Court File and Parties
COURT FILE NO.: CV-22-1112 DATE: 2023/12/07
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
John Verhoeven Plaintiff
– and –
Zachary Williams, Ian Williams, and DW Landscaping Inc Defendants
COUNSEL: Andrew M. Beney, for the Plaintiff Steven D. Gadbois, for the Defendants
HEARD: October 24, 2023
BEFORE: THE HONOURABLE JUSTICE A.D. Hilliard
Overview
[1] The Plaintiff, John Verhoeven, brought a motion for summary judgment on his claim, and dismissal of the Defendants counterclaim. The Defendants, Zachary Williams, Ian Williams, and DW landscaping Inc resist the Plaintiff’s motion on both heads of relief.
[2] Mr. Verhoeven brought a claim against the Defendants, jointly and severally, for payment under default in relation to a Promissory Note. The amount of that claim is $89,000 plus pre-litigation costs of $2,242.56, pre- and post-judgment interest and costs of this action.
[3] The Defendants have made a counterclaim for damages in the amount of $150,000, pre- and post-judgment interest and costs resulting from Mr. Verhoeven’s alleged negligent misrepresentations.
[4] For the following reasons, the Plaintiff’s motion is granted.
Factual Background
[5] The following facts are not in dispute.
[6] Mr. Verhoeven was the co-owner of a company named Horticraft Landscaping.
[7] Mr. Zachary Williams is the sole officer and director of DW Landscaping Inc. Mr. Ian Williams is Mr. Zachary Williams’s father.
[8] In the summer of 2020, Mr. Zachary Williams went to work for Horticraft Landscaping. Although the exact nature of the relationship that developed between Mr. Zachary Williams and Mr. Verhoeven is in dispute, what is agreed is that Mr. Zachary Williams’s employment by Horticraft Landscaping was for the purpose of allowing him to learn the landscaping business, specifically the business run by Mr. Verhoeven.
[9] In and around the fall of 2020, Mr. Zachary Williams entered into negotiations with Mr. Verhoeven to purchase Horticraft Landscaping. Those negotiations ultimately resulted in the drafting of a Share Purchase Agreement (SPA). Both Mr. Verhoeven and Mr. Zachary Williams retained legal counsel to assist in finalizing the SPA.
[10] The existing Horticraft contracts were listed in Appendix “B” to the SPA. One of the contracts, referred to as the Dupar Contract, was in relation to work to be completed at a property in Cambridge. The estimated value of the contract upon completion was listed at $177,000. The Dupar Contract was a new build contract. All other contracts listed in Appendix “B” were ongoing maintenance contracts.
[11] All of the contracts listed in Appendix “B” originated from an arm’s length company, Spec Construction Inc. (“Spec). Work sourced by Spec accounted for 100% of all contracts Horticraft had as of April 19, 2021. All of the ongoing maintenance contracts held by Horticraft at the time of sale originated from new build contracts sourced by Spec.
[12] The total value of all existing contracts / work on hand at the time of the signing of the SPA was $298,206. The value of the contracts was not purchased by DW Landscaping, rather a 5% royalty fee, rounded down to $12,000, was the purchase price attached to the contracts listed in Appendix “B”.
[13] On April 19, 2023, the purchase of Horticraft Landscaping by DW Landscaping was completed for a total purchase price of $292,000. Pursuant to the SPA, an initial payment of $100,000 was made, with the remaining $192,000 to be paid according to the terms of a Promissory Note, which note was personally guaranteed by both Misters Zachary and Ian Williams.
[14] The Promissory Note set out a schedule of payments to be made commencing May 15, 2021, with payments of $3,000 monthly plus $56,000 on July 31 and December 31, 2023, and a final payment of $50,000 on July 31, 2022. There was no interest that accrued or was due on the Promissory Note.
[15] Despite DW Landscaping completing work on the Dupar contract, Spec failed to pay invoices as rendered after the sale of Horticraft was completed. The outstanding unpaid balance on the Dupar contract is $139,795.62. Having not received payment on the Dupar contract, Mr. Williams stopped making payments on the Promissory Note.
[16] Mr. Verhoeven gave DW Landscaping formal notice of default on August 19, 2022, and demanded payment in full pursuant to the terms of the SPA. The amount owing on the Promissory Note as of the default is $89,000. Since the formal notice of default, no further payments have been made.
[17] Mr. Verhoeven has incurred pre-litigation costs of $2,242.56.
Issues
[18] The issues to be determined are as follows:
Is this an appropriate case for summary judgment?
Has the Plaintiff demonstrated that there is no genuine issue requiring a trial in relation to the Plaintiff’s claim?
Has the Plaintiff demonstrated that there is no genuine issue requiring a trial in relation to the Defendant’s counterclaim?
Analysis
Summary Judgment
[19] Motions for summary judgment are governed by Rule 20 of the Rules of Civil Procedure (RCP). A court shall grant summary judgment under RCP 20.04 if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[20] The Supreme Court of Canada set out the modern approach to motions for summary judgment in Hryniak v Mauldin. There is no genuine issue for trial when a motion’s judge can reach a fair and just determination of the motion on the merits. This is the case when the process “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.”[^1]
[21] Although the Court acknowledged that the RCP now allow for a motions judge to exercise his discretion to allow oral evidence to be called on a motion for summary judgment, the Court also clarified that the first step is to determine whether or not there is a genuine issue for trial on the evidence filed on the motion:
On a motion for summary judgement under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(20(a) [emphasis in original].[^2]
[22] Most of the facts in this matter are not in dispute. The issues regarding both the Plaintiff’s and Defendant’s claim relate to matters of contract interpretation, which involves legal analysis rather than factual findings.
[23] The analytical approach to contractual interpretation by judges involves reading the text of the written agreement and applying common sense and logic to determine the parties’ intentions. The Ontario Court of Appeal (OCA) set out the following general principles of contract interpretation:
When interpreting a contract, an adjudicator should:
(i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the "cardinal presumption" that they have intended what they have said;
(ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
(iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and
(iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.[^3]
[24] Summary judgment is a proportionate means of achieving a just result on the facts before me. The amount of money the parties are litigating over does not justify the expense of a trial when considering that most of the facts are not in dispute.
[25] Summary judgment is also more expeditious and less expensive than a trial in this case. As noted above, the subjective intentions of the parties are not to be considered in interpreting the contract so hearing viva voce evidence at a trial would not add anything to the analysis and would only lead to unnecessary expense for both parties.
[26] I am therefore of the view that this is exactly the type of case for which summary judgment is appropriate.
Plaintiff’s claim
[27] Mr. Zachary Williams on behalf of DW Landscaping does not dispute that the terms of payment of the Promissory Note were not met. He acknowledges that payments ceased being made and the company was therefore in default. There is no contest that Mr. Zachary Williams and Mr. Ian Williams personally guaranteed the Promissory Note.
[28] The dispute regarding the Promissory Note centres around the Defendants’ position that payment was contingent upon the completion of the Dupar contract. However, the dispute is less factual than it is one of interpretation. It is not in dispute that the SPA does not contain any reference to the Dupar contract being paid as a condition precedent to the payments set out in the Promissory Note.
[29] The Defendants’ primary argument against the motion for summary judgment being granted is based upon their view of how the SPA should be interpreted. They argue that the way in which payments were structured and the surrounding circumstances of the SPA should be considered in determining whether payment of the Promissory Note was contingent upon the completion of the Dupar contract.
[30] The evidence of Mr. Williams is that the purpose and timing of the payment schedule set out in the Promissory Note was to allow for payment on the Dupar contract which would then provide DW Landscaping the money to satisfy payment of the Promissory Note. Mr. Verhoeven’s evidence is that the only conversation the parties had about the Dupar Contract was regarding the value of the contract covering the expenses related to completion of the contract. Neither of these statements are inherently contradictory and it is notable that neither Mr. Verhoeven nor Mr. Williams specifically deny the other’s positions on this issue.
[31] However, in addition to the general principles of contract interpretation set out above, I must also consider the cautionary direction of the Ontario Court of Appeal and the Supreme Court of Canada that courts are not to use the surrounding circumstances to overwhelm the words of the agreement, nor to deviate from the text of the contract to the point of effectively creating a new agreement.[^4]
[32] It was open to Mr. Williams to negotiate a term of the SPA to specify that payment of the Promissory Note was contingent upon the payment of the Dupar contract. However, there is no evidence that such a term was even contemplated by the parties. Although some correspondence between the parties has been entered into evidence, none of that correspondence reveals any discussions or negotiations linking payment of the Dupar contract to satisfaction of the Promissory Note.
[33] There is no genuine issue for trial on the facts before me. The Defendants have acknowledged defaulting on the promissory note and a plain language reading of the SPA reveals nothing that makes payment of the Dupar contract condition precedent to the payment of the promissory note.
Defendants’ counterclaim
[34] The claim for negligent misrepresentation arises from Mr. Verhoeven allegedly telling Mr. Williams that Spec was a good ongoing customer from whom Mr. Williams could expect further business. At the time the SPA was executed, all of the work being done by Horticraft were contracts that were obtained through Spec. Mr. Williams takes the position that Mr. Verhoeven knew or ought to have known that no more business could be expected from Spec and that receipt of further payments from Spec was seriously at risk.
[35] There are five (5) legal requirements for a party to be successful in proving a claim of negligent misrepresentation:
There must be a duty of care based on a “special relationship” between the representor and the representee.
The representation in question must be untrue, inaccurate, or misleading.
The representor must have acted negligently in making said misrepresentation.
The representee must have relied, in a reasonable manner, on said negligent misrepresentation.
The reliance must have been detrimental to the representee in the sense that damages resulted.[^5]
[36] There is no evidence that a “special relationship” existed between Mr. Verhoeven and Mr. Williams. Although Mr. Williams was employed by Mr. Verhoeven for a period of time, that employment was at Mr. Williams’s request in furtherance of his desire to gain knowledge of the business he was intending to acquire. This was not a situation where Mr. Williams was a long-time employee of Mr. Verhoeven, mentored and groomed to take over the business. The evidence is that Mr. Williams first contact with Mr. Verhoeven was as a potential purchaser of Horticraft not someone looking for employment. Furthermore, the employer-employee relationship between Mr. Verhoeven and Mr. Williams was of short duration, approximately eight (8) months. The age difference between Mr. Verhoeven and Mr. Williams does not itself create a special relationship.
[37] Although Mr. Williams claims that Mr. Verhoeven knew or ought to have known that payment of the Dupar contract by Spec could not or would not be fulfilled, there is no evidence to support that position. At the time of the signing of the SPA, the Dupar contract was in good standing and all other Spec contracts had been paid in full.
[38] Any representations made by Mr. Verhoeven cannot be assessed with the benefit of hindsight. Litigation commenced against Spec after the execution of the SPA cannot be used to inform a determination of whether representations made by Mr. Verhoeven in 2021 were true and accurate at that time. There is also no evidence as to what the relationship between Mr. Verhoeven and Michael Rouse, the owner of Spec, was in and around 2021. Spec continued to have work that Horticraft was asked to bid on in 2020. There is nothing in the evidence to support the proposition that Mr. Verhoeven knew or ought to have been suspicious about the corporate affairs of Spec in 2020 or 2021.
[39] Even if there was evidence of an untrue, inaccurate or misleading representation having been made by Mr. Verhoeven, there must be evidence that he acted negligently in making that misrepresentation and there is none. The Defendant submits that their efforts to obtain evidence about what Mr. Verhoeven knew or ought to have known about Spec has been significantly hampered by the resistance of Mr. Rouse to respond to or engage in parallel litigation. However, the Defendants have an onus to put their best foot forward on a motion for summary judgment and I would note that an adjournment of the motion was not sought at any point before or during argument. Furthermore, it is pure speculation that evidence in support of the Defendant’s claim for negligent misrepresentation will be forthcoming from the litigation involving Spec.
[40] Paragraph 16 of the SPA specifically limits Mr. Verhoeven’s liability to the difference between what Mr. Williams is able to obtain by way of judgment and what is owing:
Where the Purchaser has a claim against the Vendor relating to one or more representations or warranties made by the Vendor, and the Purchaser is entitled to recover damages from a third party then the amount of the claim against the Vendor will be reduced by the recovered or recoverable amount less all reasonable costs incurred by the Purchaser in recovering the amount from the third party.
[41] In this case, Mr. Williams has obtained default judgment for the entire amount left owing on the Dupar contract. By judgment dated October 13, 2022, Horticraft was awarded the sum of $140,128.83 plus $1,991.60 in costs. Although not in evidence before me, Defendant’s counsel submitted and I accept that Mr. Rouse has now brought a motion to set aside that default judgment. However, what is relevant for the purposes of this motion is that paragraph 16 of the SPA refers not only to recovered amounts, but also recoverable amounts less costs. Even if the claim for negligent misrepresentation were made out, paragraph 16 of the SPA would act as a shield for Mr. Verhoeven.
[42] I accept Mr. Williams’s evidence that he relied on the representation of Mr. Verhoeven that the payment on the Dupar contract would be satisfied. However, that does not in and of itself meet the fourth criteria. In addition to demonstrating the representation was untrue, inaccurate or misleading and negligently made, Mr. Williams must also demonstrate that his reliance on the negligent misrepresentation was reasonable. Both Mr. Verhoeven and Mr. Williams were represented by legal counsel in the preparation and execution of the SPA. It was incumbent on Mr. Williams to make all necessary inquiries into the contracts held by Horticraft and to exercise due diligence in assessing any representations made to him by Mr. Verhoeven about the business.
[43] There is no evidence as to what efforts, if any, Mr. Williams undertook to make inquiries about the status of the Dupar contract or Spec. There is nothing in the evidence to suggest that Mr. Verhoeven assured Mr. Williams that he could operate a viable landscaping business on work sourced from Spec alone. Indeed, the evidence is to the contrary. Mr. Williams confirmed during his examination for discovery that Mr. Verhoeven was sub-contracted after the sale of Horticraft to assist Mr. Williams in quoting new jobs. This evidence is confirmed by Mr. Verhoeven. Even if Mr. Verhoeven made the representation to Mr. Williams that Spec was a good customer from whom he could expect ongoing business knowing that to be untrue, I find that it was not reasonable for Mr. Williams to rely on that representation without any further inquiries.
[44] I am satisfied that there is some evidence that DW Landscaping, and by extension Mr. Williams, suffered damages as a result of the Dupar contact not being fulfilled. A dispute about the quantum of damages does not invalidate the satisfaction of this element of the test. All that must be shown is that some damages resulted and there is evidence in that regard.
[45] However, if any of the legal requirements for negligent misrepresentation are not met then the claim fails. In this case, evidence is lacking on four out of five of the requirements. I therefore find that the Plaintiff has satisfied his burden to demonstrate that there is no genuine issue for trial regarding the Defendant’s counterclaim.
Conclusion
[46] Based on all of the foregoing, I find that the Plaintiff has been successful in demonstrating that there is no genuine issue requiring a trial. The Plaintiff’s claim is granted, and the Defendant’s counterclaim is dismissed.
[47] The parties shall file written submissions on costs as follows:
The Plaintiff shall file his primary submissions on or before January 5, 2024, which shall be no longer than 3 pages in length, double-spaced, 12-point font, exclusive of Offers to Settle and Bill of Costs.
The Defendants shall file their responding submissions on or before January 12, 2024, which shall be no longer than 3 pages in length, double-spaced, 12-point font, exclusive of Offers to Settle and Bill of Costs.
Reply by the Plaintiff on or before January 19, 2024, which shall be no longer than 2 pages in length, double-spaced, 12-point font.
[48] Order to go:
Judgment issued in favour of the Plaintiff in the amount of $89,000 plus pre-litigation costs, fixed in the amount of $2,242.56.
The Defendant’s counterclaim is hereby dismissed.
A.D. Hilliard
Released: December 7, 2023
COURT FILE NO.: CV-22-1112 DATE: 2023/12/07
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
John Verhoeven Plaintiff
– and –
Zachary Williams, Ian Williams, and DW Landscaping Inc Defendants
REASONS FOR JUDGMENT
A. D. Hilliard, J.
Released: December 7, 2023
[^1]: 2014 SCC 7, [2014] 1 SCR 87 at para 49.
[^2]: Ibid at para 66.
[^3]: Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, [2017] O.J. No. 6654 (CA) at para. 65. The general principles set out by the majority judgement quoted were agreed with by Laskin, J.A. in dissent, whose dissenting judgment found favour with the SCC in overturning the majority judgment of the OCA, 2019 SCC 60, [2019] S.C.J. No. 60.
[^4]: Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592 at para 46 and Corner Brook (City) v. Bailey, 2021 SCC 29 at para 20.
[^5]: Doumouras v Chander, 2019 ONSC 6056, [2019] O.J. No. 5322 at para. 25 (SCJ).