SUPERIOR COURT OF JUSTICE - ONTARIO
RE: JIM BOTTARINI, Plaintiff
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STEALTH HEALTH FOODS INC., Defendant
AND RE: STEALTH HEALTH FOODS INC.
Plaintiff by Counterclaim
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JIM BOTTARINI, EDGE FUTURES GROUP LLC and ROBERT GLEN WILLIAMS
Defendants by Counterclaim
BEFORE: Justice S. M. Stevenson
COUNSEL: Anthony J. Frost, for the Plaintiff/Defendants by Counterclaim Jim Bottarini and Edge Futures Group LLC
Stephen M. Turk, for the Defendant/Plaintiff by Counterclaim
DATE HEARD: November 28, 2012
E N D O R S E M E N T
Introduction
1The plaintiff (defendant by counterclaim), Jim Bottarini (“Mr. Bottarini”), is a manager of the defendant by counterclaim, Edge Futures Group LLC (“Edge”), a company Mr. Bottarini deposes is engaged in lending and investments. Mr. Bottarini is also involved in the North American distribution of imported cacao products and carried on business as a packager and distributor of food products for sale to retailers.
2The defendant (plaintiff by counterclaim), Stealth Health Foods Inc. (“Stealth”), is an Ontario company that carried on business as a packager and distributor of consumer packaged food products and materials for sale to retailers in Canada.
3Mr. Bottarini moves for summary judgment under Rule 20 of the Rules of Civil Procedure, R.R.O. Reg. 194, against Stealth. He seeks judgment in the amount of $150,000 USD, plus pre-judgment and post-judgment interest, with respect to a promissory note dated October 1, 2010 (the “Note”) entered into between Edge and Stealth and assigned to Mr. Bottarini. Mr. Bottarini also seeks dismissal of the counterclaim against him and his related entity, Edge, as well as costs.
Facts
4Mr. Bottarini, Mark Gobuty (“Mr. Gobuty”), the sales manager and product developer of Stealth, and one of the defendants by counterclaim, Robert Glen Williams (“Mr. Williams”), engaged in discussions during the months of September and October 2010, which Mr. Gobuty deposes was for the purposes of furthering a joint venture business. Three meetings took place involving some or all of the parties in Phoenix, Arizona on September 22, 2010; in Palm Springs, California on September 24, 2010; and in Staynor/Clearview, Ontario from October 2 to 6, 2010.
5Mr. Gobuty deposes that the meeting in Phoenix on September 22, 2010, concluded with the parties, Mr. Bottarini, Edge, Mr. Gobuty, Stealth and Mr. Williams, agreeing to pursue a joint venture business. They agreed to utilize their respective contacts, facilities, and expertise to arrange for the supply of cacao in large quantities from Ecuador, which would be Mr. Williams’ responsibility, to be imported into North America, warehoused and sold in bulk in Arizona, which would be Mr. Bottarini and Edge’s responsibility; and to be packaged in Ontario for consumer use and sold and distributed to retailers in North America, which would be the responsibility of Stealth.
6Mr. Bottarini deposes that the parties never entered into a joint venture agreement (“JVA”) either orally or reduced to writing. He acknowledges, however, that the parties had preliminary meetings to discuss possible business dealings.
7On October 1, 2010, Edge and Stealth executed the Note. Pursuant to the terms of the Note, Stealth was to be provided with the sum of $150,000 USD and agreed to unconditionally pay the sum of $150,000 USD to Edge, together with interest accrued at the rate of 8% per year on any unpaid balance. The entire outstanding amount was to become immediately payable upon demand but no demand was to be made before December 31, 2010. The Note also allowed for the transfer of the Note to another holder without notice to Stealth and Stealth agreed to be bound to any subsequent holder of the Note under the terms of the Note. The Note was to be construed, interpreted, and governed in accordance with the laws of the Province of Ontario.
8On or about October 6, 2010, funds in the amount of $150,000 USD were advanced by Edge to Stealth. Edge alleges that it made demand by e-mail dated December 31, 2010, to Stealth for payment and that by the assignment agreement dated March 31, 2010, Edge assigned all of its right, title, and interest in the Note to Mr. Bottarini. Mr. Bottarini alleges that Stealth has failed to pay any amount for principal or interest since the date of the execution of the Note, despite repeated demands.
9Stealth contends that a JVA was entered into between the parties and that the funds advanced pursuant to the Note formed part of the JVA. Mr. Bottarini denies that a JVA was entered into between the parties and submits that the $150,000 advanced to Stealth was a loan.
Issue
Should summary judgment be granted to Mr. Bottarini in accordance with the relief sought in the Notice of Motion or should the summary judgment motion be dismissed?
Relevant Statutory Provisions
10Rule 20 of the Rules of Civil Procedure governs motions for summary judgment. Rule 20.01(1) prescribes when a plaintiff may bring a motion for summary judgment:
20.01(1) A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim…
11Rule 20.04(2.1) prescribes the court’s powers on a motion for summary judgment:
20.04(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.
The Law on Summary Judgment
12In the recent Ontario Court of Appeal decision of Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, the summary judgment rule was clarified. At paras. 37 and 38, the Court explained the purpose of the amended Rule 20:
[T]he amended rule permits the motion judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.
However, we emphasize that the purpose of the new rule is to eliminate unnecessary trials, not to eliminate all trials. The guiding consideration is whether the summary judgment process, in the circumstances of a given case, will provide an appropriate means for effecting a fair and just resolution of the dispute before the court.
[Footnote omitted; Emphasis original.]
13In a summary judgment motion, the court must apply the “full appreciation test” as set out in Combined Air, at para. 50:
In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?
14The Court of Appeal also confirmed the requirement that all parties put their “best foot forward” on a motion for summary judgment. At para. 56, the Court stated:
By adopting the full appreciation test, we continue to recognize the established principles regarding the evidentiary obligations on a summary judgment motion. The Supreme Court of Canada addressed this point in Lameman, at para. 11, where the court cited Sharpe J.’s reasons in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Ont. Gen. Div.), at p. 434, in support of the proposition that “[e]ach side must ‘put its best foot forward’ with respect to the existence or non-existence of material issues to be tried.” This obligation continues to apply under the amended Rule 20. On a motion for summary judgment, a party is not “entitled to sit back and rely on the possibility that more favourable facts may develop at trial”: Transamerica, at p. 434.
Mr. Bottarini’s Position
15Mr. Bottarini and Edge submit that the Note speaks for itself and that Stealth signed the Note with the full benefit of legal advice and Stealth has admitted liability. They further contend that no JVA was agreed to and at the most, Stealth contemplated that Mr. Bottarini would obtain shares in Stealth. Mr. Bottarini contends that Stealth has provided no evidence that any shares were ever offered or issued to Mr. Bottarini.
16Further, Mr. Bottarini argues that Stealth concedes that it was a fundamental condition to the alleged JVA that an Ecuador plant was viable and there is no reliable evidence that an Ecuador plant was ever viable. Mr. Bottarini also submits that Stealth concedes that key business and structure terms were never agreed to and he contends that Stealth’s evidence is “riddled with inconsistencies”.
17Mr. Bottarini further submits that Edge is a company solely engaged in lending and investments whereas Chocolate Superfoods, LLC (“CS”) is a company engaged in cacao distribution. Both companies are controlled by Mr. Bottarini, but CS is not joined as a party. Mr. Bottarini submits that if any entity controlled by him could possibly be found to have entered into a JVA, which is denied, it could only be CS.
18Mr. Bottarini argues that the purpose of the Note was not to enter into a JVA, but rather to provide short term financing to Mr. Gobuty to allow him to pursue a cacao business with Mr. Williams. Mr. Bottarini contends that repayment was to be made upon the refinancing of Mr. Gobuty’s home.
19Mr. Bottarini points to the fact that there is no document, either drafted or executed, that refers to a JVA, nor is there any document, drafted or executed, that refers to Mr. Bottarini, Edge, or CS receiving shares in Stealth.
20Mr. Bottarini relies on an exchange of e-mails in December 2010, wherein he states that Stealth acknowledged liability for the Note and it confirmed that it was making arrangements to pay the Note and offering to pay $50,000 a month. Further, Mr. Bottarini relies on an exchange of e-mails in January 2011, wherein Mr. Gobuty mentioned that he would not be able to repay the Note until he was paid by Mr. Williams. Mr. Bottarini contends that in these e-mails, Stealth never denies liability and never mentions a JVA.
21The sole director and officer of Stealth is Mr. Gobuty’s life-partner, Ann Barnes (“Ms. Barnes”). Mr. Bottarini also contends that Ms. Barnes is the 95% shareholder of Stealth and she is an experienced, retired commercial lawyer who would have understood the consequences of Stealth entering into the terms of the Note without any mention of an alleged JVA. He further argues that Ms. Barnes was present at the signing of the Note and that she has sworn no evidence and therefore an adverse inference may be drawn.
22Mr. Bottarini further submits that Stealth, with the assistance of an independent lawyer, prepared the first draft of the Note and there was no mention of the JVA in the Note. Additionally, he argues that Stealth sought and received independent legal advice from at least two other lawyers on the structure of the alleged JVA. Mr. Bottarini states that the advice from one of those lawyers was to grant shares to Mr. Williams and Mr. Bottarini in Stealth rather than create a new company. Mr. Bottarini contends that there is no evidence that he was ever told about this proposed structure.
23It is Mr. Bottarini’s position that there is no document in which Mr. Gobuty offered or agreed to sell shares in Stealth to either Mr. Bottarini or Edge. He contends that there is a document in which Mr. Gobuty offered an equity participation to Mr. Williams alone.
24Counsel for Mr. Bottarini also submits that given there is no written agreement between the parties, the courts should prefer clear, written agreements between the parties over undocumented, oral discussions and negotiations. He submits that the principles of commercial law require certainty.
25Mr. Bottarini also argues that even if the deal had been crystallized, as Stealth alleges on October 3 or 4, 2010, there was a condition to be met that Mr. Bottarini was to travel to Ecuador to ensure that the cacao plant was viable. Mr. Bottarini contends that Mr. Gobuty never went to Ecuador to inspect the plant, nor is there any evidence of production of cacao by the Ecuadorian facility that was allegedly to be set up by Mr. Williams. Mr. Bottarini deposes that he did go to Ecuador for other business and reported that the plant there was not viable.
26Mr. Bottarini admits that he was interested, through his company CS, in becoming a distributor for Mr. Williams’ cacao plant as he wanted access to the Canadian market through Stealth and low pricing from Mr. Williams. Mr. Bottarini, however, contends that it was Mr. Williams’ failure to sign any agreements, not Mr. Bottarini’s, which ended any business relationship.
27Mr. Bottarini also contends that there are many inconsistencies with Stealth’s evidence, including:
i) Mr. Gobuty’s denial that Stealth had ever encumbered its assets despite a PPSA search contradicting the evidence;
ii) Stealth’s pleading that it requested both Mr. Bottarini and Mr. Williams to execute the necessary documents to reduce the JVA to writing, but presented no such document to Mr. Bottarini; and
iii) Stealth’s assertion that it advanced $40,000 to Mr. Williams to put into the JVA to complete a manufacturing facility in Ecuador.
With respect to the last point, Mr. Bottarini contends that Stealth attempted to collect the money as a loan, and that Mr. Gobuty will not admit that Stealth authored an Equity Evaluation, yet all of the documents were in Stealth’s possession and Mr. Gobuty admits that the contents are accurate.
28Mr. Bottarini also questions where the $150,000 USD advanced to Stealth went, as Stealth has provided no independent evidence as to what the money was spent on and when the money was spent.
Stealth’s Position
29Stealth contends, as set out in Mr. Gobuty’s Affidavit, that the Note was part of a larger transaction and that the funds became investment funds with respect to the JVA. It submits that Mr. Bottarini’s evidence that the Note was a loan makes no commercial sense as the funds were advanced without any security on any assets or otherwise; there were no personal guarantees; Stealth was in a foreign jurisdiction from Edge; and Mr. Bottarini and Mr. Gobuty had just met.
30Stealth further submits that a trial is necessary in light of what it alleges is Mr. Bottarini’s “suppression of evidence”, including why the Note was assigned and the adverse inference that should be drawn from same.
31It is Stealth’s position that in May 2010, Mr. Gobuty met with Mr. Williams and formed a joint venture business whereby Stealth would import food products from Mr. Williams’ business interests in Ecuador. Stealth contends that over time it advanced approximately $40,000 to Mr. Williams in furtherance of this joint venture business.
32Stealth further contends that in September 2010, Mr. Williams introduced Mr. Gobuty to Mr. Bottarini who was interested in joining the joint venture. Meetings were held with respect to furthering a JVA and after a meeting in Phoenix the parties agreed to pursue a JVA. Mr. Gobuty contends that a few days later, the parties met in Palm Springs, California where they discussed and confirmed details of the JVA, including potential revenue streams, sales, customers, logistics, and other administrative and financial details. Mr. Gobuty points to an e-mail sent by Mr. Bottarini to both Mr. Williams and Mr. Gobuty dated September 20, 2010, wherein Mr. Bottarini indicates that he already had an order with respect to the joint venture. In the e-mail, Mr. Bottarini questions whether or not the paperwork and accounting should be done in the United States or whether or not it should be run through Stealth. Further, the e-mail indicates that he has $150,000 available now and that the funds had an 8% interest rate that he did not mind “covering himself”.
33Mr. Gobuty deposes that the JVA was contingent upon Mr. Bottarini completing, to his satisfaction, review of the facilities of Stealth and Mr. Williams’ facilities in Ecuador. Stealth contends that prior to Mr. Bottarini travelling to Ecuador and Ontario, the parties continued to discuss the JVA in a series of e-mails.
34Stealth’s evidence is that prior to travelling to Ecuador, Mr. Bottarini attended at the offices of Stealth to review its facilities and at the same time he advanced the sum of $150,000 USD to Stealth which represented Mr. Bottarini and Edge’s investment in the joint venture business. It alleges that the Note was to be held pending Mr. Bottarini’s review of the facilities in Ecuador. Mr. Gobuty deposes that the Note was to confirm receipt of the funds and to repay if Mr. Bottarini was not satisfied with the facilities in Ecuador. Mr. Gobuty contends that there was an urgency to the matter as it was represented to him that both Mr. Bottarini/Edge and Mr. Williams had purchase orders that needed to be fulfilled.
35Mr. Gobuty also deposes that new companies were to be incorporated, including a super food wholesaler and a packaged goods company, along with the Ecuadorian company. Mr. Gobuty also contends that Mr. Bottarini confirmed his satisfaction with the Ecuadorian facilities and the joint venture business moved forward. He deposes that a number of e-mails were forwarded dealing with shipment of products, including pricing, labelling, packaging, and text of copy. He points to one e-mail in particular where Mr. Bottarini writes to both Mr. Williams and Mr. Gobuty, “FYI... We are going to provide product for all these clients… I sure of it!”
36Stealth’s position is that it was to be a holder of the funds advanced by Edge that were either going to be returned to Mr. Bottarini and Edge, or were to be invested in the joint venture upon Mr. Bottarini’s direction. Mr. Gobuty deposes that Mr. Bottarini had to “mask” his involvement in this cacao and raw food company in order to keep his other suppliers unaware about his change in the future purchase and sales cycles.
37Mr. Gobuty further deposes that Stealth advanced, on Mr. Bottarini’s instructions, funds totalling $124,000 USD to Mr. Williams and his legal representative, Unique Management Inc. Mr. Gobuty states that the funds became investment monies in furtherance of the parties’ joint venture business and that neither he nor Stealth received any direct benefit from the funds.
38Mr. Gobuty’s evidence is that in late October 2010, he requested, on behalf of Stealth, that both Mr. Bottarini and Mr. Williams execute documentation to reduce the parties’ agreement to writing with respect to their joint business agreement. He contends that both Mr. Williams and Mr. Bottarini failed, or refused, to sign the documentation and the business relationship came to an end. Mr. Gobuty deposes that Mr. Williams and Mr. Bottarini have continued to do business and have cut Stealth out of the business which he states is now lucrative.
39Mr. Gobuty further deposes that Stealth had advanced to Mr. Williams before Mr. Bottarini’s involvement $40,000 in furtherance of the joint venture business, which amount grew in time to in excess of $120,000. Stealth argues that it was to be repaid those funds from litigation settlement proceeds that Mr. Williams was to receive in early 2011. Mr. Gobuty contends that Mr. Bottarini was aware of this fact but neither he nor Mr. Williams advised Mr. Gobuty of the settlement of Mr. Williams’ litigation. Mr. Gobuty’s evidence is that Mr. Williams retained these funds in order to further his business venture with Mr. Bottarini. He also contends that Mr. Bottarini was aware that Stealth needed to be paid back by Mr. Williams prior to Stealth being able to pay Edge.
40Stealth submits that as a result of Mr. Bottarini and Mr. Williams’ action and inaction, it has suffered damages regarding the joint venture business in the form of lost investment funds and lost anticipated profits. It argues that Mr. Bottarini and Mr. Williams continued to conduct business relationships with one another and their companies, utilizing information and resources received from Stealth for their mutual benefit.
Disposition
41Taking into consideration the evidence before me, Rule 20, and the test in Combined Air v. Flesch, I find that there is a genuine issue requiring a trial and I am not prepared to grant Mr. Bottarini’s request for an order granting summary judgment and summary dismissal of the counterclaim against him and Edge. For the following reasons, I do not have a full appreciation of the evidence and issues that is required for me to make dispositive findings.
42There is clearly conflicting evidence as to the nature of the agreement entered into between the parties that may necessitate testimony from other individuals, including a Mr. Robert Ettlebrick (an investor in the $150,000 and whose relationship with Mr. Bottarini was not addressed by Mr. Bottarini in his Affidavit and was only addressed on cross-examination) and Mr. Williams. There is conflicting evidence regarding the purpose of the $150,000 advanced; that is, whether it was a loan or an investment in the alleged joint venture. There are questions as to whether Mr. Bottarini authorized the payments from the $150,000 to Mr. Williams. There is also conflicting evidence over when Mr. Bottarini made the demand for the $150,000 and more evidence is needed concerning the business relationship between Mr. Bottarini and Mr. Williams for the Court to fully appreciate the evidence.
43Mr. Bottarini contends that there is no written agreement between the parties regarding a joint venture, which is conclusive evidence that a joint venture was not entered into by the parties. However, there are some detailed e-mails exchanged between the parties concerning pricing, labelling, travel to Ecuador, correcting type, and so on that need to be delved into further at trial in order to properly determine the issue as to whether there was a joint venture, and whether the $150,000 was an investment in that joint venture if there was one. There are many facts in dispute between the parties and it is difficult to properly weigh the evidence and evaluate the credibility of the parties without the trial narrative.
44At the cross-examination of Mr. Bottarini, it was determined that Mr. Ettlebrick was an investor in the $150,000 advanced to Stealth. Counsel for Stealth asked a number of questions of Mr. Bottarini regarding the $150,000 that were refused. In particular, Mr. Bottarini refused to answer questions regarding: whether he had in the past loaned the amount of money Edge loaned to Stealth after only meeting a person a couple weeks prior; whether or not he ran the loan past anyone who partnered with him and Edge; whether or not he discussed the $150,000 with anyone; the last known address and phone number of Mr. Ettlebrick; whether or not there was any written correspondence between Mr. Bottarini and Mr. Ettlebrick regarding the loan; disclosure of a Distribution Agreement that Mr. Bottarini and/or his company had with Pecari, a company in Ecuador; production of all of Mr. Bottarini’s e-mails that were forwarded to Mr. Williams between September 2010, to the present; and, whether or not Mr. Bottarini was blind copying Mr. Williams on e-mails to Mr. Gobuty.
45While counsel for Mr. Bottarini argues that Stealth could have brought a refusals motion with respect to these questions, the answers to most of these questions would certainly be of assistance to the Court as there is conflicting evidence as to the purpose of the Note and this information from Mr. Ettlebrick would have been helpful, especially on a summary judgment motion. The plaintiff has clearly not put his best foot forward by refusing to provide this information. Without this information, I do not have a full appreciation of the evidence. Further, it is apparent that there are material facts and credibility issues in dispute that would be best determined at trial. I am not able to weigh and draw inferences based solely on the Affidavits and cross-examinations of the two witnesses, Mr. Bottarini and Mr. Gobuty, when other individuals were involved in the discussions concerning the alleged joint venture and the financing of the Note. I therefore find that it is in the interests of justice that the matter proceeds to trial.
Costs
46Both counsel for the plaintiff and counsel for the defendant filed costs outlines and made submissions regarding costs. The defendant was successful on this motion and seeks $18,800 in fees and disbursements plus HST on a partial indemnity basis. The plaintiff, had he been successful on this motion, indicated that he was seeking costs on a substantial indemnity basis in the amount of $32,532.31 and counsel for the plaintiff also indicated that the plaintiff’s partial indemnity costs were approximately the same as the defendant’s costs on a partial indemnity basis. I note that the plaintiff’s costs on a partial indemnity basis are approximately $24,000 when adding the fees and disbursements provided in the plaintiff’s costs outline.
47I was not provided with detailed time spent by the defendant but note that counsel claims 54.7 hours, which appears reasonable given this was a summary judgment motion and I understand that two days of cross-examinations were held. I have considered what the plaintiff, as the unsuccessful party, would have reasonably expected to pay if he was unsuccessful on the motion given the costs outline provided. I have also taken into consideration the factors set out in Rule 57 of the Rules of Civil Procedure that the court may consider when exercising its discretion in awarding costs, the decision of Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), and the costs submissions of both parties.
48Taking all of these factors into consideration, I order that the plaintiff pay to the defendant the sum of $21,000, inclusive of HST and disbursements as I also find that this is an amount that is fair and reasonable for the plaintiff to pay and an amount that the plaintiff could have reasonably expected to pay if unsuccessful.
Order
49I order the following:
i) The plaintiff, Jim Bottarini’s motion for summary judgment and summary dismissal of the counterclaim against him and Edge is dismissed.
ii) The plaintiff, Jim Bottarini shall pay to the defendant, Stealth Health Foods Inc., the sum of $21,000, inclusive of HST and disbursements.
Stevenson J.
DATE: January 9, 2013