North Star Ford Sales (Calgary) Inc v Tifferelle Holdings Ltd, 2013 ABQB 412

Court of Queen ’ s Bench of Alberta Citation: North Star Ford Sales (Calgary) Inc v Tifferelle Holdings Ltd, 2013 ABQB 412 Date: 20130723 Docket: 1201 11505 Registry: Calgary Between: North Star Ford Sales (Calgary) Inc Applicant - and - Tifferelle Holdings Ltd, formerly known as Crowfoot Ford Sales Limited and Ford Credit Canada Limited Respondents _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice L. D.

Wilkins _________________________________________ ______________ [ 1 ] North Star Ford Sales (Calgary) Inc (North Star) purchased the dealership known as Crowfoot Ford from Tifferelle Holdings Ltd (Crowfoot) with an effective date of April 30, 2011. Ford Credit Canada Limited (Ford Credit) provided floor plan financing for the vehicle inventory which was taken over by North Star at the time of the purchase. [ 2 ] North Star and Crowfoot now disagree as to the proper

interpretation which should apply to the terms of the Asset Purchase Agreement. They have submitted that disagreement to this Court pursuant to s 7.1(3) of the Rules of Court to finally determine that

argument on the

interpretation of the contract as a question of law without the necessity of a trial. [ 3 ] The issues in dispute relate solely to matters variously described as “disputed hold back amounts” (North Star) and “disputed incentives (Crowfoot). At the time of the present application there remain 3 such matters in dispute: 1. Amounts paid by Ford Canada under the Wholesale Assistance Program 2. Amounts paid by Ford Canada under the Advertising Rebate 3. Amounts paid by Ford Canada under the Preparation and Condition Program North Star Argument [ 4 ] North Star argued that the proper

interpretation of the Asset Purchase Agreement demanded a finding that North Star was entitled to an adjustment for the disputed hold back amounts. [ 5 ] Counsel urged the Court to adopt a strict

interpretation of the provisions of the Agreement in a commercially reasonable manner citing the judgment of Blair, J A in Ventas, Inc v Sunrise Senior Living Real Estate Investment Trust , 2007 ONCA 205 at para 24 .

Referring to s 3.6 of the Agreement Counsel argued that any amounts paid or payable to the Seller by Ford Canada which fall within the definition of rebates are required to be adjusted in favour of the Purchaser. [ 6 ] Counsel argued that failure to make such a finding would mean that the Vendor would receive those amounts twice – once when the rebates were included in the invoice price for a new vehicle and once again when the rebate was paid by Ford Canada to the Seller. [ 7 ] North Star further argued that Ford Credit contracts support that

interpretation and must be considered by this Court when interpreting the Asset Purchase Agreement. [ 8 ] The selling dealer (Crowfoot), as part of the floor plan financing security required by Ford Credit, assigns to Ford Credit all its property interests in the vehicle inventory.

The Purchaser (North Star) accepts that assignment and agrees its contractual rights with the Vendor do not affect that assignment in favor of Ford Credit. [ 9 ] North Star further agrees that it was required to assign all of its receivables to Ford Credit, warranting its ownership of the same. [ 10 ] The invoice price of each of the new vehicles includes the amount of the Ford rebates and those are accordingly assigned to Ford Credit under the Wholesale Finance Contract. [ 11 ] Alternatively North Star argues that if the disputed holdback amount are found to be lawfully retained by Crowfoot, the amounts owing by North Star to Ford Credit under the financing documents should be reduced by the same amount, as those rebate amounts are part of the amounts assigned to Ford Credit.

Crowfoot Argument [ 12 ] Crowfoot argued that no post-closing assignment in relation to the disputed incentives was intended or contemplated to be made by the parties in the Asset Purchase Agreement. Counsel argues that Ford Credit is not a proper party to the dispute. There is no basis to reduce the amount of the financing provided by Ford Credit by the amount of the disputed incentives. The Purchase and Sale Agreement provide for the sale of all the Vendor’s assets at the date of closing for $20.8 million dollars allocated among various assets.

The price allocated to the new vehicle inventory is NIL provided the Purchaser assumed the financing thereon by Ford Credit. [ 13 ] Para 3.6 provides for the usual adjustments to be made for all amounts paid or payable by Crowfoot. [ 14 ] Para 3.4 provides for adjustments for GST and holdbacks received by Crowfoot and for a further adjustment in favour of the Purchaser for the holdback payable by Ford Canada on the new vehicle inventory (the 2%). Counsel argued that Crowfoot provided a conveyance document and bill of sale to North Star for the new vehicle inventory as at the date of closing.

Crowfoot argued it signed the Internal Lender Document requested by Ford Credit solely at the request of Ford Credit, its former floor plan financer. [ 15 ] Ford Canada had paid the disputed incentives to Crowfoot prior to the date of closing. The Vendor’s calculation of the amounts so paid is as follows: 1) Preparation and cleanup - $18,423.00 2) Advertising - $24,787.00 3) WAP - $46,887.00 In argument Crowfoot explained the purpose for which Ford Canada reimbursed the dealer for those amounts. [ 16 ] Crowfoot argues that it is the

interpretation of 3.6(

b) of the Asset Purchase Agreement which is at the heart of this dispute. That

section reads:

b) all amounts paid or payable by or in the case of amounts such as rebates or royalties, payable to Crowfoot under all contracts. [ 17 ] Crowfoot argues that the disputed incentives at issue here are rebates and royalties and those items are adjustable only where they remain “payable” to Crowfoot.

[ 18 ] Once such an amount has been paid it is no longer payable and therefore not to be adjusted. [ 19 ] The argument by North Star that this

interpretation would see the Vendor paid twice is not correct. Crowfoot at the time of closing has largely incurred the costs the rebate was designed to alleviate. [ 20 ] Crowfoot argues Ford Credit is not a proper party to this suit as it is not a party to the Asset Purchase Agreement. Finance documentation was all signed after the sale documentation and was solely designed to secure the Ford Credit interest in the new vehicle inventory which had then been transferred to North Star.

Ford Credit Argument [ 21 ] Ford Credit argued that it was not a party to the Asset Purchase Agreement although its agreement to provide wholesale inventory financing to North Star was conditional on the Asset Purchase Agreement being concluded. Ford Credit at no time received any of the Ford Canada rebates owing either to Crowfoot or North Star.

Ford Credit had also provided the same floor plan financing to Crowfoot as was being provided to North Star. [ 22 ] By virtue of the Asset Purchase Agreement, North Star was required to assume all of the obligations of Crowfoot owing to Ford Credit at the closing without any adjustments. [ 23 ] Ford Credit at no time received any rebates paid by Ford Canada and claims no interest in any such payments made to Crowfoot prior to the closing. [ 24 ] Ford Credit seeks an Order dismissing the claim for relief by North Star with costs.

Decision [ 25 ] The provisions of the Asset Purchase Agreement relating the matters in dispute are as follows: "3.4 Adjustments to the Purchase Price The Purchase Price shall be adjusted in the following manner: (ii) There shall be a downward adjustment in an amount equivalent to the aggregate amount of GST and holdbacks received by Crowfoot; and (iii) There shall be a further adjustment in favour of the Dealer for the holdback payable by Ford of Canada on the new vehicle inventory and on the demonstrator vehicles which are included in the Purchased Assets." “3.6 Adjustments The Parties shall make without duplication the usual adjustments relating to the Business and the Purchased Assets as at the close of business on the Effective Date and the other adjustments contemplated by this subsection.

Adjustments shall include ... : (

b) all amounts paid or payable by, or in the case of amounts such as rebates or royalties, payable to Crowfoot under all Contracts....” 1.1(r) “Contracts” means the contracts, purchase orders, service orders agreements, warranties, warranty policy and other contractual obligations of Crowfoot to the extent to which the same relate to the ordinary course operations of the Business, including but not limited to those listed in

Schedule 5 and the Non-Assignable Contracts, but excluding any of the same to the extent to which they relate to Excluded Assets”; 1.1 (aa) “Excluded Assets” means: (

i) all cash, bank balances, moneys in possession of banks and other depositories, term deposits and similar cash property of, owned or held by or for the account of the Seller as at the close of business on the Effective Date; [ 26 ] By the provisions of para 3.6 amounts paid or payable by Crowfoot under all contracts are subject to adjustments and amounts such as rebates and royalties payable to Crowfoot are subject to adjustment. The point at issue is whether the disputed incentives (so named by the Vendor) or the “disputed holdback amounts” (so named by the Purchaser) constitute “rebates or royalties payable to Crowfoot”.

[ 27 ] North Star in its brief argued that each of the disputed holdback amounts is a rebate payable or paid by Ford Canada with respect to the new vehicles. [ 28 ] Crowfoot argues that each of those disputed incentives was paid to Crowfoot by Ford Canada before the closing date and there were no such items “payable to Crowfoot” at the time of closing. [ 29 ] This Court has no difficulty in concluding each of the disputed holdbacks or incentives were rebates. [ 30 ] However, by virtue of the terms of the lengthy and complex agreement negotiated between Vendor and Purchaser adjustments to the purchase price were only to be made for rebates payable to Crowfoot .

The distinction between amounts paid or payable by Crowfoot pursuant to the contracts which were adjustable and the rebates or royalties payable to Crowfoot which were not could not be clearer. There can be no finding of ambiguity. [ 31 ] The claim by the Purchaser that this

interpretation would see Crowfoot paid twice for those items is not correct. Each of the items represents a compensation paid by Ford Canada for expenses incurred by Crowfoot prior to the closing date. To interpret the agreement to provide those costs would be paid to the purchaser who had not incurred any of the costs would be a commercially unreasonable

interpretation as well as an

interpretation which is not possible having regard to the words chosen by the contracting parties. [ 32 ] The amounts of those rebates paid to Crowfoot prior to the closing constitute “cash or bank balances” of Crowfoot which are excluded assets pursuant to s 1.1(a)(

a) of the agreement. [ 33 ] In this case there can be no consideration of the doctrine of contra preferendum. Both parties to the Purchase and Sale Agreement were represented by Counsel and agreed to the words chosen. Those words do not create an ambiguity. [ 34 ] Finally the argument of North Star that the

interpretation of the Purchase and Sale Agreement must take into account the floor plan financing agreements required by Ford Credit cannot be accepted for the following reasons: 1. The Asset Purchase Agreement contains an “entire agreement” provision which prohibits reference to any other agreements, negotiations, discussions, prior understandings and undertakings written or oral. (1.5) 2. It is clear from the facts that all of the right title and ownership of Crowfoot in the vehicle inventory was conveyed directly to North Star as contemplated by the Purchase and Sale Agreement at the closing date.

That transfer of ownership was further confirmed by the delivery to North Star of a general conveyance and bill of sale at the closing date. 3. The documentation required by Ford Credit to replace its security for the floor plan financing previously executed by Crowfoot with new floor plan security executed by North Star dated one day after the closing date cannot affect the

interpretation of the Purchase and Sale Agreement. That is so, notwithstanding that Ford Credit requested Crowfoot to execute an Assignment of Crowfoot’s interest in the Wholesale Conditional Sales Contract. North Star assigned “all refunds, rebates, monies or credits now or hereafter owing to the buyor by the manufacturer…” It is amounts now or hereinafter owing to North Star that become part of the floating charge when the same is triggered by default.

Amounts previously received by North Star from Ford Credit Canada are not part of the security. [ 35 ] This Court must find that North Star had the ownership and property interest in the vehicles that were in turn pledged to Ford Credit when the new security agreement was executed. The amount of the debt to Ford Credit assumed by North Star was the same as that which was owing by Crowfoot at the closing date. Those amounts were agreed by each party to be paid to Ford Credit.

There is no merit in the argument by North Star that somehow this Court should reduce the amounts owing to Ford Credit by the rebates paid to Crowfoot. [ 36 ] Accordingly the claim of North Star against Crowfoot is dismissed with costs. This Court declares that Crowfoot is entitled to receive the amount of all rebates actually paid to Crowfoot prior to the closing date. [ 37 ] The claim of North Star against Ford Credit is also dismissed with costs. Such a claim should never have been advanced. Heard on the 29 th day of April, 2013. Dated at the City of Calgary, Alberta this 23 rd day of July, 2013. L. D.

Wilkins J.C.Q.B.A. Appearances: Alexandra C Bochinski of Davis LLP

for the Applicant John Y. Pak of McLeod Law LLP for the Respondent