2015 QCCS 6024, 2015 QCCS 6024

Bolouri c. Aveos Holding Company 2015 QCCS 6024 SUPerior JR1353 COURt CANADA PROVINCE of QUÉBEC DISTRICT of MONTREAL N°: DATE : 500-17-077934-134 December, 17, 2015 __________________________________________________________________________ presiding: the HONORABLE BRIAN RIORDAN, J.S.C. __________________________________________________________________________ C hAHRAM BOLOURI Plaintiff v.

AVEOS HOLDING COMPANY Defendant __________________________________________________________________________ judgment __________________________________________________________________________ THE ISSUE [ 1 ] This case requires the Court to decide whether the designation by Defendant (" AHC ") of its subsidiary Aveos Fleet Performance Inc. (" AFP ") to make certain payments to Plaintiff constitutes a "perfect delegation" or an "imperfect delegation" [1] .

If the former, AHC would be liberated from the obligations it otherwise would have had towards Plaintiff for the amounts in question, whereas under the latter, its ultimate liability would be maintained and AFP would merely become a co-debtor for the amounts. [2] THE CONTRACTS [ 2 ] Between October 2007 and March 2011, Plaintiff served as president and chief executive officer of AFP, as well as a member of the Board. He was also the chief executive officer of AHC and a member of the Board.

Apparently, he served on the Board of other AHC subsidiaries as well, including a company called "Aeroman" that performs aircraft maintenance services in Guatemala. [ 3 ] His employment with AFP and compensation entitlements, including certain share allotments in AHC, were governed by a series of contracts, as follows: a. Employment Letter with AFP dated October 16, 2007 (Appendix A to Exhibit P-1); b. Shareholders' Agreement with respect to AHC shares, dated March 12, 2010 (" Shareholders Agreement ": Exhibit P-3); c.

Amended and Restated Restricted Share Unit Plan with respect to AHC shares, approved by the AHC Board of Directors in August 2010 (the " Plan ": Exhibit P-2); d. Memorandum of Transaction with AHC and AFP, dated December 3, 2010 (the " Transaction ": Exhibit P-1). [ 4 ] As part of his compensation, Plaintiff became eligible to receive 210,526 restricted share units of AHC (" RSU "). An RSU is defined in the Plan as: " a unit the value of which is equal to the Fair Market Value Per Share (of AHC) on any given date, credited by means of a bookkeeping entry on the books of (AHC) or in accordance with

Article 4 " (paragraph 2.1(pp) of the Plan) . [ 5 ] After vesting, as defined in the Plan, a holder of RSUs has " the right to elect to convert any vested RSUs and receive payment in the form of fully paid Shares (of AHC) in respect of any vested RSUs recorded in the Participant's account … " (paragraph 4.8(

a) of the

Plan) . [ 6 ] The Shareholders Agreement, at paragraph 7.07(a)(i), gives Plaintiff " the right to sell to (AHC), and (AHC) shall be required to repurchase, on one occasion, all of the Common Shares (of AHC) and vested RSUs then held ". [ 7 ] With respect to the Transaction, it was entered into by Plaintiff, AHC and AFP as of December 3, 2010, in contemplation of the termination of Plaintiff's employment as president and CEO of AFP.

That occurred some four months later, on March 31, 2011 [3] . [ 8 ] The Transaction appears to have been seen by the parties as a form of additional compensation for Plaintiff's accepting certain restrictions for the future, as seen in the following clause: WHEREAS the Parties have agreed that Mr. Bolouri shall be subject to certain restrictive covenants following the cessation of his employment with (AFP), in consideration of (AFP) agreeing to provide Mr.

Bolouri with the payments and benefits set forth under the present Memorandum of Transaction. [ 9 ] In the Transaction, the parties agreed that each of Plaintiff's RSUs had a value of $26.89, giving a total value of Plaintiff's RSUs of $5,661,044.10, as set out in

section 3(

a) of the Transaction. It also contains the following clause: 3(

d) Forfeiture of Rights Under the Plan: The Parties hereby agree and understand that all RSUs issued to Mr. Bolouri under the Plan shall be automatically cancelled as of the Termination Date (of his employment). … Moreover, the Parties hereby specifically agree that, as of the Termination Date (March 31, 2011), Mr. Bolouri shall have no rights whatsoever under the Plan or under the Aveos Holding Company Shareholders Agreement dated March 12, 2010, other than the right to receive the payments specifically set forth at

section 3 of the present Agreement . (The Court's emphasis) [ 10 ] The " payments specifically set forth at

section 3 " of the Transaction relate solely to the valuation and buy-back of Plaintiff's RSUs, presumably in compensation for their automatic cancellation under paragraph 3(d). [ 11 ] Paragraph 3(

b) is another key provision for present purposes: 3(

b) Payment Schedule: Consistent with Mr. Bolouri's proposal to pay out said vested RSUs on an extended basis, the Parties have agreed that the payment to be made by the Company (defined as AFP) shall be in accordance with the

schedule set forth below (The Court's emphasis) [ 12 ] The paragraph then sets out a five-point

schedule for the payment of the $5,661,044.10, adopting the following dates for paying the amounts indicated below:

i) June 30, 2011: $1,132,337.90; ii) January 1, 2012: $1,132,177; iii) June 30, 2012: $1,132,177; iv) December 31, 2012: $1,132,177;

v) Upon the Board's approval of AFP's external audit for the 2010 financial statements: $1,132,177. [ 13 ] Payments i, ii and v were made as foreseen, all being paid by AFP. As of March 19, 2012, AFP was under CCAA protection and it filed an assignment in bankruptcy on November 22, 2013. It thus defaulted on payments iii and iv, for a total of $2,264,354. That is the amount for which Plaintiff is now suing AHC. ANALYSIS [ 14 ] In order for perfect delegation to occur, a creditor must be found to have intended to release his principal debtor entirely in favour of the delegated debtor [4] .

Article 1668 of the Civil Code is quite clear on that: 1668. Where the delegatee accepts the delegation, he retains his rights against the delegator, unless the delegate evidently intends to discharge him. 1668. Le créancier délégataire, s'il accepte la délégation, conserve ses droits contre le débiteur délégant, à moins qu'il ne soit évident que le créancier entend décharger ce débiteur. [ 15 ] Does the Transaction show an evident intention on the part of Plaintiff to discharge AHC and replace it by AFP? It appears so. [ 16 ] Paragraph 3(

b) stipulates that the payment of the RSU redemption is to be made by AFP. That, by itself, is not determinative. What seals Plaintiff's fate, however, is the language in paragraph 3(d), read in conjunction with the waiver and release clauses in the document. [ 17 ] The language in paragraph 3 (

d) is worth repeating: Moreover, the Parties hereby specifically agree that, as of the Termination Date, Mr. Bolouri shall have no rights whatsoever under the Plan or under the (Shareholders Agreement) dated March 12, 2010, other than the right to receive the payments specifically set forth at

section 3 of the present Agreement. (The Court's emphasis)

[ 18 ] This clause is unequivocal. All of Plaintiff's rights under the other agreements are replaced by the " payments specifically set forth " in

section 3 of the Transaction, payments to be made by AFP, alone. Thus, Plaintiff's rights under the other contracts are cancelled, thereby discharging AHC of its obligation under the Shareholders Agreement to repurchase Plaintiff's RSUs. [ 19 ] Plaintiff argues that the fact that AHC is a party to the Transaction, and thus agreed to the payment arrangement set out in paragraph 3(b), shows that neither Plaintiff nor AHC intended that the latter be discharged of its obligation to repurchase Plaintiff's RSUs. The Court has difficulty understanding that logic and, moreover, comes to the opposite conclusion.

By signing the Transaction, AHC ratifies its contents, including the cancellation of any rights other than those set out in it. [ 20 ] Last, but certainly not least, we must consider

section 5: Waiver of Claims, and

section 6: Full and Final Release in the Transaction. In written argument, Plaintiff submits that these provisions do not release AHC and AHP from their obligations pursuant to the Transaction and, absent explicit language releasing AHC, Plaintiff maintains all his rights against AHC for the payments under paragraph 3(b). [ 21 ] The Court disagrees with Plaintiff's reading of these provisions. They, in fact, do contain explicit language releasing AHC. [ 22 ]

Section 5 goes on for over 20 lines to ensure that Plaintiff's acceptance of the payments provided for in the Transaction, including those in paragraph 3(b), is in " full and final payment and satisfaction of any and all rights and claims against (AFP) or any of its past, present or future parent, subsidiaries, or affiliated companies or entities ( including, in particular, (AHC) … " (the Court's emphasis) . It would be hard to be more explicit than that. [ 23 ] The same goes for

section 6. There, " in consideration of the payments and benefits set out at Sections 2, 3 and 4 hereof, Mr. Bolouri gives and grants to the Company, to the Aveos Group and to each Member of the Aveos Group, a full and final release and discharge from all manner of actions, causes of action, rights, suits, complaints, grievances, debts, claims, liabilities and demand of any kind or nature whatsoever which he had or has or may have now or in the future ". As noted in the preceding paragraph, AHC is included " in particular " in the Aveos Group, which is defined in

section 5. [ 24 ] If lawyers were remunerated by the word, the one who drafted this document would be a wealthy person indeed! Nevertheless, it is abundantly clear that Plaintiff had abandoned all other rights except for those set forth in the Transaction and that the parties intended to discharge AHC under the Shareholders Agreement. [ 25 ] Plaintiff's counsel argues that it would have made no commercial sense for Plaintiff to renounce his rights against AHC, a solvent company, and replace it by AFP, which sought CCAA protection 16 months after the Transaction was signed and eventually declared bankruptcy.

Counsel also points out that Plaintiff testified that he did not wish to release AHC in any way when signing the Transaction. He also testified that it was AHC who drew up the Transaction, thereby invoking the contra proferentem rule of

article 1432 of the Civil Code [5] . [ 26 ] The Court recognizes that it must interpret the Transaction based on what the proof shows to be the common intention of the parties, rather than on the literal meaning of its words [6] . That said, the proof shows no common intention among the parties, and certainly not enough to overrule the literal meaning of the words of the Transaction. [ 27 ] Although no one from AHC testified, it did file a written Plea.

The allegations in it, even in the absence of any testimony to support them, may be considered, since they provide perspective useful for interpreting the contracts that Plaintiff has filed as exhibits. [ 28 ] At paragraphs 16 through 18 of the Plea, AHC argues that it never had the obligation to buy back Plaintiff's RSUs. Its reliance on the terms of the Plan and the Transaction is not to allege a perfect delegation but, rather, to assert that it never had the obligation to buy back unconverted RSUs.

Whatever the validity of this position, it certainly shows that there existed no common intention of the parties that could contradict the otherwise clear wording of the Transaction. [ 29 ] Concerning the contra proferentem rule,

article 1432 states that " in case of doubt, a contract is interpreted in favour of the person who contracted the obligation and against the person who stipulated it ". The mere fact that AHC's attorneys were responsible for typing up the Transaction does not mean that AHC stipulated all its contents. In fact, Plaintiff testified that it was he who suggested, albeit through a generous gesture on his part, the contents of paragraph 3(

b) of the Transaction. In that light, if this rule is to apply, it could well go against Plaintiff's position. [ 30 ] As for the logic behind the wording of paragraph 3(b), as well as the rest of the document, it is not for the Court to speculate on the parties' motivation for doing what they did in the way that they did it. Numerous provisions of the Transaction come together to lead us to conclude that Plaintiff agreed to substitute AFP for AHC with respect to the repurchase of his RSUs.

We need go no farther than that. [ 31 ] We must therefore dismiss Plaintiff's action in this file. [ 32 ] As for costs, in light of the fact that AHC chose not to present its defence or attend at trial, the Court will not grant them. BASED ON THESE REASONS, the court: [ 33 ] DISMISSES Plaintiff's action in the present file; [ 34 ] the whole, without costs. _____________________________ BRIAN RIORDAN, J.S.C.

Mtre. Cara Cameron Mtre. Pierre-Luc Cloutier Attorney for Plaintiff Hearing Date: December 2, 2015 [1] The hearing in this file proceeded ex parte after AHC opted not to present a defence or to be present at the trial. At the hearing, the Court heard two witnesses: the Plaintiff and the trustee in bankruptcy of AFP. [3] Plaintiff testified that the termination of his employment in March 2011 was not "for Serious Reason", as mentioned in the Plan. In fact, he apparently stayed on for a while after that to assist with the transition to the person replacing him. [5] 1432.

In case of doubt, a contract is interpreted in favour of the person who contracted the obligation and against the person who stipulated it. In all cases, it is interpreted in favour of the adhering party or the consumer. 1432. Dans le doute le contrat s'interprète en faveur de celui qui a contracté l'obligation et contre celui qui l'a stipulée. Dans tous les cas, il s'interprète en faveur de l'adhérent ou du consommateur.