2013 ONSC 6055, 2013 ONSC 6055

CITATION : Hafiz v. Rahman, 2013 ONSC 6055 DIVISIONAL COURT FILE NO.: 441/12 DATE: 20130927 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: Al-Asad Hafiz, Plaintiff (Respondent) AND: Towfiq Ahmed Rahman, Defendant (Appellant) BEFORE: Mr. Justice H.J.

Wilton-Siegel COUNSEL: Al-Asad Hafiz , Self-Represented Plaintiff (Respondent) Jayson Thomas , for the Defendant (Appellant) HEARD: September 11, 2013 ENDORSEMENT [ 1 ] The appellant Towfiq Ahmed Rahman (the “appellant”) appeals an order dated July 5, 2012 of Deputy Judge Clemenhagen (the “Order”) pursuant to which the appellant was ordered to repay to Al-Asad Hafiz (the “respondent”) the amount of $10,000. [ 2 ] In his oral reasons, the Deputy Judge found that the $10,000 was paid as a security deposit pursuant to a document entitled “Proposal of Sale/Purchase” dated July 5, 2011 in connection with the proposed sale of a business by the appellant to the respondent (the “Proposal”).

The parties consented to several extensions of the dates contemplated in the Proposal for the closing of the transaction. [ 3 ] The Deputy Judge also found that a more formal agreement was signed by the appellant on September 10, 2011, and by the respondent on behalf of the corporation Dhaka Convenient Centre Inc. (the “Corporation”) on September 11, 2011 (the “Purchase Agreement”). The Purchase Agreement contemplated a closing of the transaction on September 12, 2011.

By this time, the parties had agreed that the transaction would proceed as an asset sale rather than a share sale. [ 4 ] The Deputy Judge further found that the appellant told the respondent that the monthly rent payable under the business lease was $2,000 net, for a total gross rent of $3,000 after inclusion of additional rent and HST. The Purchase Agreement contained a representation and warranty that there was a valid subsisting lease with a remaining term of 4.5 years at a rent of $2,000 monthly.

However, the “renewal, extension and amending agreement” dated May 30, 2011 between the landlord and the Corporation (the “Lease Extension”) provided that the monthly rent for 2012 would be $3,400 gross and $2,400 net, and would escalate from there in later years.

The Deputy Judge found that the appellant did not learn of this new rent until September 9, 2011 when he received the Lease Extension and that he delivered a copy of the Lease Extension to the respondent on September 10, 2011. [ 5 ] On September 12, 2011, the respondent’s lawyer advised the Corporation in writing that the respondent was exercising a condition in his favour in the Purchase Agreement to terminate the Agreement on the basis that he was not satisfied with the terms of the Lease Extension.

The condition provided that the Purchase Agreement was conditional on the buyer being satisfied at his own discretion with the terms of the Lease Extension. The Deputy Judge concluded that the respondent was entitled to have his deposit returned to him. [ 6 ] The standard of review on an appeal from an order of a deputy judge of the Small Claims Court is set out in Housen v. Nikolaisen , 2002 SCC 33 , [2002] 2 S.C.R. 235 at paras. 8 , 10, 19, 25, 27 and 28.

On this standard, a decision will be interfered with only if the deputy judge made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error. In this case, as the issues involve the

interpretation of the Purchase Agreement, which are matters of law, I have proceeded on the basis that the standard of appeal is correctness. [ 7 ] The appellant says the Deputy Judge erred in three respects: 1. In ordering repayment of the deposit notwithstanding that the deposit was given without any condition, representation or warranty concerning the Corporation’s rent obligations and on a non-refundable basis; 2.

In failing to make a finding as to whether the respondent knew or reasonably ought to have known of the correct amount of the Corporation’s rent prior to executing the Purchase Agreement, in which event the respondent could not reasonably have relied on the warranty in the Purchase Agreement; and

3. In ordering the respondent to pay “$1,000 now” if he wished to obtain an adjournment at the commencement of the trial. [ 8 ] I will address the first two issues together as they both turn on the terms of the Purchase Agreement. [ 9 ] The Deputy Judge found that the Proposal was not a binding agreement. Even if it was, the governing agreement between the parties as of September 12, 2011 was the Purchase Agreement. There is no question that it was signed by both parties. The appellant has not suggested that he was not bound by it.

The Purchase Agreement specifically referred to the deposit and, in addition to the warranty respecting the lease, also contained the condition in the respondent’s favour, which he purported to exercise to terminate his obligations under the Agreement. [ 10 ] Whatever the terms upon which the deposit was originally provided to the appellant under the Proposal, such terms were superseded by the Purchase Agreement. There is no language in the Purchase Agreement supporting the appellant’s position that the deposit was non-refundable.

Instead, the Purchase Agreement provides that the deposit is to be held in trust pending completion or other termination of the Agreement. It also provided that the deposit would be returned to the respondent if the Purchase Agreement terminated pursuant to the condition in favour of the respondent. The condition in the respondent’s favour provided him with absolute discretion to terminate that Purchase Agreement after reviewing the Lease Extension.

Although the condition did not contain a requirement to act reasonably, the Deputy Judge was satisfied that the difference between the represented and the actual rent of $400 monthly was material for this business. This is tantamount to a finding that the respondent acted reasonably in exercising the condition. [ 11 ] In short, under the Purchase Agreement, the respondent was entitled to terminate the Agreement and receive back his deposit by exercising the condition in his favour.

He validly exercised this right and is therefore entitled to an order in his favour requiring a return of the deposit. [ 12 ] I note that the Deputy Judge also appears to have proceeded on the basis that the respondent was entitled to terminate the Purchase Agreement based on the incorrect representation and warranty in the Agreement regarding the terms of the Lease Extension. The appellant has treated the Deputy Judge’s conclusion regarding the misrepresentation in this warranty as giving rise to a claim for negligent misrepresentation.

It is in this context that the appellant raises the issue of whether the respondent knew that the warranty was false at the time he signed the Purchase Agreement. His argument is that the respondent could not have reasonably relied on the incorrect warranty if he already had knowledge that it was incorrect. [ 13 ] Even assuming that this is a correct understanding of the legal significance attached to the incorrect representation by the Deputy Judge, which I think is doubtful, the argument fails for the following reasons.

The appellant’s argument assumes that the respondent read and understood the significance of the Lease Extension as soon as he received it. There is, however, a difference between possession of the document and comprehension of the document. In this case, it is clear that the respondent has a less than complete command of English and relied heavily on his lawyer for advice.

Consistent with this distinction, the Deputy Judge found that, whether or not the changed rent was communicated to the respondent immediately prior to the closing, it was “misunderstood or understood to be, at least by the Plaintiff, as $2,000”. There is a reasonable basis for this conclusion in the evidence. This finding precludes the appellant’s assertion of a lack of reliance.

The finding implies that the respondent did not have the necessary knowledge of the misrepresentation at the time he signed the Purchase Agreement. [ 14 ] In addition, and in any event, as mentioned above the Deputy Judge also reached the conclusion that the respondent was entitled to terminate the Purchase Agreement on the alternative ground by exercising the condition in his favour. This condition was absolute and unrelated to the warranty.

Even if the Deputy Judge erred in respect of the legal significance to be attached to the misrepresentation in the Purchase Agreement, his alternative basis for finding that the respondent was entitled to terminate the Purchase Agreement remains a valid basis for his conclusion. [ 15 ] Accordingly, I conclude that the Deputy Judge did not err in concluding that the deposit was to be returned in accordance with the terms of the Purchase Agreement, or in failing to make a finding as to whether the respondent knew or reasonably ought to have known of the correct amount of the Corporation’s rent prior to executing the Purchase Agreement. [ 16 ] The circumstances regarding the Deputy Judge’s statement respecting an adjournment pertain to an exchange at the opening of the trial.

The appellant requested an adjournment when he learned that the respondent intended to introduce a witness. He said he now required counsel. The appellant says that the Deputy Judge did not exercise his discretion to refuse an adjournment judicially insofar as he failed to weigh all the relevant factors prior to stating that an adjournment would be granted on the basis of costs of “$1,000 now”.

In particular, he says the Deputy Judge’s actions were unreasonable insofar as the respondent did not request an order for costs of the adjournment or that such costs be payable “now”. [ 17 ] I accept that the Deputy Judge could have used better language in stating that costs would be payable now. However, I think it is clear that he meant payable forthwith rather than after the conclusion of any adjourned trial. While he should have invited submissions from the respondent, it is reasonable to assume that the respondent would have requested costs payable forthwith if he had been properly advised by legal counsel.

Ultimately, I am not persuaded that the costs that the Deputy Judge would have awarded for an adjournment would have been unreasonable given that the parties were expected to be prepared for trial. [ 18 ] More significantly, the evidence of the respondent’s witness was of absolutely no consequence for the trial. It was entirely hearsay and, effectively, was not admitted. On this basis, I am satisfied that the appellant was in no way prejudiced by the absence of an adjournment. Disregarding the non-evidence of the witness, the trial proceeded in precisely the manner contemplated by the appellant.

At the hearing of this appeal, the appellant suggested that he had also requested an adjournment because his own witness or witnesses were not present. There is, however, no evidence in the transcript of the trial or in the appeal materials before the Court that he proposed to produce any witness who was absent at the commencement of the trial. This is simply a bald, unsupported assertion that cannot ground any argument for, in effect, a denial of natural justice. [ 19 ] Accordingly, the appeal is dismissed. The respondent says that he consulted a lawyer regarding this appeal and thereby incurred legal fees.

However, he has provided no invoice or other indication of the amount of his fees. In the circumstances, I think fees of $250 are fair and reasonable, payable forthwith by the appellant.

Wilton-Siegel J. Date: September 27, 2013