Court File and Parties
COURT FILE NO.: 14-4052-SR DATE: 2018-05-08
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
GERBER LANDSCAPING & LAWNCARE (2010) LIMITED Plaintiff
– and –
JACKSON POND MANAGEMENT INC. Defendant
COUNSEL: Steven D. Gadbois, Counsel for the Plaintiff Matthew W. Mulholland, Counsel for the Defendant
HEARD: April 25 and 26, 2018
BEFORE: The Honourable Mr. Justice D.J. Gordon
Reasons for Decision
1Gerber Landscaping & Lawncare (2010) Limited, (“Gerber Landscaping”), sold certain business assets to Jackson Pond Management Inc., (“Jackson Pond”). Closing of the transaction occurred on February 20, 2015. Part of the purchase price was to be paid over time, pursuant to a promissory note and secured by a general security agreement.
2Some time after closing, a dispute arose between the parties. Gerber Landscaping commenced this action to collect on its security as Jackson Pond refused to pay the amounts owing on the promissory note. Jackson Pond resists the plaintiff’s claim, seeking a dismissal of the action on the basis of the purported breach of the original agreement by Gerber Landscaping.
3For the reasons that follow, judgment is granted to the plaintiff for the relief sought in its statement of claim, save for costs that are yet to be determined.
Overview
4Lyle Gerber is the principal and sole shareholder and director of Gerber Landscaping. The company provided lawn maintenance, landscaping and snow removal services in the New Hamburg area. This business activity commenced in 2000.
5Phil Jackson is the principal and sole shareholder and director of Jackson Pond. The company provided pond installation and maintenance services since 2002. Its head office was in Georgetown.
6These individuals had worked on several projects together during approximately 2012 to 2014. Mr. Gerber was contemplating the sale of Gerber Landscaping given his age and future retirement. Mr. Jackson was interested as the two businesses were complimentary. Discussions initially occurred in 2013 of a general nature, then progressing to detailed negotiations in 2014.
7Ultimately, the parties entered into an asset purchase agreement on January 29, 2015. Certain assets of Gerber Landscaping, as hereafter discussed, were to be sold to Jackson Pond. The purchase price was $81,000, payable by $15,500 on closing, the balance over several years pursuant to a promissory note for $65,500, without interest, and secured by a general security agreement.
8The transaction contemplated by the asset purchase agreement closed, as scheduled, on February 20, 2015 without complaint. Both parties were represented by solicitors.
9Some months later, Jackson Pond began to complain about the customer information. Discussion occurred. Some information was provided. By July 2015, Jackson Pond made a decision. It terminated Mr. Gerber’s employment, having previously hired him following closing, and indicated a refusal to pay the balance of the purchase price as required by the promissory note. Jackson Pond retained the assets otherwise acquired from Gerber Landscaping.
10Default on the promissory note occurred with respect to the first payment due on December 31, 2015. This lawsuit followed. The statement of claim was issued on January 14, 2016. The statement of defence is dated February 17, 2016. Examinations for discovery took place at some point thereafter. For some unknown reason, the trial did not occur until April 2018.
Negotiations
11Gerber Landscaping had customers requiring pond work. Mr. Gerber subcontracted several projects to Jackson Pond in 2013. That led to discussions between Mr. Gerber and Mr. Jackson concerning Gerber Landscaping initially in 2013 and likely of a general nature. More detailed discussions occurred in 2014. Mr. Gerber instructed his accountant, Jesse Bodemer at Mulroony & Associates, to provide Mr. Jackson any information he requested.
12On January 29, 2014, Mr. Bodemer delivered the 2012 and 2013 financial statements, as well as the 2014 interim statement for Gerber Landscaping, to Mr. Jackson. Mr. Jackson presented a number of questions to Mr. Bodemer on March 4, 2014, all answered the same day.
13Further discussions took place, leading to an exchange between March 9, 2014 and March 24, 2014 between Mr. Gerber and Mr. Jackson. Mr. Jackson’s accountant was also involved in some manner with Mr. Jackson. Purchase amounts were being considered.
14At this point, both businesses were into their busy season. A decision was made to continue negotiations in the winter.
15During the 2014 season, there were several meetings. Mr. Gerber reported informing Mr. Jackson that there was a reduction in business activity but did not then know by how much in terms of revenue. Mr. Jackson denied receiving this information.
16In December 2014, discussions became more detailed. Mr. Jackson requested and received the 2012, 2013 and 2014 financial statements for Gerber Landscaping. Each of the financial statements said “as of February 28”. Mr. Jackson said he understood the 2014 financial statement reflected the 2014 revenue, primarily generated in the Spring to Fall, despite the reference to February 28.
17Mr. Jackson reported asking Mr. Gerber for 2014 revenue statements. He assumed the 2014 financial statement was for the year ending February 28, 2015 even though the financial statement was received in December 2014. Mr. Gerber denied receiving any such or other requests for financial statements or information from Mr. Jackson. He said Mr. Jackson had access to his accountant if any information was required.
18By December 2014 it appears there was an understanding on basic terms for an agreement. Both parties, at some point, retained lawyers. Both also had accountants involved to some extent.
Agreement
19The parties entered into a comprehensive written asset purchase agreement on January 29, 2015. Gerber Landscaping agreed to sell and Jackson Pool agreed to purchase “… the undertaking and substantially all of the assets and property …” of Gerber Landscaping pertaining only to the lawn care and maintenance business.
20The following are the terms of this agreement relevant to this action:
1.1 DEFINITIONS
In this Agreement and in the schedules hereto, unless there is something in the subject matter or context in consistent therewith, the following terms will have the following meanings:
(g) “CLOSING DATE” means February 20, 2015, or such other date as the parties may agree upon;
(i) CUSTOMER LIST & CUSTOMER INFORMATION: All Customer lists, files, data and information relating to the Customers, including, without limiting the generality of the foregoing, the following:
(i) list of All Customers;
(ii) details of work previously done for each Customer; and
(iii) statement of amounts charged to each Customer;
(r) “PURCHASED ASSETS” means the following property and assets used in or otherwise relating to the Business (other than the Excluded Assets):
(i) CUSTOMER LIST & CUSTOMER INFORMATION;
(ii) EQUIPMENT AND TOOL: the equipment and tools itemized in Schedule A hereto;
(iv) GOODWILL: the goodwill of the Business, together with the exclusive right of the Purchaser to represent itself as carrying on the Business in continuation of and in succession to the Vendor;
(v) TELEPHONE AND FAX NUMBERS: all telephone and fax numbers used in the operation of the Business;
(vi) WEBSITE & EMAIL ADDRESS: the Website owned by and used in conjunction with the Business, the URL being www.gerberlandscaping.ca and all email addresses used in the operation of the Business;
1.6 TIME OF ESSENCE
This shall be of the essence hereof.
2.1 PURCHASED ASSETS
On the terms and subject to the fulfillment of the conditions hereof, the Vendor hereby agrees to sell, transfer and assign to the Purchaser and the Purchaser agrees to purchase and accept from the Vendor at the Closing Time on the Closing Date, all of the Purchased Assets.
2.3 PURCHASE PRICE
The purchase price payable by the Purchaser to the Vendor for the Purchased Assets (the “Purchase Price”) shall be in the sum of $81,000.00 and shall be paid as follows:
(a) The sum of $15,500 shall be paid and satisfied by the Purchaser by delivery of a certified cheque or bank draft, or by bank to bank electronic transfer, payable to the Vendor at the Closing Time; and,
(b) the balance of the Purchase Price, namely the sum of $65,500.00, without interest, shall be paid in accordance with the following payment schedule:
31 December, 2015 $13,000.00
31 July, 2016 $ 7,500.00
31 December, 2016 $12,500.00
31 July 2017 $7,500.00
31 December, 2018 $12,500.00
31 December, 2019 $12,500.00
2.4 PROMISSORY NOTE
The Purchaser shall, at the Closing Time, execute and deliver to the Vendor:
(a) six postdated cheques in the amounts specified in Section 2.3 hereof; and,
(b) a promissory note, upon the foregoing terms and conditions, evidencing the unpaid balance of the Purchase Price (the “Note”).
2.4 ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated among the Purchased Assets as set out in Schedule B. The Vendor and the Purchaser shall file their respective tax returns prepared in accordance with such allocation.
2.8 Security for Note
To secure payment of the Note the Purchaser agrees to grant the Vendor and Lyle a first security interest over the Purchased Assets (the “General Security Agreement”) which security interest shall be registered under the Ontario Personal Property Security Act.
6.1 Purchaser’s Conditions.
The objection of the Purchaser to complete the purchase of the Purchased Assets hereunder shall be subject to the satisfaction of, or compliance with, each of the following conditions precedent:
(a) Truth and Accuracy of Representations of Vendor – All of the representations and warranties of each of the Vendor and Lyle made in or pursuant to this Agreement, including, without limitation, the representations and warranties set forth in Section 3.1 hereof, shall be true and correct (except as such representations and warranties may be affected by the occurrence of events or transactions contemplated and permitted hereby);
(b) Performance of Obligations – The Vendor and Lyle shall have performed or complied with all their obligations, covenants and agreements hereunder, that are capable of being, or required to be, performed or complied with prior to Closing.
(c) Corporate Approvals – All necessary corporate action will have been taken by the shareholder and directors of the Vendor to approve the execution and delivery of this Agreement and the Transaction Documents and performance by the Vendor hereunder or thereunder.
(d) Receipt of Closing Documentation – The Purchaser shall have received duly executed copies of all the documents referred to in Section 9.3 (a);
(e) Encumbrances – Encumbrances on the Purchased Assets shall have been discharged at the expense of the Vendor as of Closing; and,
(f) Consents, Authorizations and Registrations – All consents, approvals, orders and authorizations of any Persons or Governmental Authority required in the completion of any of the transactions contemplated by this Agreement, the execution of this Agreement, the Closing or the performance of any of the terms and conditions hereof shall have been obtained.
6.2 WAIVER AND TERMINATION BY THE PURCHASER
The conditions contained in Section 6.1 hereof are inserted for the exclusive benefit of the Purchaser and may be waived in whole or in part by the Purchaser at any time. The Purchaser shall in writing either exercise its rights pursuant to the above conditions, or waive its rights pursuant to the above conditions, on the Closing Date. Failure by Purchaser to exercise its rights shall be deemed a waiver. The Vendor acknowledges that the waiver by the Purchaser of any condition or any part of any condition will constitute a waiver only of such condition or such part of such condition, as the case may be, and will not constitute a waiver of any covenant, agreement, representation or warranty made by the Vendor that corresponds or is related to such condition or such part of such condition, as the case may be. If any of the conditions contained in Section 6.1 hereof are not fulfilled or complied with as herein provided, the Purchaser may, at or prior to the Time of Closing, at the Purchaser’s sole option, rescind this Agreement by notice in writing to the Vendor and, in such event, the Purchaser will be released from all obligations hereunder. In such event, the Vendor will also be released from all obligations hereunder.
9.3 CLOSING ARRANGEMENTS
At the Time of Closing, upon fulfilment of all conditions under this agreement which have not been waived in writing:
(a) Delivery of Closing Documents by Vendor – The Vendor and Lyle will deliver to the Purchaser the following, fully executed where applicable, and in each case, in form and substance satisfactory to the Purchaser:
(i) certified copies of the resolutions of the directors and shareholder of the Vendor authorizing the transactions contemplated in this Agreement and the Transaction Documents;
(ii) general conveyance agreements and all bills of sale, transfers and other assignments or conveyances as may be necessary to vest legal and beneficial ownership to the Purchased Assets in the name of the Purchaser;
(iii) possession of the Purchased Assets;
(iv) the HST Election referenced in Section 2.5;
(v) evidence of discharge of any Encumbrances on the Purchased Assets;
(vi) the Vendor’s Non-Solicitation and Non-Competition Covenant substantially in the form attached hereto as Schedule “C”;
(vii) Lyle’s Non-Solicitation and Non-Competition Covenant substantially in the form attached hereto as Schedule “D”;
(viii) the Bulk Sales Act Indemnity; and
(ix) such further documents and assurances as may be reasonably required by the Purchaser’s solicitors in order to complete the sale of the Purchased Assets and the Business contemplated herein.
(b) Delivery of Closing Documents by Purchaser – The Purchaser will deliver to the Vendor the following, fully executed where applicable, and in each case, in form and substance satisfactory to the Vendor:
(i) payment of the portion of the Purchase Price payable at the Closing Time pursuant to Section 2.3;
(ii) certified copies of the resolutions of the directors of the Purchaser authorizing the transactions contemplated in this Agreement and the Transaction Documents;
(iii) the Note;
(iv) the General Security Agreement
(v) the HST Election referenced in Section 2.5; and
(vi) such further documents and assurances as may be reasonably required by the Vendor’s solicitors in order to complete the sale of the Purchased Assets and the Business as contemplated in this Agreement and the Transaction Documents.
10.4 ENTIRE AGREEMENT
This Agreement and the Schedules hereto constitute the entire agreement between the Parties and supersede all prior agreements, representations, warranties, statements, promises, information, arrangements and understandings, whether oral or written, express or implied, with respect to the subject matter hereof. None of the parties hereto shall be bound or charged with any oral or written agreements, representations, warranties, statements, promises, information, arrangements or understandings not specifically set forth in this Agreement or in the schedules, documents and instruments to be delivered on or before the Closing Date pursuant to this Agreement. The parties hereto further acknowledge and agree that, in entering into this Agreement and in delivering the schedules, documents and instruments to be delivered on or before the Closing Date, they have not in any way relied, and will not in any way rely, upon any oral or written agreements, representations, warranties, statements, promises, information, arrangements or understandings, express or implied, not specifically set forth in this Agreement or in such schedules, documents or instruments.
10.7 NOTICES
Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in person, transmitted by facsimile or I pdf format by email or similar means of recorded electronic communication or sent by registered mail, charges prepaid, addressed as follows:
If to the Purchaser:
65 ONTARIO STREET
GEORGETOWN, ONTARIO
L7G 3K9
FAX NO.: C/O 416-366-9197
If to the Vendor or Lyle:
466 HILLVIEW CR.
NEW HAMBURG
ONTARIO
N3A 1K8
Any such notice or other communication shall be deemed to have been given and received on the day on which it was delivered or transmitted (or, if such day is not a Business Day, on the next following Business Day) or, if mailed, on the third Business Day following the date of mailing; provided, however, that if at the time of mailing or within three Business Days thereafter there is or occurs a labour dispute or other event that might reasonably be expected to disrupt the delivery of documents by mail, any notice or other communication hereunder shall be delivered or transmitted by means of recorded electronic communication as described.
Any Party may at any time change its address for service from time to time by giving notice to the other Parties in accordance with this Section 10.7.
SCHEDULE A
EQUIPMENT & TOOLS
Walker Mower
John Deere X54026
Legend Trailer,
Weed Trimmers, Hedge Trimmers, 3 Push Lawn Mowers, other garden tools, etc.
SCHEDULE B
ALLOCATION OF PURCHASE PRICE
EQUIPMENT $31,000.00
CUSTOMER LIST AND CUSTOMER INFORMATION $27,000.00
GOODWILL: $ 6,000.00
TEL, FAX NO., WEBSITE, EMAIL ADDRESS $ $17,000.00
21At some point prior to closing, Mr. Gerber and Mr. Jackson met at the Gerber Landscaping shop. The equipment was inspected. Mr. Gerber reported delivering a customer list to Mr. Jackson on that occasion. Mr. Jackson says he never received any documentation pertaining to customers until March 2015, long after closing. He also said Mr. Gerber answered every question he asked.
Closing
22The transaction closed as scheduled on February 20, 2015. Documents were exchanged and funds delivered as required by the asset purchase agreement. Neither Mr. Gerber nor Mr. Jackson made reference to any complaint with respect to the closing event.
Post Closing
23After closing, Mr. Gerber was employed, or worked as an independent contractor, with Jackson Pond. It appears he was doing much of the same work as before, as well as meeting with customers. This arrangement came to an end in mid July 2015 when Mr. Jackson terminated Mr. Gerber’s employment.
24There was also activity regarding customer information in this time period. Mr. Gerber reported delivering three boxes to Mr. Jackson. He did not make copies of the invoices and other documents. Mr. Jackson presented in evidence copies of all the documents he said had been received from Mr. Gerber. These documents might be half of a box in total.
25Mr. Jackson says he continually requested more information. Mr. Gerber eventually responded on July 13, 2015 “so you have all that information on file, from all the folders that I have supplied you in March 2015”.
26It also appears the lawn maintenance business was declining. Mr. Jackson reported the excitement of purchasing the business had passed by June 2015 with the reduction in revenue.
Revenue
27The financial statements filed as exhibits and referred to by the parties reveal the following revenue as at February 28 in each year as reported by the accountant for Mr. Gerber:
2012 $ 98,142
2013 $118,490
2014 $121,332
2015 $ 89,452
28These amounts include both lawn maintenance and snow removal. Revised statements indicated law maintenance revenue as follows:
2014 $ 95,650
2015 $ 74,499
29Mr. Gerber reported the business also having cash sales of $20,000 in 2014 but none in 2015. The 2015 financial statements were received in 2016.
30Mr. Jackson presented a 2015 summary of invoices, not a financial statement, showing revenue in that calendar year (comparable to 2016 in Mr. Gerber’s financial records) of $55,853.
Issues
31The defendant does not challenge the validity of the promissory note and general security agreement or the amount owing “on its face”. Rather, the defendant says the promissory note and general security agreement are not enforceable as a result of the plaintiff’s breach of the asset purchase agreement. Two issues are said to require determination:
(i) did the plaintiff misrepresent or fail to disclose the business revenue; and
(ii) did the plaintiff fail to deliver the purchased assets to the defendant.
Discussion and Analysis
(i) Pleadings
32Pleadings are the foundation of a court case. They are supposed to set out the material facts, allegations and relief sought. Lawsuits are decided within the boundaries of the pleadings.
33The plaintiff’s claim is for the collection of a debt owing on a promissory note and secured by a general security agreement. In result, the statement of claim is concise, setting out all of the required matters.
34The statement of defence, however, was poorly drafted. Misrepresentation and non-disclosure were not pleaded, the issue only arising in the defendant’s factum delivered shortly before trial and in closing submissions. There is no counter-claim. The defendant has not sought declaratory relief, rescission or damages. Rather, it simply alleges the plaintiff was in breach of the asset purchase agreement and the promissory note and general security are unenforceable. The only relief sought by the defendant is a dismissal of the plaintiff’s claim.
(ii) Credibility
35Credibility is a factor when reviewing the evidence.
36Mr. Gerber operated a lawn maintenance business for some years. This was a simple service business. Mr. Gerber’s testimony at trial was presented in a straightforward manner, answering all questions put to him clearly and without exaggeration. He was not evasive. Mr. Gerber deferred to his accountant where appropriate as they prepared his invoices and financial statements. Mr. Gerber’s evidence was consistent. I found him to be a credible witness.
37Mr. Jackson is an experienced businessman. He understands and works with financial and business documents on a regular basis. He also was aware of the due diligence process in acquiring a business. Yet Mr. Jackson was inconsistent and evasive in his testimony. He claimed not to understand various terms and financial records, contrary to his own experience. Mr. Jackson declined to call his accountant and lawyer as witnesses, both being involved in the transaction and would have testified on the very matters in dispute. Mr. Jackson accepted no responsibility for his own actions before and after closing. He paid only $15,500, an amount substantially less than the value of the assets he acknowledges receiving, yet takes the position he owes nothing further. Mr. Jackson presents with an inappropriate sense of entitlement. I found his evidence was not credible and not reliable.
(iii) Absence of Evidence
38Facts are derived from the evidence. In some cases, the absence of evidence is a factor in the analysis.
39In his defence, Mr. Jackson raised matters pertaining to the financial statements of the plaintiff and with respect to the asset purchase agreement and other documents. Yet neither the accountant nor the lawyer were called as witnesses.
40Mr. Jackson, an experienced businessman, claims he did not understand the phrase “as at February 28” on the financial statements. These documents were delivered to his accountant. No evidence was presented as to the review conducted by the accountant or any matters that were addressed by him with Mr. Jackson.
41It appears Mr. Jackson’s solicitor prepared the asset purchase agreement. He certainly attended to close the transaction with Mr. Gerber’s solicitor on February 20, 2015. One of the closing documents was a General Conveyance, transferring title to the purchased assets, including the customer list and customer information. On February 19, 2015, Mr. Gerber’s accountant printed a “customer sales detail report for the period from March 1, 2013 to February 13, 2015. Mr. Gerber says this report was delivered to Mr. Jackson prior to closing. Mr. Jackson said it was in March 2015. Pursuant to the agreement, the purchased assets were delivered on closing. No evidence was presented as to the lawyer’s involvement, particularly with respect to closing, or any matters that were addressed with Mr. Jackson or with Mr. Gerber’s solicitor.
42Mr. Jackson made no complaint as to the professional services provided by his accountant and lawyer.
43Given the allegations presented and the position taken by the defendant, in my view, the accountant and lawyer were essential witnesses for its case. In the absence of evidence, such as to a limited retainer, it is logical to assume these individuals provided the services expected of a reasonable competent accountant and solicitor. The accountant would have readily seen that the most recent financial statement was for the year ending February 28, 2014 and would have advised Mr. Jackson accordingly. The lawyer would have closed the transaction with delivery of documents transferring title and made certain of possession with respect to the purchased assets as provided for in the agreement.
44At the very least, failure to call the accountant and lawyer invites an adverse inference that neither individual’s testimony would have been helpful to the defendant.
(iv) Misrepresentation
45Misrepresentation was not pleaded in the statement of defence and could be rejected on that basis. It also fails on the merits.
46Mr. Jackson claims that Mr. Gerber failed to disclose the 2014 season revenue for Gerber Landscaping, delivering only that financial statement reflecting 2013 revenue. He also claims Mr. Gerber failed to disclose the customer information. Failure to disclose is said to be a material misrepresentation.
47Mr. Gerber reported directing his accountant to forward the business financial statements to Mr. Jackson. When that occurred, Mr. Jackson presented a number of questions to Mr. Gerber’s accountant, all of which were correctly answered. Mr. Gerber said he delivered the summary of customer invoices to Mr. Jackson prior to closing, with three boxes of all customer records a month later. Mr. Gerber also advised that he informed Mr. Jackson in the 2014 season that business had declined. Cross-examination of Mr. Gerber failed to cause any retraction.
48Mr. Jackson claimed he understood the financial statement ending February 28 was for the 2014 season. This evidence is rejected. Mr. Jackson has experience in reading financial statements and was well aware of a year-end other than the calendar year from his own company. His accountant also reviewed the financial statements. Surely, the accountant reported to Mr. Jackson on the financial statements and the need to obtain the journal or invoices for the 2014 season. I find he did not make such a request and took no steps even when informed by Mr. Gerber the 2014 season business had declined. Mr. Jackson also had access to Mr. Gerber’s accountant. The information was available had he asked.
49The summary of customer invoices delivered prior to closing was not particularized in the manner as required by the asset purchase agreement. Yet Mr. Jackson made no inquiry. Mr. Jackson, I find, did receive the three boxes containing all of the customer records. I reject his evidence to the contrary. The records Mr. Jackson presented in evidence were only a small, selective portion of those records.
50Misrepresentation could lead to rescission or damages as described in the caselaw referred to by counsel for Mr. Jackson. However, I conclude there is no evidentiary foundation to the unpleaded allegation of misrepresentation. I find Mr. Gerber delivered the documents to Mr. Jackson as he described. He assumed, quite correctly, that Mr. Jackson was dealing with his accountant for anything further. Mr. Jackson’s allegation of misrepresentation by Mr. Gerber is rejected.
(v) Delivery of Purchased Assets
51Mr. Jackson claims that Gerber Landscaping failed to deliver all of the purchased assets. His primary complaint is with the purported lack of customer information, already rejected on the evidence as above.
52The transaction was governed by the terms of the asset purchase agreement. Mr. Jackson made no complaint on closing. While merger does not apply in every transaction, it does in this case due to the terms of the agreement. Paragraph 6.3 deals with the purchaser’s conditions. Those conditions were waived by operation of paragraph 6.4. Pursuant to paragraph 9.3 (a)(iii) “possession of the purchased assets” was delivered on closing. There are no documents indicating possession of any item was deferred to a later date. Paragraph 10.4 is an entire agreement provision further enforcing delivery. At no time did Mr. Jackson present any notice as required by paragraph 10.7.
53If there was any deficiency, it was incumbent on the purchaser or its lawyer to address such on closing. Mr. Jackson closed without complaint. Presumably, his solicitor, acting on Mr. Jackson’s instructions, did not request anything further. There can be no basis to complain at a later date.
(vi) Business Decline - 2015
54In support of his allegations of misrepresentation and failure to deliver the purchased assets, Mr. Jackson refers to the decline in 2015 revenue. He said had the decline in 2014 been reported by Mr. Gerber, an allegation I have rejected, and as confirmed in 2015 he would not have done the deal or would have negotiated a lesser purchase price.
55Mr. Jackson neglects to mention the 2015 decline resulted from his own actions. Mr. Gerber indicated half of the revenue was from existing customers, the other half from new accounts. That evidence was not challenged. In a service business, it is not unusual to lose or gain customers every year. Mr. Gerber’s offers to assist in business promotion were rejected by Mr. Jackson. Perhaps Mr. Jackson did not understand the importance of personal contact and relationships in a small community. Mr. Gerber was the “face” of the business until such time as Mr. Jackson established his own credibility with customers. Yet Mr. Jackson terminated Mr. Gerber’s employment in July 2015. No doubt such impacted some of the customers.
56Mr. Jackson failed to pursue new accounts, including potential customers referred by Mr. Gerber. Mr. Jackson decided to change insurance brokers yet seemed surprised when the existing broker cancelled his lawn maintenance agreement. This was a significant source of revenue.
57In these circumstances, it is not surprising to see a revenue decline. Responsibility rests with Mr. Jackson.
58On March 4, 2014, early in the negotiation process, Mr. Jackson prepared a spreadsheet projecting revenue for 2014. At this point, the parties contemplated doing a deal that spring. Mr. Jackson was optimistic at increasing revenue. Such could have occurred. But it takes a greater effort than Mr. Jackson was prepared to contribute.
Summary
59For these reasons, judgment is granted in favour of Gerber Landscaping against Jackson Pond for payment of $65,500, and related relief as sought in the statement of claim.
60If the parties are unable to resolve the issue of costs, counsel are directed to deliver written submissions to my chambers within 30 days of the release of this decision. If submissions are not received by that date, the file will be closed and the issue of costs considered settle.
D.J. Gordon J.
Released: May 8, 2018
COURT FILE NO.: 14-4052-SR DATE: 2018-05-08
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
GERBER LANDSCAPING & LAWNCARE (2010) LIMITED Plaintiff
– and –
JACKSON POND MANAGEMENT INC. Defendant
REASONS FOR JUDGMENT
D.J. Gordon J.
Released: May 8, 2018