COURT OF APPEAL FOR ONTARIO
DATE: 20241023 DOCKET: COA-23-CV-0275
Lauwers, Miller and Harvison Young JJ.A.
BETWEEN
Corridor Transport Inc. and Corridor Transport Limited Partnership Plaintiffs (Appellants)
and
Vittorio Junior Lentini*, LTI Logistics Inc.* and Loblaw Companies Limited Defendants (Respondents*)
Counsel: James S.G. MacDonald and Melisa Rupoli, for the appellants Rob Winterstein and Michael Lauricella, for the respondents
Heard: February 22, 2024
On appeal from the order of Justice Renu J. Mandhane of the Superior Court of Justice, dated February 14, 2023, with reasons reported at 2023 ONSC 1120.
Harvison Young J.A.:
Overview
[1] This appeal flows from a failed business venture between James Hawley (“Hawley”) and members of the Lentini family (“the Lentinis”).
[2] The appellants are Corridor Transport Inc. (“CTI”) and Corridor Transport Limited Partnership, and the respondents are Vittorio Junior Lentini (“Vic Jr.”) and LTI Logistics Inc. (“LTI”). Hawley, an experienced and sophisticated businessman, envisioned a business venture to transport specialized steel products by rail.
[3] The venture was Hawley’s idea, and he recruited the Lentinis, who ran a trucking business and were experienced in hauling steel. Hawley and the Lentinis were engaged in a business together for about a year before the relationship breakdown that led to this litigation.
[4] In the action, the appellants claim that the respondents breached a contract and/or committed the tort of conversion. In addition, they claim that Vic Jr., as a director of CTI, breached his fiduciary duty by depositing funds in the amount of $148,968.62 into their bank account after the breakdown. Following a nine-day trial, the trial judge dismissed the action.
[5] The heart of this appeal is whether the trial judge committed a reversible error in finding that there was no enforceable contract between the parties and there was no conversion. In my view, she did not, and I would dismiss the appeal for the following reasons.
Factual Background
[6] Hawley has owned and operated numerous companies and businesses in various industries in Ontario. In 2009, Hawley, along with his “right hand man”, Colin Mills, embarked on a business venture to transport specialized steel products by rail. This would involve fabricating railway-approved railcars and acquiring a steel trucking business that could transport steel from road to rail.
[7] In August 2009, Hawley incorporated Corridor Canada Inc. (“CCI”) for this purpose. At the time of these events, Hawley and Mills worked out of a premises in Brampton (“Parkhurst Square”).
[8] Hawley and Mills needed the services of a trucking company with experience hauling steel. Vittorio Lentini (“Vic Sr.”) with his wife Emilia (“Emily”) became the intended partners. Lentini had transported steel for decades.
[9] From 1989 through 2009, Vic Sr. and Emily ran their trucking business through a corporation called Lentini Trucking Inc., with Vic Sr. as its sole director. In 2009, Vic Sr. wound the company up because he was unable to pay various fines and charges. He reincorporated as LTI Logistics Inc. to continue their trucking operations, this time with their son Vic Jr. named as the sole director. Vic Jr. had gone to college, worked for Loblaws, was married, and lived independently. His evidence, accepted by the trial judge, was that he never played a role in the family business except to deliver customer cheques to his mother Emily, who deposited them in the company’s BMO bank account (“BMO Account”). The cheques were payable to “LTI Logistics” and mailed to Vic Jr.’s Caledon residential address.
[10] Sometime in April 2010, the Lentinis agreed to work with CCI. Although the exact terms of the business venture are disputed, Vic Sr. and Emily moved all their equipment into Parkhurst Square and Emily worked from there until the spring of 2011. Hawley drafted a detailed Memorandum of Understanding (“MOU”) which, he asserts, memorialized their discussions. However, while Hawley signed it on April 13, 2010, the Lentinis never did. The MOU is long and complicated. It explains that the parties’ business would entail freight brokerage and steel shipping. It details the proposed corporate and partnership structure under which the parties would conduct their business. The business was to operate under the name “Newco”, but the name was later changed to CTI. The MOU also stipulated that the appellants would provide start-up and expansion capital to the Lentinis. Importantly, however, it provided that the Lentinis could compete with the partnership provided that their independent revenue never exceeded a specified threshold.
[11] As I will explain below, Hawley organized the corporate structure and the partnership in May 2010. The plans never came to fruition in the sense that no steel was ever transported by rail. That said, while the Lentinis operated out of Parkhurst Square, Vic Sr. and Emily continued to operate their former trucking business and service their clients as before. A central difference was that Emily deposited all the customer cheques into a newly opened RBC account, rather than their BMO account. As I will discuss later in these reasons, the RBC account became a key issue and trigger of the breakdown of the partnership relationship.
The Chronology of the Hawley-Lentini Relationship
[12] Hawley took steps to bring the partnership into operation in May 2010, including organizing and implementing the corporate structures within which the partnership was to work. As the trial judge found, the Lentinis did not see or review much of the documentation. The chronology is as follows:
- May 3, 2010: Hawley incorporated the appellant, CTI, to operate the parties’ trucking business. CCI and the “Lentini Group” each held half of the shares of CTI and each had the right to appoint one director. Hawley was, at all material times, the controlling mind of CTI;
- May 4, 2010: Hawley registered the appellant, Corridor Transport Limited Partnership (“CTLP”), with CTI as its general partner. On the same day, he filed a Notice of Change which specified that CTI’s directors were Hawley and “Vittorio Lentini”, and that its officers were “Vittorio Lentini” as President, Mills as Vice President, and Hawley as Secretary and Treasurer. Importantly, there was no indication as to whether the “Vittorio” referred to is Vic Sr. or Vic Jr.;
- May 11, 2010: Hawley obtained a licence allowing CTI to operate using the name “LTI Logistics Group” (“LTI Group”), which mimicked the name of the Lentinis’ existing business “LTI Logistics Inc.” On or around the same day, Hawley and Vic Jr. signed an RBC Client Agreement to open an account for CTI operating as LTI Group (“RBC Account”). Both Hawley and Vic Sr. signed as the account’s “owners”. Hawley indicated on the RBC Signature Card that CTI’s officers were him as Secretary and Treasurer, Mills as Vice President, and Emily as Signing Officer/Chief of Dispatch, [1] but he did not identify “Vittorio Lentini” as President. Hawley then executed a banking resolution stating that any two of the President, Vice President, or Chief of Dispatch had signing authority for the account. Hawley signed as “President” of CTI. He admitted that he did so despite the fact that “Vittorio Lentini” was named as President, and also admitted that he did so in order to retain control over the account;
- May 17, 2010: Hawley deposited $25,000 into the account. From then until April 2011, Vic Jr. received customer cheques payable to LTI at its registered address (i.e., his residential address) and Emily deposited them into the RBC Account.
[13] Emily worked out of Parkhurst Square. She would bring the customer cheques addressed to “LTI Logistics”, which were delivered to Vic Jr.’s residence, and deposit them in the RBC Account. The routine appears to have been disrupted in March 2011 when Emily began working from home following a dispute with Hawley and Mills. The dispute related to whether Emily had properly arranged for the insurance when a truck was involved in an accident. Until that point, she was the person who would attend the bank and deposit cheques. During the joint venture, CTI paid salaries to Vic Sr., Emily, and Mills, but not to Hawley or Vic Jr.
[14] The principal trigger for the breakdown of the partnership arrangement took place around May 5, 2011, when Vic Sr. visited the RBC branch and was told that he did not have any signing authority over the account. On May 24, 2011, Hawley and Mills told customers to stop sending LTI cheques to Vic Jr.’s address, asking them to send cheques to CCI’s office instead. The stated reason for this request was that Emily was no longer coming into the office. Later that evening, Vic Jr. called Hawley to tell him that the Lentinis had been “holding” cheques.
[15] Over the next few days, Hawley and Mills sent Vic Jr. a number of emails asking him to clarify his statement that he was “holding” customer cheques. The emails became increasingly accusatory, alleging that the Lentinis were wrongfully withholding CTI funds, that Vic Jr. was breaching his fiduciary duties as a director of CTI, and advising that if the cheques were not deposited in the RBC Account or delivered to the CCI offices by the close of business on May 26, Hawley would seek Vic Jr.’s removal as director.
[16] Vic Jr. replied that he was concerned that LTI was never mentioned in the bank documentation. The account was registered to “Corridor Transport Inc. O/A L.T.I. Logistics Group”. Vic Jr. asked Hawley to meet the Lentinis at RBC, noting that “once [he had] all the information then [they could] discuss the continuation of [the] partnership”. He apparently failed to take any such steps. In the meantime, the RBC branch allegedly advised Vic Jr. that it would no longer accept deposits made out to LTI, given that the account was registered to CTI operating as LTI Group.
[17] The parties then met face-to-face. In an email memorializing the contentious exchange, Hawley stated that he and the Lentinis agreed that they had withheld funds belonging to CTI and provided suggestions for how to resolve the issue of depositing cheques made out to LTI in the LTI Group account.
[18] In the last few days of May 2011, Hawley and Mills executed three purchase and sale agreements, along with corresponding permit applications, which transferred three vehicles registered to LTI – but paid for by CCI – to Lancaster, a corporation which Hawley had incorporated on May 9, 2011. Hawley admitted that he signed the transfer documents on behalf of LTI, even though he held no position with the company. LTI never received any funds or other consideration for the sale. On May 29, 2011, Hawley unilaterally executed a resolution that revoked Vic Jr.’s directorship of CTI.
[19] Between May and through August 2011, the respondents caused LTI to deposit cheques totalling $148,968.62 into LTI’s BMO Account, rather than into the RBC Account. That is the amount claimed by the appellants on the basis that the contract required all LTI cheques to be deposited into the RBC Account, which was set up as the partnership account.
[20] The appellants argue that the trial judge erred in failing to find that, because the parties had entered into a partnership, they were entitled to the revenue in issue that the Lentinis deposited into the BMO Account after the breakdown. The respondents submit that the appellants have not demonstrated any reversible error on the part of the trial judge, arguing that the fact that they were working in partnership for a time does not mean that there was an enforceable contract or that the appellants were entitled to the funds in question.
The Decision Below
(1) There was no enforceable contract
[21] The trial judge found that the appellants had not established on a balance of probabilities that an enforceable contract had been formed, on the basis that there had been fundamental misunderstandings between the parties on the nature of the business they had entered into, including the identities of the parties and their respective entitlements to the proceeds of the Lentinis’ trucking business.
[22] Hawley’s evidence was that, throughout the relationship, Vic Sr. was the “patriarch” of the Lentini family, and Vic Jr. had no role in the family business other than serving as a nominal director. But the parties were clearly confused about which “Vittorio Lentini” was a party to any agreement between them. A major source of this confusion was the Notice of Change for CTI which Hawley filed the day after registering the appellant, CTLP. This Notice provided that the directors included Hawley and “Vittorio Lentini”, the latter also serving as President. It did not specify whether “Vittorio Lentini” referred to Vic Sr. or Vic Jr. The trial judge accepted the Lentinis’ evidence that they considered the RBC Account to be a joint account and deposited their independent revenue into it because they were paying Hawley back for purchasing their accounts receivable. Hawley also testified that while he initially thought that the Notice of Change for CTI intended that “Vittorio Lentini” meant Vic Sr., by the events of May 2011 he believed that it meant Vic Jr.
[23] The trial judge also attributed much of the confusion about the banking and the entitlement to independent revenue to Hawley’s own conduct. Hawley, as set out in the statement of admitted facts, is a sophisticated and experienced businessman. He drafted all the documentation, including the long, complex MOU. He and Mills relied upon and referred to it extensively, although the Lentinis never signed it. The Lentinis were not so sophisticated and Vic Sr.’s English literacy is limited. He was born in Italy and has only a grade five education.
[24] In these circumstances, the trial judge found Hawley ought to have insisted that the Lentinis obtain independent legal advice.
[25] The trial judge stated as follows:
[71] Overall, on a balance of probabilities, I find that there was no meeting of the minds in relation to key terms of the business venture. The parties were never ad idem on the directors of CTI or its entitlement to LTI receivables.
[72] Hawley is largely responsible for this lack of clarity. Given Hawley’s sophistication and the Lentinis’ simplicity, I would have expected Hawley to have insisted on independent legal advice and a signed agreement. I would have expected him to have obtained written consent from Vic Jr. before naming him as a corporate director as required by s. 119(9) of the Ontario Business Corporations Act, R.S.O. 1990, c. B16: Bunton v. FTA Logistics Inc. and Ikenouye, 2020 ONSC 5463, paras. 17-21. I would have expected him to have kept the Lentinis in the loop on corporate and tax filings. I would have expected him to have kept his corporate filings up to date, including maintaining a register of CTLP’s limited partners as required by s. 4(1) of the Limited Partnership Act, R.S.O. 1990, c.L.16. He took none of these steps.
(2) There was no conversion
[26] The trial judge also found that there was no conversion over the money deposited into LTI’s BMO Account following the breakdown of the partnership because CTI had no possessory interest over the money. LTI continued to service its existing customer base: Vic Sr. continued to make runs, customer cheques continued to be sent to Vic Jr.’s address in Caledon, and Emily continued to be responsible for all the insurance and paperwork. Hawley also admitted at trial that LTI continued to do runs for its existing customers while working at Parkhurst Square. While the revenue from LTI’s business was deposited into the RBC Account, it was unclear how the parties intended LTI receivables to be treated under the partnership. This practice on its own was not enough to establish the money belonged to CTI. Therefore, although cheques addressed to LTI had been deposited into CTI’s RBC Account for a period of time, the money at issue was paid to LTI for services rendered by LTI, and not LTI Group as a part of the partnership.
Analysis
(1) Enforceability of the contract
[27] The question as to whether there was an enforceable contract is a matter of contractual interpretation. The well-established standard of review requires the appellants to demonstrate that the trial judge erred in law or principle, or that her factual findings constituted palpable and overriding error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 52, [2014] 2 S.C.R. 633, at paras. 50 and 58. They have not met this standard.
[28] First, the appellants have not identified any reviewable error in the trial judge’s factual finding that there was no agreement on the essential terms of the contract. Her findings were reasoned and well grounded in the evidence she heard over the 9-day trial.
[29] With respect to the parties, the trial judge found “that a reasonable person in Hawley’s shoes” would have been confused as to the identity of the contracting party on the Lentini side, noting that this was the central issue. At trial, Hawley admitted that he initially thought that Vic Sr. would be entering the partnership on behalf of the Lentinis because he was the “patriarch” of the trucking business with extensive knowledge of the industry. Hawley stated, however, that this changed around May 10, 2010, when setting up the RBC Account, because the Lentinis allegedly told him that Vic Jr. would be signing on behalf of the Lentini Group. He testified that, from then on, he understood the partnership to be between CTI and Vic Jr., although he never amended the incorporation documents to clarify the directorship.
[30] For their part, the Lentinis denied ever telling Hawley that Vic Jr. would be their designate for CTI or CTLP. Their evidence was that Vic Jr. was a director of LTI “on paper only” and that he had nothing to do with its daily operations or with CTI. Vic Jr. stated that he was not involved in the negotiation of the terms of the partnership or in its daily operation in any way, and that he would never have agreed to be a director of CTI because he was working at Loblaws full time and had a newborn at home. His only role was to continue receiving the LTI cheques at his home address, turning them over to Emily and acting as a liaison/translator for his parents in discussions with Hawley and Mills. It also appears that the Lentinis did not appreciate that the RBC Account was set up in the name of the LTI Group and not LTI. Nor did they appreciate the significance of that difference, which was illustrated by the Lentinis’ reaction when they realized they could not access the RBC account. Second, and in addition to her finding that there was no meeting of the minds as to the essential terms, the trial judge found that there was no meeting of the minds with respect to CTI’s entitlement to LTI’s accounts receivable, noting that the appellants’ claim to these funds was based largely on Emily’s practice of depositing LTI cheques into the RBC Account. The trial judge, at para. 75 of her reasons, answered the question as to why Emily would have deposited LTI cheques into CTI’s bank account if CTI had no legal right to the monies:
[75] In my view, this question is readily answered by the parties’ fundamental misunderstanding about the RBC account. I accept the Lentinis’ evidence that they believed that the RBC account was a joint bank account for LTI and CTI. This is the only credible explanation for Vic Jr. signing as “President” on the RBC Resolution. The registered name—“Corridor Transport Inc. o/a LTI Logistics Group”—is confusing on its face, and even more so considering that the Lentinis had never seen the Master Business License allowing CTI to operate as LTI Group. I accept that the Lentinis genuinely did not appreciate the difference between LTI and LTI Group until they spoke with the bank manager on May 26, 2020.
[31] Because the identity of the contracting parties is an essential term of a contract, these findings alone are sufficient to support the trial judge’s conclusion that there was no enforceable contract: 563689 Ontario Ltd. v. Two Saint Clair Holdings Ltd.; J.A. Willoughby & Sons Ltd. v. Selkirk, [1958] O.R. 235 (C.A.), at para. 18, aff’d, [1959] S.C.R. 753; Angela Swan, Jakub Adamski & Annie Na, Canadian Contract Law, 4th ed. (Toronto: LexisNexis Canada, 2018), at §4.124.
[32] The trial judge also concluded that the parties never understood that all of the proceeds of the Lentinis’ trucking business belonged to the partnership. The parties’ conduct and the MOU, which Hawley relied on in his evidence, confirm this. The MOU contemplated that the Lentinis would serve as independent contractors to the partnership while maintaining their existing and competing operations. One provision of the MOU stipulated that the Lentinis would continue to run their trucking business and could collect up to 110% of the historic revenue. And throughout the parties’ relationship, the Lentinis did operate independently of the partnership doing work for their existing customer base. LTI deposited its independent revenues into the CTI account because the Lentinis understood it to be a joint account, not a partnership account.
[33] The trial judge also accepted Emily’s explanation for depositing the LTI cheques into the RBC Account. She testified that Hawley had agreed to factor LTI receivables for them; this was a cost-saving measure suggested by Hawley, who admitted that he looked down on factoring. He likened it to living “hand to mouth”.
[34] The misunderstanding about the RBC Account served to underline the fundamental misunderstandings about the parties, and whether Vic Sr. or Vic Jr. was the Lentini contracting party. The appellants seem to argue that regardless of whether Vic Sr. or Vic Jr. was the contracting party, the relevant defendant was LTI which both could bind in contract. Even if this were accepted, however, it would not in itself entitle the appellants to the $148,968.62 which LTI deposited in its account after the breakdown in the relationship.
(2) Conversion
[35] There was no conversion of the appellants’ property.
[36] Conversion is a tort of strict liability that is established when one party wrongfully interferes with another’s property: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, at paras. 31-32. In the circumstances of this case, the conversion claim cannot succeed because, as discussed above, there was no enforceable contract between the parties that would have given the appellants a right to the funds in issue. The cheques deposited in the BMO Account were payable to LTI for services the Lentinis rendered in their trucking business, and, as the trial judge reasonably held, there was no clear agreement between the parties as to how the LTI receivables were to be treated. The appellants’ claim to the funds was based entirely on Emily’s practice up to May 5, 2011, of depositing the LTI cheques into the RBC Account.
[37] As I have concluded above, the appellants have not established any error or unreasonableness in the trial judge’s finding that Emily’s practice was not sufficient to establish on a balance of probabilities that the funds belonged to the partnership because of the fundamental misunderstanding about the RBC Account and how the LTI receivables would be treated. The appellants have not established a possessory interest in the funds, and the conversion claim must therefore fail.
Disposition and Costs
[38] I would dismiss the appeal, with costs of the appeal payable by the appellants to the respondents in the amount of $20,600 all inclusive.
Released: October 23, 2024 “P.D.L.” “A. Harvison Young J.A.” “I agree. P. Lauwers J.A.” “I agree. B.W. Miller J.A.”
