Court File and Parties

Court File No.: CV-15-00124000-0000 Date: 2025-07-29 Ontario Superior Court of Justice

Between:

1440195 ONTARIO INC., Plaintiff

– and –

1440194 ONTARIO INC. and MARY EDUARDA SIMAS as Estate Trustee for THE ESTATE OF ANTONIO SIMAS, Defendants

Before: Justice R.E. Charney

Counsel:

• Jonathan Barr and Tiffany Sillanpää, for the Plaintiff
• Matthew Kersten and Sabrina Waraich, for the Defendants

Heard: January 6-10, 13-15, 23, March 21 and April 15, 2025

Reasons for Decision

Introduction

[1] Antonio Simas and Luis Amaro were a Canadian success story. They both immigrated to Canada from Portugal as young men, and, as business partners in Nova Housekeeping Systems Ltd. ("Nova"), built a successful business that they sold for over $20 million in 2012.

[2] On September 12, 2015, Mr. Amaro, whose holding company is the Plaintiff 1440195 Ontario Inc., commenced this action against Mr. Simas and his holding company, the Defendant, 1440194 Ontario Inc., for damages in relation to the proceeds of sale of Nova.

[3] For ease of reference, I will refer to the corporate Plaintiff as Mr. Amaro, and to the corporate Defendant as Mr. Simas, since each principal was the sole shareholder, director, controlling mind and alter ego of their respective holding corporation, and it would be confusing to use their corporate names given that the corporate names differ by only one digit.[1]

[4] The action stems from shareholder Amending Agreements signed by the parties in 2002 and 2009, which created new divisions within Nova and set out how the profits from the new divisions were to be distributed between the shareholders, and how the proceeds of sale were to be distributed should Nova be sold in the future.

[5] Mr. Amaro alleges that the Amending Agreements are invalid, and, in the alternative, that the net sale proceeds were not allocated fairly in accordance with the terms of the Amending Agreements if they are valid. He argues that he should have received $543,801 more than he did from the sale of Nova.

[6] Mr. Amaro also alleges that Mr. Simas improperly paid himself and his wife additional salary between 2003 and 2012 to which Mr. Simas was not entitled. He alleges that he is owed $330,851 as a result.

[7] The Defendants dispute these claims. They argue, first of all, that the claims are statute barred because they were brought more than two years after the cause of action arose or could have been discovered by reasonable diligence. In the alternative, they argue that the impugned Amending Agreements are valid, and that profits and net sale proceeds were allocated in accordance with the terms of the Agreements.

Facts

[8] Mr. Amaro and Mr. Simas began working together in the 1980's. Mr. Amaro had a commercial cleaning business called Hallmark. Mr. Simas was originally hired as an employee, but soon became a partner. Hallmark was struggling financially, and almost became bankrupt, but Mr. Simas took over the finances, and was able to make the company profitable. Mr. Amaro testified that Mr Simas was good at finding new clients, and that Hallmark did well financially due to Mr. Simas' efforts. Mr. Simas "saved Hallmark". Mr. Amaro was in charge of the cleaning staff.

[9] Hallmark was sold in the mid-eighties, and in 1986, Mr. Amaro and Mr. Simas started Nova Housekeeping Services. It was a commercial cleaning and maintenance business, cleaning commercial and industrial establishments in locations in the GTA.

1996 Shareholder Agreement

[10] On August 30, 1996, Nova had four shareholders: Mr. Amaro, Mr. Simas, Victor Rodrigues and Jose Tony Goncalves. At that time, Mr. Amaro and Mr. Simas were equal shareholders, each with 45%. The shares were held by their respective holding companies. Mr. Rodrigues and Mr. Goncalves together owned 10% through their jointly owned holding company.

[11] A Shareholders' Agreement was signed on August 30, 1996, which provided that Mr. Amaro and Mr. Simas were to be the directors of the corporation. Mr. Simas was named as the President of the Corporation, and Mr. Amaro as the Secretary. The business of the corporation was restricted to "contract cleaning and maintenance services and associated functions". All cheques, promissory notes and orders requiring the signature of the Corporation had to be signed by both the President and the Secretary.

[12] The 1996 Shareholder Agreement was signed by Mr. Simas on behalf of his holding company (Antonio Simas Holdings Ltd.), Mr. Amaro, on behalf of his holding company (Luis Amaro Holdings Ltd.), and by Messrs. Goncalves and Rodrigues on behalf of their jointly owned holding company (1058178 Ontario Inc.).

[13] As President of the Company, Mr. Simas was responsible for the financial aspects of the company. Mr. Amaro continued to be responsible for the cleaning staff. As equal partners, they shared the profits equally.

[14] The Shareholder Agreement was amended on November 1, 1999, to correct an incorrect reference in the 1996 Agreement. This 1999 amendment is not relevant to this proceeding.

2001 Shareholder Resolution

[15] On February 1, 2001, the Nova Board of Directors passed a resolution that transferred Mr. Simas' shares from Antonio Simas Holdings Ltd. to 1440194 Ontario Inc., and transferred Mr. Amaro's shares from Luis Amaro Holdings Ltd. to 1440195 Ontario Inc. This resolution changed the names of the respective holding companies, but nothing else. Each principal remained the sole shareholder, director, controlling mind and alter ego of their respective holding corporation. Mr. Amaro testified that he understood that the shares were transferred for "tax reasons".

[16] Until 2002, Mr. Simas and Mr. Amaro were equal partners, and earned the same income and bonus from Nova. Mr. Simas would prepare and sign the cheques, and then they would be signed by Mr. Amaro. Mr. Amaro testified that Mr. Simas always signed first, and he (Mr. Amaro) would see Mr. Simas' signature and "just sign them" and return the cheques to Mr. Simas. Mr. Amaro explained that he trusted Mr. Simas with the finances because Mr. Simas "was good at finances, I don't know how to do that".

[17] It was Mr. Simas who worked with Nova's accountants. Although Mr. Amaro would go with Mr. Simas to the accountants in the early years of the company, he stopped going around 1997 because that "was Tony's job"; Mr. Amaro didn't understand what they were discussing, and he relied on Mr. Simas.

2002 Amending Agreement – Establishment of the Dietary Division

[18] Several of Nova's cleaning customers were long term care homes. In 2002, Mr. Simas saw an opportunity to expand the operation of the company by starting a "Dietary Division" – a division of Nova that would prepare food for long term care homes. It was understood that Mr. Simas would be responsible for the Dietary Division and that neither Mr. Amaro nor Mr. Rodrigues would have any involvement in the management or operation of the Dietary Division.

[19] On April 17, 2002, the Board of Directors (Messrs. Simas and Amaro) passed a resolution changing the name of the corporation from "Nova Housekeeping Systems Ltd." to "Nova Services Group Inc.". This resolution was signed by both Mr. Simas and Mr. Amaro and consented to by Mr. Rodrigues.

[20] On May 29, 2002, the shareholders signed an "Amending Agreement" (the 2002 Amending Agreement), to amend the August 1996 Shareholder Agreement and establish the Dietary Division. The relevant provisions in the 2002 Amending Agreement provide:

AND WHEREAS due to the disproportionate and extraordinary contributions by Antonio Simas to the profitability, steering and management of the Corporation to wit the establishment of the Dietary Department or Division (hereinafter referred to as the "the Dietary Division"), all of the parties hereto agree to amend the Shareholders Agreement and First Amending Agreement as hereinafter set forth (hereinafter referred to as the "Second Amending Agreement");

1. The recitals set out hereinabove are true in both substance and in fact;

2. A separate operating division shall be created within the Corporation as of the 1 day of June, 2002, which division shall be known as the "Dietary Division;

3. The Dietary Division shall be engaged in the provision of nutritional and dietary and food preparation and related services to present and future customers of the Corporation;

4. All of the books, records and accounts of the Dietary Division of the Corporation shall be kept separate and apart from the books, records and accounts for the Housekeeping Division of the Corporation, which division shall hereinafter be referred to as the "Housekeeping Division";

5. The shareholders of the Corporation acknowledge and agree that the Corporation's involvement and participation in the services offered by the Dietary Division and the profit of the Dietary Division is initially entirely due to the procurement of contracts for this division by Antonio Simas;

6. No fixed costs of the Corporation, except those as are entirely for goods and services totally to be utilized by the Dietary Division, shall be charged against the revenues of the Dietary Division in arriving at the net profit before taxes of the Dietary Division. Notwithstanding the actual shareholdings of the shareholders of the corporation, the net profit before taxes of the Dietary Division (hereinafter referred to as the "profit of the Dietary Division") shall be divided as follows:

i. Victor Manuel Rodrigues, or his nominee: Five (5%) Percent

ii. Jose Tony Goncalves, or his nominee: Five (5%) Percent

iii. Luis Amaro, or his nominee: Thirty-five (35%) Percent

iv. Antonio Simas, or his nominee: Fifty-five (55%) Percent

7. Said profit of the Dietary Division shall be distributed at such times and in such amounts strictly in accordance with paragraph 6 herein as determined solely in the discretion of Antonio Simas.

8. In the event of the sale of the Dietary Division of the Corporation, the net proceeds of sale for said Dietary Division as calculated by the chartered accountants of the Corporation, in said chartered accountants' sole discretion, shall be divided and payable in the manner as set out in paragraph 7 herein;

9. The distribution of the net proceeds of disposition of the Dietary Division shall be strictly in accordance with this Agreement and specifically paragraphs 6 and 7 hereinabove, whether the Dietary Division itself or the entire Corporation is sold. In the event of the sale of the entire Corporation including both the Dietary Division and Housekeeping Divisions and any other assets, if any of the Corporation, the Agreement of Purchase and Sale for same shall allocate the proceeds of disposition between (or among) the divisions of the Corporation. If said Agreement of Purchase and Sale is silent on this issue, the chartered accountants for the Corporation shall, in their sole discretion, decide upon the appropriate allocation of the proceeds of disposition and the parties hereto agree to be bound by the determination of the said chartered accountants.

10. In every other respect, the provisions of the Shareholders' Agreement and the First Amending Agreement dated November 1, 1999 are confirmed; and the Shareholders' Agreement and First Amending Agreement dated November 1, 1999 shall continue in full force and effect subject only to this Second Amending Agreement, dated 2002.

[21] That is the entire agreement (except for certain recitals not relevant to this proceeding). Excluding the title page and signing page, the agreement is 3 pages long.

[22] The 2002 Amending Agreement was signed by Antonio Simas, as President of Antonio Simas Holdings Corporation, Luis Amaro, President of Luis Amaro Holding Corporation, Jose Tony Goncalves, President of 1058178 Ontario Inc. and Victor Manuel Rodrigues, Secretary Treasurer of 1058178 Ontario Inc. Antonio Simas and Luis Amaro signed it again, as President and Secretary of Nova Housekeeping Systems Ltd., and then all four shareholders signed again in their personal capacity.

[23] The 2002 Amending Agreement contained an error. Antonio Simas signed on behalf of Antonio Simas Holdings Ltd., even though his shares had been transferred to his new holding corporation, 1440194 Ontario Inc., in 2001. Similarly, Luis Amaro signed on behalf of Luis Amaro Holdings Ltd., even though his shares had been transferred to 1440195 Ontario Inc. in 2001.

[24] Mr. Rodrigues testified that Mr. Simas brought him into the office to sign the 2002 Amending Agreement, and went through it with him. Since the Amending Agreement did not affect his percentage of the profits, he signed the agreement. Mr. Rodrigues worked only with the Housekeeping Division as "Vice President, Commercial Business Development". He had no involvement with the Dietary Division.

[25] Mr. Amaro testified that Mr. Simas told him in May 2002 that he wanted to start the Dietary Division, that Mr. Simas would manage and run it, and that the profits of the Dietary Division would be split 55/35/10. Mr. Amaro testified that he was not happy about this, and he and Mr. Simas had an argument about it.

[26] Unfortunately, Mr. Simas passed away in February 2021, so only Mr. Amaro's evidence on this issue was available at trial.

[27] Mr. Amaro testified that a couple of weeks after their argument, Mr. Simas put the 2002 Amending Agreement on his desk and asked him to sign it. Mr. Simas told Mr. Amaro that the document was to start the Dietary Division, and that it spelled out the percentage split they had discussed in their argument two weeks before. Mr. Amaro did not ask Mr. Simas any questions – he testified that he had no reason to ask any questions. He understood that the document was for the purpose of starting the Dietary Division and that the split would be 55/35/10. Mr. Simas told Mr. Amaro that he (Mr. Simas) was going to run the Dietary Division and do all the work. Mr. Amaro did not think that he needed legal advice. He did not read the document before he signed it and did not ask for a copy. He never asked for a copy of any document that he signed.

[28] Mr. Amaro testified that "Tony opened the page, said sign here, so I signed". He did not know anything about the document other than the 55/35/10 division of profits. He did not read the agreement because he trusted Mr. Simas and Mr. Simas did not tell him to read it. He did not know that if the Dietary Division was sold, he would only receive 35% of the proceeds rather than the 45% agreed to in the original agreement.

[29] Mr. Amaro acknowledges that he agreed to the change in the profit sharing, although he claims that he did so because he thought that Mr. Simas would "make my life miserable" if he did not sign. Mr. Amaro explained that Mr. Simas would make his life miserable by not talking to him or being rude to him or making fun of him.

[30] Moreover, Mr. Amaro acknowledged that he signed management salary resolutions following the 2002 Amending Agreement, and these resolutions explicitly set out the salaries Mr. Simas and Mr. Amaro would receive. Mr. Amaro also personally co-signed the cheques related to the distribution of salaries. Those amounts were not equal. For example, the Resolution of the Board of Directors signed by Mr. Simas and Mr. Amaro on January 31, 2011 indicates that the management salaries for the fiscal year ended January 31, 2011 were $994,569 for Mr. Simas, $852,271 for Mr. Amaro, and $215,142 for Mr. Rodrigues. There were similar resolutions signed for each year between 2003 and 2012, each with Mr. Simas receiving a higher management salary than Mr. Amaro. Although Mr. Amaro signed these resolutions, he testified that he did not remember signing them and that he never read them.

[31] In fact, Mr. Amaro testified that he did not remember signing any of the documents that he signed and never read any of them.

[32] There is no dispute that neither Mr. Amaro nor Mr. Rodrigues had any involvement in the management or operations of the Dietary Division.

2009 Amending Agreement – Establishment of the Alberta Division

[33] In 2009, Mr. Simas saw an opportunity to expand the business into Alberta and decided to establish the "Alberta Division". By this point, Mr. Goncalves was no longer involved with Nova, and his 5% shares had been purchased by Mr. Rodrigues, who held the shares through Victor M. Rodrigues Holdings Ltd.

[34] On September 3, 2009, another Amending Agreement was signed by the parties. The text of the 2009 Amending Agreement follows very closely to the text of the 2002 Amending Agreement. Like the 2002 Amending Agreement, the 2009 Amending Agreement is 3 pages long, excluding the title page and signing page. The relevant portions of the 2009 Amending Agreement provide:

AND WHEREAS due to the disproportionate and extraordinary contributions by Antonio Simas to the profitability, steering and management of the Corporation to wit the establishment of the Nova Services Group Inc. Alberta Branch or Division (hereinafter referred to that "Alberta Division"), all the parties hereto agree to amend the Shareholders Agreement and First Amending Agreement as hereinafter set forth…

1. The recitals set out hereinabove are true in both substance and in fact;

2. A separate operating Branch or Division shall be created within the Corporation as of the first (1) day of October, 2009, which Branch or Division shall be known as the "Alberta Branch or Division";

3. The Alberta Branch or Division shall be engaged in the provision of nutritional and dietary and food preparation and environmental related services to present and future customers of the Corporation;

4. All of the books, records and accounts of the Alberta Branch or Division of the Corporation shall be kept separate and apart from the books, records and accounts for the Housekeeping Division of the Corporation, which division shall hereinafter be referred to as the "Housekeeping Division";

5. The shareholders of the Corporation acknowledge and agree that the Corporation's involvement and participation in the services offered by the Alberta Branch or Division and the profit of the Alberta Branch or Division is initially entirely due to their procurement of contracts for this Branch or Division by Antonio Simas.

6. No fixed costs of the Corporation, except such as are entirely for goods and services totally to be utilized by the Alberta Branch or Division, shall be charged against the revenue of the Alberta Branch or Division in arriving at the net profit before taxes of the Alberta Branch or Division. Notwithstanding the actual shareholdings of the shareholders of the corporation the net profit before taxes of the Alberta Branch or Division (hereinafter referred to as the "profit of the Alberta Branch or Division") shall be divided as follows:

i. Victor Manuel Rodrigues, or his nominee: Ten (10%) Percent

ii. Luis Amaro, or his nominee: Thirty-five (35%) Percent

iii. Antonio Simas, or his nominee: Fifty-five (55%) Percent

7. Said profit of the Alberta Branch or Division shall be distributed at such times and in such amounts strictly in accordance with paragraphs 6 herein and as determined solely in the discretion of Antonio Simas:

8. In the event of the sale of the Alberta Branch or Division of the Corporation, the net proceeds of sale for said Alberta Branch or Division as calculated by the chartered accountants of the Corporation, in said chartered accountants' sole discretion shall be divided and payable in accordance with the percentages set out in paragraph 6 herein above and in the manner set out in paragraph 7 herein;

9. The distribution of the net proceeds of disposition of the Alberta Branch or Division shall be strictly in accordance with this Agreement and specifically paragraphs 6 and 7 hereinabove, whether the Alberta Branch or Division itself or the entire Corporation is sold. In the event of the sale of the entire Corporation including both the Alberta Branch or Division and Housekeeping Divisions and any other assets, if any of the Corporation, the Agreement of Purchase and Sale for same shall allocate the proceeds of disposition between (or among) the division of the Corporation. If said Agreement of Purchase and Sale is silent on this issue, the Chartered accountants for the Corporation shall, in their sole discretion, decide upon the appropriate allocation of the proceeds of disposition and the parties hereto agree to be Bound by the determination of the said chartered accountants.

10. In every other respect, the provisions of the Shareholders' Agreement and the First Amending Agreement dated November 1, 1999 are confirmed; and the Shareholders' Agreement and First Amending Agreement dated November 1, 1999 shall continue in full force and effect subject only to this Third Amending Agreement, dated September 2, 2009.

[35] Each page of this 2009 Amending Agreement was initialled by each of the parties to the Agreement. The Agreement is signed by Antonio Simas, as President of Antonio Simas Holdings Ltd., Luis Amaro, President of Luis Amaro Holdings Ltd., and Victor Manuel Rodrigues, as President of Victor M. Rodrigues Holdings Limited. Antonio Simas and Luis Amaro signed it again, as President and Secretary of Nova Services Group Inc., and then all three shareholders signed again in their personal capacity.

[36] The 2009 Amending Agreement contains the same error as the 2002 Amending Agreement: Antonio Simas signed on behalf of Antonio Simas Holdings Ltd., even though his shares had been transferred to 1440194 Ontario Inc. in 2001. Similarly, Luis Amaro signed on behalf of Luis Amaro Holdings Ltd., even though his shares had been transferred to 1440195 Ontario Inc. in 2001.

[37] As with the 2002 Amending Agreement, Mr. Amaro testified that "Tony brought me the [2009] agreement, he told me where to sign, I signed it". They had no discussions about the Agreement before Mr. Amaro signed it, and he did not read it. Mr. Simas did tell Mr. Amaro that he (Mr. Simas) would run the Alberta Division, and the profits would be split the same as the Dietary Division, 55/35/10. Mr. Amaro relied on Mr. Simas' explanation.

[38] Mr. Amaro initially testified that he did not agree to any of the terms when he signed the 2009 Agreement, but then acknowledged that he did agree to the 55/35/10 profit split, but stated that he did not agree to the rest. Mr. Amaro thought it was better to sign it, or Mr. Simas would make his life miserable, but he had no idea what was in the Agreement. He testified that he did not sign it willingly but did not know how to challenge Mr. Simas on financial matters. Mr. Amaro explained that he just wanted his pay cheque, and for the company to do well, and trusted Mr. Simas to "run the financials".

[39] There is no dispute that neither Mr. Amaro nor Mr. Rodrigues had any involvement in the management or operations of the Alberta Division.

2012 Sale of Nova Services

[40] In 2009, Compass Canada Group expressed interest in purchasing Nova Services.

[41] On September 18, 2009, Messrs. Amaro and Rodrigues signed a "Consent and Authority" consenting to Mr. Simas negotiating the sale of Nova Services "including of its assets/shares and goodwill". The Consent authorized Mr. Simas to "negotiate the best terms of sale that he can on our behalf provided that we be given the opportunity to accept such offer when the negotiations have been completed".

[42] At trial, Mr. Amaro testified that he had no recollection signing this document, although he acknowledged that it was his signature.

[43] On August 31, 2012, Nova Services was sold to Compass Group for $20.75 million, subject to various adjustments.

[44] On the sale of the assets of Nova, 49.25% was allocated to Mr. Simas and his holding company and 40.75% was allocated to Mr. Amaro and his holding company. The 10% balance was allocated to Mr. Rodrigues. The 49.25/40.75 split was based on the proportion of revenue attributable to each division.

[45] The Nova sale closed on October 31, 2012.

Distribution of Sale Proceeds

[46] Following the sale of Nova to Compass Canada, Mr. Simas distributed a one page document that indicated the allocation of the sale assets to the shareholders (the "asset sale distribution chart"). The total sales price after expenses and taxes was $17,366,076. The asset sale distribution chart indicates that 1440194 Ontario Inc. (Mr. Simas' holding company) would receive 49.25% of the sale proceeds, or $8,552,793 net after taxes, 1440195 Ontario Inc. (Mr. Amaro's holding company) would receive 40.75%, or $7,076,676 net after taxes, and Victor Holdings (Mr. Rodrigues' holding company) would receive 10% or $1,736,608 net after taxes.

[47] Mr. Amaro testified that he did not receive a copy of the asset sale distribution chart until Mr. Rodrigues gave him a copy of it in November 2013.

[48] Mr. Amaro also testified that he was not aware that the assets were being divided in accordance with percentages outlined in the asset sale distribution chart until December 16, 2013, when he received a letter from Nova's lawyer, Martin Houser, enclosing a certified cheque for $805,000 "as per Tony's email". Mr. Amaro did not know what email Mr. Houser was referring to.

[49] On December 16, 2013 Mr. Simas sent an email to Mr. Houser, asking him to distribute $2,000,000 received from Compass Group Canada "as per the following breakdown:

Pay to 1440194 Ontario LTD 49.74% of $2,000,000 = $995,000.00

Pay to 1440195 Ontario LTD 40.25% of $2,000,000 = $805,000.00

Pay to Victor Rodrigues Holco 10% of $2,000,000 = $200,000

[50] The next day, Mr. Houser emailed Mr. Simas, stating: "Tony, Luis asked me to confirm whether there is a small error in the numbers. Was he supposed to get 40.75% instead of 40.25%?"

[51] Mr. Houser testified that he wrote this email to Mr. Simas after Mr. Amaro contacted him to point out that he was supposed to get 40.75% of the proceeds, not 40.25%. This is the only contemporaneous evidence of what Mr. Amaro knew about the distribution of proceeds. The Defendant argues that this evidence demonstrates that Mr. Amaro was aware that the assets were not being distributed 45/45 as per the original 1996 shareholder agreement.

Issues

[52] The many issues in this case can be divided into three main issues:

1. The Validity/Enforceability of the 2002 and 2009 Amending Agreements;

2. The Distribution of Profits after the 2012 Sale; and

3. The allocation of salaries between Mr. Simas and Mr. Amaro and the allocation of salaries between their spouses.

Analysis

Issue 1: Validity/Enforceability of the 2002 and 2009 Amending Agreements

[53] The Plaintiff argues that the 2002 and 2009 Amending Agreements are not valid or enforceable contracts because a) there was no meeting of the minds, and b) there was no shareholder approval.

[54] The Plaintiff also argues that the 2002 and 2009 Amending Agreements are "unconscionable" and created an "improvident transaction" and are therefore unenforceable.

[55] The Plaintiff contends that the parties should therefore be returned to their pre-Amending Agreement positions.

[56] Before turning to the Plaintiff's arguments, I will consider the limitation period argument raised by the Defendant.

Limitation Period

[57] The Defendant rejects each of the Plaintiff's arguments, but first argues that the Plaintiff did not commence this action until September 12, 2015, well outside of the two year limitation period set out in s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[58] Sections 4 and 5 of the Limitations Act provide:

Basic limitation period

4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

Discovery

5 (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[59] In this case, the Plaintiff is challenging the validity of the 2002 and 2009 Amending Agreements. He contends that these Agreements violate the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA), are unconscionable and that he did not agree to their terms when he signed them.

[60] To the extent that the Plaintiff seeks a civil remedy with respect to these allegations, his claim is subject to the two year limitation period in the Limitations Act.

[61] I agree with the Defendant that these claims arose on the dates that the Amending Agreements were signed – 2002 and 2009 respectively. In addition, all of these claims were discoverable by reasonable diligence on the date that each Agreement was signed by the Plaintiff.

[62] I agree with the Defendant that these claims arose on the dates that the Amending Agreements were signed – 2002 and 2009 respectively. In addition, all of these claims were discoverable by reasonable diligence on the date that each Agreement was signed by the Plaintiff.

The discovery principle postpones the running of a statutory limitation period until the plaintiff knows, or by reasonable diligence could have known, the material facts upon which to bring an action. The principles relating to the discoverability principle were summarized by Perell J. in Nicholas v. McCarthy Tétrault, at paras. 27 and 28 (aff'd: Nicholas v. McCarthy Tetrault, 2009 ONCA 692, leave to appeal to the SCC dismissed:):

The discoverability principle governs the commencement of a limitation period and stipulates that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the facts that would support a claim for relief: Kamloops v. Nielson (1984), 10 DLR (4th) 641 (S.C.C.); Central Trust Co. v. Rafuse (1986), 31 DLR (4th) 481 (S.C.C.); Peixeiro v. Haberman, [1997] 3 S.C.R. 549. Thus, a limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence.

The circumstance that a potential claimant may not appreciate the legal significance of the facts does not postpone the commencement of the limitation period if he or she knows or ought to know the existence of the material facts, which is to say the constitute elements of his or her cause of action. Error or ignorance of the law or legal consequences of the facts does not postpone the running of the limitation period: Coutanche v. Napoleon Delicatessen (2004), 72 O.R. (3d) 122 (C.A.); Calgar v. Moore, [2005] O.J. No. 4606 (S.C.J.); Milbury v. Nova Scotia (Attorney General) (2007), 2007 NSCA 52, 283 D.L.R. (4th) 449 (N.S.C.A.); Hill v. South Alberta Land Registration District (1993), 1993 ABCA 75, 100 D.L.R. (4th) 331 (Alta. C.A.).

[63] This summary was adopted by the Court of Appeal in Unegbu v. WFG Securities of Canada Inc., 2016 ONCA 501, at para. 4.

[64] A reasonable person in Mr. Amaro's position would have read the Amending Agreements that he was asked to sign. Had he read the Agreements, he would have known all of the material facts. The Agreements were not long. Mr. Amaro clearly understood that the Agreements amended the distribution of profits for the newly established Dietary Division (2002) and Alberta Division (2009). He claims now that he was not happy with that arrangement even when he signed it, but he knew about it. Mr. Amaro also understood that Mr. Simas was assuming full responsibility for these two Divisions, and Mr. Amaro expressed no objection to that arrangement or any interest in participating in the management or operation of either of those Divisions at any time.

[65] There is no suggestion that Mr. Simas concealed either Amending Agreement from Mr. Amaro. Each was given to Mr. Amaro to sign, and he was free to read them if he wanted. He was clear in his testimony that he was not interested in reading the Agreements and made no effort to do so. A party cannot toll the limitation period simply by failing to read the contract.

[66] All Mr. Amaro had to do to discover the underlying material facts of his claim was to read the three page Agreements he was asked to sign. He did not even give them a cursory glance: Sinn v. Drabble, 2015 ONSC 5007, at para. 30. If he had any questions about the Agreements or did not understand any part of them, he could have sought legal advice. He chose not to do so, both in 2002 and in 2009. In the meantime, he continued to sign resolutions and cheques that clearly provided for an unequal distribution of profits as provided in those Agreements.

[67] Discovery is based on the exercise of reasonable diligence. Mr. Amaro exercised no diligence.

Alternative – Validity of the 2002 and 2009 Amending Agreements

[68] In the alternative, if I am incorrect about the application of the limitation period, I will consider each of the Plaintiff's arguments regarding the validity of the 2002 and 2009 Amending Agreements.

Meeting of Minds

[69] The Plaintiff argues that the only provision of the 2002 and 2009 Amending Agreements that are valid are the 35/55 rather than the 45/45 profit split, because there was no "meeting of minds" with respect to the other portions of the Agreements. Mr. Amaro testified that after reviewing the Amending Agreements with his lawyer in late 2014, they were not at all what he thought he agreed to in 2002 and 2009. He did not agree with paras. 6 or 7 of the Amending Agreements, and had no idea that the Agreements contained these paragraphs when he signed them.

[70] There is no dispute that Mr. Amaro signed both the 2002 and 2009 Amending Agreements.

[71] Mr. Amaro further testified that when he signed the 2002 Amending Agreement, he understood that it was to establish the Dietary Division and that he had agreed to the profit share arrangement. He also confirmed that he understood that Mr. Simas would be responsible for managing the new division.

[72] Similarly, he understood that the 2009 Amending Agreement was to establish the Alberta Division with the same responsibilities and profit sharing arrangement as the Dietary Division.

[73] Having signed both Agreements, it is not open to the Plaintiff to come to court years later and cherry pick the provisions of the Agreements that he agreed with and disavow those which he now claims he did not. That is not how contract law works.

[74] Nor can Mr. Amaro avoid being bound by a signed agreement by simply asserting that he signed it without reading it, or that it was not explained to him. The defence of non est factum (which was not pleaded by the Plaintiff) is available to "someone who, as a result of misrepresentation, has signed a document mistaken as to its nature and character and who has not been careless in doing so": Bulut v. Carter, 2014 ONCA 424, at para. 18. The Supreme Court of Canada has made clear that the defence of non est factum will not succeed if one is careless or reckless in failing to read or makes no effort to understand the contract: Marvco Color Research Ltd. v. Harris, [1982] 2 SCR 774, at p. 787. A person signing a document cannot avoid their obligations simply by claiming that they were careless and did not read it: The Guarantee Company of North America v. Ciro Excavating & Grading Ltd., 2016 ONCA 125, at para. 15.

[75] This principle of law is based not only upon the principle of placing the loss on the person guilty of carelessness, but also upon a recognition of the need for certainty and security in commerce. In Muskham Finance Ltd. v. Howard, [1963] 1 Q.B. 904, [1963] 2 W.L.R. 87, [1963] 1 All E.R. 81 (C.A.) at p. 912, Donovan L.J. stated:

Much confusion and uncertainty would result in the field of contract and elsewhere if a man were permitted to try to disown his signature simply by asserting that he did not understand that which he had signed.

[76] At bottom line, that is exactly what the Plaintiff argues in this case. The Plaintiff also indicates that English is not his first language, although he testified in English without difficulty, and the evidence at trial was that he was able to communicate in English at the workplace. Mr. Amaro cannot claim that he was unable to understand a document that he did not even bother to read.

[77] The wording of the Amending Agreements is clear and unambiguous. Although Mr. Amaro professed ignorance of financial matters, and tried to infantilize himself in his testimony, he was a successful and experienced businessman earning a substantial income from his business. His failure to read the Agreements before signing was not based on an inability to understand the documents, it was based on indifference. As de Sa J. stated in RBC v. Precision Markings Inc., 2025 ONSC 169, at para. 37:

When a party signing documents is a shareholder, officer, or former president of the borrower then his failure to read the document(s) is beyond mere carelessness, it is indeed – indifference: Guarantee Co. of North America v Ciro Excavating & Grading Ltd., 2015 ONSC 4465, at paras. 14, 20-22 and 25.

[78] In Bulut v. Carter, 2014 ONCA 424, the Court of Appeal stated, at paras. 20 and 22:

In our view, on their own evidence, the Carter family members were careless in signing the document that consisted of one page. The Carter family members did not read it. They did not ask any questions about it. They did not ask for an opportunity to obtain independent legal advice.

On this basis, the defence of non est factum was not open to them.

[79] This same analysis and conclusion apply in the present case. On his own evidence, Mr. Amaro did not read the Amending Agreements, he did not ask questions about them, he did not ask for an opportunity to obtain independent legal advice. He understood that the Amending Agreements were establishing new Divisions and were changing the profit sharing arrangements in relation to those new Divisions. He signed the Agreements, and is bound by them.

Unconscionability

[80] The Plaintiff also argues that the 2002 and 2009 Amending Agreements were unconscionable and therefore unenforceable. He alleges that there was 1) an inequality of bargaining power, stemming from some weakness or vulnerability affecting the claimant and 2) an improvident transaction: Uber Technologies Inc. v. Heller, 2020 SCC 16, at para. 54:

Unconscionability is an equitable doctrine that is used to set aside "unfair agreements [that] resulted from an inequality of bargaining power" (John D. McCamus, The Law of Contracts (2nd ed. 2012), at p. 424). Initially applied to protect young heirs and the "poor and ignorant" from one-sided agreements, unconscionability evolved to cover any contract with the combination of inequality of bargaining power and improvidence…

[81] In my view, the Plaintiff has satisfied neither of these criteria. Mr. Simas and Mr. Amaro were business partners, equal shareholders and directors of Nova. There was no inequality of bargaining power. If Mr. Amaro did not want to amend the Shareholder Agreement, it was open to him to say no, and Mr. Simas could have started the Dietary Division on his own, since it did not compete with Nova in its commercial cleaning and maintenance business.

[82] Nor was Mr. Amaro a vulnerable individual. The fact that he trusted and relied on Mr. Simas did not make Mr. Amaro "vulnerable" or place him in a desperate situation. As indicated above, he did not read any documents that he was given to sign. He was, at best, careless, and, at worse, indifferent. Carelessness or indifference is not the same thing as vulnerability or desperation.

[83] Finally, there was nothing improvident about either Amending Agreement. Mr. Amaro would benefit from 35% of the new Divisions' profits even though he had no additional work or responsibilities. He was not unduly disadvantaged by this arrangement.

Ontario Business Corporations Act

[84] The Plaintiff argues that s. 108 of the OBCA requires an agreement to a unanimous shareholder agreement be executed by all shareholders. The Plaintiff argues that since Antonio Simas signed on behalf of Antonio Simas Holdings Ltd., even though his shares had been transferred to his new holding corporation, 1440194 Ontario Inc. in 2001 and Luis Amaro signed on behalf of Luis Amaro Holdings Ltd., even though his shares had been transferred to 1440195 Ontario Inc. in 2001, the Agreements did not have unanimous shareholder agreement.

[85] The Plaintiff relies on the decision in Buttarazzi Estate v. Bertolo, where one shareholder, Mr. DiFlorio, transferred his shares in Con Steel to his spouse, Mrs. DiFlorio. Two years after the transfer, Mr. DiFlorio purported to sign a shareholder agreement on behalf of Con Steel. The Respondent argued that it did not matter whether Mr. DiFlorio or Mrs. DiFlorio signed the Agreement. The Court rejected this argument, stating, at para. 8:

Under our law, husbands and wives are not one indivisible unit. Mr. DiFlorio and Mrs. DiFlorio have separate legal capacities and interests. If Mrs. DiFlorio was the shareholder of Con Steel when the agreement was signed, it was she who needed to sign it, not Mr. DiFlorio.

[86] In the present case, there is no dispute that the correct individuals - Antonio Simas and Luis Amaro - signed the Amending Agreements. Antonio Simas and Luis Amaro were the only directors and sole shareholders of their respective holding companies. The inadvertent reference to the prior names of the holding companies was clearly a misnomer, and it should not be permitted to invalidate a contract that the parties followed for 10 years. The parties clearly conducted themselves as if they were bound by the Amending Agreements.

Consideration

[87] Finally, the Plaintiff argues that he did not receive any consideration for signing the Amending Agreements. Although the Amending Agreements expressly provide that they are based on the "the disproportionate and extraordinary contributions by Antonio Simas" in establishing the Dietary Division and the Alberta Division respectively, the Plaintiff asserts that "neither of these things are true", and that the Dietary Division and the Alberta Division were established without any contribution by Mr. Simas.

[88] To support this assertion, the Plaintiff called Mr. Greg Muir, a former employee of Nova who was hired by Mr. Simas and acted as Vice President and Director of Operations of the Health Care Division until his employment was terminated by Mr. Simas in 2010. Mr. Muir reported directly to Mr. Simas. He testified that he did all of the work in establishing the Dietary and the Alberta Divisions, and that Mr. Simas did nothing other than oversee and give final approval to his work.

[89] There is no dispute that Mr. Muir reported directly to Mr. Simas and only to Mr. Simas. Neither Mr. Amaro nor Mr. Rodrigues had any involvement in the Dietary and the Alberta Divisions.

[90] The evidence also demonstrates that Mr. Simas took on substantial additional work in overseeing these new divisions, including increased administrative responsibilities and the supervision of Mr. Muir.

[91] The Defendants called Bill Dillane, a long time client of Nova, who operated long term care homes and senior homes in Ontario. While Mr. Dillane agreed that Mr. Muir was a valuable employee who was instrumental in developing the Dietary and Alberta Divisions, he also testified as to the strategic and important role Mr. Simas played in procuring the contracts that served as the foundation for these new divisions. Mr. Dillane testified that Mr. Simas was his primary point of contact at Nova throughout their business dealings and facilitated critical introductions that led to the establishment of the Alberta Division. His evidence contradicts the claim that Mr. Simas was not significantly involved in the formation and success of these new divisions.

[92] Even Mr. Muir, while attempting to downplay Mr. Simas' involvement, conceded that, as President of Nova, Mr. Simas held ultimate authority over the divisions. Mr. Muir acknowledged that he reported to Mr. Simas and needed his approval for key decisions.

[93] Moreover, both Mr. Amaro and Mr. Rodrigues agreed that the establishment of the new divisions required additional work from Mr. Simas, while their own roles remained unchanged. Neither of them was involved in the new divisions aside from receiving profits. This further underscores the fact that Mr. Simas' contributions provided the necessary consideration for the amendments to the share structure.

[94] Mr. Simas could not, of course, testify on his own behalf.

[95] I am satisfied, however, that Mr. Simas, as the President of Nova, provided disproportionate (as compared to Mr. Amaro) contributions to the establishment of the Dietary and Alberta Divisions. They were his idea, and he oversaw and was responsible for their establishment. That he delegated many of these responsibilities to a capable individual like Mr. Muir does not, in my view, detract from the fact that it was Mr. Simas who spearheaded these new divisions and that Mr. Amaro, by his own admission, had no involvement in these divisions.

[96] I need not measure out the relative contributions of Mr. Simas and Mr. Muir. Courts are concerned with the existence, rather than the adequacy, of consideration: Giacomodonato v. PearTree Securities Inc., 2024 ONCA 437, at para. 4, and cases cited therein.

[97] See also: R.E. Lister Ltd. v. Dunlop Canada Ltd., [1982] 1 SCR 726, at pp. 742-3:

The adequacy of consideration supporting a contract has not been the subject of court scrutiny for several centuries: Cheshire and Fifoot's Law of Contract, 10th ed., at p. 70.

Conclusion: Validity/Enforceability of the 2002 and 2009 Amending Agreements

[98] For the foregoing reasons, I conclude that the 2002 and 2009 Amending Agreements were both valid and enforceable.

Issue 2: The Distribution of Profits after the 2012 Sale

[99] The Amending Agreements do not specify how the proceeds of sale would be divided between the shareholders if Nova was sold. Each of the Amending Agreements included identical language with respect to the allocation of proceeds: The appropriate allocation of proceeds between the divisions would either be included in the Agreement of Purchase and Sale or decided by Nova's chartered accountants "in their sole discretion".

[100] Both the 2002 and 2009 Amending Agreements provided:

If said Agreement of Purchase and Sale is silent on this issue, the chartered accountants for the Corporation shall, in their sole discretion, decide upon the appropriate allocation of the proceeds of disposition and the parties hereto agree to be bound by the determination of the said chartered accountants.

[101] The Plaintiff challenges the allocation of assets on two interrelated grounds. First, he alleges that the allocation of assets was not determined by Nova's chartered accountant, but by Mr. Simas acting alone. In addition, the method of allocation chosen by Mr. Simas was unfair and contrary to generally accepted accounting principles. I will deal with these issues in turn.

Did the Chartered Accountant decide the appropriate allocation of assets?

[102] The Plaintiff alleges that Mr. Simas breached the Amending Agreements by calculating the values of the Divisions and Net Sale Proceeds Distributions himself, rather than relying on Nova's chartered accountant to decide upon the appropriate allocation of the proceeds of disposition as provided in the Amending Agreements.

[103] The Defendant argues that the distribution of sale proceeds was determined by Nova's chartered accountant, Michael Cooper, of Cooper & Company in accordance with the terms of the Amending Agreements.

[104] Mr. Cooper was the long time chartered accountant of Nova, and, together with Mr. Simas, the only person with direct knowledge of his involvement in the allocation of proceeds in 2012. Mr. Cooper died in May 2022, so his testimony was not available.

[105] Mr. Michael Friederich, a chartered accountant who has worked for Cooper & Company since 1998, testified for the Defendant, but had no knowledge and was not able to provide any information as to who decided the allocation of the proceeds of sale. He confirmed that Cooper & Company provided all available documentation related to Nova for the purposes of this litigation.

[106] In the absence of testimony from Mr. Cooper (or Mr. Simas), I must proceed on the basis of circumstantial evidence or the lack thereof. Had Mr. Cooper been involved in the decision regarding the appropriate allocation of proceeds, I would have expected to have seen some correspondence between Mr. Cooper and Mr. Simas dealing with that issue. This was a financially significant decision, and it is aberrant that Mr. Cooper would have decided on the unusual methodology chosen without some correspondence with the Nova shareholders, or at least with Mr. Simas.

[107] As things stand, there is no evidence that Mr. Cooper had any involvement in this decision at all. The calculations for the allocation were located on Mr. Simas' computer. Mr. Simas directed Nova's counsel, Mr. Houser, regarding the allocation of funds held in trust following the sale. The cheques were distributed by Mr. Simas. The only extant correspondence from Mr. Cooper relating to the sale of Nova is dated November 27, 2014 – two years after the sale - and is unrelated to the allocation of assets. It is a letter from Mr. Cooper to a lawyer retained by Mr. Amaro.

[108] There was a dispute between the parties as to whether the November 27, 2014 letter had appended to it a copy of the Asset Sale Distribution Chart. The Plaintiff claimed that the Asset Sale Distribution Chart was inadvertently appended to the November 27, 2014 letter in the Plaintiff's Affidavit of Documents.

[109] Given that the November 27, 2014 letter makes no reference to the Asset Sale Distribution Chart, does not indicate that any such chart is attached, and the chart is not on Cooper & Company letterhead, I accept the Plaintiff's explanation and I find that the chart was not attached to or included with the November 27, 2014 letter and was not prepared by Mr. Cooper. The November 27, 2014 letter from Mr. Cooper does refer to and enclose copies of T4s and T5s and signed copies of the 2002 and 2009 Amending Agreements.

[110] Based on the evidence, and on the absence of evidence, I find that it was Mr. Simas who determined the allocation of proceeds, not Mr. Cooper. This was a breach of the terms of the 2002 and 2009 Amending Agreements.

Was the Allocation of Proceeds Contrary to Generally Accepted Accounting Principles?

[111] The Plaintiff called as an expert witness Ephraim Stulberg, a forensic accountant with expertise in business valuation. Mr. Stulberg filed an expert report and testified with respect to two issues:

i. the distribution of the sale assets when Nova was sold in 2012 and;

ii. the amount paid to Mr. Amaro and his spouse from the profits of Nova between 2003 and 2013.

[112] Mr. Stulberg's evidence was based on two alternate scenarios: one assumes that the 2002 and 2009 Amending Agreements were invalid and unenforceable, the second assumes that the Amending Agreements were valid and enforceable.

[113] I have concluded above that the Amending Agreements were valid and enforceable, and, therefore, I will consider Mr. Stulberg's evidence with respect to that scenario only.

[114] Assuming the validity of the Amending Agreements, Mr. Stulberg testified that the percentage distribution of 49.25% to Mr. Simas and 40.75% to Mr. Amaro was calculated based on a flawed methodology, because it was based on the proportion of revenue attributable to each division rather than on the proportion of profits attributable to each division.

[115] In addition, Mr. Stulberg testified that the percentages were applied to the sale proceeds prior to deduction of shareholder loans. In his opinion, this is not a correct approach, as it effectively wipes out the shareholder loans (which had been disproportionately provided by Mr. Amaro); the correct approach would be to apply these percentages after deduction of the shareholder loans.

[116] Mr. Stulberg calculated that these two issues alone caused an under-allocation to Mr. Amaro of $543,801, even if the 2002 and 2009 Amending Agreements are valid.

[117] Mr. Stulberg explained that the Housekeeping Division of Nova accounted for 80% to 90% of total profit between 2003 and 2012. For example, in 2012, the Dietary Division accounted for 19% of profits, and the Housekeeping Division accounted for 81% of profits. Using revenue to determine value of the Dietary and Alberta Divisions while ignoring their expenses unfairly increased the value of those Divisions when the assets were divided. This increased Mr. Simas' share of the proceeds at the expense of Mr. Amaro.

[118] In summary, Mr. Stulberg testified:

1. Under the terms of the Asset Purchase Agreement dated August 31, 2012, Compass was to pay a purchase price of $20.75M for Nova's assets, subject to various closing adjustments. Of this amount, $18.75M was to be paid at closing, with the remainder paid out over time.

2. The Asset Purchase Agreement does not break out the purchase price as between the Janitorial [Housekeeping], Dietary and Alberta Divisions.

3. The allocation of profits between the two divisions was based on the total sales of each division in 2012, rather than the profits. Based on this calculation, the sale of assets was divided as follows: Housekeeping Division 57% of value, Dietary/Alberta Division, 43% of value.

4. When divided in proportion to their respective ownership shares (55% for Mr. Simas and 35% for Mr. Amaro) this resulted in Mr. Simas being allocated 49.25% of the total purchase price, and Mr. Amaro being allocated 40.75%.

5. Given that the Dietary Division had lower profit margins than the Janitorial Division, it would seem inappropriate to allocate value based on revenue.

6. If the value of each division had instead been allocated based on its percentage of total company-wide profits (as opposed to revenues), Mr. Simas would have been allocated 46.9% and Mr. Amaro would have been allocated 43.1%.

7. In addition, the percentages calculated (49.25% and 40.75%) were applied incorrectly.

8. The percentages were applied to the net proceeds prior to deduction of shareholder loans owing by Nova to the shareholders. This fails to consider that Mr. Simas (and the third shareholder, Victor Rodrigues) had shareholder loan balances that were proportionately lower than their equity interest in Nova, while Mr. Amaro had a higher shareholder loan balance. This effectively penalizes Mr. Amaro for leaving more money in the company than the other two shareholders.

9. The correct approach would have been to first deduct the shareholder loan balances (similar to all the other liabilities that were deducted), and then to allocate the remaining net proceeds based on the appropriate percentages. This approach gives each shareholder proper credit for the amounts that they had loaned company.

10. Correcting for both of these issues (i.e. the allocation of value based on profits as opposed to revenue, and the application of that percentage to the equity value net of the shareholder loan balances) results in an overpayment to Mr. Simas of $405,199 and an overpayment to Mr. Rodrigues of $138,602, with a total underpayment to Mr. Amaro of $543,801.

11. If the shareholder loan issue is separated out, Mr. Simas' overpayment equals $44,536. Mr. Rodrigues' overpayment of $138,602 is based entirely on the shareholder loan issue.

[119] Mr. Stulberg testified that even if the Amending Agreements were valid, the logical way to allocate the value of Nova by Division would be based on profitability, not revenue. From a financial perspective, buyers of a business are interested in the business' future profitability, not revenue. Obviously, a profitable business with $1 million revenue is worth more money to a prospective purchaser than a money losing business with the same revenue. Moreover, the Amending Agreements provided that the partners' income from the Dietary and Alberta Divisions would be based on "net profit before taxes" from each Division.

[120] The Defendant called as an expert witness Joshua Epstein, a forensic accountant with expertise in business valuation.

[121] Mr. Epstein testified that there was no accounting standard or guideline that required that the assets be divided on the basis of profits rather than revenue. Both were reasonable alternatives. He also testified that there was no accounting principle or guideline that required shareholder loans be deducted before rather than after the allocation. These were alternative methodologies available to the accountant who decided upon the appropriate allocation of the proceeds of disposition.

[122] The Amending Agreements and the Agreement of Purchase and Sale were silent with respect to the methodology to be used to allocate the proceeds of sale. Accordingly, the Amending Agreements explicitly provided for Nova's chartered accountants to have discretion in calculating the allocation.

[123] I have concluded that Mr. Simas violated the Amending Agreements by calculating the allocation himself.

[124] I accept Mr. Stulberg's evidence that the use of revenue rather than profit as the basis to calculate the relative value of the three divisions of Nova was, at the very least, unusual, and likely adopted by Mr. Simas to increase his relative share of the proceeds from the disposition of Nova.

[125] Given that this methodology was adopted outside of the process established by the Amending Agreements, its adoption was also a violation of the Amending Agreements.

[126] To the extent that Mr. Simas benefited from this breach of the Amending Agreement ($405,199), his Estate is liable to Mr. Amaro for the shortfall suffered by Mr. Amaro.

[127] I agree with the Defendant that Mr. Simas' Estate is only liable to the extent that Mr. Simas personally benefited from this methodology. Mr. Rodrigues is not a Defendant in this action, and therefore the $138,602 overpayment made to Mr. Rodrigues is not recoverable in this proceeding.

Limitation Period

[128] The Defendant argues that the Plaintiff is out of time to dispute the allocation of sale proceeds. Nova Services was sold to Compass Group on August 31, 2012, and the sale closed on October 31, 2012. The Plaintiff commenced this action on September 11, 2015, approximately 3 years after the sale.

[129] The question becomes when Mr. Simas calculated the allocation of sale proceeds, and when Mr. Amaro became aware of, or could have become aware of, the methodology used by Mr. Simas to calculate the allocation.

[130] Mr. Rodrigues testified that in November 2013, he provided Mr. Amaro with an undated Asset Sale Distribution Chart that he obtained from Mr. Simas' computer. This chart outlined the distribution of the sale proceeds of Nova, and Mr. Amaro testified that it was the first time that he had knowledge of the allocation of sale proceeds. If this was the first time that Mr. Amaro knew about the allocation, it falls within the 2 year limitation period.

[131] Mr. Rodrigues further testified that, in or around November 2013, he provided Mr. Amaro with a USB stick containing a backup of all Nova's computers, including those of Mr. Simas, and a hard copy "Asset Sale Chart" detailing the expected distribution of sale proceeds.

[132] The Defendant argues that Mr. Rodrigues was not being honest about the date. In addition, Mr. Amaro could have made inquiries as early as October 31, 2012 as to how the proceeds of sale were to be allocated.

[133] While I am satisfied that Mr. Amaro knew or by reasonable diligence ought to have known on the date that he signed each Agreement that the sale proceeds were to be divided unequally just as the profits were (55%/35%), he could not have known that Mr. Simas would violate the Amending Agreements by deciding on the allocation himself rather than permitting Nova's chartered accountant to make that decision.

[134] In other words, it is not the 55%/35% allocation that infringed the Agreement, it is that Mr. Simas, rather than Mr. Cooper, decided to calculate the 55% and 35% on the basis of Division revenue rather than Division profit and to not deduct the shareholder loans before allocating the proceeds. The issue is when did Mr. Amaro discover that Mr. Simas had made this decision, or, through reasonable diligence, when should Mr. Amaro have made this discovery?

[135] There is no evidence that Mr. Simas ever explained to Mr. Amaro the methodology he was using to calculate the allocation of the proceeds of disposition among the divisions of the Corporation. There is no evidence that Mr. Simas ever told Mr. Amaro that he, rather than Mr. Cooper, was making this decision. Even if Mr. Amaro saw the asset distribution chart before Mr. Rodrigues showed it to him in November 2013, there was nothing on that chart to suggest that the allocation was being calculated on Division revenue rather than Division profit, or that the allocation was being determined by Mr. Simas rather than Mr. Cooper.

[136] I am satisfied that this discovery could not have been made by Mr. Amaro until he retained an independent accountant to review the methodology. It would not be apparent from any documentation that was or might have been provided to Mr. Amaro, even if Mr. Amaro had taken the trouble to read it. Until he met with Mr. Rodrigues in November 2013, Mr. Amaro had no reason to be suspicious. On this basis, I am satisfied that the limitation period would not begin to run until, at the earliest, November 2013, and likely not until Mr. Amaro retained an independent accountant to review the sale allocation and determine how it was calculated. Accordingly, this cause of action was commenced within the applicable limitation period.

Issue 3: The allocation of salaries between the spouses

[137] While neither of the spouses of Mr. Simas and Mr. Amaro worked for Nova, they each received T4 employment income from Nova. The original agreement was that each wife would receive the same income. This was a form of income splitting to reduce taxes. The salaries were not earned by the spouses, but were a means used by Mr. Simas and Mr. Amaro to reduce their taxable income.

[138] In analyzing this issue, it is important to understand that the money paid to Mrs. Simas and Mrs. Amaro was not money earned by Mrs. Simas and Mrs. Amaro, but money earned by Mr. Simas and transferred to Mrs. Simas, and money earned by Mr. Amaro and transferred to Mrs. Amaro. This tax avoidance technique was likely a violation of the Income Tax Act because neither Mrs. Simas nor Mrs. Amaro actually worked for Nova, but that is not an issue before me.

[139] Mr. Stulberg calculated that between 2003 and 2012, Mary Simas received $156,340 more than Fatima Amaro. In order to equalize these salaries, Simas would need to transfer half of that amount (i.e. $78,170) to Amaro.

[140] Mr. Stulberg testified that this unequal payment to the spouses was not the result of the differential allocation in the Amending Agreements. The differential allocation of profits in the Amending Agreements was fully accounted for in the unequal salaries and bonus paid to Simas and Amaro.

[141] Mr. Epstein testified that the unequal division of salaries between the spouses was an extension of the unequal division of salaries between Mr. Simas and Mr. Amaro as a result of the Amending Agreements. As the spouses received compensation for the purpose of tax planning and income splitting, the percentage allocation to each spouse is based on the percentage compensation to which Mr. Simas and Mr. Amaro were entitled. This reflects the salary distribution pattern within the company, where changes in the compensation of shareholders were mirrored by changes in the compensation of their spouses.

[142] Mr. Epstein recalculated the compensation received by each spouse on the basis of the 55%/35% allocation set out in the Amending Agreements, and calculated that over the years 2002 – 2012, Mrs. Simas did receive $37,237 that should have been allocated to Mrs. Amaro.

Limitation Period

[143] The Defendants argue that the Plaintiff has missed the limitation period with respect to this claim. The payments to the spouses were made each year between 2002 and 2012, so that even the final payment was made more than two years before the Statement of Claim was issued in September 2015.

[144] I agree with the Defendants with respect to the application of the limitation period to this claim. Mr. Amaro co-signed all of the cheques to pay the employees. He testified that he did not pay attention to the amounts on each cheque, and sometimes he signed the cheques without even looking at them. He could have, with minimal due diligence, known that the wives were not earning the same salaries. He took no steps to do so, and for that reason his claim is statute-barred.

[145] If I am incorrect about the application of the limitation period, I would still reject this claim. As I understand the dispute between the experts, the spouses' respective salaries came from one of two sources. Mr. Epstein's analysis is based on the premise that the spouses' salaries came from Nova's profits before those profits were allocated to each of Mr. Simas and Mr. Amaro. If this premise is correct, then the spouses' salaries would have to be divided on the same 55%/35% basis as Mr. Simas' and Mr. Amaro's salaries, because the spouses' salaries are just an extension of Mr. Simas' and Mr. Amaro's salaries.

[146] On the other hand, Mr. Stulberg takes the position that the differential allocation of profits in the Amending Agreements was fully accounted for in the unequal salaries paid to Mr. Simas and Mr. Amaro, so that there was no reason for the spouses to have unequal salaries. That can only be correct if the spouses' salaries came from Nova's profits after those profits were allocated to each of Mr. Simas and Mr. Amaro. In other words, Mrs. Simas received her salary from Mr. Simas' allocated 55% share, and Mrs. Amaro received her salary from Mr. Amaro's allocated 35% share. But if that is correct, it does not matter how much Mrs. Simas received, because the amount was just a portion of Mr. Simas' 55% share and was not taken at the expense of Mrs. Amaro. There would be no reason for Mrs. Simas to pay any portion of her share of Mr. Simas' salary to Mrs. Amaro.

Issue 4: The allocation of salaries between the Mr. Simas and Mr. Amaro

[147] Letters from Cooper & Company were sent to Nova annually outlining amounts paid to each shareholder for the Janitorial Division and Alberta/Dietary Division between 2003 and 2013 According to these letters, Mr. Simas was paid a total of $4,960,183 and Luis Amaro was paid a total of $4,291,901 over that period. The differential was based on the 55%/35% allocation for the Dietary and Alberta Divisions set out in the 2002 and 2009 Amending Agreements.

[148] Mr. Stulberg testified that even assuming the validity of the 2002 and 2009 Amending Agreements, Mr. Simas' income should have only been 20% more than Mr. Amaro's (55% - 35%). But in 2011 Mr. Simas received 25.4% of the Dietary Divisions profit ($29,166 overpayment) and in 2012 Mr. Simas received a $48,990 overpayment. The total overpayment for these two years was $78,156. To correct this mistake, Mr. Stulberg testified that the overpayments must be divided equally between Mr. Simas and Mr. Amaro, for a total payment to Mr. Amaro of $39.078.

[149] Mr. Epstein did not comment on this calculation.

[150] This claim is statute barred for the same reason as the claim for the equalization of the spouses' salaries. Mr. Amaro testified that he signed management salary resolutions, which explicitly set out the salaries Mr. Simas and Mr. Amaro would receive. He also co-signed the salary cheques. He could have, with minimal due diligence, known that the amounts had been miscalculated. He took no steps to do so and for that reason his claim is statute-barred.

Conclusion

[151] Based on the foregoing, I find in favour of the Plaintiff in the amount of $405,199, being the overpayment to Mr. Simas following the sale of Nova to Compass in 2012, with pre-judgment interest payable in accordance with s. 128 of the Courts of Justice Act.

[152] All other claims are dismissed.

[153] If the parties are not able to agree on costs, the Plaintiff may file costs submissions of no more than 3 pages, plus costs outline and any offers to settle, within 30 days of the release of this decision, and the Defendant may file responding costs submissions on the same terms within a further 20 days.

Justice R.E. Charney

Released: July 29, 2025

[1] Mr. Simas died in February 2021 and the proceeding was continued with Mr. Simas' wife Mary Eduarda Simas as Estate Trustee.