Court File and Parties

COURT FILE NO.: CV-11-2827-00 DATE: 20230214

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CORRIDOR TRANSPORT INC. and CORRIDOR TRANSPORT LP Plaintiffs – and – VITTORIO JUNIOR LENTINI and LTI LOGISTICS INC. Defendants

Counsel: James Macdonald and Melissa Rupoli, for the Plaintiffs Rob Winterstein, for the Defendants

HEARD: January 24, 25, 26, 27, 31, February 1, 2, 2023

MANDHANE J.

INTRODUCTION

[1] This case is about the rights and obligations flowing from a failed business venture between James Hawley (“Hawley”) and members of the Lentini family (“the Lentinis”).

[2] The events at issue took place over a decade ago - between 2010 and 2011. The Plaintiffs filed a Statement of Claim on July 8, 2011. Hawley started the lawsuit on behalf of Corridor Transport Inc. (“CTI”) and Corridor Transport Limited Partnership (“CTLP”). The Defendants are Vittorio Junior Lentini (“Vic Jr.”) and LTI Logistics Inc. (“LTI”), the corporate entity for the Lentini trucking business.

[3] The Plaintiffs say that the Defendants breached a contract and/or committed the tort of conversion by retaining $148,967.62 after the business venture with Hawley ended (“the Funds”). They say that Vic Jr. was a director of CTI and that he breached his fiduciary duty by retaining the Funds.

[4] The Defendants say that there was no binding contract between the parties because there was no meeting of the minds on its essential terms. They say that the Plaintiffs cannot prove entitlement to the funds such that there was no conversion. In relation to the alleged breach of fiduciary duty, Vic Jr. denies being Hawley’s business partner, being a director of CTI, or otherwise engaging in wrongdoing. He says that his father, Vittorio Lentini (“Vic Sr.”), was Hawley’s business partner, not him. Hawley did not sue Vic Sr.

[5] The parties appeared before me for a nine-day trial. The Plaintiffs called Hawley and an officer of CTI, Colin Mills (“Mills”), as witnesses. The Defendants called Vic Jr., Emilia Lentini (“Emily”), and Vic Sr.

OVERVIEW

[6] Below is an overview of the parties and the claim.

James Hawley and Corridor Canada

[7] Hawley has an MBA and is a sophisticated, experienced businessman who has owned and operated numerous companies in various industries. Prior to the events at issue, he was involved in approximately 50 business partnerships, including limited partnerships, either directly or indirectly.

[8] Throughout 2009, Hawley and his “right-hand man,” Mills, were on a quest for the “holy grail.” They believed that they would hit the “gold mine” if they could devise a way to transport specialized steel products by rail. To realize their ambitions, Hawley set out to fabricate a railway-approved railcar and to acquire a steel trucking business that could transport steel from road to rail.

[9] Hawley created Corridor Canada Inc. (“Corridor Canada”) on August 24, 2009, and named himself its sole director and officer. Corridor Canada ordered railcars from China, and Hawley and Mills started meeting with technical experts to figure out how they could retrofit the railcars to carry steel.

[10] At the same time, Hawley directed Mills to search for an existing trucking company with experience hauling steel so that Corridor Canada could offer seamless road-to-rail transportation services. Because of the red tape associated with starting a new trucking business, Hawley wanted to partner with an existing and operational trucking company that already had the required registrations, permits, licenses and insurance. Mills identified Vic Sr. as a possible business partner; he knew that Vic Sr. operated a trucking company and had extensive experience hauling steel.

[11] At the time of these events, Hawley and Mills worked out of an office at Parkhurst Square in Brampton.

The Lentinis and LTI

[12] Vic Sr. was born in Italy, left school after grade five, and immigrated to Canada as a young adult. He has been driving trucks for decades and, by all accounts, is a talented and charismatic salesman. However, Vic Sr. has low literacy in English. While he comprehends spoken English, and speaks a mix of English and Italian, he required an Italian interpreter at trial and requested that some documents be read to him in Italian.

[13] Emily grew up in Canada and graduated from high school. She and Vic Sr. have three children together, with Vic Jr. being the youngest. She has worked in the Lentini trucking business her whole adult life. Emily was diagnosed with a neurological condition in December 2010 and required hospitalization.

[14] From 1989 until 2009, Vic Sr. and Emily ran their trucking business through a corporation called Lentini Trucking Inc. (“Lentini Trucking”). Vic Sr. was its sole director. In 2009, Vic Sr. wound up Lentini Trucking because he could not renew its permits due to previous safety violations and arrears owing to the Highway 407 ETR. Vic Sr. said he did not have the funds nor the credit to resolve these issues.

[15] After receiving professional advice, on December 15, 2009, the Lentinis incorporated LTI to continue their existing operations and made Vic Jr. its sole director. The day-to-day operation of the business remained unchanged, except that customer cheques were sent to Vic Jr.’s residential address in Caledon before being turned over to Emily for deposit into LTI’s BMO bank account.

[16] Vic Jr. was 27 at the time of these events. He never worked in the family trucking business, having gone to college and gotten a job in sales. At the time of these events, he was married, worked at Loblaws and was expecting his first child.

The business venture

[17] Sometime in April 2010, after being introduced to one another by Mills, Hawley and the Lentinis agreed to start a new business venture to transport steel by truck (“the business venture”). The exact terms of the business venture are disputed and lie at the heart of this litigation. However, the parties agree that Vic Sr. and Emily moved all their equipment into Parkhurst Square and started operating their existing trucking business from there as of May 4, 2010.

CTI, CTLP, and LTI Logistics Group

[18] On May 3, 2010, Hawley incorporated CTI to own and operate a trucking business to haul steel in Canada and the United States. CTI’s Articles of Incorporation stated that Corridor Canada (Hawley’s company) and the “Lentini Group” would each hold half of the shares and would each appoint one director. At all material times, the parties agree that Hawley was the directing and controlling mind of CTI.

[19] On May 4, 2010, Hawley registered CTLP as a limited liability partnership with CTI as its sole general partner. Hawley signed the declaration form in his capacity as director of CTI.

[20] The same day—May 4, 2010—Hawley filed a Notice of Change for CTI and specified that its directors were:

• James Hawley of 8 Avellino Court, Caledon Village, and
• Vittorio Lentini of 27 Mallard Crescent, Brampton.

[21] The parties agree that Vic Sr. lived at 27 Mallard Crescent in Brampton. In terms of officers, the Notice of Change named “Vittorio Lentini” as President of CTI, Hawley as Secretary and Treasurer, and Mills as Vice-President. During the business venture, CTI paid salaries to Vic Sr., Emily, and Mills, but not to Hawley or Vic Jr.

[22] On May 11, 2010, Hawley applied for and was issued a Master Business License allowing CTI to operate using the business name “LTI Logistics Group” (“LTI Group”). Hawley said that he chose the name LTI Group to mimic LTI because LTI held licenses and insurance required to operate the trucking company, and so that LTI cheques could be deposited into CTI’s bank account.

[23] Hawley personally prepared and signed the incorporation documents and testified that he was in a rush to file them. Hawley admitted that he never showed any of the incorporation documents to the Lentinis, even though Vic Sr. and Emily were working at Parkhurst Square as of May 4, 2010. Hawley said he considered the incorporation paperwork to be “administrative.”

Royal Bank of Canada account

[24] Hawley liaised with RBC to open a business bank account for CTI. On or around May 11, 2010, Hawley and Vic Jr. signed an RBC Client Agreement to open a business account (“RBC Agreement”). Both Hawley and Vic Jr. signed as “owner.” The RBC Agreement was a standard form and did not include the name of the business opening the account.

[25] The same day, Hawley executed an RBC Standard Form Banking Resolution on behalf of CTI (“RBC Resolution”). The RBC Resolution indicated that any two of the President, Vice President, or Chief of Dispatch had signing authority over the RBC account. Hawley signed the RBC Resolution as “President” of LTI, even though the incorporation documents named “Vittorio Lentini” as President. Hawley admitted that he did so to ensure that he retained control over the RBC account. The RBC Resolution was never formally passed by CTI’s directors.

[26] On RBC’s “List of Officers and Directors” form, Hawley indicated that CTI’s officers were “James Hawley – Secretary and Treasurer” and “Colin Mills – Vice President,” but failed to include “Vittorio Lentini” as President. He indicated that the two Directors were “Vittorio Lentini, self-employed/business owner” and “James Hawley, self-employed/ business owner.” The Lentinis did not sign this document.

[27] The RBC Signature Card listed three signing officers who each provided their signature:

• Hawley, Secretary and Treasurer;
• Mills, Vice President; and
• Emily, Signing Officer.

[28] Monthly bank statements state that the account was registered to “Corridor Transport Inc. o/a LTI Logistics Group.” On May 17, 2010, Hawley deposited $25,000 into the account. Between May 2010 and April 2011, Vic Jr. received cheques payable to LTI at its registered address ( i.e., his residence), and Emily deposited them into RBC account at regular intervals. For example, on June 22, 2010, Emily deposited $13,121.03 into the account. Emily’s last deposit was made on May 5, 2011, for $17,473.19. While Emily was able to make deposits into the RBC account, she could not withdraw money from it without the prior approval from Hawley or Mills because of how the signing authorities on the account were set up.

End of the business venture

[29] Sometime in March 2011, a truck that was part of the business venture was involved in an accident and there was a dispute between Hawley and Emily as to whether the truck was properly insured. In March 2011, Emily started working mostly from home.

[30] Late in March 2011 and continuing into April 2011, Hawley sent emails to Vic Jr. expressing concerns about CTI’s operations and cash flow. His concerns were mostly related to sloppy paperwork and inefficient operation of the steel trucking business. The RBC account balance on April 1, 2011 was $13,475.

[31] On or around May 5, 2011, Vic Sr. visited the RBC branch and was told by the manager that he did not have any authority over the account. That day the RBC account balance was $34,890.49.

[32] On May 9, 2011, Hawley incorporated Lancaster Trucking Inc. (“Lancaster Trucking”). By that date, the RBC account balance was $15,026.88.

[33] Sometime during the day on May 24, 2011, Hawley and Mills told customers to stop sending LTI cheques to the Caledon Village address and, instead, to send them directly to Parkhurst Square. Mills changed the template invoices at Hawley’s direction. On the evening of May 24, 2011, Vic Jr. called Hawley to tell him that they had LTI cheques in their possession. Hawley wrote a flurry of emails to Vic Jr. demanding an explanation and maintaining that the Lentinis were holding CTI monies. By May 24, 2011, the RBC account balance had dropped to $742.29.

[34] On May 26, 2011, in a face-to-face meeting, the Lentinis told Hawley that they could no longer deposit LTI cheques into the RBC account. They said that the bank manager told them that RBC would no longer accept cheques made out to LTI for deposit into an account registered to “CTI operating as LTI Group.” The parties argued and parted ways. The RBC account balance was now $1,446.66.

[35] Between May 27 and 30, 2011, Hawley and Mills executed three Purchase and Sale Agreements and three permit applications for three vehicles. The vehicles were registered to LTI but paid for by Corridor Canada. The three vehicles were sold to Lancaster Trucking. Hawley admitted that he signed the transfer documents on behalf of LTI even though he was neither a director nor officer of that company. LTI never received any monies or other consideration in connection with the sale of the three tractors to Lancaster Trucking.

[36] On May 29, 2011, Hawley drafted a “Resolution of the Directors of CTI Taken in Extraordinary Circumstances,” which resolved to revoke Vic Jr.’s appointment as one of CTI’s two directors. Hawley unilaterally executed the Resolution and gave notice to Vic Jr. via email. As of June 1, 2011, the balance in the RBC account was down to $709.43.

[37] Between May and August 2011, LTI deposited cheques totaling $148,968.62 into its BMO account. CTI never received any of this money. In June 2011, the Lentinis incorporated Signature Truck Lines Inc. to carry on their family trucking business. Vic Jr. is the director, while Vic Sr. and Emily run the business. Vic Jr. was still employed at Loblaws.

ISSUES

[38] Was there an enforceable contract between the parties? If so, was it breached?

[39] Did the Defendants convert the Plaintiff’s property by depositing the Funds into LTI’s account?

[40] Did Vic Jr. owe a fiduciary duty to the Defendants? If so, was it breached?

[41] If the Plaintiffs establish liability, what damages should flow?

SHORT CONCLUSION

[42] The Plaintiffs have not satisfied me that the Defendants breached a contract, converted the Funds, or breached a fiduciary duty. The action should be dismissed.

ANALYSIS

Burden and standard of proof

[43] The Plaintiffs bear the onus of proving each element of the various causes of action—breach of contract, breach of fiduciary duty, and conversion—as well as damages. The standard of proof is on a balance of probabilities, which means that the party with the onus must establish that something is “more likely than not.” In considering whether a party has discharged its onus on the balance of probabilities, I must consider all the evidence about that issue regardless of who tendered it. If the evidence is evenly balanced, I must find that the party with the onus has not met the burden of proof.

Weighing the evidence

[44] The parties jointly submitted a “Statement of Admitted Facts,” and filed an aide outlining the uncontested facts about the different corporate entities. There were 62 exhibits, including business records created by third parties (i.e. bank statements, government documents, insurance documents, and registrations, etc.). These documents were inherently reliable, and I placed significant weight on them.

[45] The Plaintiffs called Hawley and Mills as witnesses, while the Defendants called Vic Jr., Emily, and Vic Sr. Overall, I was very cautious about relying on the uncorroborated testimony of any single witnesses. The Plaintiff and Defence witnesses gave diametrically opposed evidence on what happened and why, and all of their testimonies revealed gaps and inconsistencies. Because of the passage of time, the witnesses all had trouble remembering basic details like dates, locations, who was present, what was discussed, and who signed. In short, the viva voce evidence was inherently unreliable without some corroboration.

[46] To the extent that credibility is an issue, I find the Lentinis to be more credible compared to Hawley and Mills. While the Lentinis’ evidence occasionally seemed rehearsed, they were mostly honest and direct. For example, Vic Sr. and Emily both admitted that they incorporated LTI to avoid paying debts accrued by Lentini Trucking. They also admitted to depositing the Funds into their BMO account at the end of the business venture. When asked about Emily’s December 2010 illness, each of the Lentinis spontaneously welled up with tears.

[47] In contrast, Hawley rarely answered a question directly, often veering into long-winded and self-serving speeches emphasizing his business knowledge and acumen. I am troubled his admitted pattern of signing legal documents on behalf of Vittorio Lentini and LTI, without having legal authorization to do so. Hawley minimized these incidents, referring to them as “administrative” details, standard operating procedure, justified, or something the Lentinis wouldn’t have understood anyway. I have no trouble concluding that Hawley would put his own interests above his oath to this court.

Was there an enforceable agreement between the parties?

[48] The central issue before me is whether there was an enforceable agreement between the parties. The test for determining whether a contract has been formed is objective. I must consider how the Defendants’ conduct would strike a reasonable person in the same position of the Plaintiffs: UBS Securities Canada Inc. v. Sands Brothers Canada, Ltd., 2007 ONCA 405, paras. 2-3. The question is whether the Defendants’ course of conduct or acquiescence gave rise to a binding conduct: Saint-John Tug Boat Co. v. Irving Refining Ltd., 1964 SCR 614 at 621, 623.

[49] To be enforceable, the parties must have reached an agreement on all the essential terms: Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CarswellOnt 836 (ONCA), para. 21. The parties “must so express themselves that their meaning can be determined with a reasonable degree of certainty”: Scammell and Nephew Ltd. v. Ouston, [1941] AC 251. Where the parties fail to agree on the essential terms or where their intentions cannot be determined by the court, the agreement must fail: Murphy v. McSorley (1929), 1929 CarswellBC 112 (SCC), para. 10. In short, a judge cannot be tasked with making a contract for the parties after the fact: Kelly v. Watson (1921), 1921 CarswellAlta 97 (SCC), para. 2.

The Plaintiffs’ position

[50] The Plaintiffs say that the parties’ decision to form a limited liability partnership - CTLP - created a binding and enforceable contract. They say CTLP had all the indicia of a partnership, namely, (1) a business, (2) carried on in common, (3) with a view to profit: Continental Bank of Canada v. R., [1988] 2 SCR 298, paras. 22-24.

[51] Hawley says that he entered into a contract with Vic Jr., either in his personal capacity or in his capacity as sole director of LTI. The Plaintiffs say that whether Vic Jr. had the subjective intent to enter into the contract is immaterial because a reasonable person in Hawley’s shoes would have concluded that there was a binding agreement between the parties based on Vic Jr.’s actions.

[52] The Plaintiffs rely on the following evidence to support their position:

• The key contractual terms were negotiated at a meeting between Hawley, Mills, Vic Jr., Vic Sr., and Emily at Parkhurst Square on or about April 12, 2010;
• Vic Jr. was the sole LTI director at the meeting;
• Vic Jr. signed the RBC Banking Resolution as “President”; and
• Vic Jr. responded to emails sent by Hawley in December 2010 and again in March 2011.

[53] The Plaintiffs say that the totality of the evidence establishes that the main terms of the agreement were that:

• CTI would be the general partner of CTLP;
• Hawley and Vic Jr. would be the directors of CTI;
• CTI would use LTI’s name to register its equipment;
• CTI would render services under the name LTI;
• Customers would be invoiced by and send their cheques to LTI at Vic Jr.’s residential address; and
• Customer cheques would be deposited into CTI’s bank account.

While the Plaintiffs admit that this agreement was never reduced to writing, they say that there is strong circumstantial evidence supporting their delineation of the key terms.

[54] Foremost, the Plaintiffs point to the unchallenged evidence that Vic Sr. and Emily began working at Parkhurst Square around May 4, 2010; that services were rendered to customers under the name LTI; that customer cheques were set to Vic Jr.’s address; and that Emily deposited the cheques into the RBC account.

[55] The Plaintiffs further rely on a “Memorandum of Understanding between the Lentini Group and Corridor regarding the formation and operation of a new trucking business” (MOU) that Hawley created as an aide de memoire for what was discussed at the April 12th meeting with the Lentinis.

[56] The MOU is a dense, complicated, and detailed delineation of Hawley’s proposed corporate structure for the business venture. The MOU included two signature lines, one for “Jim Hawley, President, Corridor Canada Inc.” and one for “Vittorio Lentini, Sr., President of Lentini Logistics Inc.” Hawley signed the document on April 13, 2010, but the Lentinis never did.

[57] The MOU defined the parties as follows:

The "Lentini Family" refers to the individuals Vic Lentini, Sr., Emily Lentini and Vic Lentini, Jr. The "Lentini Group" refers collectively to the Lentini Family and to the companies they own, including Lentini Trucking Inc. and Lentini Logistics Inc.

"Corridor" refers collectively to Corridor Canada Inc. and to its associates and affiliates, including Colin Mills and Jim Hawley.

"Newco" will be a newly-formed (Ontario) company.

[58] The parties agree that “Newco” eventually became CTI.

[59] The MOU outlined the key terms of the bargain as follows:

• CTI will operate a freight brokerage business, with a focus on steel;
• CTI will have one board member from the Lentini Family and one board member from Corridor Canada;
• CTI’s business will be conducted through CTLP, with CTI as its general partner;
• Corridor Canada will provide working capital to enable CTI to commence operations and, in return, will be entitled to dividends of 9% per annum on capital contributions, and priority repayment in the event of dissolution of CTI or CTLP;
• Corridor Canada will provide CTI with office space, parking, storage for equipment, as well as administrative support;
• LTI will provide CTI the licenses, permits and insurance required to operate a trucking business, and will register new equipment under its name;
• CTI will reimburse CTI expenses incurred by Lentini Group and Corridor Canada forthwith;
• CTI will pay an hourly salary to Emily for her work in the offices of CTI/CTLP, and will also pay Vic Sr. and Mills for their time spent on CTI/CTLP business; and
• After repaying loans to Corridor Canada with applicable interest, CTI profits will be split 50/50 between Corridor Canada and the Lentini Group.

[60] The MOU stated that: “the Lentini Group and Corridor will deal with [CTI/CTLP] as if it was a third party, except as explicitly described otherwise in this agreement (for example, the free-of-charge use of Corridor’s exterior parking lot).” In terms of the relationship between CTI/CTLP and LTI, the MOU stated as follows:

Lentini Trucking Inc. and Lentini Logistics Inc. are not directly affected by the creation of [CTI] or [CTLP]. They will continue to exist as corporate entities and may continue to operate in the trucking business.

[61] The Plaintiffs admit that the parties initially agreed to keep CTI, LTI, and Corridor Canada separate and distinct as outlined in the MOU. Both Hawley and Mills testified that they initially believed that LTI would be operating separately from CTI and would be sub-contracted to do work for CTI. But Hawley says that the terms of the contract changed after the Lentinis moved LTI’s entire operation into Parkhurst Square. After that, according to Hawley, the agreement was more “ad hoc” and the parties effectively agreed that that Corridor Canada would invest in CTI, LTI would deposit all its revenues into the RBC account, and that CTI’s profits would be shared. While Hawley admitted that LTI was still doing runs for its existing customers while working at Parkhurst Square, he said that LTI could not operate without capital from Corridor Canada.

[62] In sum, the Plaintiffs admit that certain aspects of the contract remain unclear but say the totality of the evidence establishes that Vic Jr. and LTI entered into a partnership with CTI, and that the contract required the Plaintiffs to deposit the Funds into the RBC account for the benefit of the partnership.

The Defendant’s Position

[63] The Defendants say that the Plaintiffs have not proven that there was an enforceable contract between the parties. While the Defendants admit that they were engaged in a business venture with Hawley for a year, they say that there was never any meeting of the minds on two key aspects of the contract: the parties, and their respective entitlement to LTI’s accounts receivable.

[64] The Defendants say that Hawley knew all along that he was contracting with Vic Sr. The Defendants point out that:

• Vic Sr. was the directing and controlling mind for both Lentini Trucking and LTI;
• Vic Sr. was at the April 12th meeting;
• Vic Sr. was working at Parkhurst Square for a year and was still hauling the occasion load;
• Vic Sr. was advising Hawley and Mills on CTI’s asset purchases,
• Vic Sr. was receiving a salary from CTI;
• Vic Sr. was the person who asked Hawley to “fix the bank” in August 2010;
• Hawley’s MOU included a signature line for Vic Sr., not Vic Jr.; and
• CTI’s incorporation papers listed Hawley and “Vittorio Lentini” of Brampton as its directors.

[65] The Defendants deny ever telling Hawley that Vic Jr. would be their designate for CTI or CTLP. They say that Vic Jr. was a director of LTI “on paper only” and that he had nothing to do with its daily operations or with CTI. Vic Jr. says that he was not at the meeting with Hawley and Mills on April 12th, was not involved in negotiating the terms of the partnership in any way, never reviewed the corporate or tax filings, and was not involved in day-to-day operations. Vic Jr. says that his only role in the business venture was to continue receiving LTI cheques at his home address and turning them over to Emily and acting as a liaison/translator in their discussions with Hawley and Mills. Vic Jr. says that he would never have agreed to be a director of CTI because he was working full-time and had a newborn at home.

[66] At trial, Hawley admitted that he initially thought Vic Sr. would be entering the partnership on behalf of the Lentinis because he was the “patriarch,” “in the lead,” and had extensive knowledge of the trucking business. However, he says that this understanding changed around May 10, 2010, while setting up CTI’s RBC account. Hawley says that the Lentinis told him that Vic Jr. would be signing on behalf of the Lentini Group. From then on, Hawley says that he understood the partnership to be between CTI and Vic Jr., even though he admitted that he never amended the incorporation documents to clarify the directorship.

[67] Vic Jr. admitted that he corresponded with Hawley via email in December 2010 and March 2011 but said that this only happened when Emily was unable to receive the correspondence due to illness, and when the partnership broke down and his parents needed his help to liaise with Mills and Hawley.

[68] The Lentinis say that Hawley knew that they would be operating LTI independently of CTI. After moving into Parkhurst Square, LTI continued to service its existing customer base, Vic Sr. continued to make runs, customer cheques continued to be sent to Vic Jr.’s address in Caledon, and Emily continued to be responsible for all the insurance and paperwork.

[69] They say that the MOU contemplated LTI transporting loads for CTI as an independent contractor, and Corridor Canada investing in CTI to grow its fleet. Hawley bought and registered equipment to LTI to benefit from its existing licenses, registrations, and insurance. But LTI never transported a single rail car during the entire business venture.

[70] While LTI deposited its revenues into the RBC account, the Lentinis say that they thought it was a joint bank account for CTI and LTI. In relation to the RBC Resolution that was signed by Vic Jr., the Defendants say that he only signed as director of LTI. The Defendants points out that this is the only business record with Vic Jr.’s signature on it. Even at trial, Emily appeared to be under the mistaken impression that the RBC account was a joint bank account with CTI and LTI.

The contract is unenforceable

[71] Overall, on a balance of probabilities, I find that there was no meeting of the minds in relation to key terms of the business venture. The parties were never ad idem on the directors of CTI or its entitlement to LTI receivables.

[72] Hawley is largely responsible for this lack of clarity. Given Hawley’s sophistication and the Lentinis’ simplicity, I would have expected Hawley to have insisted on independent legal advice and a signed agreement. I would have expected him to have obtained written consent from Vic Jr. before naming him as a corporate director as required by s. 119(9) of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16: Bunton v. FTA Logistics Inc. and Ikenouye, 2020 ONSC 5463, paras. 17-21. I would have expected him to have kept the Lentinis in the loop on corporate and tax filings. I would have expected him to have kept his corporate filings up to date, including maintaining a register of CTLP’s limited partners as required by s. 4(1) of the Limited Partnership Act, R.S.O. 1990, c.L.16. He took none of these steps.

[73] Overall, I have no trouble concluding that a reasonable person in Hawley’s shoes would have been confused as to the identity of the contracting party on the Lentini side. Indeed, this was the central issue in the trial before me.

[74] I am also prepared to find that there wasn’t a meeting of the minds on CTI’s entitlement to LTI’s accounts receivable. The Plaintiffs’ claim to the Funds is based largely on Emily’s practice of depositing LTI cheques into the RBC account. They ask, why would Emily deposit LTI cheques into CTI’s bank account if CTI had no legal right to the monies?

[75] In my view, this question is readily answered by the parties’ fundamental misunderstanding about the RBC account. I accept the Lentinis’ evidence that they believed that the RBC account was a joint bank account for LTI and CTI. This is the only credible explanation for Vic Jr. signing as “President” on the RBC Resolution. The registered name - "Corridor Transport Inc. o/a LTI Logistics Group”—is confusing on its face, and even more so considering that the Lentinis had never seen the Master Business License allowing CTI to operate as LTI Group. I accept that the Lentinis genuinely did not appreciate the difference between LTI and LTI Group until they spoke with the bank manager on May 26, 2020.

[76] I also accept Emily’s explanation for depositing LTI cheques into the RBC account. She says Hawley agreed to “factor” LTI receivables for them as a cost-saving measure. (The Lentinis had previously sold their accounts receivable to a factoring company at a discounted rate in return for immediate payment.) Hawley admitted that he looked down on factoring, likening it to “living hand to mouth,” and told the Lentinis that CTI could pay LTI immediately on its account receivable to eliminate any loss in profit due to factoring.

[77] Overall, I have no trouble concluding that a reasonable person in Hawley’s shoes would have been confused as to the identity of the contracting party on the Lentini side, as well as about how LTI receivables were to be treated under the contract.

Did the Defendants commit the tort of conversion?

[78] Conversion is a tort of strict liability that is established when one party wrongfully interferes with property owned by another: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, 140 D.L.R. (4th) 463, paras. 30-32.

[79] Here, there can be no conversion because the Plaintiffs have not proven that they had a possessory interest in the Funds. The cheques were payable to LTI for services rendered by LTI. As I noted above, the agreement between the parties was entirely unclear on how LTI receivables were to be treated. The Plaintiffs claim to the Funds is based largely on Emily’s past practice of depositing LTI cheques into the RBC account. In my view, this is not enough to establish that the Funds belonged to the partnership because of the fundamental misunderstanding between the parties about the RBC account and how the LTI receivables would be treated. The Plaintiffs have not proven on a balance of probabilities that CTI or CTLP had a legal entitlement to the Funds.

Did Vic Jr. breach his fiduciary duty to the Plaintiffs?

[80] Since the Plaintiffs have not proven on a balance of probabilities that Vic Jr. was a director of CTI or a partner in CTLP, I need only consider whether he was an ad hoc fiduciary. The hallmarks of a fiduciary duty are that: the fiduciary has scope for the exercise of some discretion or power; the fiduciary can unilaterally exercise that power or discretion to affect the beneficiary’s legal or practical interests, and the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretionary power: Elder Advocates of Alberta Society v. Alberta, 2011 SCC 24 at para. 27, quoting Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, p. 136 (SCC). In addition to the beneficiary’s vulnerability, for an ad hoc fiduciary duty to arise, the claimant must lead evidence to establish that: (1) the alleged fiduciary undertook to act in the best interests of the alleged beneficiary; (2) there is a defined beneficiary who was vulnerable to a fiduciary's control; and (3) the fiduciary’s exercise of discretion or control stands to negatively impact the beneficiary’s legal or practical interest: Elder, paras 27-36.

[81] The Plaintiffs say that Vic Sr. owed an ad hoc fiduciary duty to deposit the Funds into the RBC account. I disagree. Foremost, CTI and CLTP were not vulnerable parties vis-à-vis Vic Jr. Indeed, Hawley held all the power and control over CTI. Hawley was involved in every decision that CTI made. Hawley completed all of CTI’s incorporation documents to insulate himself from any personal liability. He retained control over the RBC account. He described himself as the “banker” and admitted that the Lentinis relied on him to make investments in CTI. He admitted that he had the power to end the partnership at any time.

[82] In contrast, Vic Jr. was young and unsophisticated. He was not involved in CTI’s daily operations. He did not have a majority interest in CTI and did not have signing authority at the bank. At a factual level, I accept the Lentinis’ evidence that he never opened the mail sent to LTI and always handed it over to Emily. Even at the end of the partnership, it was Emily who was holding onto the LTI cheques, not Vic Jr. In short, while Vic Jr. technically received the LTI cheques at his home, he never deposited them or dealt with them in any way. He did not owe a fiduciary duty to CTI or CTLP. His only duty was to LTI, and his actions were consistent with that duty.

ORDER AND COSTS

[83] The Plaintiffs’ action is dismissed.

[84] The parties shall endeavor to agree on the matter of costs. If they are unable to do so, on or before February 24, 2023, both parties shall email to my assistant, Corry Allard (corry.allard@ontario.ca), with their Bill of Costs, relevant offers to settle, and costs submissions (max 5 pages, double-spaced, 12-point font, 1.5” margins).

MANDHANE J. Released: February 14, 2023

COURT FILE NO.: CV-11-2827-00 DATE: 20230214 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: CORRIDOR TRANSPORT INC. and CORRIDOR TRANSPORT LP (Plaintiffs) – and – VITTORIO JUNIOR LENTINI and LTI LOGISTICS INC. (Defendants)

REASONS FOR JUDGMENT

MANDHANE J. Released: February 14, 2023