SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ROBERT ALLAN PERRY, Plaintiff
AND:
NEIL D’SOUZA and MASS FIDELITY INC., Defendants
BEFORE: Cavanagh J.
COUNSEL: Joseph Figliomeni, for the Plaintiff
Gregory Dimitriou, for the Defendants
HEARD: November 24, 2017
ENDORSEMENT
Introduction
1The plaintiff, Robert Allen Perry, brings this motion for summary judgment for amounts that he claims are owed pursuant to a written employment agreement.
2The defendant Mass Fidelity Inc. is the parent company of Mass Fidelity Ltd., which was the plaintiff’s named employer in the employment agreement. Mass Fidelity Inc. is a guarantor of the obligations of Mass Fidelity Ltd. under the employment agreement.
3The defendant Neil D’Souza was the Chief Executive Officer of both corporate entities. The plaintiff alleges that Mr. D’Souza is liable to the plaintiff pursuant to a personal guarantee that he signed after the employment agreement was made.
4The main issues on this motion principally relate to whether Mr. D’Souza is personally liable for amounts owed to the plaintiff and, if so, the amount for which he is liable.
5For the following reasons, summary judgment is granted in favour of the plaintiff (i) against the defendants, jointly and severally, in the amount of $94,268.13 USD, and (ii) against the defendant Mass Fidelity Inc. in the additional amount of $108,464.25 USD.
Factual Background
6The plaintiff is a senior executive with over 30 years’ experience in the consumer electronics industry.
7Mass Fidelity Inc. is an Ontario corporation that, at the material times, manufactured and sold wireless audio speakers.
8Mass Fidelity Ltd. is a Delaware company and a wholly-owned subsidiary of Mass Fidelity Inc. Mass Fidelity Ltd. is not a party to this action.
9The defendant Neil D’Souza, is the Chief Executive Officer of both Mass Fidelity Ltd. and Mass Fidelity Inc. Mr. D’Souza is a substantial shareholder of Mass Fidelity Inc.
10The plaintiff entered into a written employment agreement dated December 9, 2015 with Mass Fidelity Ltd., as employer, and Mass Fidelity Inc., as guarantor (the “Employment Agreement”). Pursuant to the terms of the Employment Agreement, the plaintiff was employed by Mass Fidelity Ltd. in the position of Chief Revenue Officer commencing on December 14, 2015.
11The plaintiff is a resident of the United States. The plaintiff’s evidence is that Mass Fidelity Ltd. has never carried on any business, and that at the time he became employed he was told by D’Souza that he would be employed by Mass Fidelity Ltd. for “payroll, tax and accounting reasons”. Mr. D’Souza, on cross-examination, agreed. The plaintiff’s evidence is that he agreed to be employed by Mass Fidelity Ltd. only on the express condition that the obligations of Mass Fidelity Ltd. under the Employment Agreement be fully guaranteed by Mass Fidelity Inc.
12In the Employment Agreement, Mass Fidelity Inc. agreed that it shall be wholly responsible for the obligations of Mass Fidelity Ltd. to the plaintiff, without limitation. Mass Fidelity Inc. authorized Mass Fidelity Ltd. to enter into the Employment Agreement with the plaintiff.
13The Employment Agreement provides, among other things:
- Compensation
The Company will initially pay you an annual salary of $180,000 (the “Annual Salary”). The Annual Salary will increase to $225,000 on the earlier of: (i) June 1, 2016 or (ii) the date on which MFI has issued equity and/or debt instruments to third party financial investors, whether in one or a series of transactions, pursuant to which it has received cash proceeds of at least $3,000,000.
- Vacation
Subject to the terms and conditions of the Company’s vacation policy in effect from time to time, you will be entitled to four weeks of paid vacation in each calendar year, accrued pro rata on a monthly basis, to be taken at times agreed upon by you and the Company.
- Expenses
You shall be reimbursed for all proper and reasonable business travel expenses, and other expenses consistent with MFI policies and procedures commensurate and equivalent to other “C Level” executives of MFI.
- Termination
(a) The Company [Mass Fidelity Ltd.] is hiring you as an at-will employee. This means the Company reserves the right to terminate your employment with the Company for any reason, without Cause or advance notice, at any time throughout your employment, regardless of how long you are employed by the Company.
(b) Notwithstanding the foregoing, if the Company terminates your employment involuntarily without Cause after four months following December 14th, 2015, and conditional upon you signing the release and waiver which is enclosed as an attachment to this offer of employment, the Company shall provide you with a lump-sum “Separation Payment” calculated pursuant to this section on the Payment Date (defined below).
(c) The Separation Payment shall be calculated as follows, based on your length of service as follows:
(i) If your employment is terminated after March 1, 2016, but before 12 completed months of service, the Separation Payment shall be equal to three months of Average Compensation (defined below).
(ii) If your employment is terminated after 12 completed months of service, the Separation Payment shall be equal to six months of Average Compensation, plus one additional month of Average Compensation for each additional completed year of service.
- Guaranty by MFI
MFI has authorized this offer of employment by the Company, and in the event of any inability of the Company for any reason to comply with the terms and conditions of this offer, shall be wholly responsible for the obligations of the Company, without limitation.
14The plaintiff commenced his employment on December 14, 2015. Throughout his tenure, the plaintiff took instructions from, and reported directly to, Mr. D’Souza.
15A written agreement was entered into dated October 4, 2016 on letterhead of Mr. Neil D’Souza Chief Executive Officer, Mass Fidelity Inc. (the “First Amending Agreement”). The subject line on the First Amending Agreement reads “Amendment of the Employment Agreement dated December 9, 2015 between Mass Fidelity Ltd / Mass Fidelity Inc and Robert A Perry”.
16The First Amending Agreement reads, in part, as follows:
Dear Bob,
In recognition of the Company’s lack of capital to adequately support ongoing operations, this letter is an amendment to the employment agreement noted above, if you accept.
Temporary partial pay arrangement: To assist the company during this period of limited capital, you have agreed to accept only part of your salary from the date of execution of this agreement, to December 31, 2016, and the remainder which you are due under your employment agreement referenced above shall accrue as unpaid salary. You have agreed to accept $4,000 per month gross compensation, paid as $2,000 twice monthly through existing payroll processes. The unpaid accrual will become due and immediately payable on the earlier of December 31, 2016, the termination of your employment for any reason, or my exercise of my option to not personally guarantee further increases in your past due compensation or expenses. This personal guarantee is detailed in a separate agreement between us.
Payment of past due and new business expenses: I agree that you shall be paid $4,000 per month minimum to pay the past due expense amounts. Any remaining past-due business expenses will become due and immediately payable on the earlier of December 31st, 2016, the termination of your employment for any reason, or my exercise of my option to not personally guarantee further increases in your past due compensation or expenses.
17The First Amending Agreement is signed by Mr. D’Souza above the words “Neil D’Souza, CEO” on October 4, 2016 and it was accepted and agreed upon by the execution by the plaintiff on October 4, 2016.
18On October 4, 2016, Mr. D’Souza also signed a document entitled “Personal Guarantee and Board Membership in XYZ, Corp” (the “Personal Guarantee”). The Personal Guarantee reads, in part, as follows:
Dear Bob,
In recognition of Mass Fidelity Inc.’s capital shortage, and your agreement with Mass Fidelity Inc. to defer your salary, and accept timed payments of your business expenses instead of immediate payment in full, this letter agreement sets forth my personal guarantee for the payment of these expenses and deferred salary, as well as potential share ownership and appointment to the Board of Directors of Mass Fidelity Audio, Inc., in which I have a controlling interest.
- Personal Guarantee: Under a separate agreement you have reached agreement with Mass Fidelity for a temporary pay reduction and balance accrual, as well as timed payments for your unpaid business expenses. As part of this temporary pay reduction and balance accrual, it is recognized that the accrual amounts increase over time. In the event that Mass Fidelity Inc. fails to fulfil its obligation to you under your temporary pay agreement and timed payments for unpaid business expenses, I will be personally be obligated for these sums. Because the accrued pay accrual increases over time, at any time I reserve the right to give you notice that I will not be personally obligated for further increases in the accrual.
19The Personal Guarantee was signed by Mr. D’Souza in two capacities, as “Neil D’Souza (Personal)” and as “Neil D’Souza Controlling Shareholder & Director, Mass Fidelity Audio, Inc.”.
20A written agreement was entered into dated January 11, 2017 on letterhead of Mr. Neil D’Souza Chief Executive Officer, Mass Fidelity Inc. (the “Second Amending Agreement”). The caption on the agreement reads “AMENDMENT OF THE AMENDMENT DATED OCTOBER 4, 2016 OF THE EMPLOYMENT AGREEMENT DATED DECEMBER 9, 2015 BETWEEN MASS FIDELITY LTD /MASS FIDELITY INC AND ROBERT A. PERRY”.
21The Second Amending Agreement reads, in part, as follows:
Dear Bob,
This letter is to amend the October 4, 2016 amendment of your employment agreement, as noted above, as follows:
- Section 1: Temporary partial pay arrangement: This section is deleted in its entirety, and replaced with:
Section 1: Temporary partial pay arrangement: To assist the company during this period of limited capital, you have agreed to accept only part of your salary from the date of execution of this agreement, to February 28, 2017, and the remainder which you are due under your employment agreement referenced above shall accrue as unpaid salary. You have agreed to accept $4,000 per month gross compensation, paid as $2,000 twice monthly to December 31, 2016, and $10,000 per month gross compensation, paid as $5,000 twice monthly to February 28, 2017 through existing payroll processes. The unpaid accrual will become due and immediately payable on the earlier of February 28, 2017, the termination of your employment for any reason, or my exercise of my option to not personally guarantee further increases in your past due compensation accrual or expenses. This personal guarantee is detailed in a separate agreement between us.
22The Second Amending Agreement was signed by Mr. D’Souza above the words “Neil D’Souza, CEO” on January 11, 2017 and by the plaintiff on January 11, 2017.
23By email dated March 2, 2017, Mr. D’Souza wrote to the plaintiff as follows “Confirming that Mass Fidelity is terminating your employment effective immediately due to the financial condition of the Company”.
Analysis
24Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the Court shall grant summary judgment where there is no genuine issue requiring a trial with respect to a claim or defence.
25There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication: Hyrniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87 at paras. 49-50.
26The plaintiff submits that Mass Fidelity Inc. and Mr. D’Souza are liable under the Employment Agreement, as amended, and the Personal Guarantee to pay him a total of $202,732.40 USD as follows:
a. $92,875 USD in unpaid salary;
b. $1,393.13 USD in reimbursable business expenses;
c. $101,250 USD for separation payment; and
d. $7,214.25 USD in unpaid vacation pay.
27The defendants oppose the plaintiff’s motion for summary judgment and request:
a. A declaration that the Personal Guarantee is unenforceable and that the action against Mr. D’Souza should be dismissed with costs.
b. In the alternative, if the Personal Guarantee is found to be enforceable, an order that the quantum of damages in favour of the plaintiff be limited to the shortfall in salary between the period between October 4, 2016 and January 11, 2017.
c. In the further alternative, if the Personal Guarantee is found to be enforceable, an order that the quantum of damages in favour of the plaintiff be limited to the shortfall in salary during the period between October 4, 2016 and March 2, 2017.
28The following issues arise on this motion:
a. Are the obligations of Mr. D’Souza under the Personal Guarantee subject to a condition that was not fulfilled, such that he has no payment obligation?
b. Is the Personal Guarantee unenforceable, in whole or in part, for lack of consideration?
c. Are Mr. D’Souza’s payment obligations under the Personal Guarantee in respect of the First Amending Agreement (for salary deferral) limited to deferred salary starting on October 4, 2016 and excluding deferred and unpaid salary that was owed to the plaintiff before then?
d. Do the payment obligations of Mr. D’Souza under the Personal Guarantee cover termination pay and vacation pay?
e. Is Mr. D’Souza protected from liability for payment under the Personal Guarantee because it can be rescinded on the basis of material misrepresentations made by the plaintiff?
29These issues involve interpretation of the four agreements that were put into evidence on this motion.
30The interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine the intent of the parties and the scope of their understanding. To do so, a decision-maker must read the 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. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. The evidence that can be relied upon under the rubric of “surrounding circumstances” should consist only of objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting: Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.R. 633 at paras. 47, 57, and 58.
a. Are the obligations of Mr. D’Souza under the Personal Guarantee subject to a condition that was not fulfilled, such that he has no payment obligation?
31The Personal Guarantee provides that Mr. D’Souza’s personal obligation thereunder arises “[i]n the event that Mass Fidelity Inc. fails to fulfil its obligation to you under your temporary pay agreement and timed payments for unpaid business expenses”.
32Mr. D’Souza submits that the “temporary pay agreement” is the First Amending Agreement and that Mass Fidelity Inc. has no obligation under this agreement because it was not a party to it. Mr. D’Souza points to the first two paragraphs of the First Amending Agreement that make reference to “the Company” and “the company”, and he submits that under the Employment Agreement, the “Company” means Mass Fidelity Ltd., not Mass Fidelity Inc. Therefore, Mr. D’Souza submits, the condition to a payment obligation under the Personal Guarantee has not been satisfied and he has no obligations whatsoever under the Personal Guarantee.
33Mr. D’Souza submits, in the alternative, that if the entity that entered into the First Amending Agreement with the plaintiff is Mass Fidelity Inc. and not Mass Fidelity Ltd., then both the First Amending Agreement and the Personal Guarantee have no legal effect because a requirement under paragraph 14 of the Employment Agreement, which stipulates that the terms and conditions of the Employment Agreement cannot be amended, modified or supplemented except by the subsequent, written agreement of the plaintiff and Mass Fidelity Ltd., has not been satisfied. Therefore, Mr. D’Souza submits, the First Amending Agreement contravenes the entire agreement provision in the Employment Agreement, and has no legal effect. As a result, the condition to the payment obligation in the Personal Guarantee has not been satisfied and Mr. D’Souza has no payment obligation thereunder.
34The parties to the Employment Agreement are the plaintiff, Mass Fidelity Ltd. as his employer, and Mass Fidelity Inc. as guarantor of the obligations of Mass Fidelity Ltd. Mr. D’Souza has acknowledged that Mass Fidelity Inc. is bound by the guarantee obligation in paragraph 16 of the Employment Agreement. The Employment Agreement was signed by Greg Ponesse who is identified as “Chief Operating Officer”, and accepted by the plaintiff. In so executing the Employment Agreement, Mr. Ponesse must have represented both Mass Fidelity Ltd. and Mass Fidelity Inc.
35The First Amending Agreement, in the subject lines, describes the document as “Amendment of the Employment Agreement dated December 9th, 2015 between Mass Fidelity Ltd. / Mass Fidelity Inc. and Robert A Perry”. The ordinary and grammatical meaning of this language is that the parties were agreeing to an amendment of the Employment Agreement, and that the parties to the Employment Agreement were Mass Fidelity Ltd., Mass Fidelity Inc. and the plaintiff. I do not agree with Mr. D’Souza’s submission that the reference in the first line of the First Amending Agreement to “the Company’s lack of capital” means that Mass Fidelity Inc. is not a party to the First Amending Agreement. The evidence before me is that the entity that was actively carrying on business was Mass Fidelity Inc., and not Mass Fidelity Ltd. The entity that needed capital was Mass Fidelity Inc. In any event, it is clear that both Mass Fidelity Ltd. and Mass Fidelity Inc. had obligations to the plaintiff under the Employment Agreement, and an agreement providing for an amendment to the Employment Agreement would properly include Mass Fidelity Inc. as a party. This is clear from the subject lines of the First Amending Agreement.
36A draft of the First Amending Agreement was provided by the plaintiff to Mr. D’Souza by email dated October 3, 2016. Mr. D’Souza made changes to the draft and sent the revised version showing the changes, together with a clean signed version, to the plaintiff on October 4, 2016. One of the changes was a change of the word “companies” to “company” in the first line of paragraph 1 of the draft First Amending Agreement. It is clear, therefore, that Mr. D’Souza did not simply accept the form of the agreement as presented to him by the plaintiff, and he made changes that he considered to be appropriate. He did not change the description of the First Amending Agreement in the subject lines, nor did he make it clear that his signature above the words “Neil D’Souza, CEO” was only on behalf of Mass Fidelity Ltd., and not on behalf of both companies.
37Mr. D’Souza also submits that the plaintiff is precluded from submitting that Mass Fidelity Ltd. is even a party to the Employment Agreement because to give this interpretation to the Employment Agreement would conflict with the position taken by the plaintiff in paragraph 5 of his Statement of Claim, and would amount to a withdrawal of an admission which is only permitted with leave of the court.
38In paragraph 5 of the Statement of Claim, the plaintiff pleads:
On or about December 9, 2015, Robert and Mass Fidelity [defined as Mass Fidelity Inc.] entered into an employment agreement (the “Employment Agreement”) pursuant to which Robert agreed to accept employment as Mass Fidelity’s Chief Revenue Officer commencing on December 14, 2015 (the “Start Date”).
39This paragraph correctly states that Mass Fidelity Inc. is a party to the Employment Agreement. The services that the plaintiff was providing under the Employment Agreement as Chief Revenue Officer were provided for the benefit of Mass Fidelity Inc., the operating company that was earning revenues from the sale of products. There is not, on my reading of the Statement of Claim, an admission that Mass Fidelity Ltd. is not a party to the Employment Agreement. Indeed, the Statement of Claim does not make any specific reference to Mass Fidelity Ltd. I do not regard this paragraph of the Statement of Claim as an admission that Mass Fidelity Ltd. is not a party to the Employment Agreement.
40The submission that the Personal Guarantee that was executed by Mr. D’Souza should be interpreted in such a way that he was incurring no obligations whatsoever thereunder, if accepted, would result in an interpretation that, in my view, is commercially absurd, and should be avoided if there is an alternative interpretation that makes commercial sense and accords with the words used in the Personal Guarantee and the surrounding circumstances.
41When I interpret the First Amending Agreement as a whole, giving the words used their ordinary and grammatical meaning consistent with the surrounding circumstances known to the plaintiff and Mr. D’Souza when the First Amending Agreement and the Personal Guarantee were executed, I conclude that Mr. D’Souza executed the First Amending Agreement on behalf of both Mass Fidelity Ltd. and Mass Fidelity Inc. Both of these entities were parties to the Employment Agreement, and clear language would have been required in the First Amending Agreement to limit the binding effect of the amendments to only Mass Fidelity Ltd. There is no such clear language in the First Amending Agreement.
42Mr. D’Souza submits, with respect to the Second Amending Agreement, that it is not an amendment to the Employment Agreement, but only an amendment to the First Amending Agreement. Mr. D’Souza relies on his submissions that he has no obligations under his Personal Guarantee with respect to the First Amending Agreement and that, for the same reasons, he has no obligations under his Personal Guarantee with respect to the Second Amending Agreement. For the reasons I have given, I disagree with this submission.
b. Is the Personal Guarantee unenforceable for lack of consideration?
43Mr. D’Souza submits that when he executed the Personal Guarantee, the plaintiff was already owed money on account of unpaid salary. He submits that the Personal Guarantee does not provide for Mr. D’Souza’s personal guarantee for payment of amounts that were owed to the plaintiff under the Employment Agreement on October 4, 2016 when the First Amending Agreement and the Personal Guarantee were made. Mr. D’Souza submits that there is a presumption that any consideration referred to in a guarantee is a reference to future rather than pass consideration.
44There is no question but that the Personal Guarantee was made for good consideration. The plaintiff was unwilling to continue to provide services under the Employment Agreement without the First Amending Agreement and the Personal Guarantee and he agreed to continue to provide services in exchange for the contractual commitments made in the First Amending Agreement and the Personal Guarantee.
c. Are Mr. D’Souza’s payment obligations under the Personal Guarantee in respect of the First Amending Agreement (for salary deferral) limited to deferred salary starting on October 4, 2016 and excluding deferred and unpaid salary that was owed to the plaintiff before then?
45Mr. D’Souza submits that if the Personal Guarantee imposes any financial obligations on him in relation to the First Amending Agreement, such obligations are limited to payment of the shortfall in salary payments to the plaintiff from October 4, 2016 to December 31, 2016.
46The plaintiff submits that Mr. D’Souza is obliged under the Personal Guarantee, as it relates to the First Amending Agreement, for payment of the full amount of deferred and unpaid salary due and owing to him as of December 31, 2016, including unpaid salary for the period of time before the First Amending Agreement was made, together with payment of past due expenses that have not been reimbursed to the plaintiff as of December 31, 2016.
47The evidence is that at the time this agreement was made, there was unpaid salary and unreimbursed expenses owed to the plaintiff dating back to June 15, 2016. The plaintiff points to an exchange of emails on August 23 and 24, 2016, and an email he sent to Mr. D’Souza on September 21, 2016, as objective evidence of background facts that forms part of the surrounding circumstances that the court can look to in order to assist with the interpretation of the First Amending Agreement and the Personal Guarantee.
48On August 23, 2016 the plaintiff sent an email to Mr. D’Souza that reads “[h]ere is the unpaid expenses, in addition to my payroll arrears:” and he included a table showing unpaid expenses in the aggregate amount of $24,800.75. On August 24, 2016 Mr. D’Souza responded, writing: “Approved. As promised, you have my personal guarantee to repay these expenses, regardless of business outcome. Thanks for your patience.”
49On September 21, 2016 the plaintiff sent an email to Mr. D’Souza that reads “FYI. I think this reflects payments made to me, to date.” The email includes two tables, the first of which is entitled “Bob Perry Pay Analysis” showing a gap between “Gross Pay Payable” and “Actual Gross Pay Paid” in the amount of $33,750, and the second of which is entitled “Open Expense Reports” showing a total amount of $29,162.68, for an overall total of $62,912.68. This amount includes the amounts of deferred and unpaid salary dating back to June 15, 2016. A few days later, on September 27, 2016, the plaintiff sent a draft of the First Amending Agreement to Mr. D’Souza.
50The First Amending Agreement, in paragraph 1, refers to the plaintiff’s agreement “to accept only part of your salary from the date of execution of this agreement, to December 31, 2016, and the remainder which you are due under your employment agreement referenced above shall accrue as unpaid salary.” This paragraph stipulates the amount of the gross monthly compensation that the plaintiff agreed to accept, and provides that the “unpaid accrual will become due and immediately payable on the earlier of December 31, 2016, the termination of your employment for any reason, or my exercise of my option to not personally guarantee further increases in your past due compensation or expenses”.
51The First Amending Agreement, in paragraph 2, provides that the plaintiff shall be paid $4,000 per month minimum to pay past due expense amounts and that “[a]ny remaining past due business expenses will become due and immediately payable on the earlier of December 31st, 2016, the termination of your employment for any reason, or my exercise of my option to not personally guarantee further increases in your past due compensation or expenses”.
52It is clear from the ordinary and grammatical meaning of the language used in the First Amending Agreement that any past due salary and expenses that were unpaid and unreimbursed, respectively, as of December 31, 2016, were due and payable on that date unless the plaintiff’s employment was terminated earlier, or unless Mr. D’Souza exercised his option not to personally guarantee further increases in the plaintiff’s past due compensation or expenses.
53The Personal Guarantee, in paragraph 1, references “a separate agreement” for “a temporary pay reduction and balance accrual, as well as timed payments for your unpaid business expenses”. I regard the inclusion of the phrase “balance accrual” to mean that the unpaid balance of deferred salary owing to the plaintiff would be accrued. This, in my view, would include the entire balance of deferred salary owing to the plaintiff, including for the period before October 4, 2016 when the First Amending Agreement and the Personal Guarantee were made. The obligation of Mass Fidelity Inc. under the Employment Agreement, as amended by the First Amending Agreement, was to pay the unpaid amounts accrued for deferred salary and deferred reimbursement of expenses as of December 31, 2016. In my view, therefore, the reference in the Personal Guarantee to “the sums” is to these amounts that were due and payable on December 31, 2016. Under the Personal Guarantee, Mr. D’Souza was personally obligated for payment of these sums.
54Mr. D’Souza submits that if the Personal Guarantee is enforceable with respect to the Second Amending Agreement, his payment obligation is limited to the difference in pay between January 11, 2017 and February 28, 2017.
55The parties to the Second Amending Agreement were the plaintiff, Mass Fidelity Ltd., Mass Fidelity Inc. and Mr. D’Souza personally. I conclude that both corporations are parties for the same reasons as my conclusion that these entities are parties to the First Amending Agreement. I conclude that Mr. D’Souza is also a party because the Second Amending Agreement contains language that specifically refers to “my exercise of my option to not personally guarantee further increases in your past due compensation accrual or expenses”, and that this “personal guarantee is detailed in a separate agreement between us”.
56According to the terms of the Second Amending Agreement, sections 1 and 2 of the First Amending Agreement were deleted and replaced with new provisions that change the date December 31, 2016 to February 28, 2017. There were also some other changes. I find that Mr. D’Souza executed the Second Amending Agreement as CEO on behalf of Mass Fidelity Ltd. and Mass Fidelity Inc., in his personal capacity. This is a valid and effective agreement that amended the First Amending Agreement which, in turn, had amended the Employment Agreement.
57For these reasons, I conclude that under the Personal Guarantee, Mr. D’Souza was personally obligated for payment of the amounts of deferred and unpaid salary and deferred and unpaid expenses that were owing to the plaintiff under the Employment Agreement, as amended, as of February 28, 2017.
d. Do the payment obligations of Mr. D’Souza under the Personal Guarantee cover termination pay and vacation pay?
58Mr. D’Souza submits that the First Amending Agreement, the Second Amending Agreement, as well as the Personal Guarantee, do not specifically address the lump-sum “Separation Payment” that is referenced in paragraph 12 (b) of the Employment Agreement or payment for vacation pay. Mr. D’Souza submits that if it is held that he has a personal obligation for payment of any amount under the Personal Guarantee, this obligation excludes payment of any amounts due and owing to the plaintiff at the time of the termination of his employment for a contractual “Separation Payment” or for vacation pay.
59The plaintiff submits that the Personal Guarantee should be interpreted to include a personal obligation on the part of Mr. D’Souza for payment of all amounts due and owing to the plaintiff under the Employment Agreement when his employment was terminated.
60The Personal Guarantee does not make any reference to the contractual separation payment under the Employment Agreement or to vacation pay. The plaintiff was not asked to make any accommodation with respect to his rights under the Employment Agreement in respect of these amounts.
61When I read the Personal Guarantee as a whole and give the words used their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time that the Personal Guarantee was given, I conclude that Mr. D’Souza does not have a personal obligation under the Personal Guarantee for payment to the plaintiff of any amounts owing to him by Mass Fidelity Ltd. or Mass Fidelity Inc. in respect of the contractual separation payment or in respect of vacation pay due and owing under the Employment Agreement.
e. Is Mr. D’Souza protected from liability for payment under the Personal Guarantee because it can be rescinded on the basis of material misrepresentations made by the plaintiff?
62Mr. D’Souza submits that he was induced to execute the First Amending Agreement, the Second Amending Agreement, and the Personal Guarantee by representations and assurances given to him by the plaintiff that were false and inaccurate in the form of sales projections and Sales Pipeline Reports that contained a detailed listing of potential sellers and potential revenue for the following six months. Mr. D’Souza has provided evidence that in 2016 the plaintiff projected sales to be well in excess of $5 million whereas actual sales were approximately $1.3 million. Mr. D’Souza submits that he relied upon the sales projections made by the plaintiff when he entered into the Personal Guarantee and that he is entitled to the remedy of rescission with respect to the Personal Guarantee. It is unclear whether Mass Fidelity Inc. also submits that it is entitled to the remedy of rescission.
63The plaintiff disputes that any sales projections given by the plaintiff in the course of his employment amounted to representations. In any event, the plaintiff disputes that the defendants are entitled to the remedy of rescission.
64In Guarantee Company of North America v. Gordon Capital Corporation, [1999] S.C.R. 423, Iacobucci and Bastarache JJ. provided the following definition of rescission from Lord Atkinson in Abram Steamship Co. v. Westville Shopping Co., [1923] A.C. 773 (H.L.), at p. 781:
Where one party to a contract expresses by word or act in an unequivocal manner that by reason of fraud or essential error of a material kind inducing him to enter into the contract he has resolved to rescind it, and refuses to be bound by it, the expression of his election, if justified by the facts, terminates the contract, and puts the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into.
In this case, there is no evidence that Mass Fidelity Inc. or Mr. D’Souza, when called upon to do so, expressed an election to rescind the First Amending Agreement, the Second Amending Agreement or the Personal Guarantee. Their failure to so elect is fatal to a claim that they are entitled to exercise a remedy of rescission.
65In any event, I do not agree that the forecasts made in good faith by the plaintiff in the course of his employment as Chief Revenue Officer with respect to future sales qualify as representations of fact that, if they turn out to be inaccurate, are misrepresentations.
Disposition
66For the foregoing reasons:
a. Summary judgment is granted in favour of the plaintiff against the defendants Mass Fidelity Inc. and Neil D’Souza, jointly and severally, in the amount of Canadian dollars sufficient to purchase $94,268.13 USD (comprised of $92,875 USD for unpaid salary and $1,393.13 USD for unpaid expenses) at a bank in Ontario listed in Schedule I to the Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for the purchase of the United States dollars before the date payment of the obligation is received by the plaintiff.
b. Summary judgment is granted in favour of the plaintiff against the defendant Mass Fidelity Inc. in the additional amount of Canadian dollars sufficient to purchase $108,464.25 USD (comprised of $101,250 USD for the contractual separation payment and $7,214.25 USD for unpaid vacation pay) at a bank in Ontario listed in Schedule I to the Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for the purchase of the United States dollars before the date payment of the obligation is received by the plaintiff.
67If the parties are unable to resolve costs, the plaintiff may make written submissions within 20 days. The defendants may make written submissions within 15 days of receipt of the plaintiff’s submissions. If so advised, the plaintiff may make brief written reply submissions within 10 days thereafter.
Cavanagh J.
Date: November 27, 2017