ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-418353
DATE: 20140618
BETWEEN:
TRIO MECHANICAL CONTRACTORS LTD.
Plaintiff
– and –
PREMIER FITNESS CLUBS INC. and JOHN CARDILLO
Defendants
Gregory Gryguc, for the Plaintiff
Scott Turton, for the Defendants
HEARD: June 3 and 4, 2014
STEWART J.
Nature of the Action
[1] The Plaintiff Trio Mechanical Contractors Ltd. (“Trio”) has brought this action claiming breach of contract as against both Defendants. The claim arises out of a settlement of a claim by Trio for money owing to it for the provision of plumbing and drainage services to the Defendant Premier Fitness Clubs Inc. (“Premier”). The Defendant John Cardillo (“Cardillo”) was at the relevant time a Director and officer of Premier.
[2] Premier was placed into receivership after the settlement agreement and alleged breach thereof occurred. Although this action has been permitted to proceed as against it, Premier is now defunct and presumably has no assets. It is unrepresented in these proceedings.
The Facts
[3] At various times from 2003 to 2009, Trio provided plumbing and drainage services to the construction and maintenance of fitness clubs operated by Premier. As of mid-2009, Trio maintained that a sum in excess of $330,000.00 was owed to it by Premier.
[4] By letter dated July 9, 2009, Trio’s solicitor demanded payment of the amount said to be owing, failing which a Notice of Lien would be registered on property in Brampton where some work on Premier’s premises had been performed by Trio.
[5] Invoice lists produced by both parties demonstrate that only part of the approximately $330,000.00 claimed related to work performed at the Brampton property. Many of the invoices which comprise the total date back to 2003, 2004, 2005 and 2006 and relate to work performed at other Premier locations.
[6] By letter dated July 21, 2009, Premier’s solicitor asked for clarification and substantiation of the amount claimed.
[7] Meetings then took place between Adam Pagliaroli, President of Trio, and Cardillo on behalf of Premier. As a result of one such meeting, Trio’s solicitor indicated on November 12, 2009 to Premier’s solicitor that Pagliaroli “anticipated there would be an Acknowledgement executed by Mr. Cardillo personally and on behalf of Premier Fitness Clubs Inc. with respect to an Agreement regarding outstanding monies owed to Trio”. However, no such documentation was provided.
[8] A draft Statement of Claim containing allegations of breach of trust against Trio and Cardillo was sent to Premier and its solicitor along with an expression of Trio’s intent to issue and serve the document if no satisfactory resolution was achieved.
[9] Included in the package containing the draft Statement of Claim was a document prepared by Trio’s solicitor titled “Acknowledgement”. It contained a provision that Premier and “John Cardillo personally” confirmed that an Agreement had been entered into with Trio for payment of the full amount said to be owing, plus interest. The document also stated that:
- Premier Fitness Clubs Inc. and John Cardillo personally confirm that the entire debt will be satisfied by way of 12 monthly payments with the first such payment commencing on December 1, 23009, and ending on November 1, 2010.
[10] The Acknowledgement was prepared in a form to be signed both by Premier and by “John Cardillo – Personally”.
[11] By letter dated December 9, 2009, counsel for Premier advised Trio that its proposal was not acceptable.
[12] The threatened action for breach of trust was never commenced. Instead, Pagliaroli met with Cardillo to discuss a “working solution” to the “impasse”, as the situation was described in Trio’s solicitor’s letter of December 14, 2009.
[13] A further meeting took place on January 29, 2010 between Pagliaroli and Cardillo at which the CFO of Premier Al Guarino, was also present. At that time an agreement was arrived at to reduce the amount to be paid by some $80,000.00, to $250,000.00. This amount was to be set up as a loan and was to be paid over a period of five years at an interest rate of 5% in accordance with a Loan Amortization Schedule provided to Pagliaroli.
[14] By invoice/credit note dated February 24, 2010 and letter dated March 4, 2010, Trio provided and confirmed a credit to Premier of $80,000.00 as had been agreed by them.
[15] By cheque drawn on Cardillo Capital Corp. dated January 29, 2010, a first payment of $4,717.81 was paid to Trio.
[16] By cheque dated March 4, 2010 the sum of $1,026.35, noted to be “interest money”, was paid to Trio.
[17] Further payments of $10,000.00 and $15,000.00 were made by cheque on July 13 and 16, 2010, respectively.
[18] By cheque dated September 30, 2010 in the amount of $4,432.18 drawn on Health Holdings, a company controlled by Cardillo, further payment was made toward reducing the debt to Trio.
[19] Pagliaroli stated that Cardillo made approximately three additional payments of $900.00 in cash. This is denied by Cardillo.
[20] No written signed Agreement reflecting the settlement exists. A document titled “Agreement” was prepared by Trio’s solicitor but there is no evidence that it was ever sent to Premier or its solicitor. If it was ever sent and received, it was never executed and returned.
[21] The Agreement as drafted was to be executed by Trio, Premier and Cardillo “personally”. Provisions 3 and 4 of the Agreement are:
John Cardillo, Office (sic), Shareholder and Director of Premier Fitness Clubs Inc., personally guarantees that payments will be made and accepts all liability personally as a guarantor for Premier Fitness Clubs.
The parties hereto have ascribed their signatures today with the full benefit of each having received independent legal advice from their respective solicitors.
[22] Pagliaroli swears that at the settlement meeting Cardillo promised that he would assume personal liability for repayment of the $250,000.00 owing by Premier, and that he would personally guarantee the debt. He stated that Cardillo told him that if monthly payments of the loan could not be paid interest payments at least would be forthcoming.
[23] Cardillo denies having ever assumed personal liability for or providing his personal guarantee that the debt of Premier would be repaid.
[24] It is agreed that Trio is entitled to judgment for the amount owing to it by Premier. That amount is calculated on the basis of the $250,000.00 loan Agreement, less amounts said by Trio to have been paid to it. The resulting outstanding amount is $213,882.49.
[25] The present dispute centers primarily on whether Cardillo bears any personal liability for repayment of the amount owing to Trio.
Issues:
A. Did Cardillo promise to personally guarantee payment of the settlement amount to Trio, or to personally assume liability to Trio for such payment
B. Is the guarantee unenforceable as being contrary to the Statute of Frauds?
Issue A: Did Cardillo promise to personally guarantee payment of the settlement amount to Trio, or to personally assume liability to Trio for such payment?
[26] Trio has the burden of proving on a balance of probabilities that Cardillo promised to personally guarantee payment of Premier’s debt to Trio as reflected in the loan agreement entered into on January 29, 2010.
[27] There is nothing in writing to substantiate the making of any such promise or guarantee by Cardillo. There is no notation on the Loan Amortization Schedule given to Pagliaroi at the January 29, 1010 meeting. No written Agreement was ever executed by the parties to that effect.
[28] No mention is made of any promise or guarantee in the letter from Trio confirming the credit of $80,000.00 given by it to Premier as part of the settlement.
[29] Although a form of Agreement containing a Guarantee appears to have been prepared by Trio’s solicitor, there is no evidence that it was ever sent to Premier or Cardillo. Had it been sent, the facts and history of the dealings amont the parties suggest that it would have been rejected, just as the earlier proposed Acknowledgement had been rejected.
[30] Although Pagliaroli testified that Cardillo extended a guarantee of payment at the meeting on January 29, 2010, I find that his evidence in that regard is in the nature of wishful thinking when viewed in all of the circumstances.
[31] Pagliaroli’s recall was faulty, as he could not be at all clear in his evidence about the chronology of events or precise details of the settlement agreement. He was combative, evasive and argumentative in the giving of his evidence. He provided no reasonable explanation for the absence of some kind of affirmation of the agreement to guarantee that he advances. I find his recollection of any guarantee or promise having been given by Cardillo personally, as opposed to merely on behalf of Premier, is therefore unreliable.
[32] I also note that Trio’s original threat to lien the Brampton property for the cost of work done at other Premier locations was an attempt to overreach on its claim. The assertion that a personal guarantee or promise by Cardillo to pay Premier’s debts is, in my view, likewise an effort to overreach.
[33] It was argued that an adverse inference should be drawn against Cardillo as a result of the failure to call Al Guarino to testify as to what was said at the January 29, 2010 meeting. Cardillo is no longer an officer or director of Premier, which no longer carries on business. Accordingly, there is no evidence that Cardillo exerts any control over Guarino and, in fact, the evidence suggests that he does not. It was open to Trio to speak to and call Guarino as a witness had it chosen to do so. I decline to draw any adverse inference from Cardillo’s failure to call Guarino to testify.
[34] Accordingly, I find that Trio has not proven that any guarantee or promise was given by Cardillo to the extent the law requires.
Issue: B. Is the guarantee unenforceable as being contrary to the Statute of Frauds?
[35] I have found on the evidence that it has not been proven that any guarantee or promise was given or made by Cardillo. If I am wrong in so concluding, I will consider the alternative submission made on Cardillo’s behalf.
[36] Section 4 of the Statute of Frauds, R.S.O. 1990, c. S-19 is as follows:
- No action shall be brought … to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person … unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.
[37] This case asserts the existence of an oral promise to guarantee the indebtedness of the primary debtor Premier. As such, it falls squarely within the operation of s. 4 of the Statute of Frauds.
[38] I do not consider that the doctrine of part performance and/or s. 6 of the Statute of Frauds serve to alter this conclusion. The mere making of some payments to retire this debt through other companies controlled by Cardillo, is not adequate evidence of actual part performance by Cardillo of a liability for which he had allegedly assumed personal liability.
[39] In any event, the legal authorities provided support a conclusion that the doctrine of part performance is not applicable to contracts of guarantee (see: Actionstrength Ltd. v. International Glass [2005] 1 B.C.L.C. (H.L.)).
[40] Counsel for Trio attempted to assert a distinction between a guarantee and a promise to assume personal liability to which, he submitted, the Statute of Frauds does not apply. I do not consider that the facts of this case permit any such distinction to be drawn. The allegation is simply that Cardillo personally guaranteed repayment of Premier’s debt. The Statute of Frauds prohibits such a claim in this case.
Conclusion
[41] Trio shall have judgment against Premier in the amount of $213,882.49 plus interest as agreed at 5% from January 29, 2010.
[42] Trio’s action against Cardillo is dismissed.
Costs
[43] If the subject of costs cannot be agreed upon by the parties, written submissions on behalf of Cardillo may be delivered within 20 days of the date of release of this decision, and by Trio within 15 days thereafter.
STEWART J.
Released: June 18, 2014
COURT FILE NO.: cv-11-418353
DATE: 20140618
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TRIO MECHANICAL CONTRACTORS LTD.
Plaintiff
– and –
PREMIER FITNESS CLUBS INC. and JOHN CARDILLO
Defendants
REASONS FOR JUDGMENT
STEWART J.
Released: June 18, 2014