Court File and Parties

Court File No.: 59/11 Date: 2022 0510 Ontario Superior Court of Justice

Between: WAYNE SEXSMITH, MARY SEXSMITH and CHIMERA INDUSTRIAL SALES INC. Plaintiffs – and – EACOTT GROUP INC. and KEVIN JUBY Defendants

Counsel: M. Odumodu, for the Plaintiffs J. Keith, for the Defendants

Heard: May 27, 28, 31, June 1, 2, 3, and September 22, 2021

McArthur J.

Introduction

[1] The company, Chimera Industrial Sales Inc. (Chimera), sells and distributes fasteners. The company is and was at the relevant time owned and operated by Mary Sexsmith and Wayne Sexsmith. Mr. Sexsmith is now incapable to participate in the business and this litigation due to dementia.

[2] Chimera’s business had been listed for sale by the Sexsmiths through a real estate brokerage in 2010.

[3] Kevin Juby desired to buy and operate the business. He was the principal, officer and director of the corporation Eacott Group Inc. that was proposed to hold the assets of the company’s business upon purchase.

[4] An agreement of purchase and sale dated December 7, 2010 was signed by both Mr. Juby and Mr. Sexsmith by January 19, 2010. The closing date of January 31, 2011 was later extended to February 4, 2011.

[5] The transaction did not close. Mr. Juby did not make payment nor meet any other terms required by the agreement on the basis that a misrepresentation of sales by the plaintiffs had occurred, that agreement was void since there had never been a determination of what was being purchased and that the plaintiffs failed to close on the closing date.

[6] The plaintiffs assert Mr. Juby refused to close and wanted to renegotiate to reduce the purchase price of the agreement. The plaintiffs claim damages for breach of contract.

Issues

[7] The parties, in advance of trial, outlined the issues as in Exhibit A to be as follows:

a. Whether there was an enforceable agreement between the parties and, if so, indicate the material terms of the agreement;

b. Whether there was any misrepresentation by the vendor/plaintiff permitting the purchaser/defendant to modify the price to be paid under the asset purchase agreement;

c. Whether the purchaser's conduct in requesting a modification of the price to be paid under the asset purchase agreement constituted an anticipatory breach;

d. Whether the vendor was in breach of the asset purchase agreement;

e. Whether the vendor is entitled to enforce the asset purchase agreement;

f. If liability is determined, what is the assessment of damages.

Agreed Facts

[8] The parties provided a Statement of Agreed Facts filed as Exhibit #1 at the outset of the trial. This can be briefly summarized as follows:

a. By October 1, 2010, Mr. Juby received at printout as of that date that contained an income statement from the company’s accounting system for the period January 1, 2010 to August 31, 2010. This document indicated gross sales for that period being $45,930.49;

b. On November 26, 2010, Mr. Juby made a written proposal to purchase the company’s assets for $150,000 plus 5% of sales for two years from closing proposed prior to January 1, 2011;

c. Through a real estate agent, Mr. Juby prepared a letter of intent dated December 7, 2010 which estimated the company’s inventory at $86,000. This letter was never signed;

d. Prior to December 31, Mr. Juby was in possession of Chimera’s financial statements dated April 13, 2010 for the year-end December 31, 2009. These statements referred to an inventory of $93,720.00;

e. On December 29, 2010, the plaintiff’s lawyer wrote the vendor’s lawyer and proposed amendments to the letter of intent or a formal agreement of purchase and sale for review and signing;

f. A formal inventory count occurred for Chimera on December 21, 2010. Mr. Juby was invited and declined to participate. By early 2011, the transition of the assets and business began and Mr. Juby commenced operation of the fastener distribution business through Eacott Group Inc.

g. At the request of the purchaser’s lawyer, the vendor’s lawyer prepared an asset purchase agreement (APS) dated December 7, 2010. This was signed by Mr. Sexsmith on January 17, 2011 and by Mr. Juby on January 19, 2011;

h. The purchaser's lawyer sent the vendors’ lawyer a letter of requisitions on January 24, 2011. The letter enclosed a lien registration over the accounts, equipment an inventory of the company in favor of Libro Credit Union Limited, a draft undertaking to readjust and direction regarding title;

i. On January 31st, 2011, neither the purchaser nor vendor tendered. The purchaser’s lawyer wrote to the vendors’ lawyer inquiring about draft documentation, pointed out the transaction was to close that day and asked what is happening. On February 1, 2011, the vendors’ lawyer by letter proposed extending the closing to February the 4th, 2011 and enclosed six draft documents toward completing the transaction. Through counsel the closing date was extended to February 4, 2011;

j. By letter dated February 3, 2011, the purchaser's lawyer indicated Mr. Juby’s reluctance to close based on the purchase price being premised on the company having sales of $70,000 in gross yearly sales for 2010, he had recently received information indicating substantially lower sales and he did not know exactly what he was purchasing as there had also not yet been an accurate listing of the inventory;

k. On February 4, 2011, the purchaser nor his counsel provided the vendor with payment of $75,000 or the promissory note for a further $75,000 plus 5% of sales for the following two-year period;

l. On February 7, 2011, the purchaser’s lawyer wrote to the vendors’ lawyer and advised that Mr. Juby considered the transaction to be at an end. He indicated Mr. Juby’s purchase was premised on information showing $70,000 in gross yearly sales and approximately $93,720 in inventory whereas recent information indicated the company projected gross sales of $60,800 and approximately $75,000 in inventory and that since it never had been determined exactly what was being purchased and the company not in a position to close, the transaction was at an end;

m. The Ontario Ministry of Revenue issued a clearance certificate pursuant to s. 6 of the Retail Sales Tax Act indicating the company did not have any outstanding taxes as of February 4, 2011. Mr. Juby received the proceeds from sales of inventory that were sold from January 1, 2011 to February 7, 2011; and

n. Chimera’s sales were as follows: for 2007, 181,961; for 2008, $155,256; for 2009, $85,539; and for 2010, $61,053.

Positions of the Parties

[9] The plaintiffs submit the defendant committed an anticipatory breach by attempting to renegotiate the terms of a valid agreement and wrongfully alleging civil fraud by the plaintiffs.

[10] The defendant submits the agreement was not valid for uncertainty, the plaintiffs fraudulently misrepresented the income and inventory of the company and failed to close the transaction in any event. The defendant maintains that he was always acting in good faith and wanted to close the transaction once the price was renegotiated.

Additional Background

Plaintiff and fastener business

[11] Chimera was a fastener distributor who obtained supplies mainly from suppliers worldwide that included, amongst others, Anda, Paulin and Fuller Metrics. The levels of distributorship start as a retail customer and increase to jobber, basic distributor, intermediate distributor and, ultimately, master distributor. The increased levels receive increasing purchase discounts from suppliers that allows increased profitability. This also allows the distributor to be competitive with larger distributors in the market.

[12] Mary Sexsmith started the business in 2005 based on her personal knowledge and networks in the fastener industry with a previous employer. Eventually, her husband Wayne became a salesperson in the business. Fastener products include nuts, bolts, screws and items sold mainly to larger companies that made products in mainly automotive and manufacturing but also to the general public, like farmers. The larger part of the plaintiff’s business involved servicing and periodic replenishing the bulk bins of fastener items of various customers.

[13] The main business operation was from the rural home property of the Sexsmiths near Burgessville, Ontario. The product supplies were stored in two semi trailers located on the property. Mary Sexsmith also looked after the bookkeeping and invoicing. She was proficient with the software program and aware of the operations of the business.

[14] In 2010, Wayne Sexsmith developed health issues. The Sexsmiths decided to sell the business. They listed the business for sale with a local real estate brokerage in February 2010.

[15] At trial, the court heard the testimony of Ms. Mary Sexsmith, Mr. Kevin Juby and their respective lawyers then involved in this matter, namely Ms. Jo-Ann Hanson for the vendors and Mr. John Holmes for the purchaser. It is not necessary to go into the evidence of the lawyers in depth other than as will be referred to in these reasons and to say that the lawyers’ efforts and positions properly addressed their client’s situations as each had reasonably been expected to in the circumstances.

Circumstances prior to Asset Purchase Agreement executed by January 19, 2011

[16] In the fall of 2010, Mr. Juby saw the business listing in a local publication. He contacted the brokerage, Heritage House. Peter Retsinas, an agent with the brokerage.

[17] On October 1, 2010, the Sexsmiths provided Mr. Juby with an income statement of Chimera from January 1 to August 31, 2010. This information came from the accounting program. Sales were show as $45,930 for that period.

[18] On October 4, 2010, Mrs. Sexsmith sent an email to Mr. Juby that indicated they had no problem being contacted directly by him, commented that his four appraisers were putting little to no value on their customer base and vendor relationships and indicated that the replacement value of the assets would be $900 for the desk, $10,000 for 2 tractor trailers, $5000 for shelving, $1,200 for a scale, $15,000 for software and $90,000 approximate for inventory for a total of $122,100. Mary Sexsmith testified that the information in her email to Mr. Juby was based on the information from the accounting program. She also indicated another businessman was interested in the business.

[19] Mr. Juby was educated in the United Kingdom and included university studies. He held both British and Canadian citizenship. He and his family had sold their home in the United Kingdom and were then residing in Canada. He testified he received advice from various named individuals who were successful business owners; one was his brother who had a similar business in the United Kingdom and two members of the church he belonged to were involved in various manufacturing, fabrication, supply and equipment maintenance businesses. All of these businesses used fasteners. Mr. Juby made his own estimate of the business value.

[20] Mr. Juby prepared and sent a Purchase Proposal dated November 26, 2010 to the Sexsmiths. He offered $150,000 for the assets of Chimera where $75,000 would be paid on closing, a promissory note provided for the balance of $75,000, plus a percentage of sales for the first two years that would be paid to the plaintiffs to keep them plaintiffs involved in the business transition.

[21] The broker, Century 21 Heritage House Ltd, represented both parties. Mr. Juby signed a buyer representation agreement and a confirmation of co-operation and representation with the brokerage on December 6, 2010. The agent for the broker, Mr. Retsina, prepared a Letter of Intent dated December 7, 2010 for Mr. Juby. This letter provided a purchase price of $150,000 subject to adjustments, the inventory was listed as valued at $86,000 and the Sexsmiths would enter into non-competition agreements. A formal agreement was to be prepared.

[22] On December 13, 2010, Mr. Juby’s email communication with Sexsmiths clearly removed Mr. Retsina’s involvement from the circumstances and Mr. Juby asked that the plaintiffs’ lawyer prepare the documentation.

[23] Ms. Jo-Ann Hanson, the plaintiffs’ lawyer, prepared a four-page letter of intent which was Exhibit 4. This was sent to Mr. Juby’s lawyer, Mr. Holmes, on December 29, 2010. This document was never signed by the parties. Mr. Holmes asked Ms. Hanson to prepare the formal asset purchase agreement.

[24] Mary Sexsmith was under the impression that the transaction would be completed by December 31, 2010 and that the payment and paperwork would be completed by January 1, 2011. Mary Sexsmith had also invited Mr. Juby to participate on the taking count of inventory later in December, however, Mr. Juby declined.

[25] Ms. Hanson drafted the asset purchase agreement that was also dated December 7, 2010. There were minor changes from the letter of intent, however the core provisions remained the same. The relevant provisions in the asset purchase agreement included the following:

a. the closing date was January 31, 2011;

b. the effective date was December 31, 2010;

c. Article 2 which provided “Subject to the terms and conditions hereof the Vendor covenants and agrees to sell, assign, convey and transfer to the Purchaser and the Purchaser covenants and agrees to purchase from the Vendor as of the close of business on the Closing Date the following assets (hereinafter referred to as the “Purchased Assets”) for the total price of $150,000 (plus a percentage of gross sales as provided herein)...”;

d. Article 4.1 which provided “Subject to the compliance with all terms and conditions hereof, the transfer of possession of the Purchased Assets shall be deemed to have taken place as of the Effective Date and thereafter the Purchaser shall bear all expenses of the Purchased Assets. The Purchaser shall be in possession of the Purchased Assets and will carry on the business on his own account and in the event that the within transaction shall not close on the Closing Date, the Purchaser shall account to the Vendor for all revenue receipts, profits and advantages derived from the operation and management of said business; and

e. Article 13.4 which provided “This Agreement constitutes the entire understanding among the parties and may not be amended in whole or in part except in writing signed by all parties.

[26] This agreement was signed by Wayne Sexsmith on January 17, 2011 and by Mr. Juby on January 19, 2011.

[27] By January 19, 2011, Mary Sexsmith had provided some training with Mr. Juby on the business software. Mr. Juby received the desk that remained on site and had access to all inventory. He was also provided the catalogues, customer lists, Mr. Sexsmith’s notes on each customer and had been introduced to both the various suppliers and customers and was shown how to fulfill customer orders. As Mr. Juby testified, he was aware that Mrs. Sexsmith was back working regularly at CAMI in January 2011.

[28] On January 19, 2011, Mr. Juby ran a cost evaluation report on the business software. At that time, the inventory report showed at approximately $75,000. He also testified that as he was picking inventory for filling orders that month, he discovered discrepancies in the inventory. He also testified he ran a report to get the inventory for 2010 and that the inventory was not loaded. However, despite these discrepancies which Mr. Juby claimed were inaccurate, he testified he discussed these verbally with the plaintiffs, nothing was put into writing, no was a copy of a report produced and nothing in that regard was sent to his lawyer when seeking advice. Further, there is no reference in the letter from Mr. Holmes to Ms. Hanson on February 3, 2011 about any references to the inventory picking notes, the discrepancies nor any mention of the value of the inventory other that to raise an accurate listing of inventory.

[29] In January, Mr. Juby was working the business one to two days a week. He relied on the Sexsmiths to monitor the business since he was working elsewhere.

After January 19, 2011

[30] Neither the plaintiffs nor defendant were prepared to complete the transaction on the closing date of January 31, 2011 and, through their lawyers, the closing date was extended to February 4, 2011.

[31] From January through to February, Mr. Juby, though Eacott, had made some sales and also purchased a small amount for inventory.

Analysis and Discussion

Asset Purchase Agreement enforceability and material provisions

[32] The defendant submits that the agreement of purchase and sale that was signed by the parties did not actually specify what assets were being purchased and this was a material provision that remained uncertain and, as a result, the agreement was void for uncertainty.

[33] Mr. Juby, as noted above, signed the agreement of purchase and sale on January 19, 2011. This agreement was completed and signed with Mr. Holmes and after numerous prior exchanges of documents outlining substantially similar core provisions. Both parties exchanged the signed agreement of purchase and sale through their respective lawyers during the time when it is clear the transition of the business was in progress.

[34] Mr. Holmes’ testimony as the purchaser’s lawyer was that the agreement did not have any ambiguity at all; Article 3 did set out the assets to be purchased as “all inventories, stock and trade, and all supplies used for carrying on the business of the vendor, including software programming, except stationary and other printed material of the vendor which have a name printed thereon other than to be used by the purchaser, and excluding the computer.” Mr. Holmes testified he had some concern there was no schedule attached to the agreement since paragraph 3 of the agreement provided a summary description only. Mr. Holmes would not have been sure what was the specific details of the items. However, this court finds that Mr. Juby did know what those items were.

[35] Furthermore, Mr. Holmes testimony as of the February 5, 2011 letter to Ms. Hanson indicated that there has not yet been an accurate listing of the inventory. Mr. Judy testified that he did not have an accurate list of the inventory. Mr. Holmes testified in cross-examination that Mr. Juby did not tell him (1) he had access to the computer program nor reference to the cost valuation report dated January 19, 20210, (2) he had ongoing access to the actual inventory (3) there was no dispute about what was being transferred and what was not to be transferred and (4) he declined to participate in the inventory count.

[36] Mr. Holmes clearly took Mr. Juby at his word as to the representations Mr. Juby said were made to him by the Sexsmiths. Mr. Holmes was looking to preserve Mr. Juby’s rights based on what he knew from Mr. Juby. Mr. Holmes did not see the financial statements, the earnings calculations nor inventory amounts. Rather, he assumed the representations based on Mr. Juby’s information and instructions to renegotiate the purchase price.

[37] Article 3 also provided that “the vendor and purchaser agreed to take an inventory of the same as of December 31, 2010 and prior to any opening of business by either party.” As mentioned, only one of the trailers had an inventory counted conducted as overseen by Mary Sexsmith immediately prior to December 31 st in which Mr. Juby had declined to participate. The inventory of the second trailer was not undertaken then or at any other time by either vendor or purchaser.

[38] Furthermore, before and after the signing of the agreement by all parties by January 19, 2011, Mr. Juby had access to both trailers and all inventory at all times. Mr. Juby did fill orders from the inventory in the trailers throughout January and into February. Mr. Juby testified he was concerned that the software program was not giving an accurate report of the inventory. If true, Mr. Juby’s concern could have been easily and readily addressed by him by conducting an inventory and raising this directly with the Sexsmiths. At the very least, one would expect Mr. Juby to have made some notations of such or raised specific points with his lawyer to be addressed. That did not occur.

[39] This court is mindful that the court can consider subsequent conduct of the parties where an agreement is ambiguous. See Shewchuck v. Blackmount Capital Inc. 2016 ONCA 912 at paras 35 and 36. Such conduct is not necessary to consider in this case since I find the provision in the signed agreement as to what was purchased was not ambiguous.

[40] Even if I found there was ambiguity in the agreement on this point, briefly speaking, the subsequent conduct of the parties infers the clear intention to include all inventory as of the effective date of closing. Mr. Juby knew and was invited to participate in an inventory count. He had access to all inventory and documentation before and after the date of the execution of the agreement. I agree with plaintiff’s counsel’s submission that Mr. Juby’s desire for an accurate list of current inventories did not motivate Mr. Juby to raise the issue with the Sexsmiths directly prior to Mr. Juby’s refusal to close the transaction.

[41] This court finds the material provisions existed in the agreement of purchase and sale as executed by all parties by January 19, 2011 and there are no vague nor ambiguous material provisions that would call into question the enforceability of the agreement of purchase and sale.

Misrepresentation by the plaintiffs to the defendant that permitted the defendant to modify the price to be paid under the agreement.

[42] Absent a breach of a contractual provision or fraud, a party is required to take all reasonable and good faith steps to complete the transaction under a contract. Here, the defendant claims fraudulent misrepresentation by the plaintiffs.

[43] The four elements that must exist to be established civil fraud are:

a. a false representation made by the party;

b. the party knew or was reckless as to the falsehood of the representation made;

c. the false representation caused the other party to act; and

d. the other party’s action resulted in a loss.

See Wen v. Gu 2019 ONSC 7456 at para 70.

[44] The defendant raises civil fraud by the plaintiffs in relation to the 2010 sales and the inaccuracy of the inventory. Mr. Holmes’ letter to Ms. Hanson of February 3, 2011 indicates that Mr. Juby instructed his lawyer not to close the transaction based on the implications that (1) the 2010 sales were so inaccurate that a renegotiation of the purchase price was warranted and (2) there was no accurate listing of the inventory for the purchaser to know what he was purchasing. From Mr. Holmes’ letter, these points were used to justify the termination of the agreement. Each will be reviewed separately.

2010 Sales

[45] As indicated earlier, the income statement provided by the plaintiffs to Mr. Juby for the period from January 1 to August 30, 2010, reflected sales of $49,930 for that period. Mr. Juby was also provided the sales figures for earlier years. There was no information provided by the plaintiffs nor sought by Mr. Juby as to historical monthly sales.

[46] Mr. Juby’s testimony was that, based on this information alone, he performed a straight-line estimate to project the year-to-date annual sales of $70,000. The annual sales for 2010 actually were approximately $61,000. There was no evidence that the projected sales amount was in any way provided, supported nor represented by the Sexsmiths to him. Mary Sexsmith testified she could not and did not annualize sales for all of 2010 based on business fluctuations. She also testified and this court accepts that the financial information of Chimera for at least 2008 and 2009 were provided to Mr. Juby in December 2010 and before the signing of the agreement of purchase and sale.

[47] Furthermore, there was no evidence to indicate that the sales figure of $49,930 was in any way inaccurate or false at any time. The financial records for the years 2007 to 2010 from the Sales Summary Sheet dated September 28, 2011 showed declining sales and revenues from year to year. This was explained by Mary Sexsmith that this was not a loss of customers but a decline in volume that was attributed to the overall decline in the automotive and other manufacturing industries at that time. I find this was a reasonable explanation that was neither challenged nor contradicted by the defendant.

[48] This court has also considered the submissions of the defendant and the other evidence in the case including (1) that Wayne Sexsmith signed as president of Chimera when the Corporate Profile for that time showed Terrance Fitzgerald who was a former director and president from whom she divorced in 2007, (2) that two affidavits as to liens or encumbrances for closing as signed by Wayne Sexsmith were false and (3) that non-competition agreement naming Kevin Sexsmith was signed by Wayne Sexsmith.

[49] Individually or collectively, these features do not lend support to the defendant’s allegation that the plaintiffs made, nor were reckless in making, false representations as to the income of the business for 2010. The Corporate Profile report, in view of the other evidence in this case, clearly demonstrates that attention to file updated information was lacking and not within the knowledge nor contemplation of Mary Sexsmith, in particular. Mary Sexsmith was a plain-spoken and hard-working individual without legal sophistication. She described herself as a “fancy bookkeeper” who had experience working for accountants and businesses. The signing of the affidavits of Mr. Sexsmith in the presence of counsel in advance of the anticipated closing was likewise not properly a marker of a fraudulent pattern of conduct by the plaintiffs toward the defendant. Lastly, as to the name on the non-competition agreement, I find this was an obvious typographical error by the vendors’ lawyer’s staff.

[50] The more proximate and important evidentiary context is the signed agreement of purchase and sale and the prior letters of intent as referred to earlier. None of these documents make any reference to any representations or warranties as to sales nor estimates in previous years.

[51] In summary, this courts finds there was no misrepresentation of 2010 sales by the plaintiffs.

Inventory

[52] The agreement of purchase and sale likewise did not contain any representations or warranties with respect to the value of the inventory. A letter of intent contained an article that the stock had been represented of having a current value of $86,000, that a formal inventory would be taken and purchase price adjusted in relation to the actual value and, that if no election was taken, the inventory was to be deemed the value as the parties agreed.

[53] Mary Sexsmith testified that Peter Retsinas and Mr. Juby looked at the inventory and they estimated it was $86,000. Her testimony in this regard was unconvincing. She also testified that she estimated the inventory at $90,000. The financial statements for Chimera ending December 31, 2009, listed the inventory at $93,720. Mary Sexsmith indicated this inventory increase was mainly due to Toyota not following through on some purchases. As mentioned earlier, in the last week of December 2010, Mary Sexsmith with the assistance of others counted the inventory in one trailer. There were some inventory discrepancies and she acknowledged that there might have been discrepancies with the inventory in the other trailer too. She also testified to inventory being shown in the program at $75,000 and that the inventory may have varied ten percent either way from that in the accounting program. There is also indication in the financial statements ending December 31, 2010 of another value of the inventory. This will be addressed later in these reasons.

[54] Mary Sexsmith also testified that in 2010 both she and Wayne had been ill. When asked at trial if she thought Mr. Juby had trusted her to give him the results of the inventory, she indicated no. Her testimony further was that there was then no inventory report for December 31, 2010 and there was no breakdown as to what was being transferred. This, standing alone, might appear somewhat unusual. However, in the context of her earlier unchallenged belief that she estimated the business at $225,000, their respective then health challenges and collective desire to sell the business (but not the real property for which there had earlier been an offer through the brokerage by another party) Mary Sexsmith’s evidence was coherent and is supported by the signed agreement of purchase and sale and the surrounding circumstances. There is no refence to any inventory amounts where the entire business was being sold where the expressed exception was the computer.

[55] Mr. Juby’s testimony was that he trusted Mary Sexsmith to come up with the correct inventory since he was unfamiliar with the fastener business and that the Sexsmith’s must have known that he was relying on them for information. Even if the court accept his testimony in this regard which I do not, in face of the provisions of agreement of purchase and sale which he had signed by January 19, 2011 that do not address the inventory valuation, the inventory count that he had declined to participate in and his access to the business details through his access the computer system at some point in January 2011, the defendant has not been able to prove that the Sexsmiths knowingly or recklessly made false representations of inventory to him.

[56] The court also has considered the circumstances and context of the already occurring transition where the vendors provided all customer lists, supplier contacts and various other materials, transferred the business software program to Mr. Juby, introduced him to customers and gave him access to the business records and all inventories – all of which was consistent with the mutual expectations outlined in the signed agreement of purchase and sale. In addition, both lawyers were involved in the execution of the purchase agreement that did not make any reference nor contemplated an allocation of the purchase price to any items that would have otherwise necessitated some determination or obligations between the parties in that regard.

[57] This court finds that the statements made by Mary Sexsmith in relation to inventory were, despite the discrepancies that might have existed, neither falsely nor recklessly made knowing these should have been known to be false. This courts finds there was no misrepresentation of the inventory by the plaintiffs to the defendant. In any event, there is no other evidence provided by the defendant to determine what the actual inventory was or would have been on December 31, 2010.

Anticipatory breach by the defendant in requesting a modification of the price to be paid

[58] The parties through their respective lawyers had agreed on February 1, 2011 to extend the closing date to February 4, 2011. I accept Ms. Hanson’s testimony that until February 3, 2011, she expected the parties to be working toward closing, addressing any objections or issues to complete the transaction.

[59] The defendant submits that his counsel submitted a list of requisitions of usual documents in addition to the discharge of a lien with a credit union and that these were not addressed by the vendors nor their lawyer.

[60] On February 4, 2011, Ms. Hanson sent a fax letter purporting to tender. The fax was much later discovered not to have gone through to Mr. Holmes at the time or ever. The defendant takes issue with various documents provided by Ms. Hanson and submits these did not amount to a proper tender as required by the agreement. I will deal with this position later in this decision.

[61] Nevertheless, Mr. Juby was still required to deliver a promissory note and payment on the extended closing date. Mr. Juby did not tender nor took steps to communicate that he was ready, willing and able to complete the contract by delivering an executed promissory note.

[62] Mr. Holmes’ testimony was that on February 3, 2011, Mr. Juby had already instructed him not to close since he wanted to renegotiate the price or terminate the transaction. Mr. Juby testified at trial that he had no intention to walk away from the deal. I do not accept Mr. Juby’s evidence in this regard.

[63] Mr. Holmes, in view of what his client was telling him and his instructions from his client, did not communicate any objections or issues with the draft closing documentation that had been delivered to him by Ms. Hanson for his review. As testified by Mr. Holmes in his cross-examination, he did not want to suggest any changes to what he had already received or had not received that would prevent the defendant from relying on what was in the purchase agreement as a ground to terminate the transaction as Mr. Holmes knew the circumstances from Mr. Juby.

[64] I find that Mr. Juby wanted to renegotiate the purchase price of the agreement based on his changing perception and desires in the situation. Mr. Juby was not entitled to insist on renegotiating the agreement based on such discrepancies in this case. The discrepancies, even if they existed, simply did not amount to misrepresentations at law as this court has found.

[65] I find the defendant did commit an anticipatory breach of the agreement.

Vendor in breach of asset purchase agreement by misrepresentation, failure to tender or inability to close.

[66] I had earlier commented on some of the allegations of misrepresentation of the plaintiffs earlier in relation to other issue in this case.

[67] As to whether “time being of the essence” of the contract where an agreement is extended, this court is cognizant of the Ontario Court of Appeal decision in 2329131 Ontario Inc v. Carlyle Development Corp. 2014 ONCA 132 that requires the expressed statement that “time is of the essence” for the new date. Here, Mr. Holmes acknowledged and admitted that the extension here did not so expressly state time is of the essence.

[68] In addition, this court finds that the defendant cannot rely on the plaintiff not completing the transaction since he was not acting in good faith to complete the transaction and was otherwise trying to renegotiate or finding a way to get out of the agreement. See also Di Millo v. 20992320 Ontario Inc. 2018 ONCA 105133 and at para 33 and 34.

[69] There was much testimony and evidence received as to communications between the lawyers and the parties after February 4, 2011. It is unnecessary to review the evidence nor discuss this further based on the finding of an anticipatory breach. Such a finding is determinative, and the subsequent actions of the vendors’ and purchaser’s lawyers need not be considered further.

[70] By February 5, 2011, when she was made aware the transaction was not closing, Mary Sexsmith wanted the business back and felt the reputation and business had been run into the ground. The program software was transferred back to Chimera by February 9, 201. Mary Sexsmith resumed the business. She disagreed that she was able to get most of her suppliers and discounts back but rather only some of them over a significant period of time. She testified that some customer lists, technical reference books and desk were not returned.

Liability and Damages

[71] Where liability is found for the plaintiff, as is here, the approach is to put the plaintiff in the position that they would be if the contract was performed. In situations of an anticipatory breach, the appropriate method to calculate damages is based on the expectancy principle that places the person in the position as if the contract had been performed. See Young v. Euro Custom Homes Inc. 2015 ONSC 5828 at paras 14 to 16.

[72] The plaintiff submits that proven damages are $89,343.00, calculated as follows:

Purchase Price $150,000 5% of gross sales for 2 years $ 12,000 Legal Fees on aborted sale $ 3,000 Eacott Sales $ 1,785 Inventory Recovered ($75,609) Capital Assets Recovered ($ 2,028) Total $ 89, 343

[73] The defendant submits that damages, at most, should be $23,029 and, among other things, questions various aspects, the main points as follows:

a. awarding a percentage of sales where the trajectory of sales was declining and where the amount was intended to reflect work the plaintiffs would have otherwise performed the two-year period. The company was also paying some of the plaintiffs’ own personal expenses as well. The plaintiffs would have retained this amount based on the sales achieved in any event. Lastly, the defendant submits the plaintiffs have not proven or provided actual sales figures for 2012;

b. the inventory value recovered based on Mary Sexsmith evidence at trial is unreliable and substantially out of line based on the company’s financial statements as of December 31, 2010 which had inventory reflected at one point as $97,251;

c. the calculation of capital returns does not reflect actual values of these items and substantially are underestimated. In addition, the amount estimated by the plaintiff also includes items such as computer equipment, motor vehicles and furniture and fixtures not involved in the transaction;

d. the valuation does not include the customer and supplier information and the plaintiff maintains were valuable and otherwise were soon after returned by the defendant; and

e. the damages appear excessive and there is no reliable evidential basis where the business interruption period was at most only five weeks with the use of the computer program by the defendant for approximately two weeks overall.

[74] The defendant’s submissions as outlined above do have merit and will address those that apply in this case individually.

[75] The 5% fee was to recognize the efforts the plaintiff would have made throughout the two-year period. The plaintiffs since will have otherwise received this amount where the plaintiff operated and maintained all sales for the two-year period. In these circumstances, such an additional amount ought not be granted as compensation to the plaintiff that the defendant is liable for.

[76] This court is also mindful of the evidence of the Mary Sexsmith that she had placed a value of the business in 2010 at $225,000. The court also accepts that there was disruption and some impairment on a temporary basis to the goodwill, reputation and the profitability of the business even though any amounts are most difficult to determine.

[77] As to the inventory, the plaintiff did not complete an inventory at any point in 2011and the court finds the most suitable record of inventory on a cost basis is as reflected in financial statements that, as of December 31, 2010, that shows inventory of $97,251. This court is also mindful that the testimony of Mary Sexsmith was also reflected that proximate to the closing there was some idea the amounts were $75,000 and perhaps $80,000. She acknowledgement a possible variation. This court finds, for the purposes of the damage calculation, the onus should properly be on the plaintiff to demonstrate that the inventory is less than the maximum at reflected in the actual business statements it was otherwise solely responsible for. There was no inventory ever completed by the plaintiff. The plaintiff has not provided convincing evidence otherwise. This court finds on this evidence that the inventory amount is $97,251. Assuming an amount for the cost of sales made by the defendant of $785 as accepted, the inventory amount should be reduced to $96,251. The additional inventory purchased by the defendant shall also be recognized.

[78] As to the capital assets, these amounts should be increased to reflect the points properly raised by the defendant. The capital assets recovered should be increased to a value of $12,000. There were two tractor trailers and scale being retained by the Chimera as mentioned earlier and this total more reasonably reflects the total replacement values of these items and is more in line with the estimate of these items as referred to in Mrs. Sexsmith’s email dated October 4, 2010.

[79] As to the supplier and customer lists and materials, this court has very little evidence and, in these circumstances, determines a value of $7,000 for such materials returned to the plaintiffs as reasonable.

[80] This court finds the total damages owing to plaintiff by the defendant is $39,839, calculated as follows:

Purchase Price $150,000 5% of gross sales for 2 years $ NIL Legal Fees on aborted sale $ 3,000 Eacott Sales $ 1,785 Inventory added $ 305 Inventory Recovered ($96,251) Customer/supplier info ($ 7,000) Capital Assets Recovered ($12,000) Total $ 39,839

[81] There shall be prejudgment interest upon this amount commencing February 3, 2011 at the rate of 3% per year and post judgement interest of 2% per year.

Summary and Conclusions

[82] For reasons given, the plaintiffs shall have judgment in the amount of $39,839 plus prejudgment and post judgment interest as specified.

[83] As to costs, if the parties cannot agree to costs within 30 days, each party may make written submissions as to costs limited to 5 pages, excluding references to caselaw and any offers to settle, within 45 days.

“Justice M.D. McArthur” Justice M.D. McArthur

Dated: May 10, 2022

COURT FILE NO.: 59/11 DATE: 20220510 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: WAYNE SEXSMITH, MARY SEXSMITH and CHIMERA INDUSTRIAL SALES INC. AND EACOTT GROUP INC. and KEVIN JUBY REASONS FOR JUDGMENT Justice M.D. McArthur

Released: May 10, 2022