Court File and Parties

COURT FILE NO.: CV-18-000178-00 DATE: December 17, 2019 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 1324789 ONTARIO INC., Plaintiff/Defendant by Counterclaim AND: GAVIN MARSHALL, SUSAN MARSHALL, MAGENTA WATERFRONT DEVELOPMENT CORPORATION, HELIOTROPE INVESTMENT CORPORATION, MAGENTA CAPITAL CORPORATION, MAGENTA INVESTMENT CORPORATION, MAGENTA II MORTGAGE INVESTMENT CORPORATION, MAGENTA III MORTGAGE INVESTMENT CORPORATION, Defendants/Plaintiffs by Counterclaim AND: 1073650 ONTARIO INC., 2290998 ONTARIO INC., GARY BEACH and MARTHA BEACH, Defendants by Counterclaim

BEFORE: Justice Patrick Hurley

COUNSEL: Christopher J. Edwards and Charles Hammond, for the Plaintiff Denise Sayer and Adam Stikuts, for the Defendants

HEARD: December 10 and 12, 2019

Endorsement

[1] On January 18, 2019, I dismissed the plaintiff’s motion for the appointment of a receiver and an interlocutory injunction and allowed, in part, the defendants’ motion for various relief related to issues that had arisen over the management of four residential land development projects: 2019 ONSC 517.

[2] At paras. 57- 58 of my decision, I wrote:

The defendants have not delivered a statement of defence and counterclaim. As a result, I do not have the jurisdiction to make an order against a person who is not a party to the litigation nor can I, in effect, issue a declaration without that specific request being made in a pleading.

In any event, I would not make an order about MWDC exercising a right that it has under the Joint Venture Agreements because I consider this unnecessary. I am also concerned about making an order in the terms proposed by the defendant’s because it could give rise to an estoppel argument with respect to any future claim by Mr. Beach for damages based on the alleged wrongful termination of his services as project manager. This issue could only be decided if he is a named party and there is a proper evidentiary record.

[3] Following the release of my decision, the parties disagreed about the effect of it. The defendants complain that the plaintiff and Mr. Beach refused to abide by it because Mr. Beach acted as if he remained the project manager and interfered with MWDC’s contractual rights to manage the development projects as it saw fit. Mr. Beach says he did not and was only asserting the rights that he had under the Joint Venture Agreements.

[4] Because of the continuing conflict, the defendants brought this motion. The primary relief being sought by them is a finding that Mr. Beach is in contempt of two orders that I made, one on December 10, 2018 and the other on April 26, 2019 and an injunction to restrain Mr. Beach from unlawfully interfering in the administration and management of the development projects.

[5] I will deal first with the request for an interlocutory injunction. I find that the evidence does not support the granting of one at this time. I say this because it now appears that the parties have come to an understanding about the proper interpretation of the Joint Venture Agreements which should reduce, if not eliminate completely, the strife that persisted in the months following my decision.

[6] Mr. Edwards advised at the hearing of this motion that Mr. Beach accepts that, although he is entitled to challenge the legal validity of his termination as project manager and pursue a claim for damages, my decision precludes him from asserting a legal right to continue acting as the project manager either with MWDC or any third parties involved in the development projects.

[7] The Joint Venture Agreements grant MWDC the final authority in any decisions relating to the development projects if the parties are unable to agree. In an email dated March 19, 2019 Mr. Edwards wrote, in part:

To be clear, our client is prepared to accept that if there is a disagreement on a material matter and it is a dispute that cannot be resolved MWDC can then act unilaterally as provided in the JV Agreement. However, consultation is a requirement in all cases. If this does not occur our client will not agree that MWDC may proceed to sign documents on its behalf or to bind the Joint Venture.

[8] I consider this to be a correct interpretation of the Joint Venture Agreements. Although consultation is not explicitly referred to in them, it is implicit that there be some form of consultation because that would be necessary for the plaintiff (through its controlling mind Mr. Beach) to either agree or disagree with the proposed decision.

[9] I have some concerns, based on comments made by Mr. Edwards’ partner, Hugh Hammond, in emails that were filed as part of the record, that he does not share the same view and that, under his interpretation of the Joint Venture Agreements, Mr. Beach can take issue with any decision that has been made if he considers the consultation or the disclosure of information inadequate.

[10] I would hope that the parties could set aside their personal differences and proceed in a commercially responsible manner in relation to decisions that are required to move the projects covered by the Joint Venture Agreements forward to a successful completion. Given his experience with them, Mr. Beach will likely be able to provide informed advice that Mr. Marshall, in turn, might see as helpful. But Mr. Beach also has to understand that Mr. Marshall has the final authority under the Joint Venture Agreements and his contractual obligation is limited to advising Mr. Beach of his decision and that he can act as he sees fit without necessarily waiting for Mr. Beach’s response.

[11] With the assistance of counsel, the parties should be able to implement a protocol which will facilitate communication between them and the timely exchange of the proposed decision and the response to it (i.e. agreement/disagreement). If this is not done, they will have to return to court when this issue is contested again and incur more costs in what has already been very costly litigation. Moreover, I expect that a court will conclude that judicial management of operational decisions is impracticable and unnecessary and that injunctive relief may be appropriate.

[12] An injunction is an exceptional remedy and the current evidence does not warrant it. That can change in the future depending on the parties’ conduct. This includes not just abiding by the Joint Venture Agreements but also any communications or contact with third parties that has a deleterious impact on the successful completion of the development projects.

[13] Turning to the request for contempt order, I bear in mind the admonition of the Court of Appeal in the recent decision of Chong v Donnelly, 2019 ONCA 799 where the Court stated that, even if the three elements for civil contempt are established, the order is still a discretionary one and the contempt power “should be exercised cautiously and with great restraint as an enforcement power of last rather than first resort.”

[14] I do not condone some of the conduct of Mr. Beach that followed my decision in January and, in particular, after the April 26, 2019 order but it also does not rise to the level where a contempt finding should be made. It is more appropriately dealt with by way of costs. Future compliance with the Joint Venture Agreements by both parties will be an important factor in this decision.

[15] As with the other motions that I heard last week, I will decide the issue of costs at a future date when all the motions are finally determined.

Hurley, J.

Released: December 17, 2019