ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-3773-00
DATE: 20150817
B E T W E E N:
1161267 ONTARIO LTD.
Michael Woods, counsel for the Plaintiff (Moving Party)
Plaintiff
- and -
PETER MICHAEL MEI, DINA MEI AND MANCUSO MOTOR CAR COMPANY LTD.
Benjamin Salsberg, counsel for the Defendants (Respondents)
Defendants
AND BETWEEN:
PETER MICHAEL MEI
Plaintiff by Counterclaim
- and -
1161267 ONTARIO LTD.
Defendants by Counterclaim
HEARD: June 12, 2015
REASONS FOR JUDGMENT
COROZA J.
OVERVIEW
[1] In February of 2010, 1161267 Ontario Ltd. (“1161267”) entered into a joint venture agreement with Peter Mei, Dina Mei and Mancuso Car Company Ltd.
[2] Peter Mei is the principal of Mancuso and was involved in the used car trade. According to 1161267, the intention of the parties was to work together to buy and sell cars to earn a profit. 1161267 advanced $650,000 to Mr. Mei as an initial capital investment.
[3] By February of 2011, the relationship soured and 1161267 advised Mr. Mei in writing that 1161267 was terminating the agreement. 1161267 asked for the return of the initial capital investment. To date, the initial capital investment has not been returned to 1161267.
[4] 1161267 brings a motion for an order granting summary judgment in the amount of $650,000.
[5] For the following reasons, the motion for summary judgment is granted.
POSITION OF THE PARTIES
[6] The dispute arises out of the interpretation of the agreement. Both parties agree that there is one central issue in this motion; is Peter Mei obliged, under the agreement to return the initial capital investment to 1161267 upon the agreement’s termination?
[7] 1161267 argues that upon termination of the agreement, the initial capital investment must be returned. 1161267 submits that the expressed language of the agreement is clear and there is no genuine issue requiring a trial.
[8] Mr. Mei claims that he never personally guaranteed repayment of the initial capital investment and that the agreement does not expressly provide a return of the initial capital investment. Mr. Mei argues that the wording of the agreement is confusing and ambiguous. Mr. Mei submits that this issue of interpretation would be best resolved before a trial judge who can hear evidence.
FACTS
[9] On February 24, 2010 the parties entered into a joint venture agreement. The principals of 116127 are Michel and Ageliki Drakoulakos. They enlisted their son-in-law Mark Stirpe to help them draft an agreement with Mr. Mei. They retained a lawyer to draft the agreement. Mr. Mei also retained counsel to provide him with independent legal advice during the transaction. For the purposes of this motion, the relevant provisions of the agreement are set out below:
Relevant Provisions of the Agreement
Ageliki’s Company will inject funds of Six Hundred and Fifty Thousand Dollars ($650,000) into a segregated account at the Bank of Montreal in the name of the Corporation (“the account”) and the sole signing Officers for the account shall be Michel, Peter and Martha Drakoulakos, (Manager of 1161267 Ontario Ltd., only in the absence of Michel Drakoulakos), jointly and severally. No other persons other than Michel, Martha and Peter shall be authorized to withdraw funds from the account.
The funds in the account shall be used as venture capital for the acquisition and resale of motor vehicles in the discretion of Peter. Peter shall have unfettered control and decision making with respect to the acquisition and sale of such vehicles. All such vehicles acquired and sold from the funds in the account shall be accounted for in a segregated manner as distinct from the acquisition and sale of other motor vehicles with respect to which the Corporation transacts in the ordinary course of business.
The profit or loss with respect to the joint venture shall be allocated as follows:
• 60 per cent to the corporation; and
• 40 per cent to Ageliki’s Company.
Profits/losses shall be calculated on the bases of the gross resale of the vehicles less the cost of the sale of the vehicles. At no time shall the losses be taken from the initial capital funding of $650,000. […]
The profits shall be calculated and paid out on a monthly basis by the Corporation in Canadian funds. The Corporation shall prepare and deliver to Ageliki’s Company a monthly ledger showing a breakdown of the cost and sale of each vehicle. The Corporation shall cut a cheque to Ageliki’s Company on a monthly basis or as the parties may otherwise further agree in writing.The parties hereto agree to a 90-day wind-down clause whereby either party can give written notice to the other parties of the termination of this joint venture in which case the Corporation shall sell any of the vehicles acquired with the funds from the account, a final rendering of profit and loss shall be made, and the balance of the funds in the account shall be returned to Ageliki’s Company, totalling $650,000.
It is not contemplated that Michel or Martha Drakoulakos will take out any funds from the account although they shall have equal signing authority with Peter. To the extent that Michel or Martha do, in fact, take out any funds from the account, that shall reduce the Corporation’s liability to account for such sum taken out by Michel, Martha or Ageliki’s Company.
ANALYSIS
The Principles to be Applied on a Summary Judgment Motion
[10] I have reviewed the principles and the cases set out by Mr. Woods (for 1161267 Ontario Ltd.) in his very helpful factum. Under Rule 20.04(2), the court shall grant summary judgment if it is satisfied there is no genuine issue requiring a trial with respect to a claim or defence.
[11] Assuming that each party has put their best foot forward, I am in a position to make the necessary findings of fact, apply the law to the facts and thereby achieve a fair adjudication of the case on the merits. (See: Hryniak v. Mauldin, 2014 SCC 7).
[12] I have reviewed the affidavits filed by both parties, the examinations of Mr. Mei and Mr. Stirpe, and the joint venture agreement. It is not an extensive record and all of this material has allowed me to come to a full appreciation of the evidence.
There is No Genuine Issue Requiring a Trial
[13] Mr. Salsberg (for Mr. Mei) does not dispute that 1161267 provided $650,000 for the purpose of acquiring cars and then reselling cars for profit. However, Mr. Salsberg argues that the agreement is poorly drafted and does not expressly provide a guarantee that the principal amount will be paid back. Since, there is ambiguity surrounding the various provisions of the agreement, this is a matter that can only be resolved by a trial with a trial judge determining the true intent of the parties.
[14] I am not persuaded by Mr. Salsberg’s argument for the following reasons.
[15] First, I do not accept the argument that there is ambiguity in the words of the agreement. The cardinal rule of contract interpretation is that the court should give effect to the intention of the parties as expressed in their written agreement. (See: Venture Capital USA Inc. et al. v. Yorton Securities Inc., (2005) 2005 15708 (ON CA), 75 O.R. (3d) 325 (C.A.) at para. 26). When a court interprets an agreement it must take a practical, common-sense approach not dominated by technical rules of construction. In short, I must review this contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. (See: Creston Moly Corp v. Sattva Capital Corp., 2014 SCC 53 at paras. 47-48). I do not think the agreement is ambiguous. I am satisfied that when the paragraphs of the agreement are examined carefully, the agreement expressly provides that upon receipt of written notice of termination, the initial capital investment was to be returned to 1161267. Paragraph four explicitly states that at no time shall the losses be taken from the initial capital funding of $650,000 and paragraph six expressly provides that upon notice of termination a “final rendering of profit and loss shall be made, and the balance of the funds in the account shall be returned to Ageliki’s Company, totalling $650,000”.
[16] Second, there is ample evidence led by 1161267 that the intention of the parties was to ensure that investment capital advanced by 1161267 was protected. During his cross-examination Mr. Stirpe was specifically asked about any discussions he had with Mr. Mei about the agreement prior to signing it. Mr. Stirpe testified that Mr. Mei knew the initial investment capital was not to be used if there were losses and that the initial capital investment was really a guaranteed investment certificate. Mr. Stirpe put it this way:
Q. Okay so tell me again exactly what did Mr. Mei say about the principal? The $650,000?
A. That it will be used to purchase vehicles.
Q. Did he say anything else about the $650,000?
A. That at no time were losses going to be taken, as per the Agreement, from the capital.
Q. We are going to have this debate with the judge about….
A. Okay
Q. …what the Agreement means. All right well where were the losses going to come from then? If there were losses, where were they going to come from?
A. Peter was going to accept the losses out of his own pocket.
Q. So he would pay for all of the losses and your in-laws would get a share of the profits?
A. Yes and the other share would go to Peter.
Q. I see. And the words he used again were what?
A. 60/40 split on the profits.
Q. And what about the $650,000?
A. That’s our capital.
Q. And what words did he use about that?
A. That it wouldn’t be touched. (See: Examination of Mark Stirpe, July 18, 2014 at pages 11-13)
[17] I acknowledge that Mr. Mei has asserted that it was never his intention to personally guarantee a return of the initial capital investment. However, there is nothing in the material filed before me suggesting that Mr. Stirpe is mistaken about this conversation taking place. Moreover, at the time of the execution of the agreement, Mr. Mei agreed to grant 1161267 collateral mortgages on two parcels of land owned by Mr. Mei in the amount of $650,000. When the surrounding circumstances are considered, it is reasonable to conclude that the intention of the parties was that the initial capital investment provided by 1161267 was a guaranteed investment to be returned in full upon termination of the agreement.
CONCLUSION
[18] I have considered Mr. Mei’s argument that paragraphs three, four, five and six are contradictory and ambiguous. I find that when the entire agreement is read as a whole, the intention of the parties is plainly expressed within the confines of the agreement.
[19] Mr. Mei had over 20 years’ experience in the used car business and 1161267 sought to take advantage of this expertise by purchasing and reselling cars at a profit. However, 1161267 sought security for their initial capital investment and was provided with security in the form of collateral mortgages. Mr. Mei was going to be paid 60 per cent of the profits for his services and he had an obligation to distribute the profits. The initial capital investment was not to be touched and returned upon termination of the agreement. This narrative is supported by the language of the contract and there is no evidence on this record that this was not the true purpose and intent of the parties.
[20] Accordingly, I would reject the argument of Mr. Mei and grant summary judgment in the amount of $650,000.
[21] If the parties cannot agree about the matter of costs, they may make submissions in writing. The submissions of 1161267’s may begin within 20 days from the release of these reasons for decision. Mr. Mei’s submissions may follow within a further 20 days.
Coroza J.
Released: August 17, 2015
COURT FILE NO.: CV-13-3773-00
DATE: 20150817
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1161267 ONTARIO LTD.
and –
PETER MICHAEL MEI, DINA MEI AND MANCUSO MOTOR CAR COMPANY LTD.
REASONS FOR JUDGMENT
Coroza J.
Released: August 17, 2015