0757129 B.C. Ltd. v. Saunders

2013 BCSC 1097 0757129 B.C. Ltd. v. Saunders

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: 0757129 B.C. Ltd. v. Saunders, 2013 BCSC 1097 Date: 20130621 Docket: S53650 Registry: Nanaimo Between: 0757129 B.C. Ltd. Plaintiff And Charles Saunders Defendant Before: The Honourable Mr. Justice Truscott Reasons for Judgment Counsel for the Plaintiff: P.J. Giroday Counsel for the Defendant: P.K. McMurchy Place and Date of Trial: New Westminster, B.C. November 20-23 and 26-30, 2012, and January 7, 2013 Place and Date of Judgment: New Westminster, B.C. June 21, 2013 [1] The plaintiff was the purchaser from the defendant of all the shares of SCS Steel Container Systems Inc. ("SCS") by way of an agreement in writing dated April 27, 2006 ("the Agreement"). [2] The plaintiff now sues the defendant for alleged misrepresentations and other alleged misdeeds that the plaintiff says have caused it loss and damage. [3] Mr. Calverley of the plaintiff and his partners approached Mr. Saunders in early 2006 to see if he was interested in selling SCS. [4] On March 17, 2006, Mr. Calverley, through his own business, put down $10,000 as a non-refundable deposit to Mr. Saunders for the exclusive rights to negotiate and complete the purchase of SCS land, buildings and business within 90 days of that date, for a purchase price of $2,000,000 that Mr. Saunders had set as his sale price. [5] On April 20, 2006, Mr. Calverley and Mr. Saunders entered

into a form of preliminary agreement for the purchase of all Mr. Saunders' shares in SCS for $2,000,000, with the agreement to include all land, buildings and assets listed. [6] The document called for the purchase price to be paid in two instalments, the first instalment to be $1,000,000 paid to Mr. Saunders at the time of closing, from financing provided by the HSBC bank, and the second instalment of $1,000,000 to be financed by Mr. Saunders through a two-year second mortgage. [7] This document stated that it was not binding on either party until a formal share purchase agreement was finalized. [8] Mr. Calverley says Mr. Saunders gave him an equipment list prior to the formal Agreement being entered into but told him that his accountant was still working on the financial statements for SCS for the year 2005. [9] Mr. Calverley says he received the unaudited financial statements for 2005 for SCS in late April 2006 before the Agreement was entered into on April 27, 2006. [10] He also says Mr. Saunders told him there was a company loan for $237,000 that he was going to personally retire. [11] The business of SCS was the manufacture and installation of steel container bins onto the flat decks of customers' trucks. To install the bins on the flat decks SCS used a system it purchased from an outside supplier that it attached to the truck and used to roll or pull the bin onto the

flat deck. These are referred to as Ampliroll units or systems. [12] When Mr. Calverley received the unaudited financial statements for SCS for 2005, he concluded that he and his partners could do better than SCS was doing and the $2,000,000 purchase price for the shares could be justified. He considered SCS had good assets and good inventory and was profitable. He says the financial statements were critical for him as he considered they justified the $2,000,000 purchase price. [13] The balance sheet in the financial statements indicated that the inventory and work in progress as at December 31, 2005 totalled $477,000. This number was not broken down further in the financial statements. [14] Mr. Calverley says he never inquired of Mr. Saunders what was included in that figure and did no investigation of its accuracy himself and Mr. Saunders never indicated what was included himself. [15] The balance sheet indicated a bank loan outstanding of $235,782. This is the bank loan that Mr. Calverley says Mr. Saunders told him he was going to personally retire. [16] The Agreement for the sale of Mr. Saunders' shares is a multi-page document that includes a number of clauses that have relevance to the claims made by the plaintiff. They are as follows: 1. Definitions In this Agreement ... (b) "Closing Date" means June 30, 2006 or such other date as may be mutually agreed upon in writing

by the parties; (c) "Financial Statements" means the financial statements of the Company attached to this Agreement as Schedule 1; ... (e) "Time of Closing" means 4:00 p.m. on the Closing Date. ... (h) "Date of Adjustments" means that unless another date is specifically referred to or utilized in or for this Agreement, the Date of Adjustments, for the purposes of this Agreement, shall be January 2, 2006; ...

3. Purchased Shares and Purchase Price 3.1 Subject to the terms and conditions of this Agreement and based on the representations and warranties of the Vendor set forth in this Agreement, on the Closing Date the Vendor will sell, assign and transfer to the Purchaser and the Purchaser will purchase from the Vendor all (but not less than all) of the Shares for $2,000,000.00 (the "Purchase Price") less those credits in favour of the Purchaser hereinafter described at Articles 3.2, 3.3 and 3.4. 3.2 The Vendor acknowledges receipt from the Purchaser of a non-refundable deposit in the sum of $10,000 00, the said deposit to be credited to the Purchaser and set off against the Purchase Price. 3.3 The Vendor acknowledges that the Company's indebtedness due to HSBC Bank Canada is estimated, of the date of this Agreement, to be approximately $250,000.00 (the "HSBC Debt") and it is agreed by the parties hereto that the outstanding balance of the HSBC Debt at the Closing Date, as determined by the Purchaser, shall be credited to the Purchaser and set off against the Purchase Price. 3.4 The Vendor acknowledges that he will provide financing to the Purchaser in the amount of $1,000,000.00 to assist the Purchaser with the completion of this Agreement for the purchase of the Shares (the "Vendor Financing"). The amount of the Vendor Financing will be credited to the Purchaser and shall set off against the Purchase Price. The Vendor Financing will be for a two year term, commencing from the Closing Date (the "2 Year Term"). ... 3.8 The Vendor Financing will be a second charge on the Lands ranking in priority behind a first Mortgage in the sum of $1,000,000 to be granted in favour of HSBC Bank Canada.

4. Vendor's Representations and Warranties In order to induce the Purchaser to enter into and consummate this Agreement, the Vendor represents and warrants to the Purchaser as follows: ... 4.2 Financial and Tax Representations (a) The Financial Statements are true and correct in every material respect and present fairly the assets, liabilities and financial position of the Company as at December 31, 2005 and the results of its operations to that date, in accordance with generally accepted accounting principles applied on a basis consistent with that of the previous year. (b) There are no liabilities, contingent or otherwise, of the Company which are not disclosed or reflected in Schedule 1 except those incurred in the ordinary course of business and the Company has not guaranteed, or agreed to guarantee, any debt, liability or other obligation of any person, firm or corporation. There are no liabilities of any other party capable of creating a lien, claim, encumbrance or charge on any of the assets of the Company. (c) The Company is not indebted to the Vendor or any affiliate, director, officer or employee of the Company except as shown on the Financial Statements. ... (f) No payment of any kind has been made or authorized since December 31, 2005 to or on behalf of the Vendor or to or on behalf of officers, directors or shareholders of the Company. Since December 31, 2005 the

Company has not paid or agreed to pay any compensation, pension, bonus, share of profits or other benefit to, or for the benefit of, any employee, director or officer of the Company except in the ordinary course of business and has not increased or agreed to increase the compensation of any director, officer or management employee. (g) Since December 31, 2005: (i) there has not been any material adverse change in the financial position or condition of the Company or any damage, loss or other material adverse change in circumstances affecting the Business or assets of the Company or its right or capacity to carry on business; ... (h) All material transactions of the Company have been promptly and properly recorded or filed in or with its respective books and records. The minute books of the Company contain records of all the meetings and proceedings of shareholders and directors of the Company. ... (p) The Company has not before the date of this Agreement: ... (ii) disposed of anything to a person with whom the Company was not dealing at arm's length for proceeds less than the fair market value. ... 6.3 Books and Records At any time up to the Closing Date, the Vendor will permit the Purchaser, and its auditors, solicitors and other authorized persons, to make such investigation of the assets of the Company and of its financial and legal condition as the Purchaser deems necessary

or advisable to familiarize itself with such assets and other matters and to have full access to the Business premises and to all records, documents and other information related to the Business and the Company, including all working papers (internal and external) and details of accounts and inventories prepared, obtained or used in connection with the preparation of the Financial Statements. 6.4 Interim Management--Positive Covenants From the date of this Agreement to the Closing Date, the Vendor will cause the Company to: (a) carry on the Business in the ordinary course, in a prudent, businesslike and efficient manner and substantially in accordance with the procedures and practices in effect on December 31, 2005; ... 6.5 Interim Management--Negative Covenants From the date of this Agreement to the Closing Date, the Vendor will not permit the Company, without the prior consent in writing of the Purchaser to: (a) purchase or sell, consume or otherwise dispose of any of its assets except in the ordinary course of business; ... (d) waive or surrender any material right; ...

8. Purchaser's Conditions of Closing 8.1B The obligations of the Purchaser under this Agreement are also subject to the following conditions for the exclusive benefit of the Purchaser being fulfilled in all material respects in the reasonable opinion of the Purchaser at the Time of Closing or waived by the Purchaser at or before the Time of Closing or agreed by the Vendor and the Purchaser to be indemnified for by the Vendor: (a) the representations and warranties of the Vendor contained in this Agreement will be true and correct on and as of the Closing Date; (b) the Vendor will have complied with all covenants and agreements in this Agreement agreed to be performed or caused to be performed by it on or before the Closing Date; ...

11. General 11.1 Reliance The Vendor acknowledges and agrees that the Purchaser has entered into this Agreement relying on the representations, warranties, covenants and agreements and other terms and conditions of this Agreement and that no information which is now known, which may become known or which could upon investigation have become known to the Purchaser or any of its present or future officers, directors or professional advisors in any way limits or extinguishes any rights the Purchaser may have against the Vendor, including without limitation, any right to indemnity under section 11.3 of this Agreement. 11.2 Survival of Vendor's Representations The representations, warranties, covenants and agreements of the Vendor contained in this Agreement and in any document or certificate given under this Agreement will survive the closing of the transactions contemplated by this Agreement and remain in full force and effect notwithstanding any waiver by the Purchaser unless such waiver was made after notice in writing by the Vendor to the Purchaser setting forth the breach. 11.3 Indemnification by the Vendor The Vendor covenants and agrees to indemnify and save harmless the Purchaser from any loss, damage, liability, cost and expense (including without limitation any tax liability) suffered by the Purchaser directly or indirectly as a result of or arising out of any breach of

representation, warranty, covenant or agreement of the Vendor contained in this Agreement, the Vendor's Closing Certificate or any document or certificate delivered under this Agreement. ... 11.11 Entire Agreement This Agreement contains the whole agreement between the Vendor and Purchaser pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions between the parties and there are no representations, warranties, covenants, conditions or other terms other than expressly contained in this Agreement. ... 11.14 Extraordinary Matters The parties agree that notwithstanding anything herein to the contrary and notwithstanding the sale of the Shares by the Vendor to the Purchaser, that as regards: ... (b) monies collected by the Company after the Closing Date with respect to those accounts that were described as Receivables of the Company as of December 31, 2005 (the "Pre-2006 Receivables"), any such monies when received by the Company shall be paid to the Vendor without deduction provided, however, that if the Company has incurred a cost or expense of any kind, whatsoever, after the Closing Date, to recover the Pre-2006 Receivables then the Company shall be entitled to be reimbursed on account of any such cost or expense prior to forwarding the balance of the monies to the Vendor; ... [17] The 2005 unaudited financial

statements of SCS were attached as Schedule 1 to the Agreement. [18] The representations in the Agreement that are alleged to have been breached are: a. 4.2(a) "The Financial Statements are true and correct in every material respect and present fairly the assets, liabilities and financial position of the Company as at December 31, 2005..."; b. 4.2(g) "Since December 31, 2005, there has not been any material adverse change in the financial position or condition of the Company or any damage, loss or other material adverse change in circumstances affecting the Business or assets of the Company..."; c. 4.2(h) "All material transactions of the Company have been promptly and properly recorded or filed in or with its respective books and records."; d. 4.5(b) "The Company is not in breach of any law, ordinance, statute, regulation, by-law, decree, covenant, restriction, plan or permit to which it is subject or which applies to it and the uses to which the assets of the Company have been put are not in breach of any law, ordinance, statute, regulation, bylaw, order, decree, covenant, restriction, plan or permit..."; e. 4.2(f) "No payment of any kind has been made or authorized since December 31. 2005 to or on behalf of the Vendor or to or on behalf of officers, directors or shareholders of the Company..."; f. 4.2(p) "The Company has not before the date of this Agreement:...(ii) disposed

of anything to a person with whom the Company was not dealing at arm's length for proceeds less than the fair market value"; and g. 6.5 "From the date of this Agreement to the Closing Date, the Vendor will not permit the Company, without the prior consent in writing of the Purchaser to: (a) purchase or sell, consume or otherwise dispose of any of its assets except in the ordinary course of business." [19] The plaintiff alleges that these misrepresentations were false and misleading, and Mr. Saunders was aware that the representations were false and made them recklessly without knowing whether they were false or true. [20] The alleged misrepresentations in the Agreement and other alleged misdeeds covered by the evidence at trial are as follows: a. The value of the inventory was significantly below what was stated in the Company's financial statements, $477,000, and the Plaintiff alleges that a more accurate value for the inventory and work in progress was $50,000. b. Mr. Saunders misrepresented to the Plaintiff that a composter was not part of the inventory of the Company as stated in the financial statements. c. Between December 31, 2005 and June 30, 2006, Mr. Saunders sold a trailer to himself for less than market value. d. After December 31, 2005, Mr. Saunders caused SCS to repay a shareholder's loan to himself in excess of the value of the loan. e. After December 31, 2005,

Mr. Saunders caused SCS to pay personal benefits on his behalf. In addition to the net cost of these expenses, the Plaintiff has suffered damages because deductions for these expenses has been disallowed by the Canada Revenue Agency increasing SCS's tax liability. f. Prior to the closing date of June 30, 2006, Mr. Saunders converted assets of SCS to his own use, including a flat deck, containers, bins and raw steel to a value of $117,339.07, and has failed to reimburse SCS for these assets. [21] The plaintiff alleges that the misrepresentations in the Agreement with respect to the amount of inventory and the inclusion of a composter in the inventory have caused it a loss in value of its shares of $390,000. [22] This is the loss in value of the shares estimated by Ms. Stanley, a chartered accountant, whose report of the quantification of loss as of January 1, 2006 was put into evidence providing this opinion. [23] The opinion itself is based on a number of assumptions, the most significant one being that the book value of inventory and work in progress in the 2005 financial statement for SCS should have been set at $50,000 and not at $477,000. [24] In her report Ms. Stanley says that she was asked to give an opinion on: (a) what impact, if any, does the alleged misrepresentation in the value of inventory have on the fair market value of the shares of the company; (b) what impact

does the valuation of inventory have, if any, on the apparent profitability of the company; and (c) what impact, if any, does the valuation of inventory have on the apparent income-earning capacity of the company. [25] Her conclusion, subject to the scope of her review, analysis, qualifications and assumptions, is that the loss in value of all the issued and outstanding shares as at December 31, 2005 is $387,000, later amended to $390,000. [26] Some of the facts she was asked to assume for the purpose of her loss calculations and opinions were as follows: (a) The Plaintiff purchased 100% of the shares of the Company from Mr. Saunders on January 1, 2006 on the basis of a Purchase Agreement (the "Agreement") dated April 27, 2006; (b) The purchase agreement set the closing date for the Transaction at June 30, 2006 however the 2006 Corporate Tax return indicated that the change of control occurred on January 1, 2006; (c) Appraised value of land and buildings was $1,700,000 as at March 23, 2006 per appraisal prepared by Vic Sweett of Pacific Rim Appraisals Ltd. for Charles Saunders; (d) A subsequent appraisal prepared by David L. Kirk of Cunningham & Rivard Appraisals (Nanaimo) Ltd. as at March 23, 2006 indicated that the appraised value of land and buildings was $1,510,000; (e) (i) When the Plaintiff purchased the shares in SCS they relied on the 2005 financial statements, which

included a value for inventory of $477,000; (ii) The Plaintiff did not know, at that time, what the inventory consisted of; (f) the inventory value in the 2005 financial statement included a piece of equipment, a composter, that was not an asset of the company and was not included in the sale of the shares to the plaintiff; (g) Mr. Saunders assigned a value of $200,000 to that composter in his calculations of inventory for the 2005 financial statements; (h) Mr. Saunders assigned a value of $250,000 to raw materials in his calculation of inventory for the 2005 financial statements; (i) the actual value of raw materials as of December 31, 2005 was approximately $23,000; (j) the balance of stated inventory was comprised of a Park model trailer valued at $27,000; and (k) in February 2006, prior to entering into the Agreement with the plaintiff, Mr. Saunders sold the trailer to himself for $16,000 but did not disclose this to the plaintiff. [27] In her report Ms. Stanley says that: The loss of value arising from alleged misrepresentations made in the financial statements can be determined by comparing the value of the company based on historic financial statement information to the value of the company based on revised financial information. The difference between these two values would be the gain or loss of value arising as a result of revised financial information. [28] She

prepared two different schedules of financial information, one schedule being historic financial information which included inventory and work in progress of $477,000, a bank loan of $236,000 and a shareholder's loan of $41,000. It included as well $41,000 of income tax payable. The net asset value of that schedule was calculated at $2,056,000. [29] The second schedule set out revised financial information that reflected a reduction to inventory and work in progress of $427,000 to $50,000, but left the bank loan and shareholder loan in place as originally stated. It also reduced the $41,000 in income tax payable to $4,000. [30] With this set of revised financial information she came to a conclusion of $1,666,000 of net asset value. [31] The difference between $2,056,000 and $1,666,000 produced the loss in value of the shares of $390,000. [32] In reducing the inventory and work in progress from $477,000 to $50,000, she explains that she took out the composter at $200,000 and reduced inventory by $227,000 for a total reduction of $427,000, leaving an amount of $50,000 for inventory and work in progress, to include the Park model trailer. [33] She did not reach any conclusion of the impact of the revised valuation of inventory on the apparent profitability of the company or on its apparent income-earning capacity. [34] The total claim of the plaintiff to include damages from the

misrepresentations and other alleged misdeeds and the loss in value of the shares is put at the amount of $570,566.20. [35] Mr. Saunders submits the total claim should be dismissed on the basis that there was in fact no misrepresentation by him at all and no loss sustained by the plaintiff. [36] He submits Ms. Stanley used the wrong date of January 1, 2006 for the valuation of the shares when it should have been the closing date of June 30, 2006 when the shares were actually sold to the plaintiff. There being no opinion of the value of the shares at that point in time, the submission is that no loss in the value of the shares has been proven. [37] He points out that the bank loan that Ms. Stanley set as a liability of $236,000 in her calculations was in fact reduced to zero by his payment of that loan prior to the closing date of June 30, 2006. He submits this payment increases Ms. Stanley's estimate of value of the shares at June 30, 2006 to $1,902,000 instead of $1,666,000. [38] As to his shareholder loan that was considered by Ms. Stanley to be in the amount of $41,000, Mr. Saunders states that he was paid this loan amount prior to June 30, 2006 so it was no longer a debt on the books of the company. He submits on this evidence Ms. Stanley's value of the shares at June 30, 2006 increased by another $41,000 to $1,943,000. [39] On the asset side, he submits the evidence

indicates that an Ampliroll unit was purchased on April 23, 2006 for $10,849 and was still on site at June 30, 2006 and should have been included in the inventory existing as at June 30, 2006. The submission is made that this would further increase Ms. Stanley's value of the shares by another $10,849 for a total value of the shares at June 30, 2006 of $1,953,849, or close to her assumed value at December 31, 2005 or January 1, 2006, based on $477,000 of inventory, of $2,056,000. [40] He therefore submits the plaintiff's loss of share value as of June 30, 2006 is close to nil. [41] He also criticizes Ms. Stanley's net asset valuation approach of assessing the value of SCS when SCS was never in the business of accumulating inventory but was in the business of manufacturing and selling steel bins. [42] Further it is submitted the net asset valuation approach is not appropriate to employ to value the shares when the parties did not set the value of the shares in the first place on this basis or on any other known basis. Mr. Saunders simply said he wanted $2,000,000 for his shares without regard for any consideration of SCS's financial picture and there is no evidence that the plaintiff used any particular formula to decide to accept that amount. [43] It is submitted that it was just a general feeling of Mr. Calverley that he could grow the business further, that it was profitable

already, the inventory was at a value of $477,000, and the land and buildings and equipment would be included as well, that supported the plaintiff's decision to accept Mr. Saunders' sale price of $2,000,000 for the shares. [44] As to the claims that he purchased the Park model trailer at less than fair market value, overpaid himself on his shareholder loan, caused SCS to pay personal expenses of his, including making $14,000 of the loan payments he was supposed to make on the HSBC loan, took an Ampliroll unit worth $15,500 without paying for it, and converted steel and finished goods to his own use worth $117,339.07, Mr. Saunders' submission is that all of these claims properly belonged to SCS and not to the plaintiff and SCS is not a party to this action. [45] In any event, it is submitted that he bought the trailer with US funds and incurred expenses moving it to the US and SCS claimed and was given a loss on the trailer on its tax return of $27,000 so the net loss to SCS remains unknown. In addition, there is no indication of how any loss on the trailer would impact the value of the shares. [46] It is also submitted that SCS paid Mr. Saunders' minor personal expenses because he was not drawing any salary at all in running the company from December 31, 2005 to June 30, 2006. [47] On the $14,000 claim for the loan payments made by SCS on the HSBC loan, the submission is made

that Mr. Saunders understands the plaintiff has abandoned this claim. [48] On the claim for taking an Ampliroll unit without paying for it, it is submitted this claim is not proven. [49] It is finally submitted that the claim for missing steel and missing bins in the period December 31, 2005 to June 30, 2006 is not proven either. Analysis [50] One representation in the Agreement is that the financial statements of the Company are true and correct in every material respect and present fairly the assets, liabilities and financial position of the company as at December 31, 2005. [51] Ms. Stanley's opinion of the loss in value of the shares at December 31, 2005 is principally based on the inventory and work in progress being $50,000 as of that date and not $477,000 as stated in the financial statements because the composter at a value of $200,000 was removed by Mr. Saunders and steel inventory of a value of $227,000 did not exist at that date. [52] In fact it is not correct that the composter was removed as at December 31, 2005 because it was not removed until sometime much closer to June 30, 2006, and only on payment of the HSBC loan by Mr. Saunders. [53] Mr. Saunders submits that the actual value of the shares at December 31, 2005 is irrelevant because the purchaser did not have to tender its purchase money for the shares until closing on June 30, 2006. [54] He submits that June

30, 2006 should have been used by Ms. Stanley as the date for determination of the value of the shares because only when payment of the purchase price was made was the money of the plaintiff at risk and only then did he have to tender his shares. [55] I am not sure at the end of the day it makes much of a difference which date is used. It may be that before June 30, 2006 Mr. Saunders paid off the HSBC loan in the amount of $236,000 and increased the net asset position of SCS at that time, but by that date he also removed the composter from the inventory, thereby reducing the net asset position of SCS by $200,000. [56] In addition, to use June 30, 2006 as the date for valuation of the shares would have brought into play all the operations of SCS in the six-month period after December 31, 2005 when Mr. Saunders continued to operate SCS, to determine the overall financial picture at that date. [57] This may have turned out worse for Mr. Saunders as to the value of the shares at that date if any or all of the alleged misdeeds of his in the six-month period after December 31, 2005 are determined to have been proven. [58] It is more appropriate in my view to consider each of the plaintiff's claims in turn in order to see what conclusion this leads to. [59] I agree that all these claims could have been brought by SCS because they are all matters that could affect the size of its

assets. [60] However, with Ms. Stanley's opinion equating the net asset value of SCS to the value of the shares and her opinion being the only opinion at trial, any changes in the assets as at December 31, 2005 will also affect the value of the shares purchased by the plaintiff to the same extent. [61] I must say in passing, however, that I question how the net assets of a company can dictate the value of the company's shares, but with no contrary opinion from any other business valuator, and no further explanation by Ms. Stanley of this issue or cross-examination of her on this issue, I will accept her opinion that for this company its net asset value equalled its share value. [62] The decision of the Court of Appeal in Olive Hospitality Inc. v. Woo, 2007 BCCA 355, is distinguishable on this issue. [63] In that case, the evidence of the accountant at trial was that the loss belonged to the shareholders and not to the company. The trial judge concluded otherwise and found it was the company's loss. [64] It was as a result of this evidence that Mr. Justice Lowry said "the accountant did not say, nor can I accept, that the shareholders' investment was the same as the company's equity in the business". [65] In this case the accountant, Ms. Stanley, has given her opinion that for this company its net asset value equalled its share value. It is a matter of evidence and not of the

Court deciding otherwise. [66] The Olive decision is completely distinguishable. [67] On the basis of Ms. Stanley's opinion that net asset value equals share value, I conclude any of the plaintiff's claims on asset value as at December 31, 2005, if proven, will affect share value to the same extent. [68] I will discuss each of the claims individually, starting with the make-up of the inventory and work in progress as at December 31, 2005. The Inventory of Raw Steel and WIP in the Inventory Amount of $477,000 as at December 31, 2005 [69] Ms. Stanley assumed on instructions that the actual value of the inventory and work in progress at December 31, 2005 was only $50,000, made up of $23,000 of raw steel and $27,000 for the Park Model trailer. [70] The plaintiff submits that Ms. Stanley's assumption of $23,000 for raw steel is supported by an inventory list of steel dated December 31, 2005 in Mr. Saunders' own handwriting, found in the SCS documents and totalling a value of $22,834. [71] Mr. Saunders says that this document was not meant to be a complete list of the inventory existing as of December 31, 2005. He says it was only a partial list, although not stated as such, that he prepared of odds and ends of steel that he was moving from one place to another on the site to stack for future use. [72] The plaintiff points out that in December of 2005 Mr. Saunders was laying off

employees around Christmas-time, having just completed a large job, and he was going down south for the month of January 2006. In that month sales were only $500 so there was not much need for raw steel it is submitted. [73] The plaintiff points to the evidence of two employees, Geoff Haslem and John Rothwell, who were laid off in December 2005. Both say that there was never a lot of steel lying around the yard when Mr. Saunders operated SCS. A lot of the times he ordered the steel only when SCS received an order and Mr. Haslem says when he was building containers sometimes he had to wait for material to be delivered. [74] When shown the December 31, 2005 inventory list of $22,834 worth of steel, Mr. Haslem says this volume of steel was a typical amount that Mr. Saunders carried. [75] Mr. Saunders says he always carried a complete list of inventory around with him in his truck to know what he had and what he needed to order, but he no longer has this list as he says he had no use for it after he left the company. [76] The plaintiff questions why this list of steel that was found would remain when Mr. Saunders did not keep the complete list of inventory that he says he kept in his truck at all times when he was dealing with customers. [77] The plaintiff submits as well that the sales records for the first six months of 2006 do not indicate that any containers that had been built

before January 1, 2006 were being sold after that time, only containers built after January 1, 2006. Accordingly it is submitted this must indicate that there were no containers in existence or part containers in existence at December 31, 2005. [78] Mr. Saunders says this found list of steel was part of an overall amount of $125,000 worth of raw steel inventory and perhaps an equal amount of WIP, that existed, at December 31, 2005. He does not produce any documentation or other evidence to support his own evidence and he acknowledges in his evidence that he has no recollection of how many partially or fully completed containers were in inventory as at December 31, 2005, although he says there were some. [79] He says he also had on site Ampliroll units. [80] His accountant Mr. Annesley says that the $477,000 figure for inventory and work in progress to go into the 2005 financial statement came from Mr. Saunders and he can give no evidence as to how it was made up. He says in 2004 and 2005 Mr. Saunders never provided any inventory list to him. [81] Mr. Saunders agrees the $477,000 figure came from him. [82] He says in one year he broke down the inventory but otherwise he just gave Mr. Annesley a lump sum. [83] It appears from the evidence that Mr. Saunders would give Mr. Annesley a lump sum figure for inventory and WIP and Mr. Annesley would critically look at the figure in the

context of the overall financial picture for the company for the year. If he considered that the financial picture was not what it should be he would question the inventory figure that Mr. Saunders had given him. [84] By way of example, in July 2005 Mr. Annesley records in a memo that Mr. Saunders did not count inventory at December 31, 2004 but told him that the inventory would be at least as much as at December 31, 2003 when a count was done and because the company was much busier in 2004 a higher inventory might seem plausible. [85] In August 2005 he indicated in a memo to another chartered accountant in his firm that the inventory for 2004 should be adjusted upwards by $100,000 from the 2003 year-end to equal $424,331.98 for 2004. [86] His recorded thinking was that the gross profit percentage was far lower than it should have been but Mr. Saunders had payables from two steel suppliers of $76,000 as compared to $23,000 in 2003 and he always kept current with his payables so the difference could be in inventory. [87] WIP for 2004 was declared at $100,000 after receiving instructions from Mr. Saunders and the total of $524,332 was used for inventory and WIP for 2004. [88] For the year 2005, on March 14, 2006 Mr. Annesley did calculations of different percentage costs of production from the sales figures for 2005 on which document he wrote $250,000 for inventory, $200,000 for

the composter and $27,000 for the Park Model Trailer for a total of $477,000. [89] At trial Mr. Annesley says he received the $250,000 figure for inventory from Mr. Saunders. [90] When told in March 2007 that the plaintiff considered the inventory overstated by $424,332 in the 2005 financial statements, Mr. Annesley responded: Given that no count was done, it is possible the inventory was incorrect at December 31, 2005. However, an overstatement of $424,332 would have resulted in a pre-tax loss of almost $200,000 and that would not have been likely. [91] Mr. Calverley says that in early 2007 the SCS accountant raised questions about the inventory count that Mr. Calverley presented at that time, which the accountant said he had trouble reconciling to the inventory amount of $477,000 at December 31, 2005. [92] The accountant asked Mr. Calverley to confirm the inventory count at December 31, 2006 and Mr. Calverley says he did that but can no longer find that inventory count. [93] It is his evidence that instead he did a handwritten inventory count as at February 28, 2007 and as well produced all the records of purchases of steel made from January 1, 2006 to February 28, 2007 and all records of transactions in that period of time so that the plaintiff's accountant Mr. Nudd could determine what had happened. [94] Mr. Calverley says he was the person with the plaintiff who was

purchasing the raw steel and he provided all the information to Mr. Nudd of what the price per pound was for sheet steel and structural steel and the amount of each type of steel and total value of steel included in every order filled in the period January 1, 2006 to February 28, 2007. [95] Mr. Nudd first set about to determine what the inventory amount must have been on June 30, 2006 when the plaintiff took over operations from Mr. Saunders. [96] In order to do that Mr. Nudd took all the information provided to him by Mr. Calverley and did a reconstruction on spread sheets to indicate his conclusions of the inventory amount of steel existing at June 30, 2006. [97] He determined that the February 28, 2007 inventory count of steel had a value of $319,694.28. [98] He then determined that the cost of steel purchased between July 1, 2006 to February 28, 2007 was $898,020.04. [99] For that same period of time, he determined that the value of the steel consumed in sales of products totalled $592,382.32. [100] Subtracting the steel value consumed in sales from the cost of steel purchased in that period he determined that the value of steel inventory left at February 28, 2007 should have only been $305,637.72. [101] Comparing that number to the February 28, 2007 inventory count for steel value of $319,694.28 he concluded that the beginning inventory at June 30, 2006 must have been the

difference of $14,056.56. [102] On a separate sheet of accounting, he looked at the period of time between January 1, 2006 and June 30, 2006. For the purpose of his calculations for this period of time he accepted a beginning inventory at December 31, 2005 of $23,000 worth of steel based upon the inventory list found, and then calculated the steel cost purchased in that period of time ($267,667.76) and the steel consumed in sales of product ($209,994.07) in that period of time, to conclude the amount of inventory value that should have been left at June 30, 2006. [103] He arrived at a figure of $80,673.68 made up of $57,673.68, being the difference between $267,667.75 and $209,994.07, plus the $23,000 of beginning inventory value at December 31, 2005. [104] Taking his calculated inventory amount at June 30, 2006 of $14,056.56, he concluded that steel unaccounted for between January 1, 2006 and June 30, 2006 totalled $66,617.12, being $80,673.68 minus $14,056.56. [105] In submitting that Mr. Saunders probably only had $23,000 worth of steel inventory on site at December 31, 2005, the plaintiff submits that if Mr. Saunders had $125,000 worth of raw steel inventory on site as at December 31, 2005 in all probability there would have been significantly more than that value of raw steel remaining when the plaintiff took over the company on June 30, 2006, considering that in the

period of time January 1, 2006 to June 30, 2006 the plaintiff purchased more raw steel than it sold as part of the products sold in that period of time. [106] Mr. Calverley says in his evidence that when the plaintiff took over the business July 1, 2006, the shop was busy, raw steel was on site, sheet steel was in the fabrication shop with tubing behind it ready to be processed and various containers were being assembled. [107] However he says he had no idea of the value of all the steel on site at the time as he did not do any inventory count although he says that it was not enough to fill all the orders and Mr. Saunders indicated that he was going to have to order more. [108] It is interesting to observe that the plaintiff appears to have allowed Mr. Saunders to continue to operate SCS for the first six months of 2006 without any involvement of the plaintiff and without any attempt by the plaintiff to monitor the operation as it went along. [109] I do not accept the plaintiff's submission that the value of the raw steel inventory at December 31, 2005 was only $23,000 as set out in the list that was found in Mr. Saunders' own handwriting. I accept Mr. Saunders' evidence that list was only a partial list of odds and ends of steel that he was stacking for future use. [110] While I consider the amount of raw steel in inventory at the time to have more value than $23,000, I must

reject Mr. Saunders' evidence that it had a value in the order of $125,000. [111] Accepting the plaintiff's reconstruction work and its submissions, I am prepared to consider the inventory at a value of $50,000 so that the inventory and work in progress actually existing as at December 31, 2005 was more in the order of $77,000 to include the Park Model trailer, but without regard for the composter. The Composter Unit as $200,000 of Value in the Inventory Amount of $477,000 [112] This is a composter unit that Mr. Saunders built over a number of years. In years prior to 2005 it was included in the inventory of SCS in its financial statements at $200,000 of value. It was on site when Mr. Calverley spoke to Mr. Saunders. [113] Mr. Calverley says Mr. Saunders told him it was not to be included in the sale of his shares to the plaintiff. Since Mr. Calverley did not talk to Mr. Saunders about the sale of shares until the spring of 2006, this conversation obviously must have taken place after December 31, 2005. [114] Mr. Calverley had no idea at the time of what was included in inventory as he did not ask Mr. Saunders and there was no discussion about it. It was only much later in 2007 that he learned the composter was part of the inventory at December 31, 2005. [115] Mr. Calverley says that if he had known the composter was to be included in the $477,000 of inventory, it would have

affected the plaintiff's purchase of the shares because he understood the $477,000 was all inventory. He says if he had been told $200,000 of the $477,000 was a composter, he would have asked what else was included in the $477,000 for inventory. [116] He also says Mr. Saunders told him he would retire the HSBC loan of approximately $237,000 personally prior to the completion of the sale of his shares. He says Mr. Saunders never indicated why he was prepared to do that but denies that Mr. Saunders said he would take the composter in return for retiring the HSBC bank loan, although he says that in fact Mr. Saunders did take the composter and did pay off the loan, but they were unconnected. [117] He says he concluded the composter was not part of inventory because Mr. Saunders showed him a brochure indicating a different company SCS Saunders Composting Systems Inc., and he concluded it was this company that owned the composter. [118] Mr. Saunders says this was just a brochure for a proposed company that never came into existence and the composter at all times was owned by SCS. [119] I accept Mr. Saunders' evidence on the ownership of the composter and that he did not represent otherwise to Mr. Calverley. [120] Mr. Calverley says two weeks later Mr. Saunders offered to sell the composter back to the purchasers if they would pay the bank loan, but Mr. Calverley declined as they were

not interested in that business. [121] He agrees that he and others of his group always referred to the bank loan as the composter loan but he says the bank loan was not in fact a loan connected to the composter even though he agreed on examination for discovery that it was a loan on the books of SCS for the composter and the two were connected. [122] Mr. Saunders agrees that the composter was not to be included in the sale of his shares. However he says that when he told the bank he was going to take the composter, the bank said he couldn't as the loan was attached to the composter. The bank said he had to pay off the loan first. [123] It is my conclusion that the composter was included in the inventory in the 2005 financial statements as at December 31, 2005, but thereafter Mr. Saunders told Mr. Calverley that he was going to take it prior to completion of the sale of the shares, in return for paying off the bank loan and Mr. Calverley understood and accepted that. [124] The fact that the composter was included in the inventory in the 2005 financial statements in the first instance is confirmed by Mr. Annesley's letter of March 16, 2007 to Mr. Schroeder, the new accountant for SCS. In this letter Mr. Annesley says that there was no inventory count done for December 31, 2005 but his information was that the inventory amount consisted of the composter prototype at $200,000, the

Park model trailer at $27,000, and containers and raw materials at $250,000, for a total of $477,000. [125] In s. 3.3 of the Agreement of April 27, 2006, the vendor acknowledged the indebtedness of SCS to the HSBC bank estimated at the date of the Agreement to be approximately $250,000 and it was agreed by the parties that the outstanding balance of the HSBC debt at the closing date, as determined by the purchaser, would be credited to the purchaser and set off against the purchase price. [126] That meant the purchaser would pay to Mr. Saunders on the closing date, June 30, 2006, $2,000,000 for his shares less credits in favour of the purchaser of the $10,000 non-refundable deposit, the vendor's second mortgage in the amount of $1,000,000, and the outstanding balance of the HSBC loan at that time remaining on the books of SCS. That would not have dealt with the loan itself as it would have remained on the books of SCS. [127] When Mr. Saunders paid off the loan, he took the composter as he had originally intended. That left the plaintiff with no right to a credit against the purchase price for any outstanding balance of the loan remaining. [128] This is what happened as evidenced by a letter of June 29, 2006 when the amount of $996,500 was sent to Mr. Saunders for the first $1,000,000 owed. [129] At the same time SCS no longer had the HSBC loan on its books. The inventory of SCS

may have been reduced by $200,000 by the removal of the composter but SCS realized a net benefit to its balance sheet as it no longer owed approximately $237,000 to the HSBC bank. [130] This removal of the composter from the inventory by Mr. Saunders changed the amount of the inventory but did not constitute any misrepresentation or breach of s. 4.2(a) the Agreement of April 27, 2006 in that regard, because the financial statements did include the composter as at December 31, 2005, before the composter was removed, which is all the representation required. [131] There was no materially adverse change to the financial position of the company since December 31, 2005, in contravention of s. 4.2(g) of the Agreement because, while SCS lost an asset with a book value of $200,000 from its inventory, it was relieved of a debt to the HSBC bank of approximately $237,000. [132] Accordingly Mr. Saunders can have no liability for removing the composter from inventory. Conversion of Containers, Flat Deck and Steel Inventory in the amount of $117,339.07 [133] As previously stated the plaintiff uses its reconstruction figures to submit that $66,617.12 of raw steel remains unaccounted for from the period January 1, 2006 to June 30, 2006 and submits Mr. Saunders must therefore have converted that steel for his own purposes. [134] The plaintiff submits that the missing steel was probably used in

the following transactions for which SCS received no payment: (a) Mr. Tabacco, the owner and operator of B&D Containers, says he purchased a couple of containers from Mr. Saunders in 2006 for cheque and cash. When paying cash he received no invoice from Mr. Saunders for the transaction and therefore paid no sales tax. The plaintiff submits that Mr. Saunders must have simply pocketed the cash for these two containers. It submits that the price of a 40-yard container in 2006 was $7,200 for a total of $14,400 for two containers. However, Mr. Tabacco says he never purchased a 40-yard container from Mr. Saunders. He only ordered 20-yard containers. He denies ordering a 20‑yard container and getting a 40-yard container from Mr. Saunders instead. I accept Mr. Tabacco's evidence that he never received any 40-yard containers and that he only purchased a 20-yard container from Mr. Saunders and never received a 40-yard container in its place. I reject the plaintiff's submission on this transaction. (b) A Flat Deck Installed on the Defendant's W5 Truck This is a truck of Mr. Saunders' on which it is alleged he put an AL90L Ampliroll unit that he didn't pay for. The claim is for $3,000 for the flat deck. The evidence of Mr. Haslem is that while he saw the flat deck it was built by someone else and not him. His evidence is that the flat deck was installed at the same time as a tub bin was

constructed on a Saturday for Mr. Saunders' Mack truck that he says Mr. Saunders ordered to be built and painted and removed before anyone could see it. He says the flat deck was put on another of Mr. Saunders' trucks at that time. In cross-examination he says he could be wrong. I am not prepared to find against Mr. Saunders on this evidence. Mr. Haslem's evidence is not clear enough and reliable enough to find liability for Mr. Saunders taking a flat deck without paying for it. (c) A 20-Yard Tub in the Possession of GT Excavating on the Mack Truck which formerly belonged to the Defendant. The claim is for $6,000. The basis for this claim is an invoice recorded by Mr. Saunders to GT Excavating for $37,500 that he deleted two minutes later that included a charge for $6,000 for a 20-yard container. While Mr. Saunders recorded an invoice on May 4, 2006 to GT Excavating for $37,500, which he deleted less than two minutes later, it appears to have been replaced with an invoice to GT Excavating on May 6, 2006 for $37,500 that included a charge of $6,000 for two short log bunks (Exhibit 29). I am not prepared to find liability against Mr. Saunders for a 20-yard container based on an invoice deleted less than two minutes later. (d) The construction of many containers for which there are no sales invoices. The total hours recorded for work on mini containers in the first six months of

2006 Mr. Calverley has determined was 1,407.25 hours. Doing a calculation of 21 hours per container, he says that should have produced 67 mini containers. Only 49 mini containers were in fact produced in the first six months of 2006. Accordingly the claim is for the difference of 18 mini containers at $3,300 per container for a total of $59,400. I accept Mr. Calverley's computation as proving a missing amount of money for a number of mini containers. Since I do not have confidence that the work records are completely accurate, I am not prepared to conclude that money for 18 mini containers is necessarily missing. I will allow this claim in the amount of $39,600 representing 12 mini containers. (e) Eight 40-yard bins were built in the first six months of 2006 but were previously sold and paid for by DL's Bins on November 25, 2005 for $57,600. The total steel cost used to build these bins was calculated to be $27,432.84. I allow this claim as being the cost of steel used in 2006 to build these bins for DL's Bins that had already been paid for in 2005. The material should have been available for building other products for sale in the first half of 2006. (f) Three 12-cubic-yard mini bins constructed in the first six months of 2006 were pre-paid by H&L Demolition/Waste by invoice dated December 30, 2005 for a total steel cost involved of $3,505.14. I allow this claim for the same

reason as stated for the bins for DL's Bins. Mr. Saunders' evidence is that he sometimes pre-charged customers for the steel product before he actually built it and he cites these two purchases by DL's Bins and H&L Demolition/Waste as examples, although he says that he did not normally bill a client before completion of the product. [135] The plaintiff claims a total of $117,339.07 for conversion of containers, flat deck and steel inventory. This figure is made up of $82,800 for the sales values of two 40-yard bins allegedly not paid for by Mr. Tabacco, one flat deck allegedly not paid for by Mr. Saunders, one 20-yard tub allegedly not paid for by GT Excavating and $59,400 for 18 mini bins that are alleged to have gone missing. [136] I allow the claim for the missing mini bins in the amount of $39,600 but deny the other claims. [137] In addition I allow the claims for missing steel used to make the eight 40‑yard bins for DL's Bins and the three 12-cubic yard mini bins for H&L in the total amount of $30,937.98. [138] The plaintiff also seeks an additional $3,601.09 of missing steel out of the $66,217.12 of missing steel it alleges by its calculations, but I deny this claim because I am not convinced the calculation of $66,217.12 of missing steel is completely accurate. [139] Accordingly, on the claim of $117,339.07, I allow losses of $70,537.98. Park Model Trailer as $27,000 of

the Inventory Amount of $477,000 [140] The Park model trailer was given a book value of $27,000 in the inventory amount of $477,000 in the 2005 financial statements. [141] This is another item Mr. Saunders took out of inventory for his own use in Arizona. He paid SCS $16,000 for it. The plaintiff claims the difference of $11,000 from the $27,000 value put on it in the inventory. [142] Mr. Saunders paid the $16,000 on February 22, 2006. He says he paid with US funds. This is in dispute. In any event there is no evidence of any difference in the exchange rates at that time so I will consider the loss to be $11,000. [143] Mr. Saunders says he incurred costs getting the trailer down to Arizona. In my view those must have been personal costs of his and not costs of SCS. Accordingly they cannot be used to reduce the amount owed by Mr. Saunders. [144] The plaintiff submits that this was a violation of s. 4.2(p) of the Agreement that represents that before the date of the Agreement the company has not disposed of anything to any person for less than its fair market value. [145] I agree with the plaintiff on this. It was a breach of the representation in s. 4.2(p) of the Agreement by Mr. Saunders to the plaintiff although it concerned a debt owed to SCS. Mr. Saunders continued to operate SCS from January 1, 2006 to June 30, 2006 and he took the Park model trailer for himself prior to

the date of the Agreement of April 27, 2006. It was a loss to the inventory. [146] In addition the price paid by Mr. Saunders may also have been a breach of s. 6.5 of the Agreement being a disposal of assets except in the ordinary course of business. [147] The plaintiff is entitled to recovery of this $11,000 amount from Mr. Saunders as constituting a loss on the inventory of $477,000 after December 31, 2005 before the Agreement of April 27, 2006, and the right of the plaintiff is to recover this amount under s. 11.3 of the Agreement as causing it loss. Using Ms. Stanley's opinion of the value of the net assets equalling the value of the shares, the loss of $11,000 from asset value is a loss of $11,000 to the share value. Shareholder's Loan Overpayment [148] Mr. Saunders' shareholder's loan stood at $40,975 in the 2005 financial statements. By June 30, 2006 it was overpaid to him by $13,463.62. [149] Section 4.2(f) of the Agreement mandates that no payment has been made to Mr. Saunders personally after December 31, 2005 and confirms that the company has not paid any benefit to any employee, director or officer of the company, which would include Mr. Saunders, except in the ordinary course of business. I allow this claim. Personal Expenses [150] The plaintiff submits that the company paid personal expenses of Mr. Saunders in the amount of $4,667 that he submitted as business

expenses but which were denied to SCS as business expenses by Revenue Canada. [151] This claim is allowed as a breach of the representation in s. 4.2(f) and 4.2(p) of the Agreement. Exhibit 22 indicates the expenses were incurred prior to the Agreement of April 27, 2006. Again a loss of net asset value equals a loss of share value. [152] Claims under this heading are also made for $575 for Mr. Saunders' accountant's invoice of March 31, 2006 to SCS to advise him on the possible sale of the business and Greg Saunders' invoice of December 28, 2005 to SCS for $4,021.51 for what appears to have been installation of an Ampliroll unit. [153] I allow the accountant's charge of $575 as being a personal debt of Mr. Saunders incurred prior to April 27, 2006 and not a company debt. The plaintiff has been adversely affected by this as a loss of net asset value equals a loss of share value. [154] I disallow the claim for the Greg Saunders invoice for $4,021.51 as being a personal responsibility of Mr. Saunders as there is no evidence this was an invoice for Greg Saunders' work on Mr. Saunders' personal truck. In any event it was an expense prior to even December 31, 2005. [155] Mr. Saunders says the invoice for his son's work installing the Ampliroll unit on his personal truck was in the $37,500 account reflected in the invoice of May 6, 2006 to him personally for installation on his 1975

Mack truck. I accept that evidence. Loan Payments of $14,000 on the HSBC Loan [156] The plaintiff in submissions says that between January and May 2006 SCS made five payments of $2,800 for a total of $14,000 on the HSBC bank loan that Mr. Saunders had said he personally would pay. [157] Mr. Saunders says he understands the plaintiff has abandoned this claim. I have no indication of any such agreement by the plaintiff to abandon this claim. [158] On the agreement that Mr. Calverley says he had with Mr. Saunders to pay the loan, there was no time period stipulated other than prior to the completion of the share sale and it appears Mr. Saunders did not pay out the loan until June 29, 2006 after these five payments had already been made by SCS. [159] Accordingly this claim is denied. Ampliroll Unit (AL90L) - $15,500 [160] Mr. Saunders says the AL90L Ampliroll unit on his personal truck originally belonged to another company of his, Ion Steel Recycling, and when he sold that company around 1995 he took it off one of the Ion Steel trucks and kept it for himself. It is on his W5 white cab-over truck shown in Exhibit 19. [161] Mr. Calverley says he recently looked at this Ampliroll unit on the W5 cab-over truck and to his eye it looked to be in good condition with no signs of marks on it that might indicate it had been moved from truck to truck. [162] However he also says he has no

direct evidence to prove that the Ampliroll unit came from SCS and was not paid for. [163] Greg Saunders, Mr. Saunders' son, says he put the Ampliroll unit on the W5 white cab-over truck in the fall of 2006 at his own place off the SCS property. He says he did not know where the Ampliroll unit had been before but he charged his father for his work. [164] Plaintiff's counsel points to evidence that SCS purchased an AL90L Ampliroll unit on June 28, 2005 with no corresponding sales invoice for it. [165] From this evidence the plaintiff seeks a judgment against Mr. Saunders for converting the Ampliroll unit to himself without paying for it. [166] I reject this claim. I am not prepared to pass judgment against Mr. Saunders for this claim based on only Mr. Calverley's assessment that the Ampliroll unit he saw recently looked to be in a new condition and there was a purchase of an AL90L Ampliroll unit on June 28, 2005 with no corresponding sales invoice for it. Summary [167] In summary I conclude the plaintiff has succeeded on its claims as follows: (a) $200,000.00 being the loss in value of the inventory and work in progress as at December 31, 2005, being $477,000 less the remaining inventory at a value of $77,000 less the remaining composter at a value of $200,000; (b) $39,600.00 being the value of the missing mini tubs in the first six months of 2006; (c) $30,937.98 being the loss

of steel value in 2006 from sales to DL's Bins and H&L in 2005; (d) $11,000.00 being the amount of underpayment for the Park Model Trailer; (e) $13,463.62 being the shareholder loan overpayment; (f) $5,242.00 being the claim for personal expenses; TOTAL: $300,243.60 [168] Mr. Saunders filed a counterclaim which included a claim that by virtue of Section 11.14 of the Agreement monies collected by SCS after the closing date as receivables of the company as of December 31, 2005 were to be paid to him, and this was not done. [169] At a hearing on January 7, 2013, his counsel confined his counterclaim to the sum of $684.00 as owed. [170] There being no opposition to this claim, I allow the counterclaim in the amount of $684.00. [171] I therefore order that Mr. Saunders pay the sum of $299,559.60 for the plaintiff's claims allowed after taking into account the amount of $684.00 for the counterclaim. [172] The plaintiff will have its costs at Scale 2 for matters of more than ordinary difficulty or importance, absent any dispute on costs. "The Honourable Mr. Justice Truscott"