Jedfro Investments (U.S.A.) Limited et al. v. Jacyk, in her capacity as Litigation Administrator for the Estate of Peter Jacyk et al. [Indexed as: Jedfro Investments (U.S.A.) Ltd. v. Jacyk (Litigation Administrator of)]
80 O.R. (3d) 533
Court of Appeal for Ontario,
Laskin, Borins and Juriansz JJ.A.
May 18, 2006
Contracts -- Enforcement -- Parties to joint venture agreement ignoring terms of agreement -- One party subsequently suing other parties for breach of agreement -- Action dismissed -- Party cannot seek to have agreement enforced for its benefit when it has demonstrated intention not to comply with or be bound by terms of agreement.
I, J and M and their companies were parties to a joint venture agreement to develop and sell land. When the project's lender demanded repayment of its loan, I and his company did not pay their proportionate share of the loan. J used one of [page534] his companies, which was not a party to the joint venture agreement, to purchase an assignment of the loan. The company then foreclosed on the lands and appropriated the money that I and his company had invested in the joint venture. I and his company sued the other parties for breach of the joint venture agreement. The action was dismissed. The plaintiffs appealed.
Held, the appeal should be dismissed.
The record supported the trial judge's finding that none of the parties relied on the provisions of the joint venture agreement. Once the loan was called, the plaintiffs pursued a strategy of self-interest outside the terms of the agreement. Where parties act in a way that shows they do not intend to comply with or be bound by the terms of their written agreement, one party cannot later come to court and ask to have the agreement enforced for its benefit. Enforcing the written agreement in these circumstances would be contrary to the parties' intention, as evidenced by their conduct.
APPEAL from the judgment of E. Macdonald J., 2005 3373 (ON SC), [2005] O.J. No. 514, 2 B.L.R. (4th) 151 (S.C.J.), dismissing an action for damages for breach of a joint venture agreement.
Cases referred to Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 52151 (ON CA), 64 O.R. (3d) 533, [2003] O.J. No. 1919, 226 D.L.R. (4th) 577, 38 B.L.R. (3d) 42 (C.A.), supp. reasons 2006 13954 (ON CA), [2006] O.J. No. 1729 (C.A.)
James C. Orr and Kenneth Dekker, for appellants. Andrew J. MacDonald, for respondent Gramat Investments (U.S.A.) Limited. E. Anthony Ross and Kevin J. Scullion, for respondents Nadia Jacyk, Prombank Investments Limited and Prombank International (U.S.A.) Limited.
The judgment of the court was delivered by
LASKIN J.A.: --
A. Overview
[1] Morris Iwasykiw, Peter Jacyk, Louis Matukas and their companies Jedfro Investments (U.S.A.) Limited, Prombank International (U.S.A.) Limited and Gramat Investments (U.S.A.) Limited were parties to a joint venture agreement to develop and sell 273 acres of land near the Denver, Colorado airport. Iwasykiw held a 30 per cent interest in the joint venture, Jacyk a 60 per cent interest, and Matukas a 10 per cent interest.
[2] When the joint venture began in 1989, Iwasykiw and Jacyk were close friends. However, by 1995, their relationship had unravelled over litigation involving another of their investments on LakeShore Boulevard in Toronto. The following year, the [page535] lender for the Denver project, Air Products and Chemicals Inc., precipitated a crisis among the joint venturers by demanding repayment of its US$3.8 million loan.
[3] Iwasykiw and Jedfro did not pay their proportionate share of the loan, which was US$900,000. Jacyk, who had the largest interest in the joint venture, used another of his companies, Prombank Investment Limited ("Prombank Canada"), to purchase an assignment of the loan. Prombank Canada then foreclosed on the Denver lands, and as a result, appropriated the US$1.4 million Iwasykiw and Jedfro had invested in the joint venture.
[4] Iwasykiw and Jedfro sued the defendants for breach of the joint venture agreement and related relief. By the time of trial, both Iwasykiw and Jacyk had died, but their estates carried on the litigation. The trial judge dismissed the action. Jedfro and Iwasykiw's estate appealed to this court.
B. Discussion
[5] The appellants' principal submission is that the trial judge erred by failing to find that the respondents breached the joint venture agreement. The agreement expressly provided for remedies in case a joint venturer defaulted on its obligations. Under those provisions, a member of the joint venture could purchase the interest of the defaulting member, but only on repaying the latter's interest under a formula set out in the agreement. The appellants contend that, instead of complying with these default provisions, the respondents used a non-arm's length company (Prombank Canada) to expropriate their interest without compensation.
[6] The trial judge rejected the appellants' position. She found that no party relied on the provisions of the joint venture agreement. The record amply supports this finding.
[7] For example, Jacyk decided to use one of his companies, which was not a party to the joint venture, to pay off the loan and take an assignment of the lender's position. The joint venture agreement did not contemplate what Jacyk proposed to do, and eventually did do.
[8] However, the appellants also deliberately ignored the terms of the joint venture agreement. The following pieces of evidence show that once Air Products called its loan, the appellants decided to pursue a strategy of self-interest outside the terms of the agreement:
-- The appellants knew that Jacyk intended to use Prombank Canada to foreclose, yet did not object to his doing so. [page536]
-- The appellants could have raised the necessary US$900,000 to pay their proportionate share of the loan, either from money they had received on another investment or by putting a mortgage on their LakeShore Blvd. property. For whatever reason, they chose not to do so. And they never tendered their share of the loan.
-- At the same time, they sought to avoid the default provision under the joint venture agreement, which they considered too onerous. Instead, they tried to make a "side deal" with Jacyk, by offering him security on their LakeShore Blvd. property. When Jacyk refused their offer, the appellants did nothing. After a suitable period of time had elapsed, Prombank Canada foreclosed.
-- At no time during this period did the appellants claim to rely on their rights or assume their obligations under the agreement.
[9] The trial judge summarized her finding that the appellants did not rely on the terms of the joint venture agreement and instead tried to make a side deal with Jacyk, at para. 39 of her reasons:
The reality is that these three individuals, when faced with the crisis precipitated by the demand from Air Products, had little regard for the terms of the JVA. I find as a fact that Iwasykiw and Matukas were anxious to make a deal with Jacyk that would immunize them from the consequences of continued default under the terms of the JVA. Matukas made a deal. Iwasykiw did not. He is, as stated in the amended statement of defence and counterclaim, the author of his own misfortune which is now the misfortune of his estate. These were sophisticated businessmen. There was no vulnerability among them. They had known each other for a long time. Iwasykiw knew the consequences to his investment of foreclosure. Yet, he did not do what he had the capacity to do, i.e. raise the US$900,000 to preserve his interest in the Denver Lands. He rolled the dice, so to speak. The claims in this action cannot, in law, rehabilitate the consequences of the judgment calls that he chose to make in a sophisticated commercial context.
[10] In this court, the appellants acknowledged that they tried to work out a deal with Jacyk that was different from the bargain they made under the joint venture agreement. However, they submitted that having failed to make a deal, they were entitled to fall back and rely on the default provisions of the joint venture agreement, which would at least entitle them to a buyout of their interest.
[11] I do not accept this submission. Where parties act in a way that shows they do not intend to comply with or be bound by the terms of their written agreement, one party cannot later come to court and ask to have the agreement enforced for its benefit. [page537] Enforcing the written agreement in these circumstances would be contrary to the intention of the parties, as evidenced by their conduct. See Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 52151 (ON CA), 64 O.R. (3d) 533, [2003] O.J. No. 1919, 226 D.L.R. (4th) 577 (C.A.) at pp. 551-52 O.R., pp. 595-96 D.L.R.
[12] Although the trial judge did not expressly articulate this legal principle, the tenor of her analysis shows, in substance, that she applied that principle to deny the appellants' relief. In my view, she made no error in doing so. I therefore would not give effect to the appellants' main ground of appeal.
[13] The appellants also asserted claims for breach of fiduciary duty, conspiracy and bad faith conduct. However, in my opinion, none of these additional claims can possibly succeed unless the appellants establish a breach of the joint venture agreement. As the appellants have not done so, these additional claims must also fail.
[14] I would dismiss the appeal with costs to the Jacyk respondents and the Matukas respondents, each in the amount of $25,000 inclusive of disbursements and GST.
Appeal dismissed.