Court File and Parties

Court File No.: CV-17-1343-00 Date: 2021-03-23 Superior Court of Justice – Ontario

Re: JCA & Associates Inc., Plaintiff And: 2372618 Ontario Limited c.o.b. as NYX Lounge & lifestyle Club, Bruno Adamo Pisani and Vincent Pisani a.k.a. Vince Pisani, Defendants

Before: Doi J.

Counsel: Jason R. Allingham and Brendan MacDonald, for the Plaintiff Vincent Ruscitto and Domenic Bonavota, for the Defendants

Heard: November 17, 18 and 19, 2020

Reasons for Judgment

Overview

[1] This is an action to recover a debt owed under a lease agreement. The facts in this case are somewhat unusual.

[2] The Plaintiff claims that the parties signed a back-dated lease agreement in 2015 for the Defendants to lease nightclub equipment and repay certain expenditures to settle a failed business relationship. The Defendants claim that the lease agreement was signed in 2014, deny that it was back-dated in 2015, and claim that it is no longer enforceable as it was subsumed by a shareholders agreement that converted the debt owed under the lease into a capital contribution by the Plaintiff’s principal to buy a stake in the Defendant company. Each side to this dispute gave a very different explanation for how the lease came about. Both sides agree that the outcome of this action hinges on when the lease agreement was executed.

[3] For the reasons that follow, I find that the Defendants entered into the lease agreement in 2015 to settle their business relationship with the Plaintiff’s principal. Having regard to all of the evidence, I am satisfied that the Defendants agreed to pay the Plaintiff some of what its principal had contributed to their nightclub business. I also find that the lease agreement was back-dated to create an initial lump sum payment and monthly payments afterwards. Accordingly, I find that the Plaintiff should have judgment for the debt that the Defendants owe under the lease agreement.

The Parties

[4] The Plaintiff, JCA & Associates Inc. (“JCA”), is an Ontario corporation that is closely-held by its principal and owner, John Angastiniotis (“John”). [1] Although he mainly works as a technology consultant with institutional corporations, he has pursued other business interests from time to time.

[5] The corporate Defendant, 2372618 Ontario Limited c.o.b. as NYX Lounge & Lifestyle Club (“NYX”), is an Ontario corporation that operates as an upscale adult-lifestyle “swingers” nightclub and lounge in Oakville. The individual Defendants, Bruno Adamo Pisani (“Bruno”) and Vincent Pisani (“Vince”), are NYX’s sole shareholders. Bruno serves as NYX’s chief executive officer and sole director. Vince is NYX’s chief operating officer. Bruno and Vince are siblings. John is a former NYX shareholder.

Background

[6] Three witnesses testified at the trial of this action. John testified on behalf of the Plaintiff. Bruno and Vince testified for the Defendants.

[7] Each side to the dispute gave a very different account of how the subject lease agreement was entered into. I will briefly summarize each side’s account before giving an analysis of the evidence to explain why I ultimately prefer the Plaintiff’s account.

a. The Plaintiff’s Account

[8] John claims that he met Bruno and Vince in early May 2014 after they were introduced to each other through a mutual friend. At the time, NYX was operating as a regular nightclub that previously was a salsa club. During their meeting, John, Bruno and Vince apparently talked about converting NYX to an adult-lifestyle club. They also discussed growing the business by having John manage NYX’s disc jockeys (“DJ’s”) and music format, create a marketing campaign and website, and assist with floor operations. They also discussed the prospect of John becoming a future partner or investor in the club’s business.

[9] Intrigued, John claims that he volunteered to work for free at NYX over several weeks to learn more about its business. Among other things, John gained first-hand knowledge of the club’s business performance by observing its operations, patrons, sales and income. Liking what he saw, John continued to volunteer at NYX as he considered the business to be a high-potential investment opportunity.

[10] While volunteering at NYX, John began to buy DJ-related items for the club. He felt that NYX was in desperate need of sound and lighting equipment. He later went on to buy other items for the business such as office and computer equipment, a cash register, money counters, a safety vault, a camera security system, and portable patio heaters, among other things. According to the receipts that were produced, it seems that John started to buy items for NYX in mid-May 2014. John claims that he bought the items with his own money, without seeking reimbursement, to show his interest in helping the club to succeed.

[11] On July 14, 2014, John and the Defendants entered into a formal business relationship by signing a shareholder agreement (the “Shareholders Agreement”). John prepared a draft agreement by downloading contract terms from the Internet. He then presented the draft to Bruno and Vince who agreed to all of its terms without any changes. The parties to the Shareholders Agreement did not obtain legal advice before signing it that day.

[12] Under the Shareholders Agreement, John agreed to make a $40,000.00 capital contribution to buy 25 Class A Preferred Shares in NYX (i.e., reflecting a 25% share of the company). His capital contribution consisted of: a) $21,555.00 in items or services that he had provided to NYX between May 9, 2014 and July 14, 2014; b) a $5,000.00 cash contribution on May 30, 2014; c) a further $10,000.00 cash contribution due on July 14, 2014; and d) $4,400.00 in DJ services from May 9, 2014 to July 26, 2014 that he had paid for. John’s actual capital contribution amounted to $40,955.00 as set out in the Investor Capital Contribution Schedule found at Schedule “B” to the Shareholders Agreement.

[13] The Investor Capital Contribution Schedule confirmed that the items that John delivered to NYX, which formed part of his capital contribution, would remain his property until the amount of his investment in NYX was off-set by dividends or until NYX bought the items from him. The Investor Capital Contribution Schedule listed each item and its purchase dates along with a brief description of each item with its quantity and cost.

[14] After signing the Shareholders Agreement, John did not receive any dividends or any other return on his investment in the club. Over time, he became increasingly dissatisfied and grew highly critical of Bruno and Vince for allegedly engaging in poor or improper business practices. Ultimately, John concluded that he had made a bad investment.

[15] On May 31, 2015, John gave Bruno and Vince a document entitled Notice of Shareholders Agreement Termination for Cause (the “Notice of Termination”). In a similar way to how he had created the Shareholders Agreement, John prepared the Notice of Termination by downloading content from the internet. By providing the document, John gave notice that he wished to end his relationship as a NYX shareholder and negotiate a reimbursement of his financial contributions to the club. According to John, Bruno and Vince were unsurprised but disappointed by the Notice of Termination, which proposed that John receive a $90,141.00 payment to reimburse his capital contribution and other costs that he and his wife incurred to buy items for the club and to handle its advertising, website, bookkeeping and other activities.

[16] Thereafter, John entered into negotiations with Bruno to conclude his business relationship with the Defendants. To arrive at terms that would be financially viable for the Defendants, John proposed having the Defendants make monthly lease payments over a five year period to reimburse a portion of his actual contributions to NYX. To mitigate the risk of default on the payments, he proposed back-dating the lease for one year to create an up-front lump sum payment.

[17] Sometime between June 2 and 15, 2015, John claims that he and his wife met Bruno at a Tim Horton’s coffee shop in Rexdale. During the meeting, Bruno purportedly agreed that the Defendants would enter into a lease agreement based on a draft that John had prepared for the meeting. The draft consisted of lease terms that John had downloaded from the internet. As a sign of good faith, John claims that he gave Bruno an iPad containing NYX’s customer information. After agreeing to the lease, Bruno and John left the coffee shop and went to NYX where they signed the lease agreement by back-dating it to May 5, 2014 (the “Lease Agreement”) to structure an initial lump sum amount that was immediately due. John claims that Vince was present when Bruno signed the Lease Agreement on behalf of the Defendants at the club.

b. The Defendants’ Account

[18] Bruno and Vince claim that they met John in early March 2014. They had been looking to hire a DJ for the club and were introduced to John through a mutual friend. John made a good first impression. Bruno and Vince agreed to let John help them with DJ’ing at NYX.

[19] Initially, Bruno, Vince and John enjoyed a good relationship. The clientele at NYX liked the older format of music that John and the other DJ’s played at the club. Business was good.

[20] On May 5, 2014, the Defendants claim that they entered into the Lease Agreement with JCA, John’s closely-held corporation, to acquire the items and services listed in Appendix “A” to the Lease Agreement. The Defendants claim that they agreed to take future delivery of the listed items and services for NYX pursuant to the dates and costs in Appendix “A”. Bruno and Vince claim that the Lease Agreement was signed on May 5, 2014. They also claim that John created the schedule of items and services at Appendix “A” by forecasting NYX’s future needs and estimating the costs to deliver them. The Lease Agreement also stipulated that John was to make certain capital contribution payments, which I shall return to later in these reasons.

[21] The Defendants agree with the Plaintiff that the Shareholders Agreement was executed on July 14, 2014. Under the Shareholders Agreement, John bought a 25% stake in NYX in exchange for providing the items, cash and services that made up his investor capital contribution. The Investor Capital Contribution Schedule to the Shareholders Agreement listed fewer items than in the Lease Agreement. According to Bruno, this was because the Shareholders Agreement listed only John’s contributions that were due up until July 14, 2014 when the agreement was executed. In other words, John’s capital contribution under the Shareholders Agreement only included the items, cash payments and services that were due under the Lease Agreement up to the date that the Shareholders Agreement was signed. However, Bruno and Vince also testified that they expected John to deliver all of the items, cash and services required under the Lease Agreement as part of his capital contribution under the Shareholders Agreement.

[22] The Defendants concede that none of the payments due under the Lease Agreement were ever made to JCA or to John. They claim that all of the deliverables under the Lease Agreement were folded into John’s capital contribution under the Shareholders Agreement, including those that were not listed in the Investor Capital Contribution Schedule to the Shareholders Agreement. On this basis, the Defendants claim that they were fully relieved of any obligations to make payments under the Lease Agreement as they were subsumed by the Shareholders Agreement.

[23] Bruno testified that he was not sure why the cash payments that John made as part of his capital contribution (i.e., $5,000.00 on May 30, 2014, and $10,000.00 on July 14, 2014) were listed in the Lease Agreement, which Bruno claims was signed on May 5, 2014 before the Shareholders Agreement was signed on July 14, 2014. Bruno and Vince had spoken with John about becoming a partner or shareholder in the club, and had discussed the cash portion of his capital contribution. However, Bruno could not explain why both cash payments were set out in the Lease Agreement. Bruno also could not explain why John, who was brought on to handle DJ’ing at the club, was to provide NYX with various items (e.g., a cash register, portable patio heaters and bbq tanks, a safety vault, counterfeit readers, and coin and money counters, among other items) that were unrelated to DJ operations. Vince claims that John’s cash contributions were listed in the Lease Agreement because their dates and amounts had been discussed and agreed upon before it was signed. Vince also claims that John agreed to deliver items based on what he thought NYX would require, which were listed in Appendix “A” to the Lease Agreement.

[24] On or about May 31, 2015, Bruno and Vince received the Notice of Termination from John. Bruno and Vince understood that John would be walking away from NYX with nothing as the Shareholder Agreement had subsumed the amounts owed under the Lease Agreement. However, as John had retained important client information that Bruno and Vince needed to operate the club, Bruno states that he entered into negotiations with John in June 2015 in an effort to retrieve the information. Vince claims that he last saw John on May 31, 2015 at NYX when he delivered the Notice of Termination, and did not later see him until this litigation was commenced.

[25] Bruno claims that he did not reach a resolution with John. Bruno denies that he agreed to pay JCA or John for any of the items, cash or services that John had provided to the club, and he denies that he signed the Lease Agreement in 2015 to reimburse John’s contributions to NYX. After failing to settle their business relationship, Bruno claims that John hold him that he would get his money back “one way or another.” Feeling threatened, Bruno claims that he reported John’s remark to police. Bruno claims that police advised him to stop dealing with John, which led him to stop communicating with John thereafter.

Central Issue

[26] The parties agree that the central issue in dispute is whether the Lease Agreement was signed in May 2014, or whether it was signed in June 2015 and back-dated to May 2014.

Analysis

[27] As explained below, I find on a balance of probability that the Plaintiff has established that the Lease Agreement was signed on June 15, 2015 and backdated to May 5, 2014. In making this determination, I find that the Defendants’ position is unlikely and strained.

[28] From the evidence, I find that it unlikely that John would have entered into an agreement to provide NYX with items in the future based on a projected schedule that he would have created. I am persuaded by John’s evidence, which was unshaken in cross-examination, that it would have been difficult for him to project the club’s future equipment needs and set up a delivery schedule with cost estimates having the level of detail set out in Appendix “A” to the Lease Agreement. Bruno and Vince impressionistically claimed that the delivery schedule would have been relatively easy to prepare, but did not meaningfully explain how John would have predicted the club’s needs to create a delivery schedule. The receipts that were produced to verify some of John’s purchases do not match the costs that appear in Appendix “A” which seem to have been inflated with a mark-up to compensate his time to deliver the items. That said, I am persuaded that John bought the items as their need arose, which is consistent with the fact that the last two tranches of items were delivered to the club at irregular intervals on June 22, 2014 and August 1, 2014, respectively.

[29] Bruno and Vince submit that John was a careful businessman who would never have used his own money to pay for items and services for NYX without having an arrangement in place to recoup his investment. They reject John’s claim that he gratuitously provided the deliverables to show his strong interest in joining the business to help it succeed. I accept that it is unconventional for someone to deliver tens of thousands of dollars worth of items and services to a business without arranging to be reimbursed. However, John, Bruno and Vince all agree that their initial relationship was positive and led them to share a mutual interest in building the business together. They also agree that they discussed John becoming a partner or an investor when he initially felt that NYX would be a profitable investment opportunity. In these particular circumstances, I find that John gratuitously delivered the items and services to show his support for NYX and to entice Bruno and Vince to invite him to join the business as a partner or an investor. This is consistent with John’s decision to continue working at the club without remuneration to build his relationship with Bruno and Vince in anticipation of being invited to assume a formal role with the business.

[30] As stated earlier, Bruno could not explain why John’s two cash payments (i.e., the first for $5,000.00 due on May 30, 2014 and the second for $10,000.00 due on July 14, 2014) towards his capital contribution under the Shareholder Agreement were set out in the Lease Agreement. John’s cash payments did not directly relate to the items and services to the lease transaction. As such, it is difficult to understand why the cash payments would have been listed in the Lease Agreement on May 5, 2014, had it actually been signed then. According to Vince, he and Bruno had agreed with John on how much cash he would pay to become a partner or investor in the business. Having agreed to the cash payments, Vince claims that they were included in the Lease Agreement when it was drawn up. However, Vince did not explain why a lease for John to deliver items and services to NYX would mention the cash portion of his capital contribution to buy a stake in the business. Moreover, Bruno did not corroborate Vince’s account. When asked in cross-examination why John’s cash payments were listed in the Lease Agreement, Bruno testified that he did not know. Given the significance of taking on a new partner or investor, I find that Bruno’s inability to explain why the cash payments are listed in the Lease Agreement raises questions as to the reliability of Vince’s account that John had agreed to buy a stake in NYX by May 5, 2014 when the Defendants claim that the Lease Agreement was signed.

[31] There are other difficulties with Vince’s explanation for why John’s cash payments are in the Lease Agreement. I do not believe that John would have agreed on May 5, 2014 to pay $15,000.00 in cash to acquire an unspecified interest in NYX knowing that he would later have to make additional unspecified capital contributions. To this end, I doubt that John would have agreed to pay $15,000.00 in cash to acquire his stake in NYX before he then agreed several months later to provide an additional $25,955.00 worth of items and services pursuant to the Shareholders Agreement on July 14, 2014. It would have made little sense for John to negotiate the acquisition of his interest in the club in piecemeal fashion this way, and the Defendants gave no explanation for how or why events unfolded in this manner. In my view, the Defendants account is unlikely.

[32] Moreover, had the Lease Agreement been signed on May 5, 2014 before the Shareholders Agreement was made on July 14, 2014, then it would stand to reason that the Investor Capital Contribution Schedule to the Shareholders Agreement would have listed all of the items that John had to deliver under the Lease Agreement, along with his cash contributions and payments for DJ services, if all of these deliverables actually comprised his capital contribution as the Defendants allege. Bruno and Vince testified that the Investor Capital Contribution Schedule listed only those items, cash and services that John was to deliver under the Lease Agreement until July 14, 2014 when the Shareholders Agreement was signed. But the Defendants assert that all deliverables under the Lease Agreement were subsumed by the Shareholders Agreement as John purportedly agreed that his capital contribution included them all. If this were true, it would have made more sense for every item and service in the Lease Agreement to have been listed in the Investor Capital Contribution Schedule to the Shareholders Agreement. The fact that over a dozen items listed in the Lease Agreement are not included in the Investor Capital Contribution Schedule casts doubt on the Defendants’ claim that John agreed for these items to be included in his capital contribution.

[33] There is a further inconsistency that arises from the explanation that Bruno and Vince gave for the Investor Capital Contribution Schedule. Although they claim that the Investor Capital Contribution Schedule lists only those items, cash and services that John had to deliver under the Lease Agreement until July 14, 2014 when the Shareholders Agreement was signed, the schedule actually lists two (2) further $200.00 payments that John was to cover on July 19 and 26, 2014 to pay for DJ services at the club on those dates. The fact that both of these payments, which post-date the Shareholders Agreement, are included in the Investor Capital Contribution Schedule without the other items under the Lease Agreement that John was to deliver after July 14, 2014 is inconsistent with the Defendants’ explanation for the Investor Capital Contribution Schedule. In my view, this inconsistency raises questions about the reliability of their position.

[34] On May 31, 2015, John delivered the Notice of Termination to Bruno and Vince after their business relationship broke down. Seeking to obtain compensation for the items, cash, services and other contributions that he provided to NYX, John began negotiations to conclude his business relationship with the Defendants on terms. To this end, John prepared the Notice of Termination by detailing his contributions and their estimated value along with his proposed terms for being reimbursed. John also sought to gain a bargaining advantage by blocking access to the club’s website and social media accounts (i.e., by changing access passwords) and by retaining customer information which Bruno and Vince needed to run the business.

[35] Bruno and Vince quickly felt the impact of not having the customer information that was stored on an iPad that John had purchased and kept in his possession. To a lesser extent, the Defendants were disrupted by not having access to NYX’s website and social media, which John had set up and maintained by using his own credit card. With Vince’s knowledge and approval, Bruno entered into negotiations with John in June 2015 for the return of the customer information and to end their business relationship.

[36] In the Notice of Termination, John asked for $90,141.00 as reimbursement for the various contributions that he had made to NYX. Familiar with the club’s income, and realizing that the Defendants had limited available funds, John expressed his willing to negotiate a compromise amount for his contributions. Bruno explained that he and Vince were unable to pay what John wanted, and tried to work out the return of the customer information in exchange for returning the various items that John had delivered to NYX. John declined to take these items as they were used and apparently had little to no value.

[37] During his negotiations with Bruno, John claims that he proposed a lease arrangement for a portion of his contributions to NYX, amounting to $50,860.00, to be repaid over several years in monthly instalments that the Defendants would pay after they made an initial lump sum payment. As a sign of good faith, John claims that he agreed to return the club’s customer information. In exchange, he claims that Bruno agreed to the proposed lease arrangement.

[38] Bruno flatly denies that John gave him the iPad or the customer information, or that he ever agreed to enter into a lease. Lacking the funds needed to meet John’s demands, Bruno claims that their negotiations failed to reach a resolution as John steadfastly refused to accept the return of his equipment from the club (i.e., the only items of value that Bruno could offer) in exchange for the return of the customer information.

[39] In June 2015, John claims that he and his wife met Bruno at a Tim Hortons coffee shop in Rexdale near his mother-in-law’s home. Although he was unable to recall the actual date of the meeting, he testified that it occurred sometime between June 2 and 15, 2015. During the meeting, he claims that Bruno verbally agreed to the terms of the draft lease agreement after John had given him an iPad with the customer information. Thereafter, John claims that they all went to NYX where Bruno and John signed the Lease Agreement by backdating it to May 5, 2014 to structure the up-front payment that he requested. John claims that he signed the Lease Agreement for JCA, and that Bruno signed it on behalf of the Defendants while Vince was present. Once the Lease Agreement was signed, John understood that a cheque for the amount owed was to be provided. However, the Defendants did not make any payments.

[40] John’s account of his interactions with Bruno are corroborated by a series of text messages which they exchanged between June 2, 2015 and July 2, 2015. During an initial exchange of texts from June 2 to 10, 2015, John and Bruno arranged to meet and discuss the lease arrangement. On June 10, 2015, John advised Bruno that he had prepared “the lease agreement for you to sign, as we agreed.” By briefly responding “ok” that day, I find that Bruno acknowledged that the purpose of the meeting was to sign the Lease Agreement which John had prepared.

[41] On June 15, 2015, John and Bruno exchanged texts to set up a meeting that evening at a Tim Hortons coffee shop in Rexdale. John claims that he and Bruno met only once at Tim Hortons. During their exchange, John asked “will you have a cheque for me?” to which Bruno replied “Ok, no worries.” In light of this, I find that John and Bruno met that evening to sign the Lease Agreement. In my view, Bruno’s reply shows that he led John to believe that he would bring funds to pay the amount owed to JCA under the Lease Agreement once it was signed.

[42] On June 18, 2015, John sent Bruno a text asking, “when can we meet to get a cheque?” Bruno did not respond.

[43] On June 19, 2015, John sent Bruno the following text:

“Bruno, I know you are busy with NYX but I need my money… This money was promised some time ago!”

Bruno responded to John with the following text message:

“I am working on it. Will let you know on Monday.” [Emphasis added]

[44] On June 22, 2015, John sent this text to Bruno:

“Bruno, I have not heard from you! Seriously, I am becoming impatient & tired of this crap. You swore on your HONOUR, in front of [my wife], that I would see my money!”

Bruno did not respond to John.

[45] On June 23, 2015, John sent several text messages to Bruno in succession:

“Bruno, I am not hearing from you! What is happening?”

“Seriously? I am giving you until the end of June, as we agreed! I was not kidding that I will seek remedy via legal channels…”

“I have made every concession up to now, in good faith! I am waiting for the initial installment cheque…”

On June 25, 2015, John texted the following to Bruno:

“Bruno, I want my money, as per our agreement! You have signed a lease and the first year is DUE NOW! The deadline is June 30…”

“Otherwise, I am seeing my lawyer! You can avoid a great deal of embarrassment and costs by honoring your commitment!

On June 29, 2015, John sent Bruno the following text:

“Bruno, tomorrow is the deadline! Please call me to settle this matter!”

On July 2, 2015, John sent this text:

“Bruno, I am done! You will be hearing from my lawyer! Good luck with the club without me! You have burned yet another bridge with a business partner! NICE!”

Bruno did not respond to these messages.

[46] During his last meeting with John in mid-June 2015, Bruno claims that frustrations boiled over when they could not arrive at a resolution. According to Bruno, John told him that he would recover his money one way or another. Taking this as a threat, Bruno disclosed at trial for the first time that he had reported the matter to police who advised him to stop dealing with John. Bruno claims that this is why he did not correspond with John after June 19, 2015.

[47] Under cross-examination, Bruno claimed to not know about the lease agreement or cheque that John had mentioned in his text messages. However, Bruno sent John a text on June 10, 2015 in which he acknowledge the lease agreement without asking for clarification. Bruno also sent a reply text on June 15, 2015 to reassure John that he would have a cheque. In a text to John sent on June 19, 2015, Bruno advised that he was working on getting him the funds and would give an update in a few days. From their exchange of messages, I find without hesitation that Bruno clearly knew of the Lease Agreement and the payment that would be owed once the agreement was signed. Bruno’s self-serving denials contradict his own text messages and are simply not credible.

[48] The above-reproduced texts corroborate John’s account regarding how and when the Lease Agreement was entered into. In the circumstances, I prefer John’s account of these events over the one given by Bruno and Vince. In my view, John and Bruno had an agreement in principle by June 10, 2015 to conclude John’s business relationship with the Defendants by entering into a lease arrangement to reimburse a portion of his capital contributions to the club. In turn, I find that John met Bruno on June 15, 2015 at Tim Hortons where they verbally agreed to enter into the Lease Agreement before going to NYX to sign the Lease Agreement. I find that John gave Bruno an iPad with the customer information before they signed the Lease Agreement. I also find that Bruno signed the Lease Agreement on behalf of the Defendants in Vince’s presence at NYX, and that the Lease Agreement was backdated to structure an initial lump sum payment. After the Defendants did not pay what was owed under the Lease Agreement, John sent Bruno a series of text messages in an unsuccessful effort to obtain payment from the Defendants.

[49] To entice John to return the customer information, I find that Bruno sent him text messages with false reassurances that payments would be made in accordance with the terms of the Lease Agreement once it was signed. I acknowledge that the Defendants were likely not motivated to make any payments under the Lease Agreement after John had returned the customer information.

[50] During examinations for discovery, the Defendants asked the Plaintiff to produce any records in its possession that showed when the Lease Agreement was created. In response, the Plaintiff produced screenshots of two “properties” boxes to the Word file for the Lease Agreement that John had stored on his computer. The first properties box indicates that the file for Lease Agreement was created on July 12, 2015 at 3:53:46 pm, modified on January 14, 2015 at 5:33:23 pm, and accessed on July 12, 2015 at 3:53:46 pm. The second properties box has a slightly different format which shows that the same Lease Agreement was created on January 14, 2015 at 4:48 pm and last saved that day at 5:33 pm. Although both properties boxes show that the file for the Lease Agreement was modified and last saved on January 14, 2015 at 5:33 pm, it is unclear why each properties box has a different date for when the file purportedly was created. According to John, the date for when the file was created is the date when he downloaded content from the internet to create the Word file for the Lease Agreement. However, John could not explain why the first properties box shows that the Word file was created on July 12, 2015 (i.e., almost a month after June 15, 2015 when he claims that the Lease Agreement was signed) or why the second properties box indicates that the Word file was created earlier on January 14, 2015. When asked to account for this, John stated that he likely downloaded the content from the internet on or about January 14, 2015 (i.e., around the time that his relationship with Bruno and Vince soured, when he started to actively consider ending his involvement with the Defendants) and did not make any changes after saving the file at 5:33 pm that day.

[51] Although I accept that John may have saved a different version of the Lease Agreement on July 12, 2015 which may have led to another version being created that day, he could not explain with any clarity why the first properties box shows that the Lease Agreement file was created on July 12, 2015 before it was modified on January 14, 2015. He also could not explain why the properties boxes show two different dates for when the Lease Agreement was created, apparently on July 12, 2015 and January 14, 2015, respectively. [2] That being said, I accept that John likely downloaded internet content that he saved as a Word file on January 14, 2015 to create the Lease Agreement that Bruno and John signed on June 15, 2015 but backdated to May 5, 2014. I note that there is no evidence to suggest that the Lease Agreement was created in 2014.

[52] The Defendants submit that the Lease Agreement would have been drafted differently to better capture the reimbursement of John’s capital contribution, had that truly been its intended purpose, without a cumbersome backdated arrangement. I acknowledge that the form and content of the Lease Agreement is rather unconventional and leaves something to be desired. However, I recognize that John, who is not legally trained, prepared the contract by compiling terms that he downloaded from the internet without the benefit of legal advice. In addition, John and Bruno negotiated the terms and conditions of the Lease Agreement. Taking this all into account, I find that the Lease Agreement captured the parties’ intention to conclude their business relationship by partially reimbursing John for his contributions to NYX with payments to JCA, his closely-held company. In addition, I find that the Lease Agreement was backdated to structure an initial lump sum payment followed by a series of monthly payments to JCA which the Defendants agreed to pay. It is not uncommon for parties to enter into backdated contracts for commercial reasons, and for the courts to enforce these contracts to give effect to the intention of the parties: Geoff R. Hall, Canadian Contractual Interpretation Law (3d, 2016) at pp. 133-135; Chablis Textiles Inc. (Syndic de) v. London Life Insurance Co., [1996] 1 SCR 160 at para 25; Grosvenor Canada Ltd. v. South Coast British Columbia Transportation Authority, 2015 BCSC 177 at paras 81-82, upheld 2016 BCCA 106. Having regard to all of the circumstances in this case, I am satisfied that the Lease Agreement should be upheld.

[53] Under the Lease Agreement, the Defendants owed JCA an initial payment of $14,706.40 (i.e., equal to twelve monthly payments of $1,017.20 plus a $2,500.00 security deposit). Given the amount of this payment, I accept that John believed that JCA would be paid by cheque which explains why he asked Bruno for one several times during their exchange of text messages between June 15 and 19, 2015. Notably, Bruno responded to John’s request for payment on June 19, 2015 by sending him a text that stated, “I am working on it.” In view of this, I find that Bruno’s text corroborates John’s account as to how the Lease Agreement came about.

[54] The Plaintiff seeks to have the Defendants held jointly and severally liable for the amounts owed under the Lease Agreement. However, Bruno claims that he signed the Lease Agreement only for the corporate Defendant, and Vince claims that he was unaware of the arrangement under the lease to reimburse John for some of his contributions to NYX. On this basis, Bruno and Vince submit that they should not be personally liable under the Lease Agreement.

[55] The court follows a practical and common-sense approach to contract interpretation to give effect to the intention of the parties at the time a contract is formed: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para 47. The objective intent of the parties and the scope of their understanding is derived by reading the contract as a whole, and by giving the words used their ordinary and grammatical meaning in keeping with the surrounding circumstances, or the factual matrix, that was known to the parties when the contract was formed: Sattva at paras 47-48 and 50; Hall at pp. 9-10. In considering the surrounding circumstances, the court may consider prior related contracts between the parties that form part of the factual matrix: 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273 at para 55; HIH Casualty and General Insurance Ltd. v. New Hampshire Insurance Co., 2001 EWCA Civ 735 at paras 83-84. By interpreting related contracts together and not in isolation, the court strives to have them operate harmoniously to achieve their overall goal: Samson Cree Nation v. O’Reilly & Associés, 2014 ABCA 268 at para 82; Salah v Timothy’s Coffees, 2010 ONCA 673 at para 16.

[56] In this case, the first page of the Investor Capital Contribution Schedule at Schedule “B” to the Shareholders Agreement dated July 14, 201 states the following:

The attached appendix B denotes the audited and verified Capital Contribution Schedule for John Angastiniotis, in the amount of $40,000, acknowledging the contributions and value made to the Corporation, operating as NYX Lounge & Lifestyle Club, in addition to cash contributions of $15,000. It is also acknowledged that the aforementioned equipment and contributions, less the $15,000 in cash, will remain the property of John Angastiniotis, under his ownership, until such time as the investment has been paid off with adequate dividends, in the form of Return on Investment [ROI] OR that the assets have been purchased from John Angastiniotis by the Corporation, in the event of the pre-mature termination of this agreement. [Emphasis added]

In the event that the business relationship were to terminate, the Investor Capital Contribution Schedule provided that the equipment and contributions that John gave to NYX, less his $15,000.00 cash contribution, would remain his property until he received their value in dividends or until the assets were purchased from him by NYX (i.e., the “Corporation” defined in the Lease Agreement). This suggests that the parties contemplated that NYX alone would pay for John’s contributions if his business relationship ended before he received dividends equal to their value.

[57] However, on the particular facts of this case, I am satisfied that Bruno and John opted to not rely on the terms of the Investor Capital Contribution Schedule when they agreed to conclude John’s business relationship with NYX and reimburse his contributions to the club. Instead, as set out earlier, I find that Bruno and John negotiated new terms which formed the basis for the Lease Agreement by which they expressly agreed to repay $50,860.00 of John’s contributions to NYX, including his $15,000.00 cash contribution, by making an initial payment and subsequent monthly payments to JCA. In light of this, I am satisfied that the terms of the Lease Agreement overtook the Shareholders Agreement including the terms of its Investor Capital Contribution Schedule.

[58] I am satisfied that Vince was aware of the Lease Agreement and that he authorized Bruno to sign it for themselves and NYX’s corporate entity. I accept that Vince agreed that Bruno would negotiate with John on behalf of themselves and NYX. As brothers and family business partners, I am satisfied that Bruno kept Vince apprised of the progress of his negotiations with John. After meeting John at Tim Hortons on June 15, 2015, I find that Bruno returned to NYX that evening and had Vince’s final approval to sign the Lease Agreement before he and John did to in Vince’s presence.

[59] The preamble to the Lease Agreement defines the term “Lessee” as “Bruno Pisani/Vince Pisani (NYX Lounge) or 2372618 Ontario Ltd.”. Having regard to the genesis and purpose of the Lease Agreement and the context of this case, as set out earlier, I am satisfied that the parties intended for all of the Defendants to be bound to its terms and obligations: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at paras 47-48 and 58. Had the intent truly been to bind only NYX’s corporate entity as Bruno and Vince claim (i.e., without binding themselves), then I find that the Lease Agreement could, should and would have only referred to the corporate entity without mentioning either of them. However, this is not how the Lease Agreement was prepared. I am mindful that neither Bruno nor Vince obtained legal advice before Bruno signed the Lease Agreement, although this seems to reflect the approach they consistently took in their dealings with John throughout their business relationship together. That said, I appreciate that Bruno and Vince are shrewd and astute businessmen. As such, I do not believe that Bruno would have proceeded to sign the Lease Agreement which named Vince and himself if they were not to be personally bound and liable as lessees for the debt incurred under the contract.

[60] In my view, applying the term “or” disjunctively to the Lease Agreement in this context would lead to a commercially absurd or unreasonable result by not properly identifying the lessees to the contract. Given the relevant background to this case, I am satisfied that the word “or” in the preamble to the Lease Agreement should be construed as “and” to bind all of the named lessees, to give effect to what the parties reasonably intended, and to achieve a reasonable result that avoids commercial absurdity: Clergue v. Vivian & Co. (1909), 41 SCR 607 at 617; Boy Scouts of Canada, Provincial Council of Newfoundland v. Doyle at para 125. In my view, adopting this interpretation will allow for a practical and common-sense outcome in this case that appropriately enforces the intention of the parties to the Lease Agreement when it was made.

[61] The Defendants claim that the term “or” in the preamble to the Lease Agreement creates an ambiguity in the contract that should be construed in their favour by virtue of the contra proferentem rule, which applies the more favourable interpretation against the drafting party: Scanlon v. Castlepoint Development Corp., [1992] O.J. No. 2692 (CA) at paras 90-91, leave to appeal refused [1993] SCCA No 62. However, contra proferentem is a rule of last resort that only applies in the face of an ambiguity when all other rules of construction fail: Arthur Andersen Inc. v. Toronto-Dominion Bank, [1994] O.J. No. 427 (CA) at para 17, leave to appeal refused [1994] SCCA No 189; Canadian National Railway Co. v. Royal and Sun Alliance Insurance Co. of Canada, [2008] 3 SCR 53 at para 33; Hall at pp. 89-91. Given my finding that the parties intended to name all of the Defendants as lessees, and that the term “or” should be read conjunctively to give effect to this intention and avoid a commercial absurdity, I find that the contra proferentem rule is not applicable in this case: Solway v. Lloyd’s Underwriters (2006), 80 O.R. (3d) 401 (CA) at para 43; Brown v. Sovereign General Insurance Company, 2021 ONSC 511 at para 32.

[62] Based on the foregoing, I find that the Lease Agreement was signed on June 15, 2015 and backdated to May 3, 2014. As the Defendants did not make any of the payments required under the agreement, I find that they breached their contractual obligations. JCA was not required to mitigate its damages, and could insist on performance of the terms and claim damages by taking the position that the lease remained in force: 607190 Ontario Inc. v. First Consolidated Holdings Corp., [1992] O.J. No. 2074 (Div. Ct.) at paras 8 and 10, citing Highway Properties Ltd. v. Kelly Douglas & Co., [1971] SCR 562 at pp. 716 and 718. This approach for claiming damages applies to the breach of a chattels lease: Keneric Tractor Sales v. Langille, [1987] 2 SCR 440 at para 22. In any event, I find that the Defendants did not show that JCA had failed to mitigate its damages given John’s uncontested evidence that the leased items had depreciated to little or no value. I add that the payments owed to reimburse John’s cash contributions and his payments for DJ services were not open to mitigation. In the circumstances, I see nothing excessive or unconscionable in awarding damages to JCA on the basis of its position that the lease remained in force.

Outcome

[63] Accordingly, I find that the Plaintiff should succeed on its claim for damages under the Lease Agreement for which the Defendants are jointly and severally liable. Having reviewed the Plaintiff’s damages calculation, the Defendants have conceded that $100,341.03 is the correct amount of damages to trial, inclusive of pre-judgment interest. As such, I find that the Plaintiff should have this amount along with post-judgment interest pursuant to the Courts of Justice Act.

[64] Should the parties be unable to settle the matter of costs, the Plaintiff may deliver written cost submissions of not more than 5 pages (exclusive of its bill of costs, any offer(s) to settle, or authorities) within 20 days, and the Defendants may deliver their written costs submissions on the same terms within a further 20 days. Reply submissions may not be delivered without leave.

Doi J. Date: March 23, 2021