ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-03-0841
DATE: 2012-04-03
B E T W E E N:
STEPHEN BURNS,
The Plaintiff was self-represented
Plaintiff
- and -
GERALD CHAMPAGNE, SHARAN SOHI, 1103513 ONTARIO LIMITED and DOUGLAS ALAN McMILLAN,
Brennan Sacevich, for the Defendant Sharan Sohi
Francis J. Thatcher, for the Defendant Gerald Champagne
McMillan was self-represented.
Defendants
HEARD: June 6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 22, 23, 24, 27, 28, 29, 30, 2011, at Thunder Bay, Ontario
J. dep. Wright, J.
Reasons For Judgment
INTRODUCTION: 2
ISSUES: 3
WAS MCMILLAN A PARTNER IN THE COYOTES VENTURE? . 4
DID SOHI ACT IN ANY CAPACITY FOR THE PARTNERSHIP? . 4
WAS BURNS A PARTNER IN THE COYOTES VENTURE? . 4
CASE FOR THE PLAINTIFF . 4
Stephen Burns: 4
Dennis Raymond Burns . 16
Robert Favuzzi 19
Marianne Burns . 19
Bernadette Burns . 19
CASE FOR THE DEFENDANTS: 20
Gerald Champagne . 20
Leslie Ann Savitsky: 27
Michael McNabb . 28
Sharan Sohi 31
Daniel Chrusz . 34
Douglas Alan McMillan . 35
BASIS FOR BURNS SUBROGATED CLAIM: 43
ASSIGNMENT OF CAUSE OF ACTION .. 45
CONCLUSION .. 46
Was Burns a partner in the Coyotes enterprise? . 46
Does McMillan have a cause of action? Specifically, was he ousted from the partnership or did he voluntarily withdraw? . 50
INTRODUCTION :
[ 1 ] The plaintiff, Stephen Burns, sues the defendants in his personal capacity and as the assignee of the rights of Douglas Alan McMillan.
[ 2 ] The plaintiff alleges that he conceived of and he and McMillan planed to embark upon a once-in-a-lifetime business opportunity in partnership. They were going to create a "category breaking" nightclub/bar. This would be based upon a microbrewery on the premises and an attached gymnasium. They considered that the ideal location was being offered and that the combination of location, innovative presentation, and the diverse talents of the principals made the project unstoppable. They invited Champagne to join them because of his previous practical experience in managing bars.
[ 3 ] The plaintiff alleges that the three embarked upon a partnership. This partnership retained the services of the defendant Sohi to assist them in the set-up of their business including the negotiation of a lease with a landlord named Chrusz.
[ 4 ] The plaintiff alleges that when the full potentialities of the business plan became known to Champagne and Sohi the latter persons, while supposedly negotiating with the landlord on behalf of the partnership, struck a deal with the landlord the result of which was that a lease was given to Champagne for the bar which he called Coyotes. This he is said to have run very profitably for seven years while Sohi ended up being his landlord receiving the fruits of the lease he had negotiated on behalf of the partnership at substantially higher than market rates. Sohi also became a partner in the adjoining hotel.
[ 5 ] The plaintiff submits that the hotel business opportunity was one which came to the attention of Sohi while he was acting for the partnership and should have accrued to the partnership.
[ 6 ] The plaintiff argues that the actions of the defendants Champagne and Sohi were in breach of the fiduciary duty owed by the said defendants to the plaintiff and McMillan.
ISSUES:
[ 7 ] Burns submits that the issues to be determined are:
Was Burns a partner in the Coyote venture?
Was McMillan a partner in the Coyotes Venture?
Did Sohi act in any capacity for the partnership?
Did Sohi and/or Champagne divert gains or usurp an opportunity which had been available to the partnership?
In the alternative, if Burns is not found to have been a partner, can he stand in McMillan’s shoes and sue Champagne and Sohi for damages sustained by McMillan?
WAS MCMILLAN A PARTNER IN THE COYOTES VENTURE?
[ 8 ] Everyone agrees that McMillan and Champagne discussed opening a nightclub in partnership. The nightclub was to be located on the site of a former nightclub called the Silverado. The nightclub was subsequently called Coyotes.
DID SOHI ACT IN ANY CAPACITY FOR THE PARTNERSHIP?
[ 9 ] Burns, McMillan and Champagne, while disputing amongst themselves whether Burns was a member of the partnership, all agree that Sohi was retained as an agent to negotiate the terms of the lease with the Chrusz, the owner of the former Silverado property located at 439 Memorial Ave. in the City of Thunder Bay. Sohi submits that he was retained simply as a consultant by Champagne after McMillan had voluntarily withdrawn from the relationship. His version of these facts does not survive scrutiny.
WAS BURNS A PARTNER IN THE COYOTES VENTURE?
CASE FOR THE PLAINTIFF
Stephen Burns:
[ 10 ] Stephen Burns and his brother Dennis Burns say he was a partner. McMillan, Champagne, Sohi, and their witnesses Chrusz and McNabb deny that Burns was a partner.
[ 11 ] Burns testified that he and McMillan met in 1988, attended university together and shared accommodation for a number of years. They were best friends. Both were budding entrepreneurs, on the lookout for business opportunities. Neither had any money.
[ 12 ] In 1992 Burns met Sharan Sohi when Burns was working at a Chinese Restaurant, “Simplee Chinese”, on Syndicate Avenue. At that time there were three Simplee Chinese restaurants: the Syndicate Avenue store, the Intercity Mall store which was operated by Silver Wong as franchisee and the Keskus Mall store operated by another franchisee. Sharan Sohi was the franchisor of these restaurants.
[ 13 ] In addition to his ownership of the right to franchise Simplee Chinese restaurants, Sohi was also the franchisee of some Taco Time restaurants.
[ 14 ] In September 1993 Silver Wong withdrew from business and Burns took over his Intercity Mall franchise.
[ 15 ] Burns considered that he and Sohi were friends. He says that as a business graduate he was able to assist Sohi in developing better business practices. On the other hand Sohi was able to assist Burns with the practical requirements of running a business which Burns was finding exhausting.
[ 16 ] In June of 1994 McMillan returned to Thunder Bay. At this time Burns was busy trying to get his business, the Intercity Mall "Simpee Chinese" off the ground.
[ 17 ] Burns says he suggested to Sohi that Burns purchase the equipment at the Keskus Mall location and relocate on Red River Rd. He bought the equipment but Sohi prevailed upon him to attempt to resurrect the Keskus Mall location, claiming he would waive the franchise fees to assist Burns.
[ 18 ] The store in the Keskus Mall was located in an area which was destined for urban redevelopment and eventual extinction. The Eaton's store, the keystone to business in the area, was being closed. If the Simplee Chinese location could be made profitable it would have some market value.
[ 19 ] The circumstances dictated that all of Burns’ energy was directed towards his businesses.
[ 20 ] McMillan returned to Thunder Bay with a dream. He wanted to start a nightclub which would incorporate an on-site brewery. McMillan had been employed as a Brewer at such a restaurant called the "Brewpub". He was confident of his ability to produce beer which would attract customers.
[ 21 ] Burns became quite interested in the concept of a brewpub. He noted that as a general rule the cost of beer is a constant throughout the industry. In order to acquire a competitive advantage a bar must offer something unique. Beer made by a microbrewery on site was not only unique but it reduced the cost of beer thereby giving that establishment an economic edge.
[ 22 ] Burns says that he suggested a “partnership”: if McMillan would help Burns in his restaurant Burns would work with McMillan on his nightclub/brewery. In the meantime Burns and his girlfriend would provide McMillan with accommodation. I have put the word “partnership” in quotations deliberately. Although this is the word Burns used, there was never any suggestion that McMillan would thereby become Burn’s business partner in Simplee Chinese. The question is whether the understanding was that Burn’s would be a business partner in McMillan’s bar.
[ 23 ] McMillan worked in Burn’s restaurants. Burns and McMillan were on the lookout for ideas for a bar.
[ 24 ] Burns says that he and McMillan recognized that while McMillan could bring brewing skills to the business and Burns could assist in incorporating and organizing the business, Burns’ energies were being absorbed by his own business and it was imperative to have a partner who was familiar with liquor licensing board regulations and the operation of a large bar.
[ 25 ] Burns says that McMillan had previously worked with Champagne and that McMillan suggested that they bring Champagne in as a partner.
[ 26 ] Burns says that Burns, McMillan and Champagne met and agreed to become partners in the enterprise. They looked at potential locations and spoke to potential investors.
[ 27 ] In February 1995 McMillan, Burns, his girl friend, Tina Kanellos, and Sohi attended a trade show in Toronto. McMillan and Burns remained a day or two afterwards so they could tour restaurants and bars in search of innovative ideas. Burns says that this trip was at his expense on the assumption that he was a partner with McMillan.
[ 28 ] Burns says that the day following their return from the trade show he went to see Sohi. Burns says that while he was with Sohi, Burns learned that a popular nightclub location on Memorial Avenue, previously known as the Silverado, which had burned down, was available. Burns says that he wanted to know more and that Sohi immediately called Michael McNabb a commercial realtor and confirmed that the location was open to lease but that the owner did not want another bar on the premises because of difficulties he had encountered with the prior establishment.
[ 29 ] Burns says he called McMillan and told him to come down to Sohi's office. He also called Champagne but he was working. McMillan, Burns and Sohi met at Taco Time. They understood that other groups were vying for the location and that they would have to move fast.
[ 30 ] Burns says that there was a second meeting that day at a bar called "On Deck". This meeting consisted of McMillan, Burns and Champagne. They ate at the bar and then moved to Burns apartment. They advised Champagne of the availability of the location. Burns suggested that they retain Sohi to act for them in creating the deal. Champagne did not know Sohi at the time. Burns maintains that the three confirmed that they wanted to proceed as partners. Champagne would be managing partner with 50% McMillan and Burns would split the other 50%.
[ 31 ] They considered that since the owner of the site would have to rebuild in any event the cost of renovations could be kept to a minimum and their cash needs would be low. They agreed that, if necessary, they would pay more than the going rate on the lease in order to encourage the owner to rebuild as a bar. Each agreed to speak to potential investors to raise the money required.
... (continues verbatim)
[ 243 ] Under these circumstances McMillan has no cause of action against either Champagne or Sohi and therefore Burns has no cause of action against the defendants either personally or as assignee of McMillan’s rights.
[ 244 ] The action will be dismissed.
____________ ”original signed by”_ ___
The Hon. Mr. Justice J. deP. Wright
Released: April 3, 2012
COURT FILE NO.: CV-03-0841
DATE: 2012-04-03
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
STEPHEN BURNS, Plaintiff
- and –
GERALD CHAMPAGNE, SHARAN SOHI, 1103513 ONTARIO LIMITED and DOUGLAS ALLEN McMILLAN, Defendants
REASONS FOR JUDGMENT
J. deP. Wright J.
Released: 03 April, 2012
final
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