Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20211006 DOCKET: C68972

Benotto, Brown and Harvison Young JJ.A.

BETWEEN

Alberino Albert Salvatore, 2232465 Ontario Limited, and Sprint Mechanical Inc. Plaintiffs (Appellants)

and

David Tommasini, Anna Rucchetto, Four Seasons Aviation Ltd., and Sky Ship Capital Corp. Defendants (Respondents)

Counsel: Alan G. McConnell, for the appellants Stephen Dale Denis, for the respondents

Heard: September 8, 2021 by video conference

On appeal from the judgment of Justice Edward M. Morgan of the Superior Court of Justice, dated December 9, 2020, with reasons reported at 2020 ONSC 7619.

Reasons for Decision

Introduction

[1] The appellants, Alberino Albert Salvatore, 2232465 Ontario Limited, and Sprint Mechanical Inc., appeal the order of the motion judge granting summary judgment dismissing their action against the respondents David Tommasini, Anna Rucchetto, Four Seasons Aviation Ltd., and Sky Ship Capital Corp.

[2] The appellants and some of the respondents entered into a series of documents regarding the acquisition and operation of a helicopter: a June 24, 2016 Letter of Intent (the “LOI”); an LOI amending agreement dated July 15, 2016 (the “July Letter Agreement”); a September 14, 2016 Aircraft Management Agreement (the “AMA”); and a September 14, 2016 AMA amending agreement (the “September Letter Agreement”).

[3] In the action, the appellants alleged that the agreements contained a binding obligation on the part of the respondents to pay for one-half of the acquisition cost of the helicopter (the “Buy-in Claim”). As well, the appellants alleged that the respondents breached other provisions in the documents causing damage to the appellants.

[4] The motion judge granted summary judgment dismissing the action. The appellants appeal. At the hearing, we dismissed the appeal with reasons to follow. These are those reasons.

The Main Grounds of Appeal

[5] The appellants advance two main grounds of appeal: (i) the motion judge erred in finding that the respondents were not subject to an enforceable promise to pay the appellant half of the acquisition cost of the helicopter; and (ii) the motion judge erred in dismissing the action in its entirety, instead of permitting some of the claims to proceed to trial.

The Buy-in Claim

[6] Article 14.13 of the AMA – the so-called “entire agreement clause” – provided, in part, that “[t]his Agreement and the matters referred to herein constitute the entire agreement between Owner and Operator regarding the subject matter hereof”. The clause went on to state that the AMA superseded and cancelled all prior agreements “with respect to or in connection with the subject matter of this Agreement”.

[7] We accept the appellant’s submission that the motion judge erred in law by holding that art. 14.13 of the AMA expressly cancelled the LOI and July Letter Agreement. In reaching that conclusion, the motion judge failed to interpret art. 14.13 within the context of the entire AMA, contrary to the general principles of contract interpretation: Geoff R. Hall, Canadian Contractual Interpretation Law, 3rd ed. (Toronto: LexisNexis, 2016), §2.2.1.

[8] One recital to the AMA specifically stated:

AND WHEREAS the principals of the Operator, David Tommasini and Anna [Rucchetto], have agreed to acquire, and the principal of the Owner, Albert Salvatore, have agreed to convey, a direct or indirect 50% interest in the Owner, or the successor owner of the Aircraft, as the case may be (the “Buy-in”)….

[9] Accordingly, by its terms the AMA recognized the existence of a Buy-in arrangement amongst some of the parties outside of the four corners of the AMA. When art. 14.13 is read in that context, it is clear that the “subject matter” of the AMA dealt with the operation of the helicopter, not the Buy-in obligations that existed between the parties.

[10] However, in our view that error in law was of no consequence. We see no reversible error in the motion judge’s conclusion, at paras. 21 and 22, that the LOI and July Letter Agreement lacked sufficient material facts to characterize them as legal contracts, especially given “the absence of the fundamental business terms on which the co-ownership of the Sikorsky and the jointly owned business of the parties in operating the helicopter would be built”.

[11] When the Buy-in and Owners Agreement sections of the LOI are read together, they provide: (i) the respondents agreed to pay 50% of the helicopter’s acquisition costs after one year, termed the “Buy-in Amount”; (ii) upon receipt of the Buy-in Amount, Albert Salvatore would convey to the respondents a one half-interest in the entity that owned the helicopter, termed the “Buyer”; (iii) while the legal form and structure of the ownership of the helicopter had not yet been settled, “the end result is that the ownership and operation of the Aircraft is to be as a separate stand-alone business, directly or indirectly owned and controlled by Albert and David/Anna, each as to 50%”; (iv) the LOI referred to the entity that owned the helicopter as the “Owner”; and (v) “Albert and David/Anna shall enter into a definitive agreement in respect of the Owner (which will be the form of a Partnership Agreement, Shareholders Agreement or some other form, depending on the final structure of the Aircraft ownership)”.

[12] In other words, the LOI contemplated a “quid pro quo” under which the respondents would, after one year, pay 50% of the acquisition costs of the helicopter in return for which they would receive a one-half interest in the entity that ultimately owned the helicopter and operated the stand-alone helicopter business. The rights and obligations of those with an interest in the “Owner” were to be set out in a “definitive” Owners Agreement.

[13] In his reasons, the motion judge observed, at para. 23, that “[o]n its face, the LOI made any further business dealings with respect to the helicopter conditional on the negotiation of what it dubbed a ‘definitive agreement’ settling all material aspects of the ‘separate stand-alone business’ of owning and operating it.” In our view, that was an accurate interpretation of the LOI.

[14] In the result, the parties never entered into an Owners Agreement. In the absence of such an agreement, there was no certainty about what bundle of ownership rights and obligations the respondents would receive or be subject to upon their payment of the Buy-in Amount. Put colloquially, the parties never agreed on the “quid” that the respondents would receive in return for their “quo” – namely, their payment of the Buy-in Amount. In those circumstances, we see no reversible error in the motion judge’s conclusion that there was no genuine issue requiring a trial with respect to the appellants’ Buy-in Claim and breach of the duty of good faith claim.

The AMA and Internal Cost Claims

[15] In their statement of claim, the appellants also alleged two other types of breach of contract. First, the appellants pleaded that the respondents failed to reimburse them for the respondents’ “costs associated with the importation, registration and adding the Helicopter to the Four Seasons’ AOC”: Statement of Claim, para. 31 (the “Internal Cost Claim”). Second, the appellants alleged that the respondents had breached certain provisions of the AMA, including one dealing with a short form lease: Statement of Claim, paras. 38, 41 and 47 (the “AMA Claims”). In para. 50 of their statement of claim, the appellants pleaded that, as a result of these breaches, they had suffered damages estimated at $225,000 in respect of costs of finding a replacement aircraft on a temporary basis and eventually a new hangar facility, pilot and maintenance for the helicopter, as well as “an estimated $300,000.00 in future lost profits from the Venture.”

[16] In granting summary judgment, the motion judge dismissed the action in its entirety, including the AMA and Internal Cost Claims. However, the motion judge’s reasons did not address those claims. They should have. Nonetheless, that omission does not alter the result in this case.

[17] This was a summary judgment motion. The respondents’ notice of motion clearly sought the dismissal of the entire action. In response to such a request for relief, the appellants were obliged to put their best foot forward. Yet, the appellants failed to adduce any evidence particularizing or supporting their pleaded AMA and Internal Cost Claims.

[18] In his affidavit filed on behalf of the appellants, Mr. Ian Bergeron made the general statement that “[t]he refusal to pay the Buy-in was followed by further breaches of the agreement between the parties by the defendants, resulting in damages being suffered by the plaintiffs as detailed in the pleadings herein.” Mr. Bergeron did not specify the damages suffered or adduce any evidence to support or quantify such damages. As a result, there was no evidence before the motion judge that would have permitted him to conclude that there was a genuine issue requiring trial regarding any damages suffered by the appellants in respect of their AMA and Internal Cost Claims. Accordingly, we see no error in the motion judge’s dismissal of the action as a whole.

Disposition

[19] For the reasons set out above, the appeal is dismissed.

[20] In accordance with the agreement of the parties, the respondents are entitled to their partial indemnity costs of the appeal fixed in the amount of $43,663.20, inclusive of disbursements and applicable taxes. The parties have agreed that the appellants shall pay those costs of the appeal, together with the costs awarded below, on or before December 8, 2021.

“M.L. Benotto J.A.” “David Brown J.A.” “Harvison Young J.A.”