ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NOS.: CV-10-407811 and CV-10-413378

DATE: 20140820

BETWEEN:

Court File No. CV-10-407811

S & J GARERI TRUCKING LTD.
Plaintiff

– and –

ONYX CORPORATION
Defendant

AND BETWEEN:

Court File No. CV-10-413378

HARLOW CONTRACTING INC.
Plaintiff

– and –

ONYX CORPORATION, GIOVANNI LIONIELLO, a.k.a. JOHN LIONELLO, a.k.a. JOHN LIONELLO and VINCENZO LIONIELLO, a.k.a. VINCE LIONELLO, a.k.a. VINCE LIONELLO
Defendants

Ian R. Mang, for S & J Gareri Trucking

Marvin Kurz and Shana Dale, for Harlow Contracting

Kyle Armagon for the Defendants

HEARD in Toronto: 29, 30 April and 1, 2 May 2014

REASONS FOR JUDGMENT

MEW J.

1Following a public tender which closed at the end of May 2009, Onyx Corporation was awarded a contract by the City of Mississauga to provide winter road maintenance services for a term of five winter season periods commencing on 30 November 2009 and concluding on 14 March 2014.

2The offer made by Onyx in its tender included the provision of 20 dual purpose tandem axle spreader/plough trucks with operators.

3Following the successful tender by Onyx, separate arrangements were made by Onyx with two companies – the plaintiffs Harlow Contracting Inc. and S & J Gareri Trucking Ltd. – for the provision by those companies to Onyx of, respectively, five and two trucks with operators. The Harlow and Gareri trucks became part of the complement of 20 winter maintenance vehicles provided by Onyx pursuant to its contract with the City.

4After one winter season of collaboration between Onyx on the one hand, and Harlow and Gareri, on the other, Harlow and Gareri were told by Onyx that their services and vehicles were no longer required.

5Neither Harlow nor Gareri had a written agreement with Onyx concerning the provision of trucks and operators.

6Harlow and Gareri assert that the essential terms of their respective relationships with Onyx, at least so far as duration and compensation were concerned, reflected the main contract which Onyx had with Mississauga, including its duration for five winter seasons.

7Onyx, on the other hand, claims that it could terminate Harlow or Gareri at will. Indeed, although not a position advanced on behalf of Onyx by counsel, one of the principals of Onyx stated, quite emphatically, that because there were no written agreements with Harlow or Gareri, there were no contracts between Onyx and those parties.

8In separate actions, tried together, Harlow and Gareri assert breach of contract on the part of Onyx (Harlow’s claims against the two principals of Onyx, John Lioniello and Vince Lioniello were not pursued at trial).

9The following issues fall for determination:

(a) Did Harlow and Gareri each have contracts with Onyx;

(b) If so, what were the terms of those contracts;

(c) If applicable, did Onyx breach its contracts; and

(d) If so, what damages are payable to Harlow and Gareri.

FACTS

10Each of Harlow, Onyx and Gareri have done contract snow removal work for the City of Mississauga in the past.

11Prior to 2009, Mississauga had no minimum number of trucks that it required in any tender for snow removal services. It also had no limits on the age of its contractors’ trucks.

12In early 2009, in an apparent effort to consolidate its snow removal services, prospective service providers for a five year contract term commencing in November 2009 were required to tender for a minimum of 19 trucks. A further requirement was that the trucks must be no more than 15 years old.

13As already noted, Onyx was successful in tendering for the City contract for 20 dual purpose tandem axle spreader/plough trucks, which included attachments for ploughing snow and spreading salt on roads. Neither Harlow nor Gareri, which also participated in tenders, was successful.

14Onyx had been required to provide the City of Mississauga with a bid deposit of $75,002.81, which was the equivalent of 1% of the total price which Onyx put forward in its bid as the payment it would receive over the five year contract for the 20 trucks. Once Onyx’s tender was accepted, the deposit was retained by the City as a performance bond for the duration of the contract.

15Onyx and the City signed the main contract between them on 15 September 2009. The tender documents previously completed by Onyx were included in the contract documents.

16At the time it prepared its tender, Onyx did not have 20 trucks meeting the specifications required by the contract. Nevertheless, the tender included a “contractor’s equipment list” in which Onyx listed 20 2010 International 7500 trucks.

17Although Onyx claimed that it had the financial capability to supply all 20 trucks for the contract itself, at the time of the tender, Onyx only had seven trucks that could meet the tender requirements. While Onyx did then acquire a further 11 units in 2009, some of them were required for other commitments and, thus, not all of the Onyx trucks were available for the City of Mississauga contract.

18John and Vince Lioniello (who are brothers) knew Luis Madeiros, who was the principal of Harlow. Prior to the City of Mississauga tender, there had been some discussion of Onyx and Harlow putting in a joint bid. In the end, they decided to put in individual bids.

19After the successful bid by Onyx, there were further discussions between John Lioniello and Luis Madeiros. There was some disagreement as to who approached who. However, there is no dispute that discussions occurred and, initially, that a proposal was made for Harlow to provide seven trucks and operators to Onyx.

20Onyx also received an approach from Tomasso Gareri, the principal of S & J Gareri Trucking Ltd. He offered to provide three trucks and operators.

21After further deliberations, Onyx decided that it could use five units from Harlow and two units from Gareri.

22Both Harlow and Gareri asked Onyx for a written contract setting out the terms of their arrangements.

23When Mr. Gareri presented a draft contract, Vince Lioniello confirmed that he had declined to enter into a written agreement and did not even read the draft proffered by Mr. Gareri.

24Similarly, when Mr. Madeiros suggested having a contract drawn up, Vince Lioniello refused.

25According to Mr. Madeiros, Vince Lioniello said that their previous acquaintance while working for the City of Mississauga yard and a handshake should be enough. Mr. Lioniello denies making the “handshake should be enough” comment.

26Vince Lioniello, when pressed in cross-examination, conceded that Onyx’s refusal to enter into written contracts was because he did not want clear and precise terms. Vince Lioniello thought it would be to the advantage of Onyx not to have written contracts.

27Notwithstanding the position of Onyx regarding written commitments, Onyx asserted that both Harlow and Gareri clearly knew what the terms of their respective arrangements with Onyx were.

28Onyx, Harlow and Gareri disagree as to what some of the key terms of the agreements consisted of.

29A crucial element of disagreement between the parties is whether the arrangement was for a fixed term of five years or otherwise.

30The plaintiffs say that each of them believed that they had a five year contract covering the same period as the main contract between Onyx and the City. Each of them claims that they secured assurances – Mr. Gareri from John Lioniello and Mr. Madeiros from Vince Lioniello – that the terms of their deals would be five years.

31Onyx, on the other hand, says that it was at liberty to terminate the arrangements with Gareri and Harlow at will, although John Lioniello at one point in his testimony also said that the term of the arrangements with the plaintiffs was for one snow removal season.

32Both of the Lioniellos were adamant that they had not made five year deals and that they had said and done nothing that would encourage the plaintiffs to think that they had five year deals.

33From the perspective of Mr. Gareri, although Onyx declined to enter into a written agreement with him, he expressed himself to nevertheless be confident that he had a five year deal. Originally, the discussions with Onyx were that Gareri would supply three trucks. In that connection, Mr. Gareri provided Onyx with a cheque in the amount of $11,360.49. This represents the amount of the deposit, payable by Onyx to the City of Mississauga, for three dual purpose trucks to be supplied by Onyx. In other words, as part of the arrangement for Gareri to provide trucks to Onyx, it effectively reimbursed Onyx for the deposit it had already paid in respect of three of the 20 units it had tendered for. When Onyx cut the number of vehicles to be provided by Gareri from three to two, Gareri was provided with a refund equivalent to the deposit for one vehicle.

34While there is no doubt that the “deposit” provided by Gareri was intended to reimburse or indemnify Onyx, at the request of Onyx, Gareri’s cheque was made payable to Vince and John Lioniello personally. The Lioniellos admitted that such an arrangement suited their purposes from a tax perspective.

35Mr. Madeiros took a different approach. He, too, provided a cheque, also made payable to the Lioniello brothers personally. It was for $18,935. This represented what he calculated to be a share of the bid deposit for five trucks. On the “re” line of the cheque, he had written “contract for five years”. The cheque was accompanied by a receipt entitled “Paid to Onyx Corp. for deposit for 5 years 5 trucks”. Vince Lioniello signed the receipt. It is disputed who prepared the receipt. But it is not disputed that Vince Lioniello signed it.

36The parties also dispute whose idea it was for Mr. Madeiros to provide such a cheque. There is no dispute, however, that Mr. Madeiros handed the cheque to Vince Lioniello. Neither of the Lioniello brothers made any comment at the time about the “contract for 5 years” notation. When asked about it in cross-examination, John Lioniello said that from his perspective, Mr. Madeiros had left a cheque, it was for a certain amount and that was “fine”. He added, referring to Mr. Madeiros “he figured he had a five year deal – I didn’t have an agreement with him for five years – if the guy wants to give me 20 grand, so be it”. John Lioniello did not see it as his responsibility to straighten Mr. Madeiros out. Nor did he see any false pretence in what had happened.

37The financial arrangements with the plaintiffs were, essentially, a flow through of the amounts payable by the City of Mississauga to Onyx under the main contract. There were two elements to that compensation, namely a daily stand by rate, set at $394 per day for each of the 145 days of the 2009-10 winter season, plus an hourly rate of $60 per truck and operator for the hours for which the units were actually in operation.

38In addition to agreeing to pay amounts reflecting a proportionate share of the deposit (in which regard it should be noted that Mr. Madeiros did a slightly different calculation to that done by Mr. Gareri), the plaintiffs also paid an annual administration fee to the defendant of $2,000 per truck.

39Both of the plaintiffs went out and acquired vehicles so that they could fulfill their commitments to Onyx. Both plaintiffs acknowledged that they did not tell Onyx that they were going out to acquire vehicles. Onyx, on the other hand, alleges that it was expressly warranted by both plaintiffs that they already had the necessary equipment and would not be going out to acquire equipment in order to be able to supply Onyx.

40The issue is largely academic because the plaintiffs have not included any costs associated with acquiring new vehicles as part of their claim.

41The first season passed without any disputes arising over the terms of the deals or the monies payable (there were a couple of performance-related concerns in connection with Harlow which the defendant does not at this juncture raise as a cause for Harlow’s termination).

42In February 2010 and unbeknown to the plaintiffs, Onyx started to look for financing to acquire seven trucks that would, effectively, replace the units being provided by Gareri and Harlow. Lease financing and acquisition of the vehicles was confirmed by a lease agreement dated 8 April 2010.

43Vince Lioniello called Mr. Gareri at the end of May 2010 to tell him that Gareri’s services were not needed any more. Mr. Gareri subsequently went in to meet with Mr. Lioniello in the hope of salvaging the deal but to no avail. Mr. Madeiros went in to meet with Vince Lioniello on 2 June 2010, ostensibly for the purpose of picking up his final payment for the 2009/10 season. He was given a cheque and, in turn, gave Mr. Lioniello a cheque for $10,500 representing his administration fee. As with the deposit cheque, he was asked to change the payee on this cheque from Onyx Corporation to V & J Lioniello. Only after this cheque had been handed over did Mr. Lioniello tell Mr. Madeiros that his services were no longer needed.

44Both Mr. Madeiros and Mr. Gareri were told by Mr. Lioniello that they were being terminated because of budget cutbacks and lack of work. In addition, Mr. Madeiros was told that there were performance concerns relating to Harlow. At trial, however, Onyx did not maintain the position that Harlow’s contract was terminated for performance-related issues.

45Both of the plaintiffs received letters from Onyx, confirming that Onyx would no longer require their services for the upcoming snow season. Each of the letters stated that, inter alia, “Budget cutback/lack of work has forced Onyx Corporation to let go of all subcontractors”. A refund of half of the deposits paid by Gareri and Harlow accompanied these termination letters with the promise that the balance would be remitted upon return of the City of Mississauga’s GPS units and antennae. In the case of Harlow there was also a repair bill for damage that was allegedly caused by one of its trucks to one of Onyx’s units.

46The termination letters indicated that any further correspondence regarding “this matter” should be directed to Onyx’s solicitors.

47The defendant’s evidence was that the cutbacks referred to related to other contracts which Onyx had. It was acknowledged that the contract between Onyx and the City, which had four more seasons to run at the time that the plaintiffs were terminated, continued to be for 20 units.

48Vince Lioniello acknowledged that the letters written to Harlow and Gareri were not truthful. He said that he felt he had to offer some explanation for the termination of the plaintiffs. He did not simply want to tell them to “get lost”. He acknowledged that the reason for their termination was because it was more profitable for Onyx to acquire additional trucks rather than subcontract to the plaintiffs.

DISCUSSION AND ANALYSIS

49The defendants did not have a monopoly on questionable evidence. But to the extent there was unsatisfactory or conflicting evidence given by the plaintiffs, it did not have a bearing on my determination of the existence or terms of the contracts between the parties. On the material issues in dispute, I found the evidence of the plaintiffs to be credible and, to the extent of any conflict with the testimony of the Lioniellos, I accept the versions provided by Mr. Gareri and Mr. Madeiros.

50That said all of the parties can be criticized for their failure to commit themselves to a written contract.

51When dealing with contracts which are substantially or wholly oral, it is necessary to distill from the words and actions of the parties what they intended: see G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011) at 16.

52Evidence of the parties’ subjective intention has no independent place in determining the terms of their bargain: Eli Lilly & Co. v. Novopharm Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129 at para. 54.

53The test of what the parties agreed to requires an objective determination. The contract must, of course, include the requisite elements of offer, acceptance and consideration. An illustration which closely resembles elements of the present cases is offered by Anson on Contracts, 21st ed., p. 28 (quoted by Ritchie J. in St. John Tug Boat Co. Ltd. v. Irving Refinery Co. Ltd., 1964 88 (SCC), [1964] S.C.R. 614):

So if A allows B to work for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liable to pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constitutes the acceptance.

54Mr. Gareri presented a draft contract which specified a five year term. When he was rebuffed by the defendant he nevertheless continued to deal with them even though he had not obtained their express confirmation that the term of the contract was, in fact, five years.

55Mr. Madeiros took a less direct approach by writing “contract for 5 years” on the deposit cheque which he gave to the defendant.

56If these attempts at memorializing their belief that the contract was five years was all that had occurred, I would find only that they had entered into binding contracts for undefined terms which could be terminated upon reasonable notice being given.

57However each of the plaintiffs provided the defendant with a deposit that was for an amount which corresponded, or was intended to correspond, to an amount that represented a proportionate share of the deposit payable by Onyx under its main contract with the City of Mississauga for a fixed term contract for five winter seasons. These payments were accepted, with some enthusiasm, by the Lioniellos, who even had the cheques made payable to themselves personally, rather than to Onyx Corporation, admitting that they did so in order to evade tax.

58Notwithstanding their position that they had contracts which could be terminated at will, Onyx concocted a story to justify their termination of their agreements with the plaintiffs.

59At the end of the day, the defendant was not straight with the plaintiffs.

60The defendant made a deliberate choice not to commit itself in writing. It must live with the consequences of that.

61In the absence of written terms, the court must, as previously indicated, look at what was said and done to ascertain what the parties bargained for. In that regard, the evidence supports the position taken by the plaintiffs.

62Reference was made in argument to employment law cases in which it has been held that a definite term should not be implied into a contract unless it is necessary to give the arrangement business efficacy: Canelas v. People First of Canada (2009) 2009 MBQB 67, 237 Man. R. (2d) 267, [2009] 6 W.W.R. 294 (at para. 11).

63On the present facts, particularly having regard to the deposits paid, business efficacy would support the conclusion that a five year term, if not expressly agreed to between the parties, can necessarily be implied into their contractual arrangement.

64Why else would the plaintiffs have paid their share of Onyx’s deposit/bond for a five year contract with the City if their deals were not for five years?

65I have, as noted already, considered the option of finding that the contracts between the parties were for unspecified terms and, therefore, terminable on reasonable notice. But in light of the evidentiary support for the finding that the plaintiffs’ contracts were for fixed terms, it is not necessary for me to determine what reasonable notice under the circumstances would have been.

66It follows that I find that the plaintiffs each had five year contracts with the defendant and that the defendant breached those contracts by terminating them in or about June 2010 when the contracts each had four more winter seasons to run.

DAMAGES

67The plaintiffs are under a duty to mitigate their losses, even where a contract is for a fixed term: Graham v. Marleau Securities Inc. (2000). The onus of proving a lack of reasonable mitigation falls on the defendant: Michaels v. Red Deer College, 1975 15 (SCC).

68No evidence of a failure on the part of either of the plaintiffs to reasonably mitigate their losses was put forward by the defendant. Indeed, there was minimal cross-examination of the plaintiffs on the issues of damages and mitigation.

69By agreement between the parties the profit per truck achieved by the defendant in the four years following the termination of the plaintiffs was as follows:

2010-11 $43,417
2011-12 $37,647
2012-13 $45,025
2013-14 $57,097.50

70The evidence at trial was to the effect that, subject to the application of administration fees of $2,000 per vehicle, there was a complete flow through of revenues from Mississauga to the plaintiffs. This would result in net income per truck (before further deductions) of $183,186 over the four year term of the contract which the plaintiffs should have enjoyed the benefit of. This amounts to a total loss of $366,372 for Gareri and $915,930 for Harlow.

Gareri

71Gareri’s revenues for the November 2009 – March 2010 season totaled $134,336 from which falls to be deducted $4,000 for the agreed upon administration fee payable to the defendant ($2,000 per truck).

72Gareri had and still has ten trucks, eight of which were at all material times, and continue to be, employed by another company. According to Mr. Gareri, although he bid on a contract to do work for Peel Region, and looked at, but felt he could not qualify for, several other contracts, he has not, for the last four years, been able to do anything with the two extra trucks. He claims that most municipal contracts are not open to his company because the critical mass of trucks which he has available is not great enough to bid on such work.

73There was no evidence either way that Gareri sought out other sub-contracting opportunities.

74As already noted, no serious challenge was mounted by the defendant to challenge Gareri on its mitigation efforts or on the calculation of its loss.

75Based on the agreed net income per truck amount of $183,186 and after taking into account four years’ worth of administration fees which have not had to be paid, Gareri’s loss would be $350,372. In the absence of evidence that Gareri failed to take reasonable steps to mitigate, that sum represents what Gareri could have expected to earn by way of profits over the four year remaining terms of the contract.

Harlow

76During the 2010/11 winter season, although Mr. Madeiros was unable to find work for his vehicles, he did generate personal income by driving for other operators.

77Harlow then obtained a snow ploughing contract at York University. It originally started with four trucks at diminished (compared to the Mississauga contract) rates and hours. Now it is down to three trucks.

78Although, during the course of cross-examination, it was suggested on behalf of the defendant that Harlow could have done more, in my assessment, his efforts have been reasonable. Over the four years he has generated total revenues of $266,650.92. It is estimated that the expenses incurred to generate this revenue have been $154,300 with the result that the net income generated by Onyx and Mr. Madeiros during the four year period has been $112,350.92. When this figure is deducted from the $915,930 figure representing what Harlow might reasonably have expected to earn through the Onyx/Mississauga contract, a net loss of $802,649.08 results, from which a further $40,000 should be deducted to reflect the administration fees for four years which did not have to be paid. The resulting total would be $762,649.08.

79In its prayer for relief Harlow seeks damages of $700,000. Counsel for Harlow confirmed that his client does not seek to amend that prayer for relief.

CONCLUSION

80The plaintiffs had oral contracts for the provision of snow removal services, as subcontractors, to the defendant.

81These contracts were for a five winter season term.

82The defendant wrongfully terminated the contracts after one season.

83The plaintiffs are entitled to damages which reflect the revenue they could reasonably have expected to generate from the Onyx contracts, less administration fees which they did not have to pay because of the early termination of the contracts, less revenues generated through mitigation.

84The efforts made by the plaintiffs to mitigate their losses are reasonable and were not, in any event, challenged (other than through limited cross-examination) by the defendant.

85The plaintiffs shall therefore have judgment against Onyx as follows:

(a) Gareri $350,372
(b) Harlow $700,000

86The plaintiffs are entitled to pre-judgment interest in accordance with the Courts of Justice Act.

COSTS

87The defendants shall pay the plaintiffs’ costs. Counsel for the plaintiffs have provided the court with bills of costs and sealed envelopes containing offers made. If costs cannot be agreed, I will fix them. In that regard, the plaintiffs shall provide a short submission of not more than three pages in support of their bills of costs (including any costs considerations which may be engaged by the offers to settle) by Friday 12th September. The defendant shall provide a responding submission by no later than Monday 22nd September.

Mew J.

Released: 20 August 2014

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Court File No. CV-10-407811

S & J GARERI TRUCKING LTD.
Plaintiff

– and –

ONYX CORPORATION
Defendant

AND BETWEEN:

Court File No. CV-10-413378

HARLOW CONTRACTING INC.
Plaintiff

– and –

ONYX CORPORATION, GIOVANNI LIONIELLO, a.k.a. JOHN LIONELLO, a.k.a. JOHN LIONELLO and VINCENZO LIONIELLO, a.k.a. VINCE LIONELLO, a.k.a. VINCE LIONELLO
Defendants

REASONS FOR JUDGMENT

Mew J.

Released: 20 August 2014