COURT OF APPEAL FOR ONTARIO

CITATION: Scamurra v. Sandy Scamurra & Sons Limited, 2016 ONCA 311
DATE: 20160428
DOCKET: C60913

Strathy C.J.O., Lauwers and Benotto JJ.A.

BETWEEN

Sandy Scamurra

Applicant

(Respondent/Appellant by Cross-Appeal)

and

Sandy Scamurra & Sons Limited, Sandy Scamurra Contracting Ltd., 726127 Ontario Inc., Albert Scamurra, Felix Scamurra, AFJ Disposal Inc., TD Canada Trust and Royal Bank of Canada

Respondents

(Appellants/Respondents by Cross-Appeal)

Michael N. Freeman, for the appellants/respondents by cross-appeal

Albert Campea, for the respondent/appellant by cross-appeal

Heard: March 18, 2016

On appeal from the judgment of Justice Gordon D. Lemon of the Superior Court of Justice, dated August 7, 2015.

By the Court:

[1] The parties are brothers who operated several businesses together. They encountered difficulties that they resolved by entering into a Share Purchase and Sale Agreement. The agreement provided for the payment of monthly sums by the appellants, Albert and Felix Scamurra, to the respondent, Sandy Scamurra, in exchange for his shares in the companies. The agreement was secured by a Share Pledge Agreement.

[2] The appellants defaulted on the required payments. The parties tried again to resolve the matter. Their lawyers exchanged offers in November 2014. When the appellants remained in default, the respondent brought a motion for summary judgment requesting either: enforcement of the Share Purchase and Sale Agreement, including the Share Pledge Agreement; or, in the alternative, enforcement of the settlement he claimed was reached by letter dated November 28, 2014.

[3] The motion judge found that there was no binding settlement in November 2014. However, he awarded judgment to the respondent for both past and future amounts owing on the Share Purchase and Sale Agreement. For the reasons that follow, we would allow the appeal and dismiss the cross-appeal.

A. Facts

[4] The parties operated various family businesses under the corporate names Scamurra Contracting Ltd., Sandy Scamurra and Sons Limited, and 726127 Ontario Inc. In response to problems that arose, the respondent brought an application pursuant to the oppression remedy section of the Business Corporations Act, R.S.O. 1990, c. B. 16. The application was settled on September 6, 2013.

[5] The settlement was incorporated into the terms of a Share Purchase and Sale Agreement, whereby the respondent agreed to sell to the appellants all of his shares in the corporations in return for $450,000. This amount was to be paid by way of 12 monthly instalments of $12,500, commencing on October 1, 2013 and ending on October 1, 2014. If the monthly payments could not be made, the appellants were to provide quarterly payments to make up for the shortfall. The appellants were also required to make 120 monthly payments of $2,500. Finally, the appellants were to pay the respondent a car allowance totalling $700 per month, plus insurance and HST, for ten years.

[6] A Share Pledge Agreement, dated October 1, 2013, was attached to the Share Purchase and Sale Agreement as “Schedule A”. According to the terms of this agreement, the shares were to be held in escrow until the entire purchase price was paid.

[7] The appellants defaulted on the payments under the Share Purchase and Sale Agreement. They discussed resolution and exchanged correspondence through respective counsel. The correspondence included letters dated November 18 and 28, 2014, in which most terms of the settlement were set out by the parties. Yet settlement documents were not provided to the respondent, and he moved for summary judgment. He sought either an enforcement of the settlement outlined in the November 28, 2014 letter or payment of the full amount owing under the Share Purchase and Sale Agreement.

[8] The motion judge concluded that no settlement had been reached in November 2014 but granted summary judgment to the appellant in the full amount owing on the agreement. This amount totalled $361,719.51, including $13,492.19 in interest.

B. Analysis

Overview

[9] The appellants submit that, in the absence of an acceleration clause, the motion judge erred in ordering them to pay the full amount – past and future – owing on the Share Purchase and Sale Agreement. If the appeal is allowed, the respondent relies on his cross-appeal, in which he claims that the motion judge erred in not finding that there was a binding settlement agreed to in November 2014.

The Appeal

[10] The appeal centers on the motion judge’s award of the full amount owing on the Share Purchase and Sale Agreement in the absence of an acceleration clause.

[11] The respondent submits that, based on the Share Purchase and Sale Agreement, the Share Pledge Agreement, and the surrounding circumstances, the parties intended that, upon default, the full balance outstanding would become due and owing.

[12] We disagree with the respondent. An acceleration clause is a provision that requires the debtor to pay off the balance sooner than the due date if some specified event occurs, such as the failure to pay an installment: Black’s Law Dictionary, 8th ed. (St. Paul: Thomson West, 2004). Acceleration clauses are common in commercial agreements that provide for a series of installment payments. For reasons that have not been explained, the parties did not include an acceleration clause in the Share Purchase and Sale Agreement. Nor did they do so in the Share Pledge Agreement, which was the means by which security was provided for the payments.

[13] The agreements also contemplate what would happen in the event of default. Paragraph 6 of the Share Purchase and Sale Agreement provides that, in the event of a late payment, interest accrues at the rate of 10% per year. Paragraph 14 explains that the reasonable expenses incurred by the respondent in recovering payment in case of a default are to be paid by the appellants. Further, the Share Pledge Agreement provides security for the payments. It contemplates that the respondent’s shares would be held in escrow until the whole of the purchase price is paid to him by the appellants.

[14] The terms of the agreements are clear. The motion judge erred by collapsing the outstanding payments into the amount owing in the absence of an acceleration clause and in the face of terms agreed to by the parties setting out their responsibilities in case of default.

[15] It is noteworthy that the respondent did not treat the appellants’ default as accelerating the balance owing under the Share Purchase and Sale Agreement or entitling him to realize on the security of the shares held in escrow. On the contrary, the respondent accepted payments of $108,000 from the appellants between October 2014 and March 2015, bringing the balance in good standing apart from interest and costs.

[16] The respondent sought to rely on fresh evidence about events that occurred between the parties after the summary judgment was released. The fresh evidence seeks to demonstrate the continued default of the appellants. This proposed evidence does not meet the test set out in R. v. Palmer, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759. In particular, it is not relevant to the issues before us and could not have affected the result of the court below.

The Cross-Appeal

[17] We agree with the motion judge’s analysis that the correspondence did not amount to a binding agreement. The appellants’ counsel wrote to respondent’s counsel on November 18, 2014: “we confirm that the parties have tentatively resolved [their outstanding issues]”. This letter notes that “[t]his issue of costs remains to be addressed.” The response from the respondent’s counsel on November 28, 2014 reiterated that “[t]he issue of costs has not been agreed-upon.” The respondent’s counsel also clearly stated: “The terms of the settlement offer are not severable from each other.”

[18] The issue of costs was outstanding and the terms were not severable. There was clearly no binding settlement and the cross-appeal is therefore dismissed.

C. Disposition

[19] The appeal is allowed. The cross-appeal is dismissed. The parties may – if so advised – return to the application judge to determine the quantum of damages and the costs of the application appealed from. If the parties cannot agree on costs of the appeal, they may provide the court with brief written submissions within ten days of the release of these reasons.

Released: April 28, 2016

“G.R. Strathy C.J.O.”

“P. Lauwers J.A.”

“M.L. Benotto J.A.”