AIMCO RE GP Corp., as General Partner for and on Behalf of AIMCO Realty Investors LP v. CHC MPAR Church Holdings Inc. as General Partners for and on Behalf of CHC MPAR (412 Church) Development Limited Partnership MPAR Holdings Inc. v. CHC Realty Development Corp. et al.

[Indexed as: AIMCO RE GP Corp. v. CHC MPAR Church Holdings Inc.]

Ontario Reports

Ontario Superior Court of Justice

Penny J.

November 12, 2019

149 O.R. (3d) 52 | 2019 ONSC 5864

Case Summary

Contracts — Interpretation — Shotgun buy-sell provision — Corp-oration entering into co-ownership agreement with limited partnership to acquire and develop specific property — Corporation exploring opportunity to purchase neighbouring property with one owner of general partner without notifying other owner of general partner — [page53] Corporation initiating offer under shotgun clause and applying for specific performance — Respondent claiming oppression remedy and remedies for breaches of fiduciary duty, confidence and contract — Legal relation-ship between the parties not giving rise to oppression remedy or to fiduciary or contractual duties as alleged.

Corporations — Oppression — Corporation entering into co-ownership agreement with limited partnership to acquire and develop specific property — Corporation exploring opportunity to purchase neighbouring property with one owner of general partner without notifying other owner of general partner — Corporation initiating offer under shotgun clause and applying for specific performance — Respondent claiming oppression remedy and remedies for breaches of fiduciary duty, con-fidence and contract — Legal relationship between the parties not giving rise to oppression remedy or to fiduciary or contractual duties as alleged.

Partnership — Partnership agreement — Fiduciary duties — Corp-oration entering into co-ownership agreement with limited partnership to acquire and develop specific property — Corporation exploring opportunity to purchase neighbouring property with one owner of general partner without notifying other owner of general partner — Corporation initiating offer under shotgun clause and applying for specific performance — Respondent claiming oppression remedy and remedies for breaches of fiduciary duty, confidence and contract — Legal relationship between the parties not giving rise to oppression remedy or to fiduciary or contractual duties as alleged.

A general partnership was formed by CHC Realty Development Corp. ("CHC") and MPAR Holdings Inc. ("MPAR"), resulting in the formation of a limited partnership, CHC MPAR LP, for the purpose of acquiring and developing certain parcels of land in Toronto for student housing. MPAR was given the opportunity to invest in the project as a limited partner but chose not to do so. Since more capital was required, CHC approached the applicant, AIMCO, who was prepared to become involved, but only as a 50 per cent co-owner and not as a limited partner. In July 2014, AIMCO and CHC MPAR LP entered into a co-ownership agreement. Purchase of the parcels completed in August 2014, with each of AIMCO and the limited partners in CHC MPAR putting up half the money. A rezoning application for the parcels had previously been rejected by the city, and in December 2015 an appeal to the Ontario Municipal Board was dismissed. The board's decision specifically commented on how the proposed development would have negatively affected a neighbouring property. The decision left insufficient time within the terms of the limited partnerships for the project to be redesigned for a renewed approvals process. AIMCO and CHC, without telling MPAR, investigated the possibility of purchasing the neighbouring property. MPAR, without the knowledge of the co-owners, subsequently began to market the original parcels and claimed to have received an unsolicited offer of $28 million. Following extended negotiations an AIMCO subsidiary acquired the neighbouring property for $6 million. After MPAR learned of the closing it demanded that the neighbouring property be held on behalf of the "co-ownership". AIMCO initiated an offer under a shotgun clause of the co-ownership agreement to purchase the half interest of CHC MPAR (the limited partnership and its general partner) in the original parcels (or sell its own interest to CHC MPAR) for $14 million. CHC MPAR purported to accept AIMCO's sale offer but only on the basis that the neighbouring property be included. As no authorized response was received to the shotgun offer, AIMCO's purchase offer was, under the terms of the co-ownership agreement, deemed to be accepted on April 15, 2019 and the transaction was required to [page54] close by June 10, 2019. CHC MPAR did not attend the scheduled closing. AIMCO regarded that failure as a breach of the co-ownership agreement and applied for an order directing CHC MPAR to complete the transaction. MPAR applied to dismiss AIMCO's application and obtain relief based on oppression and breaches of fiduciary duty, confidence and contract.

Held, the AIMCO application should be allowed; the MPAR application should be dismissed.

The issues raised in the MPAR application were effectively the only defence raised to AIMCO's application for specific performance of its shotgun offer. With respect to oppression, MPAR was neither a co-owner, nor a partner, nor a joint venturer. It was a 50 per cent shareholder in the general partner of a limited partnership that was a co-owner. The general partner shareholders' agreement specifically provided that the two shareholders were not restricted from engaging in or investing in any similar or competitive business and were not required to bring any business opportunity to the partnership. The potential acquisition of the neighbouring property was a business opportunity that neither MPAR nor CHC were required to bring to the partnership, nor did either of them have any right to participate in such an opportunity. Even if CHC's role in the acquisition of that property were capable of attracting the oppression remedy, the conduct was not in fact contrary to MPAR's reasonable expectations as defined by the agreements and was not opp-ressive, unfairly prejudicial or an unfair disregard of MPAR's relevant interest. Further, the remedy of a forced sale of the two sets of parcels, assets owned by AIMCO and the limited partnership, would bear no relationship to that oppression. The same was true for the remedies of a joint auction and an accounting.

AIMCO and CHC owed no fiduciary duties to MPAR so there was no breach of such duties. AIMCO owed no duty of confidence to MPAR. The duties of confidence owed as between CHC and MPAR did not extend to any information relating to the neighbouring property, so there was no breach of any duty of confidence and no basis on which to award the requested remedy of imposing a constructive trust and ordering an accounting.

With respect to allegations of breach of contract, because the co-ownership agreement did not govern the acquisition of property other than the original parcels, the acquisition of the neighbouring property was not analogous to a "corporate opportunity" of the co-ownership, and MPAR was not a party to the co-ownership agreement in any event, AIMCO and CHC owed no obligations of honesty and good faith to MPAR in relation to their pursuit of the acquisition of an entirely different property.

Cases referred to

BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, 2008 SCC 69, 301 D.L.R. (4th) 80, 383 N.R. 119, J.E. 2009-43, 52 B.L.R. (4th) 1, 71 C.P.R. (4th) 303, EYB 2008-151755, 2008 SOACQ para. 10,147, 2008 CCAN para. 10,065, 2009 CCSG para. 51,112, 2009 BCLG para. 78,675, 2009 OCLG para. 51,488, 2009 CCLR para. 200,832, 2009 CSLR para. 900-288, 2009 ACLG para. 79,251, 172 A.C.W.S. (3d) 915; Bhasin v. Hrynew, [2014] 3 S.C.R. 494, [2014] S.C.J. No. 71, 2014 SCC 71, 379 D.L.R. (4th) 385, 464 N.R. 254, [2014] 11 W.W.R. 641, J.E. 2014-1992, 4 Alta. L.R. (6th) 219, 27 B.L.R. (5th) 1, 20 C.C.E.L. (4th) 1, 245 A.C.W.S. (3d) 832, EYB 2014-244256, 2015 CCLG para. 25-556, 2014EXP-3530; Boughner v. Greyhawk Equity Partners Limited Partnership (Millenium), [2013] O.J. No. 227, 2013 ONSC 163 (S.C.J.); Brant Investments Ltd. v. Keeprite Inc. (1991), 1991 CanLII 2705 (ON CA), 3 O.R. (3d) 289, [1991] O.J. No. 683, 80 D.L.R. (4th) 161, 45 O.A.C. 320, 1 B.L.R. (2d) 225, 26 A.C.W.S. (3d) 1261, 1991 SOACQ para. 10,004 (C.A.); Density Group Ltd. v. HK Hotels LLC, [page55] [2012] O.J. No. 3378, 2012 ONSC 3294, 218 A.C.W.S. (3d) 328, 5 B.L.R. (5th) 131 (S.C.J.); Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 CanLII 654 (SCC), [1999] 3 S.C.R. 108, [1999] S.C.J. No. 48, 176 D.L.R. (4th) 257, 245 N.R. 88, [1999] 9 W.W.R. 380, 127 B.C.A.C. 287, 67 B.C.L.R. (3d) 213, 50 B.L.R. (2d) 169, 11 C.C.L.I. (3d) 1, 47 C.C.L.T. (2d) 1, [1999] I.L.R. I-3717, 90 A.C.W.S. (3d) 786; McDonald v. Brookfield Asset Management Inc., [2016] A.J. No. 1263, 2016 ABCA 375; Smithies Holdings Inc. v. RCV Holdings Ltd., [2014] B.C.J. No. 2257, 2014 BCSC 1688; Trimac Ltd. v. C-I-L Inc., 1987 CanLII 3376 (AB KB), [1987] A.J. No. 409, 52 Alta. L.R. (2d) 263, [1987] 4 W.W.R. 719, 79 A.R. 378, 5 A.C.W.S. (3d) 293 (Q.B.)

Statutes referred to

Business Corporations Act, S.O. 1990, c. B.16, s. 248 [as am.]

APPLICATION by one partner for specific performance of a shotgun clause and by other partner for relief based on oppression and other breaches.

Daniel Murdoch and Libby Nixon, for AIMCO RE GP Corp.

No one appearing forCHC MPAR (412 Church) Development Limited Partnership or its General Partner CHC MPAR Church Holdings Inc.

Richard Macklin and J. Daniel McConville, for MPAR Holdings Inc.

Derek J. Bell and Katelyn Ellins, for CHC Realty Development Corp. and CHC Realty Investment Inc.

PENNY J.: —

Overview

[1] There are two competing applications arising out of a co-ownership agreement ("COA") governing the co-ownership of parcels of land at 412 Church, 79 Granby and 81 Granby (the "412 Parcels") in Toronto. The parties to this agreement are the applicant, AIMCO, and a limited partnership, CHC MPAR LP, by its general partner, CHC MPAR GP (collectively "CHC MPAR"). Each of AIMCO and CHC MPAR LP have a 50 per cent interest in the 412 Parcels.

[2] The COA was made in July 2014 for the purpose of purchasing, co-owning and developing the 412 Parcels as student housing. CHC MPAR LP was formed for the purpose of holding a 50 per cent ownership interest in the 412 Parcels. The acquisition of the 412 Parcels was concluded at a price of $10 million. Each of AIMCO and CHC MPAR LP's limited partners put up half the money for the purchase price.

[3] CHC MPAR GP is the general partner for the limited partnership. The general partner is 50 per cent owned by each of CHC Realty Development Corp. ("CHC") and MPAR Holdings [page56] Inc. ("MPAR"). Neither MPAR nor CHC are investors in CHC MPAR LP. The investors are the limited partners: Woodbourne Capital Management, which owns 52 per cent of the limited partnership units; and another limited partnership, CHC Realty Development ("412 Church") Finance LP ("Finance LP"), whose limited partners own the remaining 48 per cent of the limited partnership units. MPAR had the opportunity to invest in limited partnership units but chose not to do so.

[4] A corporate chart showing the relationship between all the relevant entities is attached to these reasons as Appendix A.

[5] MPAR Developments Inc. (a company sharing common ownership with MPAR) was hired as the development manager of the student housing project. Its responsibilities included obtaining all necessary municipal approvals for the development of the 412 Parcels. There was, however, opposition to the Co-Owners' proposed development, including from the owner of 418 Church, an adjacent property. The Co-Owners' development proposal was turned down by the committee of adjustments. Finally, the Co-Owners' appeal to the Ontario Municipal Board was dismissed in December 2015. The OMB specifically commented on the incompatibility of the Co-Owners' development plans for the 412 Parcels with the existing use and status of the property at 418 Church.

[6] The denial of development approval at the OMB was a devastating blow to the Co-Owners' plans. It effectively brought those plans to a grinding halt. AIMCO and CHC lost confidence in MPAR Developments, MPAR and their owners. MPAR Developments' contract as development manager was terminated in 2016. AIMCO and CHC, independently of MPAR, explored the possibility of acquiring 418 Church. These efforts were successful. The limited partners of CHC MPAR LP were offered the opportunity of a 50 per cent participation in the 418 Church acquisition. They declined. No such offer was extended to MPAR as 50 per cent owner of CHC MPAR GP. AIMCO and CHC entered into an agreement of purchase and sale with the owner of 418 Church in July 2017. CHC later assigned its rights under to this agreement to AIMCO. That agreement closed in June 2018 and AIMCO became the owner of 418 Church.

[7] The COA contains a "shotgun" clause. In March 2019, AIMCO served an initiating notice to exercise its right to acquire the limited partnership's 50 per cent interest in the 412 Parcels or be bought out by the limited partnership. The offered price was $14 million (based on an implied value of $28 million for the 412 Parcels as a whole). Neither of CHC MPAR LP or GP responded to the shotgun notice. Thus, AIMCO's position in the [page57] first application is that, under the terms of the COA, AIMCO's shotgun purchase offer was deemed to be accepted. AIMCO therefore seeks an order directing CHC MPAR to complete the transaction as required by the COA and sell the 412 Parcels to AIMCO for $14 million.

[8] The second application has been brought by MPAR.

[9] MPAR opposes the AIMCO offer and its application for specific performance of the shotgun offer. CHC supports AIMCO's offer. The limited partners of CHC MPAR LP also support accepting the AIMCO offer to purchase the limited partnership's interest in the COA for $14 million.

[10] CHC MPAR GP is deadlocked because CHC and MPAR, both 50 per cent shareholder of the general partner, cannot agree about the AIMCO offer. As a result of this deadlock, CHC MPAR GP did not respond to the AIMCO shotgun notice and has not appeared in this litigation. Rather, MPAR itself purported to exercise CHC MPAR's right under the COA to acquire AIMCO's interest in the 412 Parcels for $14 million on the further condition that the additional parcel of land, 418 Church, acquired by AIMCO (which is not subject to the COA), be included in the acquisition.

[11] In its application MPAR relies on the oppression remedy and also alleges breaches of contract, fiduciary duty and confidence against AIMCO and CHC to support various remedies, including leave to bring a derivative action on behalf of CHC MPAR GP and the limited partnership. By the end of the hearing, however, MPAR had abandoned its application for leave to commence a derivative action and narrowed the range of remedies it is seeking to the following:

(1) Regarding the claim for oppression:

(a) leave to issue and register a certificate of pending litigation and/or caution upon 418 Church and 412 Church;

(b) MPAR shall purchase all of AIMCO's and CHC MPAR's interest in the 412 Parcels and 418 Church for $34 million, on the basis of purchasing the 412 Parcels for $28 million and 418 Church for $6 million, within 60 days. MPAR shall also pay to the limited partners of CHC MPAR any difference in return the limited partners would have received had the AIMCO shotgun notice closed in accordance with its terms;

(c) in the alternative, the 412 Parcels and 418 Church shall be jointly auctioned for the benefit of the "Co-Ownership" in an agreed upon or court supervised process. [page58]

(2) In the alternative, in regard to the claims for breach of fiduciary duty and breach of confidence:

(a) a 50 per cent interest in 418 Church shall be held in constructive trust in favour of CHC MPAR LP, and AIMCO shall account to CHC MPAR LP for the profit earned on 418 Church.

(3) In the further alternative, in regard to the claim for breach of contract:

(a) a trial on damages for MPAR's loss of opportunity.

[12] The facts upon which the AIMCO application is based are not in dispute. Nor is it seriously contended that MPAR's purported response to AIMCO's shotgun offer was either valid or enforceable.[^1] Rather, the central issue in this dispute is the circumstances of AIMCO's acquisition of 418 Church. MPAR claims that the opportunity to acquire 418 Church was in the nature of a "corporate opportunity" of the Co-Owners' and that it was unlawful for AIMCO, with CHC's knowledge and assistance, to exclude MPAR from the negotiations and to acquire 418 Church for AIMCO's sole benefit. MPAR therefore asks that AIMCO's application be dismissed and that MPAR's request for relief based on oppression and breaches of fiduciary duty, con-fidence and contract be granted.

[13] Accordingly, the principal issues on this application may be stated as follows:

(1) Oppression

(a) Did AIMCO and/or CHC engage in conduct which is "oppressive" within the meaning of s. 248 of the Ontario Business Corporations Act [S.O. 1990, c. B.16]?

(b) If the answer to this question is yes, are the remedies sought, i.e.,

(i) MPAR's purchase of the 412 Parcels and 418 Church for $34 million, or [page59]

(ii) a joint auction of the 412 Parcels and 418 Church for the benefit of the "Co-Ownership," available to MPAR and otherwise appropriate in the circumstances?

(2) Breach of Fiduciary or Confidential Duties

(a) Did AIMCO and/or CHC owe fiduciary duties or duties of confidence to MPAR?

(b) If the answer to this question is yes, did AIMCO and/or CHC breach any duties that were owed to MPAR? and

(c) If the answer to this question is yes, is the remedy of a declaration of a constructive trust in favour of CHC MPAR LP, and requiring AIMCO to account to CHC MPAR LP for the profit earned on 418 Church, available to MPAR and otherwise appropriate in the circumstances? or

(3) Breach of Contract

(a) Did AIMCO and/or CHC breach any contractual obligations owed to MPAR?

(b) If the answer to this question is Yes, is the remedy of a trial to determine damages for MPAR's loss of opp-ortunity available to MPAR and otherwise appropriate in the circumstances?

Background

[14] Lying at the heart of MPAR's legal claims in their application are the circumstances surrounding AIMCO's acquisition of 418 Church. Accordingly, I will in this section include a summary of the facts leading up to the AIMCO acquisition and shotgun offer. There are several critical agreements governing the parties' business relationship. I will outline these agreements in this section; however, specific details of these agreements will be dealt with later in my analysis of the relevant issues.

[15] MPAR's principal, Matthew Rossetto, identified the 412 Parcels as a possible site for student housing and entered into agreements for the purchase of the 412 Parcels in 2012. MPAR needed financing, however, and so approached CHC because it had experience in financing student housing developments.

[16] MPAR and CHC created CHC MPAR GP to act as the general partner for a limited partnership to be formed. They are 50/50 shareholders in the general partner. There is a general partner shareholders' agreement. [page60]

[17] CHC was responsible for finding financing for the proposed development. The limited partnership, CHC MPAR LP, was formed and CHC found investors willing to invest $2.36 million. This was done through a subscription for limited partnership units in Finance LP, which in term held limited partnership units in CHC MPAR LP (ultimately, 48 per cent). There is a term sheet, a subscription agreement and a limited partnership agreement. These agreements restricted property ownership and development to the 412 Parcels only. The term of the agreement, during which there had to be substantial completion of the student housing project, was four years.

[18] Additional capital was required. CHC arranged for Woodbourne to invest $2.6 million by way of limited partnership units in CHC MPAR LP (52 per cent). Woodbourne received the limited partnership agreement, a subscription agreement and a financing package. Again, the ownership and development was restricted to the 412 Parcels only and substantial completion within four years.

[19] MPAR was given the opportunity to invest in this project as a limited partner. It chose not to do so. MPAR's financial interest in this project was restricted to (a) management fees payable to MPAR Development; and (b) a portion of a potential profit share upon successful completion of the development of the 412 Parcels. The profit share would only become payable to CHC MPAR GP if certain financial preconditions were met (para. 6.12 of the COA). These preconditions were never met. There is no claim for loss of profit share or profit share opportunities and no evidence about the likelihood or possible amount of any profit share being paid.

[20] More capital still was required. CHC approached AIMCO. AIMCO also had experience with the development of student housing projects and had worked with CHC before. AIMCO was prepared to become involved but only as a 50 per cent co-owner, not as a limited partner. Thus, AIMCO and CHC MPAR LP entered into the COA in July 2014. As a result, CHC MPAR GP assigned its interest in the 412 Parcels to AIMCO and CHC MPAR LP; each held an undivided 50 per cent interest in the 412 Parcels. The purchase of the 412 Parcels closed in August 2014 for $10 million: AIMCO put up half the money; the limited partners in CHC MPAR put up the other half.

[21] Before construction could start on the student housing project, the 412 Parcels had to be rezoned. MPAR Developments' rezoning application had been rejected by the City in May 2014. In September 2014, MPAR Developments submitted an appeal of the City's decision to the Ontario Municipal Board. On December 23, 2015, the OMB dismissed the appeal. The OMB decision [page61] specifically commented on the 418 Church property and that the proposed development of the 412 Parcels would have a negative impact on 418 Church. The parties were shocked by the OMB decision. One of the consequences of the OMB decision was that the project could no longer be completed with the term of the limited partnerships. The two limited partnerships, Finance LP and CHC MPAR LP, expired on May 30, 2018 and January 9, 2019. This did not leave sufficient time to redesign the project, go through the approvals process all over again and achieve substantial completion of the project by those deadlines.

[22] The loss of the OMB appeal caused AIMCO and CHC to lose confidence in MPAR and MPAR Developments. AIMCO did not want MPAR "tying up" the 418 Church site or to be "beholden" to MPAR. CHC and AIMCO decided on their own to investigate whether 418 Church might be available for purchase. CHC and AIMCO recognized that the value of the 412 Parcels would be higher if they could be developed without opposition from a third-party owner of 418 Church. They wanted 418 Church in "friendly" hands.

[23] From January to July 2016, CHC and representatives of AIMCO discussed and then made approaches to the owners of 418 Church. Although MPAR made similar proposals to CHC and AIMCO, MPAR was discouraged from getting involved. CHC and AIMCO did not initially tell MPAR they were actively negotiating with the owner of 418 Church.

[24] Through September, MPAR was asked for and provided financial and budget information about the 412 Parcels project, 418 Church and various legal documents. AIMCO and CHC analyzed their relationship with MPAR Developments and how to terminate that relationship. AIMCO wanted to get 418 Church "under control" before terminating MPAR Developments because it did not want MPAR "to possibly get in the way". This strategy was not disclosed to MPAR.

[25] In October 2016, AIMCO terminated the development management agreement with MPAR Developments. In November 2016, CHC advised MPAR that AIMCO intended to pursue an acquisition of 418 Church. MPAR says it was led to believe this was to be for the benefit of the project and the parties to the COA. MPAR, however, privately expressed concern to CHC that AIMCO might acquire 418 Church on its own and use the shotgun provision under the COA to buy out CHC MPAR LP and exclude it from the benefit of future development opportunities at this location.

[26] By December 2016, AIMCO and CHC thought they had a deal to buy 418 Church. A definitive agreement was not signed immediately, however, and it soon became apparent that there were [page62] internal issues within the corporation that owned 418 Church which created an obstacle for the completion of the acquisition.

[27] In March and April 2017, MPAR was asked to contact Mr. Aquino, a principal of the owner of 418 Church, and encourage him to conclude the deal. MPAR met with Aquino as requested.

[28] In the spring of 2017, MPAR, without the knowledge of the Co-Owners, began to market the 412 Parcels. On July 26, 2017, MPAR claimed that it had received an "unsolicited" offer to purchase the 412 Parcels. The offer was to buy the 412 Parcels for $28 million with a three-year vendor take back mortgage of $13 million and a 4 per cent commission (2.15 per cent payable to MPAR and 1.85 per cent to Royal LePage). MPAR took the position that this offer was "more profitable" than acquiring 418 Church and building a student housing project.

[29] The following day, Aquino signed the agreement to sell 418 Church; the buyer was contemplated to be an AIMCO-related entity. Through the summer, there were discussions with MPAR about whether AIMCO was prepared to buy out CHC MPAR but these did not progress. Although MPAR describes the negotiations to buy 418 Church as "secret", by August 2017 MPAR had copies of both the letter of intent and the agreement of purchase and sale for the 418 Church deal. MPAR continued to urge AIMCO and CHC to accept the unsolicited offer of $28 million.

[30] In August 2017, it was made clear to MPAR that AIMCO would hold on to its position in the 412 Parcels and purchase 418 Church as a standalone property. MPAR still wanted AIMCO to buyout CHC MPAR for the equivalent of the "unsolicited" offer of $28 million.

[31] In September 2017, it was again made clear to MPAR that CHC MPAR was not going to be part of the deal to acquire 418 Church.

[32] In October, conditions under the agreement to buy 418 Church had to be waived. CHC and AIMCO waived the conditions without prior consultation with MPAR. They also changed the proposed buyer of 418 Church to a CHC entity because AIMCO did not want to become embroiled in a potential dispute with the shareholders of the owner of 418 Church, who were not of one mind about the sale of 418 Church.

[33] CHC initially paid the $50,000 deposit for the 418 Church purchase from an account of CHC MPAR, although this was the result of an internal error and was later reversed.

[34] In March 2018, MPAR advised CHC and AIMCO that it was interested in making an offer to purchase both the 412 Parcels and 418 Church. Later that month, AIMCO advised that it was not interested in selling. [page63]

[35] In April, there were discussions with AIMCO about CHC getting a bonus for closing the 418 Church deal. The evidence, however, is that no bonus was ever finalized or paid. At around the same time CHC approached the limited partners of CHC MPAR about whether they wanted to participate in a deal involving the acquisition of 418 Church. The limited partners did not wish to do so. AIMCO and CHC also had discussions about a "solution" to the MPAR "relationship". MPAR was not included in any of these discussions.

[36] In June 2018, the internal disputes between the shareholders of the owner of 418 Church seemed to have been resolved so CHC assigned the 418 Church deal back to AIMCO. The closing was scheduled for June 22, 2018. On June 22, an AIMCO sub-sidiary acquired 418 Church for $6 million. The closing, and the circumstances leading up to the closing, were not shared with MPAR until after the fact.

[37] When MPAR learned the deal had closed, it sent a letter demanding that 418 Church be held on behalf of "the Co-Ownership". There were acrimonious meetings in December 2018 and February 2019 which did not produce any resolution.

[38] AIMCO initiated a purchase (or sale) offer under the COA shotgun clause in March 2019. It offered to purchase CHC MPAR's 50 per cent interest in the 412 Parcels (or sell its interest to CHC MPAR) for $14 million (i.e., half of $28 million). This was the same as the amount of the unsolicited offer previously advocated by MPAR but without the $13 VTB mortgage and the hefty commission payable to MPAR and Royal LePage. The limited partners wanted CHC MPAR to accept AIMCO's offer to purchase.

[39] Contrary to the wishes of CHC and the limited partners of CHC MPAR, MPAR purported to accept AIMCO's sale offer for $14 million on behalf of CHC MPAR but only on the basis that the properties subject to the transaction include 418 Church, which had been acquired by AIMCO. Notwithstanding its opposition to this offer being made, CHC asked MPAR to explain how it proposed to finance the transaction and how it proposed to deal with the necessary liquidation and dissolution of the limited partnerships. MPAR has never answered these questions. Sub-sequently, counsel for CHC and Woodbourne wrote to AIMCO and MPAR indicating that MPAR had no authority to accept the sale contained in AIMCO shotgun offer and that they supported AIMCO's offer to purchase.

[40] As no authorized response was received to the shotgun offer, AIMCO's purchase offer was, under the terms of the COA, deemed to be accepted on April 15, 2019 and the transaction was required to close by June 10, 2019. CHC MPAR did not attend [page64] the scheduled closing. AIMCO regarded that failure as a breach of the COA and issued its application in this litigation. CHC MPAR did not file a notice of appearance in either application.

Analysis

[41] As noted above, as the only "defence" to AIMCO's app-lication to enforce its shotgun offer is the allegations advanced in the MPAR application, I will focus in my analysis on the MPAR allegations.

1. Oppression

(a) Was there oppressive conduct?

[42] MPAR argues that it was, vis-à-vis its status as a 50 per cent shareholder in CHC MPAR GP, oppressed when CHC, "it's 50% partner, deliberately cut MPAR out of a crucial transaction related to their joint venture knowing that MPAR wanted to be involved, misled MPAR about the 418 Church purchase, and ultimately lied to MPAR to hide the closing of the 418 Church deal, because 'AIMCO did not want MPAR involved'".

[43] In addition, MPAR alleges that CHC engaged in other acts of oppression. CHC

(a) failed to give MPAR the opportunity to finance the purchase of 418 Church contrary to s. 4.0(4) of the general partner shareholders agreement; and

(b) tried to negotiate a secret commission for itself for assisting AIMCO to acquire 418 Church.

[44] In order to place these claims in context, I will first review the fundamental principles of oppression. I will then consider the role of the general partner in this limited partnership. Then I will review the relevant provisions of the general partner shareholders' agreement governing the relationship between CHC and MPAR.

[45] The test for oppression, articulated in BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, 2008 SCC 69, at para. 89, involves two parts:

(1) whether the evidence supports the reasonable expectations asserted by the claimant; and

(2) whether the evidence establishes that those reasonable expect-ations were violated by conduct falling within the terms "oppression, unfair prejudice or unfair disregard of a relevant interest". [page65]

[46] It is well settled that one of the best indicators of a party's reasonable expectations is the agreements they themselves entered into in the context of the relationship in issue.

[47] Oppressive conduct is conduct which is burdensome, harsh and wrongful. Conduct is unfairly prejudicial if the conduct pre-judices rights or disregards interests unfairly. Oppression carries the sense of conduct that is coercive and abusive and is suggestive of bad faith, although bad faith, dishonesty and intention to harm are not necessary requirements for conduct to be oppressive. Unfair prejudice admits of a less culpable state of mind, that nevertheless has unfair consequences. Finally, unfair disregard of relevant interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholder's reasonable expectations: BCE Inc., at para. 67.

[48] The limited partners were the equity investors in this undertaking. They are analogous to shareholders within the limited partnership structure. In order to maintain their limited liability, much like shareholders, the limited partners did not manage the business and affairs of the partnership. They appointed and contracted with the general partner to do so.

[49] Some matters, however, required a majority vote of the limited partners. These included

(a) engaging in any business other than the defined purpose of the limited partnership (owning and developing the 412 Parcels);

(b) incurring debt for reasons outside of the defined project (owning and developing the 412 Parcels); and

(c) amending the terms of the COA.

[50] Other matters required a special vote requiring 66 2/3 per cent approval of all limited partners. These included

(a) extending the term of the limited partnership; and

(b) any amendment to the agreement which would have the effect of increasing a limited partner's financial commitment without written consent.

[51] The general partner was required to exercise its powers and discharge its duties honestly, in good faith and in the best interest of the partnership and to exercise the care, diligence and skill of a prudent and qualified administrator.

[52] It is well established, apart from the express terms of its agreement with the limited partners in this case, that the general partner in a limited partnership is a fiduciary vis-à-vis the limited partners and the partnership: L.R. Hepburn, Limited Partnerships [page66] (2005), pp. 3-5 to 3-8; Boughner v. Greyhawk Equity Partners Limited Partnership (Millenium), [2013] O.J. No. 227, 2013 ONSC 163 (S.C.J.), at paras. 56 to 63, per Morawetz J. (as he then was).

[53] MPAR variously describes itself as a partner, a joint-venturer and a co-owner (or member of the "co-owner group"). However, these terms obscure the nature of the specific relationship these parties agreed to in sophisticated legal documents drafted with the benefit of legal counsel.

[54] MPAR was not a co-owner; it was a 50 per cent shareholder in the general partner of a limited partnership that was a co-owner. MPAR put no equity into this undertaking. It remains, however, the only participant that has received any money in the form of monthly development management fees paid to its affiliate MPAR Developments.

[55] MPAR is not a partner. It acquired no limited partnership units. MPAR holds 50 per cent of the shares of a partner.

[56] Nor is MPAR a joint venturer. The general partner shareholders' agreement specifically provides, in para. 1.09, that "nothing in this Agreement shall be deemed in any way or for any purpose to constitute any party the agent or partner of another party in the conduct of any business or otherwise or a member of a joint venture or joint enterprise of any other party".

[57] The shareholders' agreement also stipulates that the two shareholders are not restricted from engaging in any similar or competitive business or investing in a similar or competitive business and are not required to bring any business opportunity to the partnership. Paragraph 6.02 provides in full:

Except as otherwise agreed to by the Shareholders, none of the Shareholders or their Affiliates, or their respective directors or officers, shall be:

(a) restricted from engaging in or otherwise being involved with any business that is similar to or competitive with the Project;

(b) restricted from investing in any person engaged in a business that is similar to or competitive with the Project; or

(c) required to bring any business opportunity to the partnership, and nothing herein confers upon any shareholder any right to participate in such opportunity, or any interest in such opportunity,

and no action or omission permitted in accordance with the foregoing paragraphs shall be impugned or challenged on the basis of conflict of interest or breach of fiduciary duty.

[58] There is no evidence of any "corporate act" done by CHC MPAR GP whatsoever, much less an act that is oppressive of MPAR's rights and interest. While I tend to agree with MPAR that a "corporate act" is not the only conduct that could result in [page67] the application of the oppression remedy and that the conduct of a co-shareholder might, in some circumstances, qualify as oppressive, this is not one of those circumstances.

[59] MPAR's obligation was to cause the general partner to act in the best interests of the partnership and the limited partners. The "partnership" had no authority to acquire or develop any property other than the 412 Parcels. A vote of the limited partners was required to expand the scope of the project. A special vote was required to extend the term or to increase the limited partners' financial commitment. Although no vote was ever held (MPAR never proposed one, or even sought out the limited partners to discuss the matter), the evidence is unchallenged that the limited partners did not want to add 418 Church to the project, advance more funds for this acquisition or extend the term.

[60] The potential for an acquisition of 418 Church is in no way analogous to a corporate opportunity in these circumstances. The potential acquisition fell squarely into the exclusions expressly contemplated by the agreements with the limited partners and in the general partner shareholders' agreement. The potential acquisition was a business opportunity that neither MPAR nor CHC were required to bring to the partnership; nor did either of them have any "right" to participate in such an opportunity.

[61] CHC was, I grant, not at all times entirely forthright with MPAR during the events of 2016 to 2018. I am satisfied, however, that CHC was, throughout, attempting to act in the best interests of the limited partners. I am not able to say the same about MPAR.

[62] It is clear than in promoting the unsolicited offer to buy the 412 Parcels (under which MPAR would enjoy immediate participation in commissions of over $1 million, while the limited partners would, because of the VTB mortgage, presumably have to wait three more years for half their money) over the potential 418 Church acquisition, MPAR was focused solely on its own interest, not that of the limited partners. Similarly, the limited partners were not prepared to extend the term of the project and were not prepared to advance more money into the partnership to finance the 418 Church acquisition. The limited partners wanted to accept AIMCO's shotgun offer. Contrary to the limited partners' interests, MPAR (which has no investment at risk) has, in pursuit of his own interests, tied up the limited partners' investment well past the date upon which they were entitled to their money back and denied them the benefit of the shotgun offer which was acceptable to them.

[63] Thus, even if I were prepared to treat CHC's role in the acquisition of 418 Church as capable of attracting the oppression [page68] remedy, the conduct was not in fact contrary to MPAR's reasonable expectations as defined by the agreements it signed, and was not oppressive, unfairly prejudicial or an unfair disregard of MPAR's relevant interest.

(b) Is MPAR entitled to acquire the Properties for $34 million?

[64] Even if I were prepared to find that CHC's conduct was contrary to MPAR's reasonable expectations and was oppressive of MPAR's interests, the remedies sought in relation to the alleged oppression would not be available. I say this for three reasons:

(1) CHC does not own and did not pay for the 412 Parcels or 418 Church;

(2) the remedies sought would be, by necessity, levied against the entities that do own these properties, AIMCO and CHC MPAR LP, not CHC; and

(3) MPAR has not argued for, and has no basis for, an oppression claim against AIMCO or the limited partnership.

[65] The evidence is clear that AIMCO and the limited partners financed the acquisition of the 412 Parcels, that AIMCO and the limited partnership owned the 412 Parcels as equal tenants in common and that AIMCO alone financed the acquisition of and owns, through a related entity, 418 Church. It is AIMCO and the limited partnership alone which have the right to exercise the shotgun offer under the COA.

[66] MPAR has advanced no factual or legal basis upon which I could order that oppressive conduct by CHC in relation to its co-shareholder in CHC MPAR GP could give rise to a requirement that the limited partnership or AIMCO be forced to sell an asset which they own and for which they paid valuable consideration.

[67] MPAR did not pursue an oppression claim directly against AIMCO or the limited partnership. The reasons for this are obvious. AIMCO has no connection to CHC MPAR GP, other than the COA which is only signed by CHC MPAR GP as general partner for the limited partnership. AIMCO has no connection at all, contractual or otherwise, with MPAR. There is no corporation in respect of which they hold an interest in common.

[68] The same is true with respect to CHC MPAR LP. MPAR has no claim or right to the limited partnership's assets. Apart from being co-owners of shares in the general partner, neither MPAR nor CHC has any connection to ownership of the 412 Parcels or 418 Church. [page69]

[69] There is simply no basis upon which MPAR could advance an oppression claim against AIMCO or the limited partnership. Thus, even if CHC were found to have oppressed MPAR, the remedy of a forced sale of the 412 Parcels and 418 Church, assets owned by AIMCO and the limited partnership, not CHC, would bear no relationship to that oppression.

(c) Should there be a joint auction and an accounting?

[70] The same analysis I have just advanced under the prior heading applies equally to the question of a joint auction and accounting. This is simply not a remedy that would be available for oppression by CHC even if it had been proved.

2. Breach of fiduciary duty or duty of confidence

[71] MPAR's principle argument under this heading is based on the law of joint ventures. MPAR argues that it was part of the "co-ownership" group and that the COA was a joint venture. MPAR goes on to argue that joint ventures are per se fiduciary relationships in which the parties owe duties of a fiduciary nature to one another. This includes duties of honesty, good faith and full disclosure. MPAR relies, in particular, on Smithies Holdings Inc. v. RCV Holdings Ltd., [2014] B.C.J. No. 2257, 2014 BCSC 1688.

[72] MPAR also alleges that AIMCO and CHC knew that MPAR wanted to acquire 418 Church for the "co-ownership" and that they misled MPAR about their "secret" negotiations for 418 Church and on whose behalf AIMCO and CHC were proposing to make that acquisition. MPAR argues either that the acquisition should have been done for the benefit of the "co-ownership" or that AIMCO and CHC owed a duty to advise MPAR that they were pursuing the opportunity on their own, in which case MPAR could also have pursued the 418 Church acquisition opportunity for its own benefit.

[73] Finally, MPAR argues that AIMCO and CHC owed MPAR a duty not to use the "co-ownership's" confidential information for their own purposes. MPAR alleges that AIMCO and CHC improperly used confidential financial analysis prepared by MPAR for the benefit of the "co-ownership" to evaluate the 418 Church acquisition for themselves.

(a) Were duties of a fiduciary or confidential nature owed to MPAR?

(i) AIMCO

[74] There are a number of problems with MPAR's arguments under this heading. [page70]

[75] First, s. 3.2 of the COA expressly disclaims that there is any partnership, joint venture or agency relationship between the co-owners. Section 3.2 provides, in relevant part:

Each Co-owner expressly disclaims any intention to create a partnership or joint venture with one another. Nothing in this Agreement shall constitute either Co-owner as the agent of the other of them (except as expressly provided in this Agreement). Each Co-owner covenants with the other Co-owner that it will not, at any time, alleged or claim that a relationship of partnership, joint venture or (except as expressly provided in this Agreement) agency was or is created. Nothing in this agreement shall constitute the Co-owners partners or joint venturers nor (except as expressly provided in this Agreement) constitute one the agent of the other . . .

Except as specifically provided otherwise in this Agreement, no Co-owner shall have any authority to act for or on behalf of another Co-owner.

[76] AIMCO did not undertake to act in the best interest of CHC MPAR LP and there is no evidence that CHC MPAR LP was vulnerable to AIMCO. MPAR abandoned its application seeking leave to commence a derivative action through CHC MPAR GP on behalf of the limited partnership. MPAR in its own right, as a 50 per cent shareholder of CHC MPAR GP, is even further removed from any possible fiduciary obligation. There is no evidence that AIMCO undertook any obligation to act in MPAR's best interests.

[77] Second, I am not prepared to accept that a joint venture is a per se fiduciary relationship. Even Smithies, perhaps a high water mark of the imposition of fiduciary obligations, concedes that "the more compelling line of cases requires a case specific approach to determining fiduciary duty": supra, at para. 67. Ontario courts have repeatedly held that joint ventures are not per se fiduciary relationships and that it is rare, and potentially commercially dangerous, to impose a fiduciary relationship on businesses dealing at arm's-length in a commercial transaction. Just because parties are in a joint venture does not necessarily alter the legal relationship between them from being simply contracting parties: Density Group Ltd. v. HK Hotels LLC, [2012] O.J. No. 3378, 2012 ONSC 3294 (S.C.J.), at para. 122. Even in the absence of the express disclaimer, therefore, the imposition of a fiduciary obligation in the context of the COA would require an ad hoc or fact specific inquiry. There is nothing about this relationship to suggest that AIMCO undertook to act on behalf of CHC MPAR LP or MPAR.

[78] Further, as noted earlier, MPAR is not a co-owner. MPAR reveals considerable ambivalence in its arguments about the capacity in which it has brought its application. On the one hand, MPAR argues it is acting for the benefit of the "co-ownership", [page71] yet it has abandoned its application for leave to bring a derivative action. MPAR, as a purely technical matter, has no standing to bring an application for relief on behalf of CHC MPAR LP. Indeed, it's co-owner of the general partner and the limited partners have expressly indicated their opposition to MPAR's application. On the other hand, MPAR claims to be owed obligations personal to it and seeks remedies on the basis of alleged harm arising from a breach of those obligations. Even if AIMCO owed a fiduciary obligation to CHC MPAR LP (which I have found it does not), this would in no way translate into a fiduciary obligation owed by AIMCO to MPAR.

[79] MPAR points to para. 3.5 of the COA, which requires each co-owner to act reasonably, promptly, honestly and in good faith and in the best interests of the "property" (the 412 Parcels) and to exercise the degree of care, diligence and skill that is that a reasonably prudent person would exercise as a co-owner in comparable circumstances.

[80] MPAR also references para. 5.3 of the COA, which provides that all decisions with respect to the management and control of the 412 Parcels shall be by unanimous approval of the co-owners, vested in a committee consisting of six members: three appointed by AIMCO; two appointed by CHC; and one appointed by MPAR. MPAR argues that these provisions import the notion of a fiduciary obligation to consult about an important business decision such as the acquisition of 418 Church.

[81] As noted earlier in these reasons, no decision was made by AIMCO or CHC, to the exclusion of MPAR, which falls within the scope of paras. 3.5 or 5.3. This is because the COA dealt with specified property -- the 412 Parcels. The COA contains no provisions dealing with the acquisition of additional property. CHC MPAR LP was prohibited from acquiring or developing additional property. The decision to acquire 418 Church could only be made by the co-owners if CHC MPAR GP had specific authority from the limited partners to do so. Thus, if MPAR wanted CHC MPAR LP to acquire 50 per cent of 418 Church, it needed to go to the limited partners first. The 418 Church transaction took place over a prolonged two years. There is no evidence that MPAR ever sought to put the idea of the 418 Church acquisition to a vote of limited partners. More importantly, the evidence is that the limited partners were not prepared to expand and delay the 412 Parcels project or finance the acquisition of any additional property.

[82] MPAR also argues that AIMCO is liable for participating in or facilitating a breach of fiduciary duty by CHC. This, of course, turns on successfully arguing that CHC breached fiduciary duties [page72] owed to MPAR, a subject to which I will turn under the next heading.

[83] Paragraph 13.1(b) of the COA provides that no party to the COA shall disclose any "Confidential Information" to any third party. Paragraph 13.1(d) provides that no party shall use any Confidential Information except as authorized or to advance the business of the Co-ownership.

[84] MPAR alleges that it prepared information about the viability of a joint 418 Church/412 Parcels development and provided it to AIMCO. MPAR then argues that AIMCO breached its obligations under the COA by using this information to decide whether it (as opposed to the Co-ownership) would acquire 418 Church.

[85] I cannot agree with this argument. As stated earlier, the opportunity to acquire 418 Church did not belong to the Co-ownership or CHC MPAR LP or, least of all, to MPAR. Any information provided by MPAR was the property of CHC MPAR LP and AIMCO, not MPAR. MPAR is not a party to the COA. It has no standing to sue for breach of any obligation under the COA.

[86] CHC and the limited partners do not want CHC MPAR LP to acquire 418 Church under any circumstances. MPAR's claimed remedy for AIMCO's alleged breach of confidence, a constructive trust of 418 Church in favour of CHC MPAR LP, is exactly what CHC and the limited partners do not want.

[87] MPAR's alternative remedy, that 418 Church be held in constructive trust for MPAR, makes even less sense. The information said to constitute the confidence breached was not MPAR's. Any confidential information belonged to the C-owners. The limited partnership could not acquire, and the limited partners did not want to acquire, 418 Church. AIMCO paid 100 per cent of the purchase price for 418 Church. There is no basis upon which MPAR personally could possibly end up with ownership of 418 Church by way of constructive trust.

(ii) CHC

[88] As noted earlier, the general partner shareholders' agreement between CHC and MPAR specifically provides that nothing in the agreement constitutes any party the agent or partner of another party in the conduct of any business or otherwise or a member of a joint venture or joint enterprise of any other party.

[89] Shareholders as such do not owe fiduciary duties to one another: Brant Investments Ltd. v. Keeprite Inc. (1991), 1991 CanLII 2705 (ON CA), 3 O.R. (3d) 289, [1991] O.J. No. 683 (C.A.).

[90] The obligation of the general partner was to act in the best interest of the limited partners. [page73]

[91] I can find in the evidence no basis to establish an ad hoc fiduciary relationship between the two shareholders of the general partner. CHC never gave any undertaking to act on behalf of MPAR and such an undertaking appears to have been expressly disclaimed in their shareholders' agreement. Further, MPAR was not in any way vulnerable to the unilateral exercise of any dis-cretionary power available to CHC. There is no evidence that CHC has made any profit, secret or otherwise, from the acquisition of 418 Church.

[92] I agree with CHC's argument that MPAR's own conduct demonstrates that the parties were not acting as fiduciaries with one another. MPAR "secretly" negotiated a commission for itself under the unsolicited $28 million offer for the 412 Parcels. MPAR's response to the AIMCO shotgun offer was contrary to the limited partners' express direction and interest. MPAR's application has deprived the limited partners of the benefit of the AIMCO shotgun offer which they wanted to accept. They wanted to accept it because it would have resulted in the return of their investment plus a profit of approximately 100 per cent. MPAR's application has delayed the limited partners' entitlements under the limited partnership agreements, given that the term of their investment has long expired and they are entitled to a liquidation of the limited partnerships and repayment of their investment. Given the abandonment of MPAR's application for leave to commence a derivative action on behalf of the limited partnership, it now seems clear that it is MPAR alone, not the limited partnership, which will reap any benefit arising out of MPAR's claims.

[93] In short, CHC and MPAR's conduct demonstrates that they were acting as sophisticated commercial actors, at arm's-length, advancing their own commercial interests and seeking to fulfil their own obligations to their stakeholders.

[94] I find that CHC did not owe fiduciary duties to MPAR.

[95] Paragraph 6.01 of the general partner shareholders' agreement provides that no shareholder may disclose to any third party or use for any purpose other than for the business of the general partner any confidential information concerning the business and affairs of the general partner.

[96] The conceptual analysis used to analyze the duty of confidence between the co-owners in the context of the COA also applies here.

[97] Any information prepared by MPAR did not belong to MPAR or, for that matter, the general partner. The "business and affairs" of the general partner were to act in the best interest of the limited partnership and the limited partners. The acquisition of 418 Church was not available to the general partner just as it [page74] was not available to the limited partnership. The obligations of confidence arising between CHC and MPAR under the general partner shareholders' agreement did not extend to matters involving 418 Church. The information concerning 418 Church was not confidential and there was, in any event, no breach by CHC of any duty of confidence involved in AIMCO 's acquisition of 418 Church.

(b) Did AIMCO and/or CHC breach any duties owed?

[98] I have found that AIMCO and CHC did not owe fiduciary duties to MPAR. Accordingly, there was no breach of any such duties.

[99] I have also found that AIMCO owed no duty of confidence to MPAR. Further, the duties of confidence owed as between CHC and MPAR did not extend to any information relating to 418 Church. Accordingly, there was no breach of any duty of confidence regarding that information by AIMCO or CHC.

(c) Should a constructive trust be declared and an accounting ordered?

[100] Having found there was no breach of fiduciary duty or of a duty of confidence, there is no basis to award the requested remedy of imposing a constructive trust and ordering an accounting.

3. Breach of contract

(a) Was there a breach of contractual obligations owed to MPAR?

[101] I have, in connection with the earlier analysis of the claim for breach of fiduciary duty, touched on MPAR's allegation concerning para. 3.5 of the COA. Paragraph 3.5 provides that the Co-owners will act "reasonably, promptly, honestly and in good faith and in the best interests of" the 412 Parcels development project. MPAR argues this contractual obligation was breached by AIMCO's acquisition of 418 Church. MPAR also relies, in its claim for breach of contract, on the common law doctrine, articulated in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, [2014] S.C.J. No. 71, of honest performance and good faith.

[102] MPAR argues that AIMCO and CHC breached the obligation of honest performance and good faith by "secretly" pursuing the acquisition of 418 Church, not only to the exclusion of MPAR but by actively misleading MPAR as to their actions and intentions. Here again, MPAR asserts both claims on behalf of the co-owner, CHC MPAR LP, and in its personal capacity as a 50 per cent shareholder of the general partner. [page75]

[103] The difficulties I have with this argument are similar to those discussed earlier. First, the COA is not concerned with any property other than the 412 Parcels. The limited partnership had no capacity to acquire additional property without the written agreement of the limited partner investors. The limited partners expressly did not want the limited partnership to undertake additional obligations.

[104] Second, MPAR it is not a party to the COA and is most certainly not a Co-owner of the 412 Parcels. It has no standing to sue for a breach of that agreement on behalf of any Co-owner. Even if MPAR could advance a claim on behalf of the limited partnership, AIMCO and CHC did not breach any duty of honest performance and good faith owed to the limited partnership.

[105] To succeed in a claim for breach of honest performance and good faith, the plaintiff must show that the defendant sought to undermine the plaintiff's interest in bad faith or motivated by some other subjective, improper motive. The limited partnership did not have the capacity to acquire 418 Church; it did not have the funds to do so; and its limited partners did not, as they would have been required to do, approve (nor did they want to approve) the acquisition of 418 Church. AIMCO and CHC consulted with the investors underpinning the limited partners to see if they wanted to participate. They elected not to do so, took no position on AIMCO's acquisition and supported AIMCO's eventual shotgun offer to buy them out at a value of $28 million for the 412 Parcels. This is not evidence of dishonesty, bad faith or other subjective improper motive.

[106] Third, a plaintiff alleging a breach of the duty of honest performance and good faith must have a contract. If there is no contract, there is nothing to perform. If there is nothing to perform, it cannot be performed dishonestly or in bad faith: McDonald v. Brookfield Asset Management Inc., [2016] A.J. No. 1263, 2016 ABCA 375, at para. 57.

[107] Fourth, to the extent MPAR makes the claim of honest performance and good faith in its own capacity, it has no basis upon which to do so. Unlike the limited partnership and the general partner, it has no contractual relationship with AIMCO at all. The duty of honesty and good faith does not exist in a vacuum. It applies only to an existing contract. The SCC in Bhasin, supra,is very explicit about this. The duty of honesty and good faith applies in the context of the performance of a contract. It does not apply to the negotiation of a contract, where freedom to act upon individual self-interest remains paramount.

[108] Because (a) the COA did not govern the acquisition of property other than the 412 Parcels; (b) the 418 Church acquisition [page76] was not analogous to a "corporate opportunity" of the Co-ownership; and (c) MPAR was not a party to the COA in any event, AIMCO and CHC owed no obligations of honesty and good faith to MPAR in relation to their pursuit of the acquisition of an entirely different property. In the circumstances of this case, AIMCO and CHC, were not required to disclose their intentions to acquire 418 Church and breached no legally enforceable obligation to the extent they failed to do so.

[109] In one sentence at para. 127 of its factum, MPAR invokes the third party beneficiary rule in contract set out in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 CanLII 654 (SCC), [1999] 3 S.C.R. 108, [1999] S.C.J. No. 48, at paras. 31 to 38. The point was not addressed in oral argument. MPAR appears to argue that because it had the right to one seat on the management committee of the Co-ownership (para. 5.3 of the COA), it should be afforded third party beneficiary status under the COA as if it were a full sign-atory and party.

[110] I am unable to accept this argument.

[111] The third party beneficiary rule is an exception to the general rule requiring privity of contract to enforce contractual obligations. Whether a person is a third party beneficiary is determined on the basis of two critical and cumulative factors:

(1) did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision; and

(2) are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, as determined by reference to the intentions of the parties?

[112] Reviewing the COA as a whole and para. 5.3 of the COA in particular, I am unable to conclude that either of these requirements have been met.

[113] Paragraph 5.1 of the COA provides that all actions in respect of the "Property" (the 412 Parcels) must first be approved by the Co-owners or, where applicable, by AIMCO alone. Paragraph 5.2 provides that all "Major Decisions" shall be made by AIMCO in its sole discretion. Major Decisions include: the appointment of auditors or accountants, termination of the property manager, termination of the asset manager, termination of the development manager, approval of budgets and approval of any agreement or termination of any agreement with the person not at arm's-length with MPAR or CHC. [page77]

[114] Then, para. 5.3 goes on to provide that all other decisions "in respect of the management and control of the Property" (again, the 412 Parcels) are to be made by unanimous approval of the Co-owners as represented by a committee of six members, three appointed by AIMCO, two appointed by CHC and one appointed by MPAR.

[115] Neither para. 5.3 nor the COA read as a whole supports the conclusion that AIMCO and CHC MPAR LP intended to confer any "benefit" under the contract upon MPAR. The representatives of the limited partnership (appointees from CHC and MPAR) on this committee were obliged to act in the best interests of the limited partnership, not for their own benefit. This is because the CHC and MPAR representatives were there on behalf of the general partner of the limited partnership. The general partner owed fiduciary duties to the limited partners. The power to vote on matters involving the management and control of the 412 Parcels, therefore, was conferred upon these representatives in a fiduciary capacity, not for their personal benefit.

[116] Further, as noted earlier, the decision to acquire 418 Church did not fall within the purview of the COA or para. 5.3. Management and control of the "Property" did not and could not include 418 Church. Nothing about para. 5.3 detracts from the requirement that the limited partners would specifically have to approve the acquisition and funding of any other property besides the 412 Parcels. And, as a matter of fact, the evidence is clear that the limited partners did not approve any such acquisition and did not want to participate in the acquisition of 418 Church.

[117] MPAR, I conclude, was not third party beneficiary under the COA.

(b) Should there be a trial to quantify MPAR's damages for loss of opportunity?

[118] Given my conclusion that there was no breach of any contractual obligation owed to or enforceable by MPAR, there is no need for a trial to quantify the damages arising from such a breach.

Conclusion

[119] After their loss at the OMB hearing, AIMCO and CHC lost confidence in MPAR and began to view MPAR as an obstacle to and potential commercial opponent in whatever the path forward might be. AIMCO and CHC were already in one set of relationships with MPAR and had to honour whatever obligations that entailed. They were under no obligation, however, to enter into a new and different set of relationships with MPAR. The 418 [page78] Church situation involved the negotiation of a new and different contract, not the performance of an existing one.

[120] In the absence of specific obligations of a contractual or fiduciary nature to the contrary, AIMCO and CHC were, as they behaved at the time, entitled to treat MPAR as they would any other potential competitor for land and development opportunities. This included the plan to acquire 418 Church. Having found that, given the nature of the legal relationship they had with MPAR, neither CHC nor AIMCO owed MPAR fiduciary or contractual obligations to include MPAR in this plan to acquire 418 Church, it follows that their failure to do so cannot found a legal basis for liability.

[121] In conclusion, the MPAR application is dismissed.

[122] The issues raised in the MPAR application were effectively the only defence raised to AIMCO's application for specific performance of its shotgun offer to purchase the limited partnership's interest in the 412 Parcels under the COA.

[123] Any party exercising rights under a shotgun clause must strictly comply with the terms of the authorizing agreement. The shotgun remedy is a frequent tool in shareholder, partnership and co-ownership agreements in order to provide a remedy where the participants no longer get along or, for other reasons, wish to bring their relationship to an end. "A shotgun buy-sell is strong medicine. One takes it strictly in accordance with the prescription or not at all": Trimac Ltd. v. C-I-L Inc., 1987 CanLII 3376 (AB KB), [1987] A.J. No. 409, 52 Alta. L.R. (2d) 263 (Q.B.), at para. 29.

[124] The initiating notice delivered by AIMCO to CHC MPAR strictly complied with the COA. MPAR has not identified any deficiency outside of its claim that 418 Church should have been part of the "Property" under the COA.

[125] MPAR's purported acceptance of AIMCO's implicit offer to sell was not in strict compliance with the COA. First, MPAR had no authority to accept AIMCO's offer. That authority rested with CHC MPAR GP, a corporation of which MPAR is merely a 50 per cent shareholder. The other 50 per cent shareholder and the limited partners, whose equity financed the limited partnership's participation in this project, oppose MPAR's purported offer. Second, as already discussed above, the purported acceptance included 418 Church. 418 Church is not part of the "Property". The limited partners never approved the limited partnership's acquisition of 418 Church and have demonstrated their intention never to do so. Finally, MPAR's purported acceptance was not accompanied by the required Solicitor's Letter confirming that $500,000 was held as a deposit in the solicitor's trust account. [page79]

[126] As CHC MPAR did not validly respond to the initiating notice before the end of the acceptance period, the shotgun purchase offer made by AIMCO was deemed to be accepted on April 15, 2019. The transaction was required to close by July 14, 2019 unless AIMCO provided notice to close earlier. On May 24, 2019, AIMCO delivered a notice requiring a closing on June 10, 2019. No CHC MPAR representative attended the scheduled closing.

[127] In the circumstances, the AIMCO application is granted. There shall be judgment declaring the shotgun purchase offer was deemed to be accepted on April 15, 2019 and directing CHC MPAR GP, on behalf of CHC MPAR LP, to take all necessary steps to close the shotgun transaction as soon as reasonably possible.

Costs

[128] Costs should follow the event. Absent agreement, a request for costs shall be made by filing a brief written submission, not to exceed three typed, double-spaced pages, and a cost summary within seven days of the release of these reasons. Any response to a request for costs, subject to the same page limit, together with the cost summary that would have been filed had that party been seeking costs, shall be delivered within a further seven days.

Application for specific performance allowed; other application dismissed. [page80]

APPENDIX A

Property Ownership Structure Chart

[^1]: MPAR was not entitled to represent the limited partnership in the exercise of rights under the shotgun clause. Only CHC MPAR GP could do so. MPAR's attempt to exercise the general partner's prerogative was expressly disclaimed by CHC and the limited partners. Further, contrary to the terms of the shotgun clause, the offer MPAR purported to accept was different from the offer actually made by AIMCO, in that it included the purchase of 418 Church, a property not part of the COA or CHC MPAR LP. Finally, the requisite deposit of $500,000 was not posted.

End of Document