Court File and Parties

CITATION: Sigma Ajax Inc. v. Belovich, 2008 ONCA 445

DATE: 20080606

DOCKET: C48244

COURT OF APPEAL FOR ONTARIO

FELDMAN, LANG and EPSTEIN JJ.A.

BETWEEN:

SIGMA AJAX INC.

Appellant

and

ELENA BELOVICH AND ALEXANDRE BELOVICH

Respondents (Applicants)

and

ELLIOTT STEINER, ELLENA STEINER, 1344272 ONTARIO LIMITED, O AND L DEVELOPMENTS LTD., BASIS "A" DEVELOPMENT CORPORATION, 1460714 ONTARIO LIMITED, LARISA GOLDOVSKY, JOSEPH MORANO also known as JOE MORANO AND ROBERT CHEUNG

Respondents (Respondents)

Counsel:

Chris G. Paliare and Gordon D. Capern for the appellant

Alan J. Lenczner, Q.C. for the respondents, Elena Belovich and Alexandre Belovich

David C. Moore for the respondents, Elliott Steiner, Ellena Steiner, 1344272 Ontario Limited, O and L Developments Ltd., Basis “A” Development Corporation, 1460714 Ontario Limited, Larisa Goldovsky and Joseph Morano also known as Joe Morano

No one appearing for the respondent, Robert Cheung

Heard: June 4, 2008

On appeal from the order of Justice Peter A. Cumming of the Superior Court of Justice dated December 13, 2007

ENDORSEMENT

[1] This is an appeal from the decision of Cumming J., which involved the interpretation of a joint venture agreement entered into between Sigma Ajax Inc. (Sigma) and 1346181 Ontario Limited (134). The motion judge was required to determine whether a Purchase Agreement, which was put forward by 1617651 Ontario Corp. (161) to acquire 134’s interest in the joint venture, complied with the transfer provisions of the joint venture agreement (JVA).

[2] Section 7 of the JVA allowed a co-owner to sell part of its interest, but only with the consent of the co-owner. Section 9 of the JVA provided that, without the consent of the other co-owner, one co-owner could sell “all (but not less than all) of its Co-Owners Interest”. Section 7.5 of the JVA further required a proposed purchaser to agree to be bound by, and to perform, the provisions of the JVA; any purchaser was required to step into the shoes of the joint venture partner.

[3] The motion judge concluded that 161 “agreed to step into 134 shoes under the JVA”. On the issue of whether the Purchase Agreement complied with the provision of the JVA requiring the sale of “all” of 134’s interest, the motion judge reasoned at para. 18:

The wording of the JVA is somewhat ambiguous and this assertion by Sigma has some superficial force. However, reading the JVA as an entirety and observing the reality that the residential property has been sold with only a flow of money being received by Sigma and 134 as the take-back blanket mortgage is discharged with the sales of the residential lots, it is apparent that the continuing “interest” of 134 in reality is simply its interest in the Elm Ajax Plaza JV. 134’'s entire interest therein is the subject of 161’s offer. This interpretation of the JVA gives commercial efficacy to the JVA and, in particular, to the agreement seen in s. 9 that there can be a sale by one co-owner without the consent of the other.

[4] The motion judge had made a number of orders to advance the disentanglement of the two families, each of whom owned a 50 per cent interest in 134. On this motion, he reached a result that he described in the above paragraph as efficacious.

[5] The role of the court in interpreting a commercial agreement is to search for an interpretation “which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract.” Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888 at 901.

[6] Parties must be held to the bargain they struck. While the motion judge concluded that the agreement was “somewhat ambiguous”, he did not explain the nature of that ambiguity. Moreover, such an ambiguity is not supported by a consideration of the whole of the agreement read in light of the parties’ intent when they entered into the agreement. The JVA unambiguously provides that, absent consent, a sale by one of the co-owners must be for “all” of that co-owner’s interest in the joint venture. A “Co-Owner’s Interest” includes “Property”, which is defined to include all “property, whether real or personal”. Accordingly, it includes the vendor take-back mortgage. We do not agree with the motion judge that this mortgage is “only a flow of money”; it represents a security interest in the land.

[7] Thus, the undisputed definitions in the JVA and the evidence put forward on the motion lead inevitably to the conclusion that 134’s interest was not restricted to the “plaza” portion of the property that was the subject of the Purchase Agreement. It also included the vendor take-back mortgage regarding the “residences” portion of the property as well as the ownership of shares in two trustee companies that held the two portions of the property. In addition, the joint venture’s assets were subject to a secured obligation to repay $2.2 million of shareholder loans to 134 and to Sigma and the joint venture’s security interest in the vendor take-back mortgage.

[8] It follows that, on its face, the Purchase Agreement’s offer to buy only the “Plaza JVA” did not constitute an offer to acquire “all” of 134’s interest. Thus, it also did not satisfy the JVA requirement that a prospective purchaser step into the shoes of the selling partner. Accordingly, the Purchase Agreement did not fit within section 9 of the JVA so as to trigger Sigma’s right of first refusal.

[9] Apart from giving effect to the plain wording of the JVA, this interpretation reflects the commercial reality that the Purchase Agreement would have left Sigma, without its consent, not with one new co-owner replacing 134, but with two co-owners: 161 for the plaza project and 134 for the vendor take-back mortgage on the residences project. This situation of having to deal with two partners, instead of one, was precisely the situation that the parties to the JVA sought to preclude by ss. 7 and 9 of the JVA, and why they agreed to only an “all or nothing” transfer of their interests in the joint venture.

[10] Accordingly, the appeal is allowed and the finding that the Purchase Agreement came within the terms of the JVA is set aside as is the costs order below. Instead, a declaration will issue that the 161 Purchase Agreement does not comply with the JVA.

[11] Given the result, it is unnecessary to consider the appellant’s application to introduce fresh evidence.

[12] The appellant is entitled to costs of the motion below as well as costs of the appeal, which are fixed in the combined amount of $30,000, inclusive of disbursements and Goods and Services Tax.

“K. Feldman J.A.”

“S.E. Lang J.A.”

“G. Epstein J.A.”