Jonathan's - Aluminum & Steel Supply Inc. v. Retail Alloy Metal & Plastic Plus Limited and Tharumarasa

Decision 1: Hold the contract scope to its four corners — chattels and inventory only

Ram’s position at trial was that the December 5, 2011 contract was for the entire business: chattels, customer list, phone number, goodwill, and one month of training. He claimed he had allotted only $30,000 of the $60,000 to chattels and $30,000 to goodwill, customer lists, and training. If accepted, this would have shifted the analysis: chattels and goodwill bundled at $60,000 means much less remains for inventory price.

We held the line on the document. The Contract clearly stated the purchase was for chattels (set out in the attached list) and inventory at invoice price — nothing else. Justice Wright adopted that position directly (paras. 56–60): “the Contract clearly states the purchase was for chattels and inventory. The Contract indicates that the chattels are set out in the attached list. That is a list of equipment and makes no mention of the customer list, the phone number, the training and the goodwill.” And critically (para. 58): Ram “admitted that he did not communicate to Mr. Liu that the purchase was to include goodwill, customer lists or phone numbers. He said that he only thought about it. Unfortunately, thinking about it is not good enough, and unless Mr. Liu was told and agreed to it, he cannot be bound by it.”

Decision 2: Defeat the non-competition agreement on economic duress — NAV Canada framework

The buyer’s setoff claim was the entire defence. If the February 2012 non-competition agreement was valid and Mr. Liu had breached it (by continuing to make sales), the buyer could set off losses against the inventory price — potentially eliminating recovery.

We attacked the non-competition agreement on two grounds. First: lack of consideration (Francis v. Canadian Imperial Bank of Commerce, [1994] O.J. No. 2657, Ont. C.A.). Second: even if the agreement “simply varied” the original Contract (per Greater Fredericton Airport Authority v. NAV Canada, 2008 NBCA 28), it was procured under economic duress.

Justice Wright accepted the duress argument wholesale (para. 74): “If ever there was a case that demonstrated that entry into a contract under economic duress, this is it. The plaintiff’s evidence... clearly makes out the case that he only agreed to this non-competition agreement because he was desperate to get paid for the inventory. He believed if he did not do so, he would never get paid and he communicated this to Ram.” The two preconditions of NAV Canada were satisfied: no other viable alternative; signed under protest. The initiation of litigation 8 months after signing met the “disavow as soon as possible” requirement (para. 77). The non-competition agreement was found not valid — and even if valid, “a completely separate and distinct issue from the Contract” that “plays no role in this action” (para. 80).

Decision 3: Build credibility through methodical preparation — the inventory count must withstand cross-examination

The inventory count was the dollar-magnitude question. The buyer’s position was that the inventory was worth $71,527 — not the $110,644.14 Mr. Liu invoiced. If the trial judge had accepted the buyer’s number, the recovery would have been roughly two-thirds of what we obtained. Three months after closing, Ram and five other people conducted their own inventory count without record-keeping or apparent expertise.

We anchored Mr. Liu’s count on three things: (1) Mr. Liu’s six years of running the business, with a purchase book containing invoices for all material purchased since the company’s inception; (2) the physical count completed with his sons over Christmas 2011 and into January 2012, with detailed notes; (3) the price per item, derived from prior invoice prices and current market value. Justice Wright fully accepted Mr. Liu’s count and methodology (paras. 63–65): “I find the formula and the price assigned to the inventory by Mr. Liu to be both fair and reasonable... I have complete confidence in the accuracy and fairness of Mr. Liu’s inventory count and I accept it in its entirety.” By contrast, the court had “no confidence” in Ram’s count (para. 66) and described his evidence as “confusing... self-serving... internally inconsistent” (para. 41). Methodical preparation produced the credibility finding that decided the dollar amount.

1. Contract drafting matters more than informal understanding. When a contract states the scope — chattels and inventory — do not permit later expansion to customer list, training, or goodwill. Buyers who want more should put it in writing. As Justice Wright held: “thinking about it is not good enough, and unless [the seller] was told and agreed to it, he cannot be bound by it” (para. 58). For sellers, this is a defensive shield against expanded-scope arguments at trial.

2. The NAV Canada economic duress framework is a powerful tool against post-contract amendments signed under pressure. Two preconditions: (i) no other viable alternative when signing; (ii) signed under protest. A seller who signs a non-competition agreement, restrictive covenant, or release as a condition of being paid for already-delivered goods can attack that document on duress under Greater Fredericton Airport Authority v. NAV Canada, 2008 NBCA 28. Initiating litigation within months — here, 8 months — satisfies the “disavow as soon as possible” requirement.

3. In credibility-driven trials, methodical preparation is the dollar-magnitude variable. The inventory count was the difference between $132,827.88 and roughly $71,527. Mr. Liu’s six years of purchase records, his physical count completed with his sons over weeks, his prior invoice methodology — these produced a record that the trial judge found “fair and reasonable” and accepted “in its entirety.” By contrast the buyer’s 3-months-late count, conducted by people with no apparent knowledge of the materials and without record-keeping, was given “no confidence.” Trial preparation is not the legal argument — it is the methodology and the records.