CITATION: Jackson v. Solar Income Fund Inc., 2016 ONSC 66
COURT FILE NO.: CV-15-537230
DATE: 20160309
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JENNIFER JACKSON
Applicant
– and –
SOLAR INCOME FUND INC.
Respondent
Denise Sayer, for the Applicant
Irvin Schein, for the Respondent
HEARD: December 18, 2015
G. DOW, j
reasons FOR DECISION
[1] The applicant (“Jackson”) seeks to enforce payment by the respondent, Solar Income Fund Inc. (“SIF”) of $263,600 (the “debt”) arising from a demand Promissory Note dated July 13, 2014 (the “Promissory Note”). The respondent denies liability for payment on the basis of other agreements between the parties that overrides the terms of the Promissory Note, notably a “Services Agreement” and a “Side Letter Agreement”.
[2] It is agreed that Jackson has made demand for payment and SIF has refused.
Background
[3] The evidence discloses that Jackson has formal business training in banking and securities, including more than a decade of employment with CIBC, some as a branch manager, and also being a Certified Financial Planner. She then became involved in the solar energy business. As of April, 2002, Jackson was a co-owner and operator of CPE Inc. (“CPE”), a company with expertise but few customers that SIF, a company with customers but lacking expertise, courted in early 2014 to their mutual benefit.
[4] CPE co-owners included Charles Mazzacato (“Mazzacato” and Jackson’s fiancée during part of this venture) and Brian Densham. SIF is led by Ken Kadonoff (“Kadonoff”), a lawyer with some experience in a private firm doing a variety of commercial work, who apparently drafts the subject agreements, and Paul Ghezzi who was president of SIF but resigned as of April, 2014 creating a vacancy for that position. The deal is structured with three agreements aside from the Promissory Note, or rather Notes, as same were executed in favour of not only Jackson but Mazzacato, Densham, Kadonoff and an entity known as The Solar Trust. After independent evaluation of the companies, a Share Purchase agreement is drafted to facilitate the purchase by SIF of all shares of CPE for $800,000 (allocated 40 percent to Jackson, 45 percent to Mazzacato and 15 percent to Densham). For tax reasons, Jackson chooses to incorporate and utilize two companies to facilitate the deal, the first being 2427672 Ontario Inc. (“242”), and the second being Emerging Power Inc. (“EPI”). Jackson was also to become president and chief operating officer of SIF while Mazzacato would become its chief technology officer and part of the management team.
[5] The Share Purchase Agreement is between the owners of CPI, being Jackson, Mazzacato and Densham as vendors and SIF as the purchaser. The value of $800,000 is referenced with the percentage breakdown and that the purchase price would be by the purchaser paying to the vendors “a demand Promissory Note for the full amount of the Purchase Price”. The document is dated July 30, 2014 in one version and July 31, 2014 in another version, but the parties do not dispute it was not executed until sometime in December, 2014. The Share Purchase Agreement also includes an entire agreement clause at paragraph 1.2 and makes no reference to the other agreements.
[6] The Services Agreement between SIF, EPI and 242 dated July 30, 2014 describes a consulting arrangement between the parties with details. It also includes an entire agreement clause at paragraph 12. Exhibit A of this agreement details the sale by SIF of 30 percent of the $1.4 million worth of shares to 242, payment of which is to be $50,000 at the outset and $30,000 per month provided “that cash flow permits”. There is no reference to the Promissory Note(s).
[7] The Side Letter Agreement dated July 30, 2014 between SIF, EPI and 242 “confidentially” amends the Services Agreement with a Schedule A providing, amongst other things, that SIF would pay $47,000 to Jackson on December 1, 2014, Jackson and Mazzacato will lend $100,000 to 242 and that monthly payments by SIF of $20,000 to Jackson and Mazzacato would occur “if cash flow permits” until the $800,000 for the sale of shares of CPE is completed. The Side Agreement also contained an entire agreement clause at paragraph 4.
[8] Despite the repeated insertions into the various agreements (except the Promissory Note) of entire agreement clauses, Kadonoff maintains all parties understood and agreed the money owing to Jackson, Mazzacato, Densham, himself and The Solar Trust, as evidenced by the Promissory Notes, were not payable on demand as indicated but on a go forward basis.
[9] Not to oversimplify the situation, but Jackson becomes disenchanted with the situation in the spring of 2015 departing her management role as of June 1, 2015 and demanding payment of the Promissory Note September 11, 2015.
Analysis
[10] Is the Promissory Note a clear and unconditional promise for payment in return for valuable consideration already received in the form of shares of CPE purchased by SIF and in particular Jackson’s 40 percent interest? Secondly, does the existence of the other agreements being the Purchase Agreement, Service Agreement and Side Letter Agreements somehow set aside what the Promissory Note plainly states?
Issue - Validity of Promissory Note
[11] Taken on its own, the Promissory Note dated July 31, 2014 signed by Kadonoff on behalf of SIF acknowledges the debt of $320,000 and a “promise to pay”. It makes no reference to any conditions or other agreements.
[12] To the contrary, it provides for payment to be made “without deduction for any setoff or counterclaims or other deduction of any nature.” The parties were not unsophisticated in the matters of business and the law.
[13] By comparison, a draft Promissory Note produced with respect to the $700,000 promise to pay by 242 to Kadonoff for the purchase of SIF shares contains the sentence “Demand is only permitted in the event of a default of the Services Agreement dated July 30, 2014.”
[14] Further, to render the Promissory Note unenforceable in accordance with its plain language would be contrary to the basic principle of interpreting the terms of contracts, that is, to conclude it is unenforceable would render it meaningless and this is to be avoided (Tabor v. Hospitals of Ontario Pension Plan, 2009 ONCA 583 at paragraph 3).
[15] As a result, I am satisfied the Promissory Note is a valid unconditional promise to pay.
Issue – Effect of Other Agreements
[16] It is clear the Promissory Note can be linked to the Share Purchase Agreement.
[17] Paragraph 2.3 states the purchase price of 40 percent of Jackson’s shares in CPE “will be paid and satisfied at the Closing Time by the Purchaser paying to the Vendors a demand Promissory Note for the full amount of the Purchase Price.” I would pause here to emphasize the inclusion of the word “demand” in that sentence and the absence of conditions limiting what, in my view, is a key aspect of any ordinary Promissory Note, which is the right to demand payment of the balance owing at any time.
[18] Further, whether through inadvertence or worse, paragraph 1.2 (or at the very outset of the agreement) is an entire agreement clause which clearly militates against any blocking of Jackson’s right to demand payment.
[19] The Service Agreement, from my review and listening to the submissions of the parties, pertains to the employment terms of Jackson and Mazzacato to work for SIF with EPI and 242 referenced for the purpose of providing remuneration on a tax efficient basis. The agreement covers basic terms such as compensation, termination and confidentiality. The compensation clause provides for base salary and commission. There is again, at paragraph 12, an entire agreement clause indicating the agreement “represents the entire understanding and agreement between the parties” excluding any “modification, amendment or addition” to the agreement “unless in writing and agreed by all the Parties”. This is subject to a severability clause that attempts to salvage the rest of the agreement if any provision is found to be unenforceable.
[20] The Agreement contains, in Exhibit A, no reference to the Promissory Note in question but does set out the $1.4 million being the amount for the sale of SIF shares to 242 and includes the provision of payment provided “cash flow permits”. There is, again, an Entire Agreement clause (at paragraph 8).
[21] As a result, neither agreement is sufficient to deny Jackson her right to be paid the balance owing under the Promissory Note executed in her favour.
[22] The Side Letter Agreement between SIF and EPI as well as 242 purports to amend the Services Agreement with a Schedule “A” that sets out payments to be made to the involved parties. This agreement, signed by Jackson, is a link between Jackson and the enforceability of her Promissory Note in that it provides a schedule for the repayment of the Promissory Note for $320,000. Schedule “A” sets out a payment to Jackson of $47,000 on December 1, 2014 and Jackson admits in her affidavit sworn September 22, 2015 that this occurred. She admits it reduced the amount owed to her by SIF. The phrase “to pay down CPE sale of shares to SIF” is used to describe this payment to her.
[23] Schedule “A” goes on to describe further payments “if cash flow permits” and continuing until the $800,000 negotiated for the sale of CPE shares is paid in full. Jackson admits receiving additional $9,400 in late March, 2015. The plan to pay $20,000 per month to Jackson and Mazzacato is set off by returning that amount to Kadonoff’s company as part of payments for Jackson’s new interest in SIF through 242 and EPI.
[24] Given the documentary evidence, I am not prepared to decide this matter based on other evidence given by the parties such as Kadanoff’s assertions in his affidavit and on cross-examination that all parties agreed that the Promissory Notes were not in fact payable on demand.
[25] Despite the apparent link between the Side Letter Agreement to the manner in which the sale of shares by CPE to SIF was to be paid, there is no reference to it altering the terms of the Promissory Note.
[26] As a result, I conclude the terms of the Promissory Note apply. This interpretation gives the fullest meaning to all of the documents. Further, it provides a mechanism for the parties to begin the process of separating their interests after the breakdown of the business relationship. It also does not impinge on the issues to be decided in action CV-15-540782 issued November 18, 2015 by SIF against Jackson, EPI and 242.
[27] As a result, Jackson is entitled to summary judgment in the amount of $263,600 or the balance of the Promissory Note which remains outstanding.
Costs
[28] The parties submitted their Costs Outline as required by Rule 57.01(6) at the conclusion of oral submissions. Applicant’s counsel, led by Ms. Sayer, who was called to the Bar in 2006, claimed an actual rate of $460 per hour and seeks payment of $51,307.57 on an actual basis, $34,322.54 if reduced to substantial indemnity and $23,870.04 if on a partial indemnity basis. Respondent’s counsel, led by Mr. Schein, who was called to the Bar in 1980, claimed an actual rate of $660 an hour and an actual expense (by my calculation) of $80,252.42 inclusive of fees, HST and disbursements.
[29] The parties did prepare and serve multiple affidavits and conducted cross-examinations with undertakings. Both parties expended similar hours with the higher expense by the respondent largely the result of counsel having a higher hourly rate.
[30] The Promissory Note provides for the respondent to pay “all costs and expenses (including reasonable legal fees on a solicitor and his own client basis) paid or incurred in collecting the principal sum”. In my view, the reasonable legal fees claimed are moderately excessive both with regard to Ms. Sayer’s hourly rate and that of the student and clerk billing at $200 and $210 per hour respectively. In my view, using $375 per hour for Ms. Sayer and $150 per hour for the student and law clerk results in a (rounded) amount of $41,000 which I am prepared to award inclusive of fees, HST and disbursements. This is a fair and reasonable amount and would have been in the reasonable contemplation of the parties. This amount is also consonant with the principles set out in Boucher v. Public Accountants Council for the Province of Ontario et al., 2004 14579 (ON CA), [2004] O.J. No. 2634 and Rule 57.
Mr. Justice G. Dow
Released: March 9, 2016
CITATION: Jackson v. Solar Income Fund Inc., 2015 ONSC 66
COURT FILE NO.: CV-15-537230
DATE: 20160309
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JENNIFER JACKSON
Applicant
– and –
SOLAR INCOME FUND INC.
Respondent
REASONS FOR DECISION
Mr. Justice G. Dow
Released: March 9, 2016