that Cicek did not go to Turkey around August 1, 2012, as he had said he had planned to do, or anytime before October 31 when the final payment was to have been made.
[85] I accept Mondol’s evidence that Cicek came to the store regularly after July 31, 2012.
[86] I reject Cicek’s evidence that between August 1 and early October, he only came to the store once and that that visit was at Mondol’s request.
[87] I accept Mondol’s evidence that when gas and electric bills came to 761 Dundas Street West, he paid them, and that the Defendants paid the rent directly to the landlord for August and September of 2012.
October 2012
[88] Exhibit 2 contains the following: “The final payment will be made to Cankurt Cocelli on October 31, 2012.”
[89] I accept Cicek’s evidence that in October, he repeatedly pressed Mondol for payment.
[90] There was conflicting evidence as to why the Defendants did not pay the balance of the purchase of $60,000 on October 31, 2012.
[91] Cicek gave evidence that in October, the Defendants told him that they could not pay the $60,000 immediately.
[92] Mondol said in October his intention was still to buy the pizza business for $100,000, even though he knew by then that the revenues were less than had been represented in the MLS Listing. However, he was not prepared to waive the proper assignment of the lease.
[93] I accept Mondol’s and Master’s evidence that by October, the lease had still not been provided to the Defendants and no arrangements had been made to assign the lease.
[94] I accept Master’s evidence that she and Mondol would have been willing to complete the purchase in October 2012 if appropriate steps had been taken to complete the sale, including preparation of a formal contract and the assignment of the lease.
[95] As of October 31, 2012, the date when the parties had intended the contract to be completed [i.e., the final payment to be made after or concurrently with transfer of the share in the corporation and the assignment of the lease], Cicek had taken no steps to do either.
[96] I find the Defendants were in funds and that they were willing and able to pay the $60,000 balance if the Plaintiffs had complied with the terms set out above.
[97] I accept Mondol’s evidence that during October, Cicek told him that Anna [the landlord] had said that she did not want to receive rent directly from Mondol [but only from the tenant].
[98] I accept Mondol’s evidence that in October, Cicek told Mondol that he [Cicek] would be paying the landlord directly and that the Defendants should start paying the rent to Cicek.
[99] I accept Mondol’s evidence that at Cicek’s insistence, Mondol wrote a cheque payable to Cocelli for $60,000 dated October 31, 2012. I also find that at the time he wrote the cheque, Mondol advised Cicek that there were insufficient funds in the account [on which the cheque was written] to cover the face amount of the cheque.
[100] I accept Mondol’s evidence that the Defendants had access to $60,000 that would cover the cheque but they were not prepared to cover the $60,000 cheque unless and until Cicek took the necessary steps to get the lease assigned to them.
[101] Exhibit 5 is Mondol’s cheque payable to Cankurt Cocelli dated October 30, 2012 for $60,000 re “pizza store purchase.” Cicek did not attempt to cash the cheque until February,2013, because Mondol had told him that the account on which it was written did not contain sufficient funds. The back of the cheque shows a return of the cheque NSF in February 2013.
[102] I find that between October 31, 2012 and early February 2013, the Defendants continued to operate the pizza business and to pay the rent and utilities to Cicek.
November 2012
[103] I accept Mondol’s evidence that in November 2012, he said to Turhan, “Give me back my $40,000 or get the paperwork done transferring the lease.”
[104] I accept Mondol’s evidence that even in November, had that “paperwork” been completed, he would have waived the requirement about the expenses and revenues and would still have paid the $60,000.
[105] I find that the Defendants paid the November rent to Cicek.
[106] On Saturday, November 3, 2012, Cicek signed Exhibit 11, acknowledging that Mondol had paid him $2,730 for rent. Mondol wrote “I am not responsible for any more rent. [I take that to mean he understood he was no longer to pay the rent directly to the landlord because by then, Cicek had asked him to pay the rent to Cicek.]
[107] I accept Mondol’s evidence that Cicek had advised that when Mondol paid rent to Cicek, Cicek would pay it to Anna.
December 2012
[108] I accept Mondol’s evidence that on December 1, 2012, he paid the December rent to Cicek [not to Anna].
[109] I accept Mondol’s evidence that in December 2012, Cicek requested the Defendants to provide all Mr. Right Pizza documentation to him so he could prepare “the taxes” for Mr. Right.
[110] I accept that Mondol complied with that request.
January 2013
[111] On January 6, 2013, in Exhibit 17, Cicek acknowledged receiving $3000 from Mondol for January rent.
[112] I reject Cicek’s evidence that he did not receive the rent for January 2013 from the Defendants.
[113] I accept Mondol’s evidence that on January 22, 2013, the Defendants hired a paralegal, Peter Swales, of SW Legal Services (“Swales”) because Cicek hadn’t taken the needed steps to get the pizza business transferred to them.
[114] I accept Mondol’s evidence that although he had been prepared to waive any condition on revenues, he was nevertheless unhappy about what by then he knew — that the revenues of the pizza business were about $9,000 per month, far less than the revenues that had been represented in the MLS Listing.
[115] He asked Swales to write to Cicek’s lawyer Mr. Cintosun, pointing out that Cicek had misrepresented the revenues of the store of at least $24,000 per month, when they were only about $9,000 per month and to suggest that on that basis, the $100,000 purchase price was too high. He asked Swales to mention that Cicek had failed to provide accurate and relevant accounting documentation, including tax documents, equipment appraisals, verification of ownership of Mr. Right Pizza Ltd., and had failed to take steps to provide a legal transfer/assignment of the lease.
[116] I accept Mondol’s evidence that despite the contents of Swales’ letter, in January he would still have been prepared to pay the $60,000 balance and waive the condition about revenues if the lease had been properly assigned to the Defendants.
[117] Although Mondol had paid the January rent to Cicek, he became aware in late January 2013 that Cicek had failed to pay the January rent to the landlord.
[118] On January 24, 2013, the landlord’s lawyer had sent a letter to Cicek, mentioning that the January rent was outstanding, as well as “additional rent” owing under the lease for water and waste management accounts that had accrued after July of 2012. The lease was in default and the landlord was threatening to terminate the lease.
[119] Cicek suggested that under their agreement, the Defendants should have paid the water and waste accounts, “additional rent” mentioned in the landlord’s letter to Cicek, Exhibit 7, dated January 24, 2013.
[120] Under the lease, some utility amounts owing were based on a pro rata share of overall amounts owed by the landlord and they needed to be determined by the landlord. The lease [to which I have found the Defendants had not been made privy] provided that once per year, the landlord would notify the tenant of “additional rent” owing.
[121] I find that the Defendants could not have independently determined the amounts of the “additional rent” owing for the waste and water.
[122] I accept Mondol’s evidence to the effect that he was very concerned and tried to deal directly with the landlord to prevent termination of the lease and that the landlord refused to deal directly with Mondol.
[123] On January 29, 2013 Anna the landlord’s daughter wrote to Mondol on behalf of the landlord:
Shahid: I appreciate your time and effort in trying to deal with this situation however since you are not legally liable for either rent or expenses in regards to 761 Dundas Street West, Mr. Right Pizza, it is in my best interest to deal with the tenant whose name is on the lease. Kindly remind him his rent and additional expenses as outlined in my solicitor’s correspondence is due on February 10, 2013.
[124] Mondol gave evidence that instead of taking steps to put the lease into good standing so the Defendants could continue to operate the business [and to complete the transaction], Cicek failed to pay the January rent and the additional rent owing under the lease. Cicek closed the bank account of Mr. Right Pizza in late January [i.e., he denied the Defendants’ access to the corporate bank account that he had provided to them on July 31, 2012 in order to operate the pizza business].
February-March
[125] In February, as a result of Cicek’s failure to take action, the landlord locked the premises and terminated the lease.
[126] I accept Mondol’s evidence that once the landlord changed the locks, the Defendants were denied access to the premises where they had been operating the pizza business since August 1, 2012.
[127] The equipment at 761 Dundas Street West that the Defendants had intended to buy as part of the transaction was locked inside.
[128] As a result, the Defendants were completely denied access to the premises for which they had been paying rent since August 1, 2012 and to the equipment used in the pizza business.
[129] Because of the landlord’s action against Cicek/Mr. Right Pizza Ltd., the Defendants were out on the street.
[130] I reject Cicek’s evidence that after February or March of 2013, in opening a new pizza business the Defendants were able to use the equipment that had been at 761 Dundas Street West.
[131] I reject his evidence that Exhibit 6 shows items that he had sold to the Defendants.
[132] I accept Mondol’s evidence that since he had been locked out of 761 Dundas Street West, and denied access to the equipment there, to open a new pizza business at 821 Bloor Street West it was necessary for him to purchase different equipment. [Exhibit 21 evidences his $23,000 purchase of equipment, including a cooker, a stove, ovens, dough press and mixer, freezers and cash register, dated April 1, 2013.]
APPLICATION OF THE LAW TO THE FACTS
Legal Issues
[133] The legal issues to be resolved are the following:
(1) Was there a binding purchase and sale contract as of July 31, 2012? Is Exhibit 2 a binding contract? Who were the parties? Were the parties ad idem? Did the parties agree about what was being bought and sold? Was the lease part of what was being purchased and sold? Was the share of corporate entity Mr. Right Pizza Ltd. part of what was being purchased and sold?
(2) If there is a valid and legally binding contract, was it breached, and if it was breached, by whom and what are the damages, if any, arising out of that breach?
(1) Is Exhibit 2 a Binding Contract?
[134] Counsel for the Defendants submitted that Exhibit 2, the “Purchase and Sale Agreement” between Mr Right Pizza Ltd. and the Defendants, dated July 31, 2012, was not a binding contract, in part, because the parties intended to enter into a binding contract only after Cicek returned from Turkey and Cintosun prepared formal contract documents, and in part because the parties had not agreed on the substance of the deal.
[135] At the root of the Defendants’ argument is that as of July 31, there was no consensus ad idem.
[136] Counsel for the Plaintiffs submitted there was a binding contract. The terms were agreed including that the assignment of the lease and the share were not part of the deal.
[137] In Hoban Construction Ltd. v. Alexander, 2012 BCCA 75, Bennett J.A., for the Court of Appeal of British Columbia, wrote:
[34] In Smith v. Hughes (1871), L.R. 6 Q.B. 597, in a widely-cited passage at 607, Blackburn J. formulated the test applicable to the question of whether parties have effectively agreed to enter into binding legal relations:
If whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms.
[35] In G.H.L. Fridman, The Law of Contract in Canada, 5th ed (Toronto: Thomson Canada Limited, 2006), the learned author notes at 15:
Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law is concerned not with the parties’ intentions but with their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other party said or did …; it is whether a reasonable [person] in the situation of that party would have believed and understood that the other party was consenting to the identical terms. [Footnotes omitted.]
[36] See also Kernwood Ltd. v. Renegade Capital Corp., 1997 ONCA 846, 97 O.A.C. 3, [1997] O.J. No. 179 (C.A.) at para. 17; Langley Lo-Cost Builders Ltd. v. 474835 B.C. Ltd., 2000 BCCA 365 at paras. 18-21; Diegel v. Diegel, 2008 ABCA 389 at para. 23.
[37] In Langley at paras. 20-21, McEachern C.J.B.C. stated for the Court:
[20] There is very little authority about the basis upon which intention to contract should be found. In Tilden Rent-A-Car Co. v. Clendenning (1978), 1978 ONCA 1446, 83 D.L.R. (3d) 400 (Ont. C.A.), it was suggested at 405, that a person “who attaches his signature to the contract intends by doing so to acknowledge his acquiescence to its terms, and that the other party entered into the contract upon that belief.” In A.G. Guest, ed., Chitty on Contracts, 27th ed. (London: Sweet and Maxwell, 1994), it is noted at 152 that in normal commercial transactions, where the intention to be contractually bound is at issue, the onus of proving that such an intention did not exist “is on the party who asserts that no legal effect is intended, and the onus is a heavy one”: Edwards v. Skyways Ltd., [1964] 1 W.L.R. 349. Those, however, were cases where the form of the documentation was clearly contractual. The circumstances in the instant case were far more informal.
[21] Most authorities suggest that the Court is not confined to the four corners of the alleged agreement, but may look at all the circumstances. In Osorio v. Cardona (1984), 1984 BCSC 364, 15 D.L.R. (4 th ) 619, McLachlin J. considered evidence of past agreements involving other parties, the circumstances in which the alleged agreement was made, and future actions and representations by both parties. The investigation is to determine whether a reasonable observer would think that Terry Johnson on behalf of Langley, in signing the faxed document in these circumstances, intended to be contractually bound when he signed and delivered the faxed documents.
[Emphasis added.]
[38] In Langley at para. 76, this Court referred to Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 ONCA 2734, 79 D.L.R. (4th) 97 (Ont. C.A.), setting out the following excerpt from 103-104:
As a matter of normal business practice, parties planning to make a formal written document [of] the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange or correspondence, or other informal writings. The parties may “contract to make a contract”, that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.
However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the “contract to make a contract” is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself...
[138] While I have accepted Master’s and Mondol’s evidence that the July 2012 document was to be a stopgap measure, a formal contract was to be completed later, setting out that additional steps were to be taken including assignment of the lease and transfer of the share of the corporation before or concurrently with the making of the $60,000 payment at the end of October, I have held that a formal contract was not essential.
[139] A reasonable person looking at the conduct of the parties as of July 31, 2012 would have concluded that they intended to enter into binding relations and they had agreed on the essential terms. Cicek and the Defendants had conducted themselves in such a way that a reasonable man would assume that assignment of the lease and transfer of the share of Mr. Right Pizza Ltd. would be part of the transaction.
[140] I have held that an assignment of the lease was inherent in the purchase of a turnkey operation as mentioned in the MLS Listing, as it would ensure the Defendants’ right to use the equipment and operate the pizza business located at 761 Dundas Street West for a further future period [with lease renewals] of almost 19 years.
[141] Although not specifically mentioned in Exhibit 2, an assignment of the lease was necessary for a transfer of the benefits of the pizza business to the Defendants.
[142] During the terms of the lease, the tenant could use the equipment already on the premises, including the equipment mentioned in paragraph 5 above and listed in the MLS Listing.
[143] Similarly, a transfer of the share of Mr. Right Pizza Ltd. to the Defendants was an essential part of the deal. The business was being operated in the name of Mr Right, using a corporate bank account, to which the Defendants were provided access on or about July 31, 2012.
[144] I find the parties contracted to purchase and sell the pizza business for a total of $100,000, once Cicek provided a copy of the lease and assigned it to the Defendants with the consent of the landlord, transferred the shares in Mr. Right Pizza Ltd. to the Defendants and once the Defendants had had an opportunity to satisfy themselves that the expenses and revenues were as had been represented in the MLS Listing.
[145] I have accepted the evidence of Mondol and Master that they agreed on July 31, 2012 that Mondol would operate the business after July 31, 2012 and that after Cicek returned from Turkey and the lease had been provided and once Cicek was in a position to transfer the share and assign the lease, on October 31, 2012 the Defendants would pay the balance of the purchase price, $60,000.
[146] I find that before the purchase price was paid in full, the purchasers required an assignment of the lease having the terms that had been outlined in the MLS Listing including renewals. [This meant that whether or not the equipment they were purchasing could be removed, at the very least they could use it for almost 20 more years.]
[147] Applying the test in Hobart, I have held that as of July 31, 2012, there was a binding contract to buy the business and pay the balance of $60,000 on October 31, 2012, provided the documentation of expenses and revenues and a lease having the terms mentioned in the MLS Listing agreement was assigned to them.
[148] I have found the agreed terms of the contract were as follows: the Defendants would pay $100,000 for the pizza business, including the equipment at 761 Dundas Street West and the assignment of the lease. After the $40,000 was paid by July 31, the balance of $60,000 would be paid on Cicek’s behalf to Cocelli on October 31, 2012. Final payment would be contingent on the assignment of the lease [in good standing].
Having Held There Was A Binding Contract of Agreement of Purchase & Sale dated July 31, 2012, It Is Necessary to Decide Whether It Was Breached and if so, To Quantify the Damages
[149] I have found that as of July 31, 2012, to fulfil the terms of the contract, it was necessary for the Plaintiffs to take the necessary steps to deliver the business to the Defendants, including a lease assignment and a share transfer.
[150] In Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53, Rothstein J for the Supreme Court of Canada clarified that contractual interpretation is to be treated as a question of mixed fact and law, as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix of the contract.
[151] The goal of contractual interpretation, to ascertain the objective intention of the parties, is inherently fact specific.
[152] Under the heading “The Role and Nature of Surrounding Circumstances,” the Court wrote at para 57-61:
[57] While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 1997 BCCA 4085, 101 B.C.A.C. 62).
[58] The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.
(c) Considering the Surrounding Circumstances Does Not Offend the Parol Evidence Rule
[60] The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.
[153] This Court must interpret this contract as a whole in its factual matrix.
[154] The assignment of the lease was an essential term of the deal. The Defendants reasonably understood and expected that before they would be required to pay the balance of the purchase price, Cicek would take the necessary steps to perform his end of the bargain, including taking the necessary steps to get the lease assigned to them.
[155] It was also implicit in that understanding that pending the assignment, the Plaintiffs would keep the lease in good standing.
[156] By October 31, 2012, the Defendants had agreed to waive the condition about revenues and expenses, but they never agreed to waive the condition requiring an assignment of the lease.
[157] As of October 31, 2012, the expected date of closing, Cicek had failed to produce the lease. Cicek had failed to take steps to get the consent of the landlord to its assignment.
[158] I hold that as of October 31, 2012, Mondol was justified in refusing to pay the final $60,000 until such time as Cicek had taken the necessary steps to meet the conditions in the contract, including getting the lease assigned to the Defendants and, less importantly, the share of the corporation transferred to the Defendants.
[159] I have found that as of October 31, 2012, Cicek was neither willing nor able to complete the transfer on the terms agreed on July 31, 2012. I have found the Defendants were willing and able to close at that time but Cicek /the company were not.
[160] As of October 31, 2012, the parties in effect agreed to extend the time for closing pending satisfaction of the conditions.
[161] At that time, as they took no steps to declare that the deal was at an end, the Defendants in effect agreed to extend the date for closing, to allow the Plaintiffs time to produce the lease and to assign the lease.
[162] During the period after the de facto extension of the closing date, it was incumbent on Cicek as a party to the lease that was to be assigned to ensure that the lease did not go into default and thereby make it impossible for the Plaintiffs to complete the deal.
[163] After October, Cicek failed to ensure that the lease was in good standing.
[164] Instead, despite having been paid the January rent by the Defendants and despite having received notice of additional rent owing, the Plaintiffs let the rent for January 2013 and additional rent go unpaid.
[165] In the absence of proof that Cicek ensured that the Defendants received the water and waste bills that are part of Exhibit 7, requested them to pay them and that they failed to do so, I am not satisfied that the Defendants can be faulted for failing to pay those bills.
[166] I find once the landlord notified the Plaintiff Cicek as tenant of the additional amounts owing, he was responsible as tenant to make payments to prevent a termination of the lease.
[167] The landlord refused to deal directly with the Defendants so they could prevent the lease from being terminated.
[168] The Plaintiffs’ default caused the landlord to terminate the lease and make it impossible for the Plaintiffs to ever assign the lease to the Defendants.
[169] I have found that the unjustifiable actions of the Plaintiffs caused the Defendants to be precluded from accessing the pizzeria equipment at 761 Dundas Street West and from operating the pizza business at that location.
[170] The Plaintiffs made it impossible for the transaction to ever be completed. The termination of the lease deprived the Defendants of any benefit of either the lease or the equipment at the premises they had intended to purchase under the July 31 Agreement of Purchase and Sale and for which by February 2013 they had already paid $43,000.
[171] I have rejected Cicek’s evidence that the Defendants were able to remove and use the pizza ovens, etc., from the premises at 761 Dundas Street West at their new location.
[172] It is not necessary to decide here whether, under other circumstances [if the lease had remained in good standing and if the lease had been properly assigned to the Defendants], the tenant or the Defendants would have been entitled under the lease to remove equipment from 761 Dundas Street West. The lease was terminated before it could be assigned. The Defendants lost access to the equipment as a result. There was no evidence that Cicek took any steps to attempt to recover it or deliver it to the Defendants.
Summary
[173] In short, by February 2013, by his actions, the Plaintiffs, Cicek acting in his own capacity and on behalf of the company, had made it impossible to comply with the terms of the contract. The Defendants did not receive equipment or the benefit of the assignment of the lease for which they had bargained.
[174] By making it impossible for the Defendants to comply with the terms of the Agreement of Purchase and Sale, the Plaintiffs terminated the contract.
[175] I find the Plaintiffs had failed to meet the contractual terms of the contract dated July 31, 2012. The Defendants were willing and able to comply with the terms of the contract and would have done so if the Plaintiffs had not made it impossible for the contract to be completed.
No Counterclaim for $40,000 + Interest
[176] The Defendants are not counterclaiming for the return of their $40,000 deposit despite the fact that Cicek’s actions resulted in their inability to benefit from the purchase of the equipment, the transfer of Mr. Right Pizza Ltd. and the assignment of the lease.
[177] Therefore, it is not necessary to decide whether they would have been successful had they done so.
Misrepresentation
[178] Given the fact that the Defendants did not bring a counterclaim against any of the Plaintiffs, and given this Court’s dismissal of the Plaintiffs’ action, and given Mondol’s evidence to the effect that in October of 2012 and subsequently, he would have been prepared to waive the Plaintiffs’ misrepresentation in the Listing Agreement about revenues of the business if the lease had been assigned, there is no need for this Court to decide whether what I have found was a misrepresentation of revenues in the Listing Agreement would have attracted damages, or provided an independent basis for the Defendants to refuse to close in October of 2012 and subsequently.
The Proper Parties to the Contract
[179] Given the disposition — the dismissal of the action against all Defendants — it is not necessary to determine whether Mondol or Master or both were properly Defendants in this action.
DISPOSITION
[180] The Plaintiffs’ claim is dismissed against all Defendants with costs payable by the Plaintiffs to the Defendants in the agreed amount of $10,000.
M.A. SANDERSON J.
Released: June 16, 2017
COURT FILE NO.: CV-13-477024 DATE: 20170616 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: SINAN CICEK AND MR. RIGHT PIZZA and CANKURT COCELLI Plaintiffs – and – YASMIN ABDUL-RAHIM MASTER and SHAHIADUZZAMAN MONDOL Defendants
REASONS FOR JUDGMENT
M.A. SANDERSON J.