COURT FILE NO.: CV18-58546

DATE: 2021/04/19

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

7120761 Canada Inc. doing business as Safe and Sound Real Estate Investment Group (SASREIG), 8795436 Canada Inc., Daniel St-Jean and Laurel R. Simmons

Plaintiffs, Defendants by Counterclaim

– and –

AGA Global Investments Inc., and Ali Vaidya

Defendants, Plaintiffs by Counterclaim

Paul Fauteux for Plaintiffs, Defendants by Counterclaim

Mick Hassell for Defendants, Plaintiffs by Counterclaim

HEARD: December 14, 15, 16, 17, 18, 2020

THE HONOURABLE JUSTICE M. J. DONOHUE

REASONS FOR JUDGMENT

Overview

[1] For the reasons set out below, I conclude that Mr. St-Jean and Mr. Vaidya, on behalf of their companies, entered into two agreements.

[2] In both agreements, Mr. Vaidya’s company was the passive investor giving his company’s covenant on the mortgage and standing as the registered owner on title, in consideration of a guaranteed return over four years, with no risks or duties.

[3] In both agreements, Mr. St-Jean’s companies had all the duties to handle costs, expenses and tenant issues while being entitled to the risks or rewards on the anticipated sale of the properties, at the end of the four-year term.

[4] A breach resulted when Mr. Vaidya would not cooperate on the sale of either property.

[5] This trial, involving the interpretation of two joint venture agreements, was brought under the simplified procedure provided under rule 76 of the Rules of Civil Procedure. The parties were thereby forced to present what evidence they could on the claim and counterclaim within the five days allowed by the rule.

[6] The court then permitted the parties to file written submissions. The decision is as follows.

[7] I will now turn to a detailed review of the facts.

The Parties

[8] The two numbered plaintiff companies are real estate investment companies owned by the plaintiffs, Daniel St-Jean and Laurel R. Simmons. I will refer to the numbered companies as “712” and “879”.

[9] The defendant company, AGA Global Investments Inc. (hereafter referred to as “AGA”), is wholly owned by the defendant, Ali Vaidya.

[10] Mr. St-Jean and Mr. Vaidya signed two four-year agreements on behalf of their respective companies to purchase two properties. At the conclusion of the agreements the dispute arose.

[11] I turn now to a detailed review of the background.

The Two Agreements

[12] In the spring of 2014, a rent-to-own joint venture agreement was signed for a property in Clarence Creek, Ontario. It commenced June 25, 2014, involving a tenant-buyer, Mr. Denis St-Pierre, who had an option to purchase the property at the end of the four-year term on June 25, 2018.

[13] At the same time, Mr. St-Jean and Mr. Vaidya signed a joint venture agreement for a rental property in Niagara-on-the Lake (hereafter referred to as “NOTL”) with a four-year term. The agreement shows that payments to the defendants were to start in July 2014. Mr. St-Jean testified that the term was July 9, 2014 to July 9, 2018 and this was not contradicted by Mr. Vaidya.

[14] The agreements were composed of a standard form joint venture agreement with added schedules to suit each individual agreement. The standard form included some sections that were inconsistent with the schedules such that the court looked to the surrounding circumstances to discern what the parties intended.

[15] The paperwork was sloppy with a number of acknowledged and unacknowledged errors of drafting and of completion.

[16] Although various copies of the agreements arose at trial, the essential terms relied upon by the parties, and in particular the defendants, were the same.

The Purpose of the Agreements

[17] The purpose of forming the joint venture for the Clarence Creek property was set out in clause 1.02: “The purpose (“Purpose”) of the Venture is to acquire and manage the Property for a short-term (3 to 4 years) lease-to-own deal with tenant-buyers.”

[18] The NOTL agreement was similar: “The purpose (“Purpose”) of the Venture is to acquire, lease and manage the Property.”

[19] On both Agreements it states, “This agreement creates a Joint Venture to carry out the Purpose and does not create a partnership between the parties…”

Financing the Joint Ventures

[20] The business model, which Mr. St-Jean said he created, allowed his companies to purchase real estate using “other people’s money.” Mr. Vaidya acknowledged this was so.

[21] Mr. St-Jean’s companies 712 and 879, in each agreement, were described as both the “Finder” and the “Financial Manager.”

[22] Clause 3.01 provided, “The venturers (except for the Finder) shall make an initial financial contribution described in Schedule A. Individual investor’s agreements are in Schedule D.”

[23] Clause 3.02 confirmed that “at no time during the length of this agreement will the Venturers (except the Financial Manager) be asked or required to make any additional financial contribution beyond their initial financial contribution.”

[24] Mr. St-Jean promoted in his business model various guarantees for their investors such that 712 was doing business under the name “Safe and Sound Real Estate Investment Group (SASREIG).”

[25] The defendants’ part of the acquisition of both properties was to obtain a first mortgage for 80 percent of the purchase price of the property.

[26] Neither agreement required the defendants to invest any cash. The agreement contemplated the funding of the balance of the purchase by other venturers.

Ownership of the Properties

[27] The agreements provided that the legal owner of the properties would be the primary investor, the defendants, who took out the mortgages.

[28] The beneficial owner under the agreements would be the plaintiff numbered companies.

Obligations/Responsibilities of the Plaintiff Companies

[29] In both agreements, the plaintiff companies, as beneficial owners, were responsible for

• all rental income;
• rental operating expenses; and
• any gain/loss on the sale of the properties.

[30] In both agreements, the plaintiff companies as Financial Managers solely assumed

• municipal and school taxes;
• insurance premiums
• fees and disbursements for the management; and
• mortgage payments each month.

[31] In both agreements, the plaintiff companies were to cover

• all legal fees to register the mortgage on title;
• the fees to discharge the mortgage on title;
• the fees to discharge the mortgage (on closing day);
• any and all other closing costs related to the purchase of the property; and
• fees for the Lender’s independent legal advice after the lender had agreed to enter into this agreement.

[32] In the NOTL agreement, it also stated that the plaintiff company was to cover

• all fees related to setting up other mortgages on the property, be they RRSP or CASH investments[sic]

[33] Both agreements contained provisions that the plaintiff companies would make up any shortfall of funds on the sale of the properties. The company owners, Daniel St-Jean and Laurel Simmons, also provided their personal promissory notes to honour any shortfall on the mortgage or expenses.

Cash Flow

[34] Both agreements provided that the plaintiff companies were to pay to the Primary Investor (the defendants) a monthly cash flow payment as stipulated in Schedule D, and a payment on the ultimate sale of the property.

[35] Both agreements set out such proceeds to be paid by the plaintiffs to the defendants “for rendering the service of acting as legal owner”.

Clarence Creek

[36] Under the Clarence Creek agreement, the Primary Investor/Legal Owner (the defendants) were to be paid $30,064. This was by a monthly cash flow of $550 for the 48 months of the rent-to-own deal ($26,400) and the balance of $3,664 on closing day at disposition.

[37] The agreement further states, “Over and above the monthly amounts to cover the mortgage and taxes the Primary Investor will be paid $550 for each month that the primary investor is the legal owner of the property.”

NOTL

[38] The NOTL agreement provided that the Primary Investor/Legal Owner (the Defendants) were to be paid $33,600 over four years. This was broken down as follows:

• $200/month from July to December 2014; and
• $550/month for all the following months while the Primary Investor is the Legal Owner.

[39] Further, it stated that the balance of the proceeds (“total proceeds minus monthly cash flow”) will be paid in full to the Primary Investor on closing day at disposition. That balance will be “$10,500”. [This number appears to the court to be mathematically overstated.]

“What if?” Clauses

[40] Each agreement had a different contingency clause entitled, “What If?”

Clarence Creek

[41] The Clarence Creek agreement had a provision as follows:

What if the RTO [Rent-to-Own] deal does not go the full 4 years? In consultation with SASREIG (the plaintiff company 712), the Primary Investor will decide which of the following three options is better for the interests of all the venturers involved:

a) Keep the property and find another tenant-buyer

b) Keep the property and find a regular tenant

c) Sell the property

[42] Notably there was nothing stated as to what the parties intended after the term of four years had run and the tenant-buyer opted not to purchase the property. Nothing was stated as to how then the defendants would obtain their bonus cash flow on closing.

[43] The defendants did not provide any evidence of the parties’ intentions at the time of drafting of their expectations after four years if the tenant buyers did not purchase.

NOTL

[44] The NOTL agreement specifically mentioned options at the end of the four years, as follows:

What if 8795436 Canada Inc. cannot buy the property at the end of the 48 months of this agreement? 8795436 (the plaintiff company) and the Primary Investor (the defendants) will consult in order to decide which of the following three options is better for the interests of all the venturers involved:

a) Extend this agreement to give extra time to 8795436 to buy the property

b) the Primary Investor will buy out 8795436 Canada Inc. the additional mortgage(s) and/or cash investment(s), and will thus become the legal and the beneficial owner of the Property. The buy-out price will be determined by an independent appraisal. If Option B is chosen, the Primary Investor will have up to six months to buy out 8795436 Canada Inc.

c) Sell the property to a third party

The Law

[45] When inquiring as to what the agreements said, and what was intended, I reviewed the leading decisions on contractual obligations, contractual interpretation, and the parol evidence rule.

[46] Both parties relied on the Supreme Court of Canada’s decision in Bhasin v Hrynew, 2014 SCC 71, [2014] 3 SCR 494, at para. 1, which concluded there is a common law duty to act honestly in performance of contractual obligations: “Finding that there is a duty to perform contracts honestly will make the law more certain, more just and more in tune with reasonable commercial expectations.”

[47] The evolution of contractual interpretation was reviewed by the Supreme Court of Canada in Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, 2014 2 SCC 53, [2014] 2 SCR 633, with the goal being an “exercise in ascertaining the objective intent of the parties – a fact-specific goal – through the application of legal principles of interpretation.” (See para. 49.)

[48] At para. 46, the court explained that there is consideration of the “surrounding circumstances of a contract, or the factual matrix,” when interpreting a written contract.

[49] At paras. 47-48 the court stated the following:

[T]he interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding”…To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning…

The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement…[References omitted.][Emphasis added.]

[50] At paras. 59-60, the court concluded that considering the surrounding circumstances did not offend the Parol Evidence Rule:

…The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary or contradict a contract that has been wholly reduced to writing. To this end the rule precludes, among other things, evidence of the subjective intentions of the parties…The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract…

The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.

[51] An earlier summary of contractual interpretation by the Ontario Court of Appeal is set out in the decision of Simex Inc. v Imax Corp (2005), 2005 CanLII 46629 (ON CA), 206 O.A.C. 3 (Ont. C.A.), at paras. 19-23:

[19] The Supreme Court of Canada has considered the rules respecting interpretation of contracts on several occasions. The best known articulation of these principles is found in the reasons of Estey J., in Consolidated-Bathurst Export Limited v Mutual Boiler & Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888 at 901:

Even apart from the doctrine of contra proferentem as it may be applied in the construction of contracts, the normal rules of construction lead a court 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 in to the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produced a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation…which promotes a sensible commercial result. [emphasis added]

[20] In Eli Lilly & Co. v Novopharm Ltd. 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 at para 56, Iacobucci J. elaborated on the concepts of promoting the intent of the parties and a commercially sensible interpretation. He explained that absent ambiguity, the primary vehicle for divining the intent of the parties is the words of the contract itself:

When there is no ambiguity in the wording of the document, the notion in Consolidated-Bathurst that the interpretation which produces a “fair result” or a “sensible commercial result” should be adopted is not determinative. Admittedly, it would be absurd to adopt an interpretation which is clearly inconsistent with the commercial interests of the parties, if the goal is to ascertain their true contractual intent. However, to interpret a plainly worded document in accordance with the true contractual intent of the parties is not difficult, if it is presumed that the parties intended the legal consequences of their words [Emphasis added.]

[21] Iacobucci J. also stated at para 54 that the contract must be interpreted “in light of the surrounding circumstances” Evidence of the subjective intent of the parties has “no independent place in this determination (at para 54). Furthermore, “it is unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face” (at para 55)

[22] In Canadian Premier Holdings Ltd et al v Winterthur Canada Financial Corp. et al (2000), 132 O.A.C. 17 (C.A.) at para 13, Laskin J.A. explained that, “where the words of a contract are not ambiguous commercial reasonableness may inform the court’s reading of the text, but the interpretation that produces a sensible commercial result is not determinative.

[23] To summarize, while the court strives to interpret a contract in a manner consistent with the intent of the parties, the parties are presumed to have intended the legal consequences of their words. The court will consider the context or factual matrix in which the contract was drafted, including commercial reasonableness, to understand what the parties intended. The court will not adopt an interpretation that is “clearly” commercially absurd. The court must also consider the contract as a whole. The various provisions “should be read, not as standing alone, but in light of the agreement as a whole and other provisions thereof” …..Where the contract is unambiguous, extrinsic evidence is inadmissible. [References omitted.] [Emphasis added.]

What Happened at Clarence Creek?

[52] The tenants, Mr. and Mrs. St-Pierre, had difficulty paying the rent over the four years and could not manage, financially, to exercise the option to purchase in June 2018. They advised this in April 2018, but continued their tenancy until the end of June, moving out on June 27th.

[53] The defendants acknowledged at trial that the agreement had run the four-year term.

[54] On June 5 and June 7, 2018, Mr. St-Jean and Mr. Vaidya agreed to list the house for sale. Mr. St-Jean advised that his real estate agent, Mr. Viau, would contact Mr. Vaidya about the listing. Mr. Vaidya confirmed this evidence.

[55] Mr. Vaidya thanked Mr. St-Jean for “keeping him in the loop” and stated, “especially if there is any financial implications (directly or indirectly) to me”. Mr. St-Jean promptly replied, “There are none….you keep earning money until the house is sold…which I’m holing [sic] will be quick.”

[56] On June 10, 2018, Mr. Vaidya emailed Mr. St-Jean two options for renewing the mortgage. Mr. Vaidya recommended the one-year renewal with no penalty to close early, although it was more expensive. He asked Mr. St-Jean which one he wanted to do. The same day, Mr. St-Jean emailed in reply that he agreed with the more expensive mortgage renewal and explained, “but I’m expecting that house to be sold by the fall.”

[57] In that email, he stated he would amend page one of the Primary Investor agreement reflecting an extension until the house was sold and that he would do it that day or the next day.

[58] Mr. Vaidya testified that they had agreed to sell the property but he did not receive the amended agreement from Mr. St-Jean.

[59] Disputes then began over the NOTL property.

[60] Fifteen days later, Mr. Vaidya emailed Mr. St-Jean confirming the more expensive mortgage renewal option but then said, “whether or not we sell it or do something else….also we need to change the payment plan going forward. Thanks.”

[61] Mr. St-Jean replied to go ahead with the mortgage but confirmed the property would be listed and “we’ll sell it in the next 3-4 months max.”

[62] Within minutes, Mr. Vaidya emailed back:

As a property manager you can check the condition of the house, however please do not be under any wrong impression until we discuss on Wednesday about all the options for both the properties….selling is only one of the many options and we need to discuss and decide which one will be the best option for both of us….thanks. [Emphasis added.]

[63] Mr. Vaidya at this time began to connect dealings with the Clarence Creek agreement to issues regarding the NOTL agreement. Specifically, on June 29, 2018 he wrote the following:

You know what Daniel, if I want I can also give you befitting reply and swear in a way that you would never experience in your entire life but thats not how I deal with issues/disputes – also you know very well that threatening is just not going to work on me no matter what…..the best way is to resolve issues related to both the properties together as a package so that there is no confusion going forward….hence its better you cool down over the weekend and come up with some ideas and suggestions that can resolve issues amicably …..else we both are free to do whatever we want….but please refrain yourself from using ‘my way or highway’ approach and bad language….please! thanks. [sic][Emphasis in original.]

[64] Mr. St-Jean wrote to the real estate agent, Mr. Viau, about preparing the listing and copied Mr. Vaidya on June 29, 2018. On the same day, Mr. Vaidya wrote Mr. Viau advising him that there was a dispute regarding “whether to sell or not sell” and that Mr. Vaidya had not approved Mr. Viau as agent.

[65] On June 30, 2018, Mr. Viau emailed Mr. Vaidya requesting the articles of incorporation of the defendant company AGA. There was no reply.

[66] On July 3, 2018, Mr. St-Jean sent an angry email to the lawyer, Mr. Rothman, and copied Mr. Vaidya setting out details of “How I lose money on Clarence Creek” if the house was not sold. There was no response from Mr. Vaidya.

[67] On July 5, 2018, Mr. St-Jean emailed Mr. Vaidya begging him to sell Clarence Creek to “get rid of the red ink”.

[68] On July 10, 2018, Mr. St-Jean emailed Mr. Vaidya asking for an answer by Friday, as he “is losing $100/day” while the property is empty.

[69] On July 11, 2018, Mr. Vaidya replied, “all my earlier emails were from cool and calm mind and I will reply something new when there is something new from your side.”

[70] On August 12, 2018, Mr. St-Jean wrote an angry email, using foul language, advising that if Mr. Vaidya did not sign the listing that he would start a lawsuit. Mr. St-Jean also stated that another option was for Mr. Vaidya to buy Clarence Creek and “you can rent it and lose money daily.”

[71] Mr. Viau sent the listing papers to Mr. Vaidya the following day. Mr. Vaidya did not sign the papers or communicate further.

Analysis of the Evidence on Clarence Creek

[72] Mr. Vaidya agreed to sell Clarence Creek but then resiled from that agreement. The emails make it clear that he did so because of disputes that arose on the NOTL agreement.

[73] Although Mr. St-Jean and Mr. Vaidya negotiated these two agreements, there is no connection between the two contracts. There was no commercial nexus that required that the disputes be discussed or resolved concurrently.

[74] At trial, Mr. Vaidya testified that the “What if?” clause was triggered because the tenant buyers did not buy the house. His position at trial was that he was the only venturer whose interests had to be considered and he decided to keep the property with a new tenant or a new tenant buyer.

[75] This is not persuasive because the What if? clause is premised on the deal not going the full four years. The tenant buyers were not obligated to purchase at the end of the four years; they only had an option to do so which they chose to forego. They otherwise occupied the house until the end of June.

[76] The agreement stipulated that the “end date shall be June 27, 2018”. That was the date the tenants moved out.

[77] The evidence is that the plaintiffs paid all the expenses under the agreement including the mortgage, taxes and insurance, and they paid the four years of monthly cash flow to the defendants.

[78] All the evidence supports that the agreement “went the full four years”.

[79] The only outstanding payment was the balance of $3,664 to be paid to the defendants on closing day at disposition. It was therefore sensible that Mr. Vaidya agreed to the sale to a third party in early June.

[80] At trial, Mr. Vaidya testified that he did not sign the listing because Mr. St-Jean failed to send him the amendment to the Primary Investor agreement reflecting an extension until the house was sold, and so was not guaranteed his cash flow.

[81] This is not persuasive. Mr. St-Jean had confirmed in writing that Mr. Vaidya would still be earning the cash flow pending the sale. As well, the agreement which he already had stated that he would be paid $550/month while the defendants were the legal owner of the property.

[82] The evidence shows that the email exchange between the two men resulted in Mr. St-Jean getting angry and Mr. Vaidya getting offended. I am satisfied that Mr. Vaidya resiled from the agreement to sell Clarence Creek because of Mr. St-Jean’s tone and threats connected with the NOTL matter and Mr. Vaidya was holding out on the sale as a negotiating tactic.

[83] Clause 5.10 stated the obligation to cooperate in signing written instruments that were reasonably required. On the Clarence Creek agreement, I conclude that the defendants caused the breach by not cooperating with the sale which they had agreed to.

[84] The agreement was for four years in contemplation of a sale at which time the agreement would end. It made sense for the parties to the agreement to sell to a third party since the proposed tenant buyer was unable to do so. Payments would be made to the defendants pending the sale and a bonus on disposition with cooperation on the sale and paperwork. This what the agreement provided for.

What Happened on NOTL

[85] The four years (48 months as set out in the agreement) was concluding in July 2018. Mr. St-Jean and Mr. Vaidya had some discussions in early June as to negotiating a new agreement.

[86] Mr. Vaidya wanted to extend the agreement and offered a third mortgage. Mr. St-Jean did not want to extend and replied that “it is done, over”. Mr. St-Jean offered to prepare a new contract for one year with new terms and conditions which would not include a cash flow but an RRSP mortgage. He also suggested that Mr. Vaidya could sell the house to a new owner and Mr. St-Jean would pay the service fee.

[87] Mr. Vaidya replied on June 11, 2018, that either option was out of the question without cash flow. Mr. St-Jean wrote back suggesting an extension for one year but it meant appraising the house quickly and adding an RRSP mortgage in third position. As well, he offered to compromise on the cash flow. Mr. St-Jean stated he needed the money from this contract to “stay afloat”. He wrote again June 12, 2018, asking if they had a deal.

[88] Mr. Vaidya considered that Mr. St-Jean was dealing with him on a ‘my way or the highway’ approach.

[89] Mr. St-Jean wrote again June 16, 2018, saying he would like to close the sale of NOTL and set up the RRSP mortgage before he went away.

[90] Ultimately, the parties did not agree on any terms to extend the agreement or create a new agreement.

[91] Mr. Vaidya replied on June 17, 2018, stating, “As you are unable to buy back I have to take some advice before deciding anything in a rush.”

[92] For the sale of the NOTL property, Mr. St-Jean was arranging for another Primary Investor to purchase the property. He replied to Mr. Vaidya saying, “Ali, my company is buying back….and I am using a Primary Investor to be the legal owner and my company will be the Beneficial Owner….as was the case with you.” His email continued in an angry and frustrated tone as follows:

What decision are you talking about? There are no options to decide. You cannot meet my requirements for an extension, I cannot accept your terms for an extension, we are done! What other options do you think is there? You accept my offer to extend with my terms, or you don’t. That’s it!

If you don’t, you have to sell. A 10-year old would understand that!

The contract was for 4 years as demonstrated by the calculations of the Service Fee…the 4 years are over…we are done!

I NEED to get this done ASAP as I don’t want to incur the costs of renewing the mortgage for just a couple of weeks passed July 9.

You’ve had a nice run with this for 4 years, let it go!

I have no idea what kind of advice you will be seeking…THE CONTRACT IS FOR 4 YEARS AND THE 4 YEARS ARE OVER. WE ARE DONE!

And what do you mean by deciding anything in rush…you’ve known this was coming to an end months ago…

We will start today contacting my investors to find the next buyer.

I will keep you posted.” [sic]

[93] As the plaintiff company 879 was planning to purchase the property by way of another Primary Investor, Mr. Vaidya considered that the “What if?” clause was triggered, which opened up some options. The clause stated, “What if 8795436 Canada Inc. cannot buy the property at the end of the 48 months of this agreement?”

[94] Mr. Vaidya testified that the agreement did not allow for some “stranger primary investor” to buy the property and that it specified 879 to be the buyer.

[95] On June 18, 2018, Mr. Vaidya emailed Mr. St-Jean as follows:

To keep it simple, please tell me who will be buying back from me? Is it your company (8795436 Canada Inc.)

1. If yes then there is no problem to me whatsoever

2. But if it is not then you need to read the agreement as there are 3 options mentioned and I would like to go for option #1 which is to extend the agreement.

[96] Mr. St-Jean wrote twice on June 18, 2018, seeking cooperation to sell NOTL to one of Mr. St-Jean’s primary investors or else they waste time and money with lawyers.

[97] Mr. Vaidya replied on June 19, 2018 as follows:

PLEASE REFRAIN YOURSELF FROM THREATENING ME BECAUSE YOU VERY WELL KNOW IT DOESN’T WORK ON ME!.....

One last time…I’m not the one who is creating the problem here…in fact I supported you and gave you freedom to pick any options from the agreement that creates win/win situation for both of us. Now you don’t want to do that and only want to dictate your new terms outside of the agreement then how is it my problem.

[98] Mr. St-Jean sent a reply on June 20, 2018, saying the four-year deal was over and, as Mr. Vaidya did not want to do a new agreement, he was talking with potential buyers. He added the following:

One more thing:

Please read again the doc attached because for a reason I can’t understand since I know you are a smart businessman, you seem to be the only one among the 30 investors I’ve done similar deals with who does not understand that I’ve designed a JV and contracts that is NOT like any other out there.

In my deal, I am the driver, the decision maker, and you are the passenger.

You were not involved in ANY of the 20-30 decisions that had to be made over the last 4 years regarding that property…what makes you think it will start now.

You are a PASSIVE investor, and what I decide goes.

What if 8795436 Canada Inc. cannot buy the property at the end of the 48 months of this agreement? 8795436 and the Primary Investor will consult in order to decide which of the following three options is better for the interests of all the venturers involved:

a) Extend this agreement to give extra time to 8795436 to buy the property

b) the Primary Investor will buy out 8795436 Canada Inc. the additional mortgage(s) and/or cash investment(s), and will thus become the legal and the beneficial owner of the Property. The buy-out price will be determined by an independent appraisal. If Option B is chosen, the Primary Investor will have up to six months to buy out 8795436 Canada Inc.

c) Sell the property to a third party

a) We HAVE consulted and I cannot accept your terms and you cannot accept my terms. DONE

b) we don’t want to lose the house by selling it to someone we are not in control of…for one thing, this house is attached to our home. DONE

c) the only option left is c. What is not clear about that?

[99] On July 5, 2018, Mr. St-Jean wrote Mr. Vaidya begging him to sell both properties. He reminded Mr. Vaidya that on the sale of Clarence Creek he would have made $31,000 and on the sale of NOTL he would have made $34,000. He wrote that making $65,000 over four years was “a pretty good return on an investment of zero dollar and a few hours of work with zero responsibilities and no expenses.”

[100] Mr. St-Jean wrote “So please, please, please I ask you my business associate to let go so I can sell both houses and get rid of the red ink in Clarence Creek, and tap into the equity in the NOTL house as I NEED, not merely want, but I NEED to do that.”

[101] Mr. Vaidya did not agree to sell the properties.

[102] As noted above, Mr. St-Jean sent a foully worded email on August 12, 2018, where he stated that the following:

You have stopped earning any service fee on the day the service ended. I invited you to participate in those 2 deals, well Ali you have overstayed your invitation. I do not want to meet with you, I do not want to talk with you, I do not want to pay you a bribe for you to go away because I don’t need to as our contracts are over.

Analysis of the Evidence on NOTL

[103] The essence of the defendant’s objection is a distinction without a difference. Mr. Vaidya did not wish to purchase the NOTL property. He was agreeable to sign the paperwork to sell to 879. At trial, the submission was that one option was to sell to a third party. He objected to selling to a new legal owner that would be a primary investor. However, in any of those options, the result would be the same: he would be paid the balance on closing day of $10,500.

[104] The evidence is that the plaintiffs paid all the expenses under the agreement including the mortgage, taxes and insurance, and the plaintiffs paid the four years of monthly cash flow to the defendants. It would have been sensible for Mr. Vaidya to agree that 879 could purchase its beneficial interest by using a primary investor to be legal owner, just as had been done with the defendants.

[105] By refusing to agree to an eventual sale to another primary investor as arranged by the plaintiffs, the defendants were frustrating the contract to realize the balance of the proceeds that they were owed.

[106] The What If? clause provided three options if 879 did not buy at the end of the four years.

[107] Clause (a) was to extend to give 879 extra time to buy the property. The defendant’s position was that, by using a primary investor, 879 was not “buying” the property. If that is so, there is no evidence to support that 879 agreed or wanted “extra time” to purchase.

[108] Clause (b) allowed the Primary Investor/defendants to purchase the property, but there is no evidence that the defendants wished to buy the property.

[109] Clause (c) provided that the property could be sold to a third party. By using another primary investor, this would put a third party legal owner on the property and would result in completion of the contract.

[110] Mr. Vaidya testified that, as 879 was not “buying” the property as legal owner, it was the defendant’s choice to pick one of the What If options. He chose to extend the agreement considering only the defendants’ best interests. For reasons below, I am not satisfied that this was the intention of the contracting parties.

Were the Defendants the Only Decision-Makers?

[111] Mr. Vaidya testified that both the What If? clauses gave the defendants, as the Primary Investor, the only decision-making power. The clause says to consult with the plaintiff numbered company and then decide which option is better for “the interests of all the venturers involved.”

[112] The defendants’ position was that the plaintiff companies were not venturers and so their interests need not be considered. The defence points to Schedule A which defines Venturer as “AGA Global Investments Inc”. The plaintiff numbered companies are described in Schedule A as “Financial Manager” and “Finder”.

[113] The court, however, must consider the contract as a whole. Both agreements are described as joint venture agreements involving the plaintiff companies who created the ventures.

[114] Under Clause 3.01, it refers to each of the Venturers, “except the Finder” and under clause 3.02 it refers to the Venturers, “except the Financial Manager”. This suggests that the Finder and Financial Manager are otherwise venturers but for those sections. At the very least, it suggests some ambiguity as to who a Venturer is, such that the court needs to look at the intention of the parties and the surrounding circumstances.

[115] The What If? clauses direct that the defendant Primary Investor and the Plaintiff companies were to “consult” to decide what was best for all venturers. To suggest that it was intended they consult to only consider the Primary Investor’s interest is not consistent.

[116] Mr. Vaidya’s emails at the time spoke about win/win situations and considering what would be in the best interests of both the plaintiff companies and his own. It was only in the litigation that he placed this construction on the words that his company was the only venturer and the only interests to be considered.

[117] I am not persuaded that it lay in the defendants’ power to unilaterally extend the agreements nor that this had ever been the intention of the parties.

[118] For reasons noted above, the evidence does not support that either of the What If? clauses were engaged in the agreements. If they were, I find that it was not the intention of the parties that the defendants’ interests were the only ones to be considered. Further, the defendants were obliged to act reasonably in the exercise of any discretion that they may have had. The refusal to allow a sale to another primary investor was unreasonable.

[119] A reading of both agreements make it clear that a sale of the property was the contemplated conclusion.

[120] The Clarence Creek agreement stated that the term of the agreement ended at

• the time of the sale of the property to the tenant-buyers;
• or as otherwise agreed upon between the parties in writing [emphasis added].

[121] The evidence in the emails, and testimony at trial, was that the parties agreed to sell Clarence Creek but the defendants resiled from that agreement.

[122] The agreement expected a sale, as it provided for further proceeds to be paid to the defendants “on closing day at disposition’.

[123] Similarly, the NOTL agreement contemplated the sale at the end of 48 months with proceeds payable to the defendants “on closing day at disposition.”

[124] Mr. Vaidya testified that the goal in NOTL was to finish at the end of the four years “and the numbered company has to buy back.”

[125] The defendants’ refusal to sell either property only serves to harm both the defendant company and the plaintiffs, and is contrary to the expectation of a sale in both agreements. The defendants made the issue in both agreements who the property was sold to; the tenant-buyer in Clarence Creek and 879 via a primary investor in the NOTL property. As the resulting payment would be the same, such reading of the contracts, contrary to the intentions of the parties, was capricious.

Were the Plaintiff Companies the Decision-Maker?

[126] Neither contract put sole decision-making authority into the hands of the Primary Investors (defendants). The Primary Investors are described as being paid for a service by holding the mortgage on the purchased property and being given various guarantees against any loss.

[127] The agreements themselves set out that the plaintiff companies were responsible for all rental income, expenses, property management, expenses, and any gain or loss on the sale of the property.

[128] The surrounding circumstances, which are acknowledged by Mr. Vaidya, were that his company was a “passive” investor in these agreements. It was the plaintiff companies, and not the defendants, who

• found or chose the properties;
• found the tenants
• dealt with the tenants
• paid the expenses
• paid the mortgage, taxes, and insurance
• arranged for the funding of the purchase with the Primary Investor’s mortgage, RRSP mortgages and the down payment; and
• paid out a guaranteed cash flow to the Primary Investor.

[129] Both agreements specified that it was not a partnership.

[130] Mr. Vaidya testified to being shocked and offended by Mr. St-Jean considering that these were the plaintiffs’ “deals”. He said, “…in what universe that you are thinking that I will give you my half a million dollars to invest in two properties and make you my boss and tell me, ‘My way or highway’.”

[131] The evidence supports, however, that it was the plaintiffs’ deals.

[132] The defendants were not out-of-pocket for any funds whatsoever. They had no work to do but to sign the mortgage papers and pay the mortgage with funds provided to them by the plaintiff companies. Their involvement was truly passive and brought them a guaranteed income for the term of the agreements.

Who Has Been Harmed?

[133] Mr. Vaidya represented himself and his company except for at trial. He filed his own Statement of Defence and Counterclaim. At paragraph 8 of the pleading it stated that, “The most important part of both the joint venture was [sic] that it is done for the benefit of both the parties and no one party can make unilateral decisions to harm the other [emphasis added].”

[134] Mr. Vaidya has not provided evidence that he was harmed. Rather, the evidence supports that the defendants have profited and suffered no loss:

• the defendants were paid their guaranteed cash flow for the full four years of both agreements;
• the defendants received their cash flow even when the tenants failed to pay rent;
• the defendants were not out of pocket for any funds;
• while the defendants have stood as mortgagees for the two properties, the plaintiff companies have made all mortgage payments from 2014 to date;
• the defendants’ indebtedness on the mortgages are protected by being registered on title; by guarantees by the plaintiff companies; and by personal guarantees of Mr. St-Jean and Ms. Simmons;
• there is no basis or evidence to suggest that the defendants’ credit has suffered; and
• the defendants did not establish they had risk by standing as mortgagees, considering the guarantees provided by the plaintiffs and their evidence of an expectation that the property values have increased over time.

[135] The only loss or harm to the defendants to date has been the non-payment of the proceeds on closing, which the defendants themselves caused by not cooperating with the property sales.

[136] The evidence supports that it has been the plaintiffs who have suffered from the conduct of the defendants. They were losing money on the Clarence Creek agreement as discussed below and this was explained to Mr. Vaidya in the spring of 2018. They needed the sale to “stop the red ink”.

[137] On the NOTL property, the plaintiffs needed the defendants’ cooperation on the sale to obtain their equity that had built up on the property.

Did the Plaintiffs Default on the Agreements?

[138] The defendants seek to invoke the default clause 5.17 under both agreements, which provides that if the plaintiff companies, “defaults in any of its obligations set out herein, the Primary Investor has the right to assume control and management of the property after 60 days from the first day of default, thus becoming the beneficial owner as well as the legal owner of the Property.”

[139] Did the plaintiffs’ default and thereby lose their beneficial interest in the two properties? This is the subject of the defendants’ counterclaim.

Did the Plaintiffs Default on the Clarence Creek Agreement?

(a) Failure to Report

[140] The defendants submit that the plaintiffs breached their obligation under clause 2.01(a) to report in writing “quarterly with respect to the operations and management of the joint venture and the property.”

[141] Specifically, the defendants submit that the failure to disclose the rent problems which the plaintiffs had with the tenant-buyers breached the plaintiffs’ duties of good faith and duty of honest performance in contracts (per Bhasin v Hrynew).

[142] The defendants, as passive investors, never requested such quarterly reports during the four-year term of the agreements. There was no evidence that they expected quarterly reports. Mr. Vaidya testified that he spoke regularly with Mr. St-Jean.

[143] The schedules to the agreement made it clear that the plaintiffs were responsible solely for rental difficulties, and the cash flow to the defendants was guaranteed. The cash flow was in fact paid despite defaults in the rent.

[144] Mr. St-Jean testified that the rental problems were not relevant to report to the defendants because, as passive investors, they were not liable for any expenses or affected by rental defaults. They received their cash flow regardless.

[145] There is therefore ambiguity between stating an obligation to report on operations quarterly while there was no responsibility or effect on the defendants for such operations. Looking at the parties’ intentions when they contracted is important. The early emails demonstrated that their discussions were an investment wherein the plaintiffs managed everything and the defendants wanted “no hassles”.

[146] As such, I do not find that the plaintiffs defaulted on an obligation to report quarterly in writing, as that was not their intention.

[147] As well, I am not persuaded that any failure in reporting caused any prejudice to the defendants which would trigger the default clause.

[148] Mr. Vaidya testified that he did not find out that the tenant-buyers were unable to qualify for a mortgage to buy the property “until very late”. He felt this should have been reported to him earlier by Mr. St-Jean. Since it was only an option to purchase, it was never a sure thing that the tenants would buy. It cannot be said that the defendants were disadvantaged in any way.

[149] The defendants submitted that a default occurred as Mr. St-Pierre offered to extend the option to purchase agreement with the tenants. Mr. St-Pierre denied that this was done and stated that he mixed up this agreement with other rent-to-own deals. The emails and testimony of the tenant-buyer, Mr. St-Pierre, however confirm that there was discussion about extending the agreement to November 2018.

[150] The emails also confirm that Mr. Vaidya was hopeful that the deal would extend to November or even later. Again, it is not shown that the plaintiffs were acting contrary to the defendants’ interests.

[151] Such an extension was contemplated within the agreement and the plaintiffs had the authority to do so:

What if the RTO deal needs to be extended by 1 or 2 years?

The Primary Investor and SASREIG WILL extend this agreement by the required number of months or years, and will adjust the term, and amount of the Proceeds accordingly.

[152] Ultimately, the tenants opted not to purchase, and not to extend, past the four years so it was not an issue.

[153] I am not satisfied that this was a breach of the agreement.

(b) Did the Rent-to-Own Not Go Four Years?

[154] The defendants considered it a default that the plaintiffs did not recognize the What If? clause was triggered on the basis that the agreement did not go the full four years.

[155] They submit this was so because the rental agreement which the St-Pierre tenant-buyer signed provided that non-payment of rent made the agreement null and void. The evidence is that Mr. St-Jean worked with the tenants to help them continue with the deal for which the tenants were grateful.

[156] Mr. Vaidya testified that he thought Mr. St-Jean should have looked for new tenant-buyers when the default occurred. But he was also hopeful of extending the agreement to the St-Pierre tenants to give them more time to purchase.

[157] In any event, it was the plaintiffs who were responsible for dealing with the tenant issues.

[158] As the St-Pierres advised in April 2018 that they would not be purchasing the property, Mr. Vaidya testified that the agreement did not go the full four years which triggered the What If? clause.

[159] However, the evidence is that

• the tenants resided in the property the full four years;
• the tenants decided not to exercise an “option” to purchase rather than an obligation to purchase;
• the cash flow was paid to the defendants without fail despite rental defaults in the four years; and
• the plaintiffs absorbed all losses related to the rental difficulties including litigation with the tenant-buyers

[160] This evidence leads to the conclusion that the RTO went the full four years to the benefit of the defendants as contemplated and expressed in the agreement without any prejudice to the defendants.

[161] It was not a breach by the plaintiffs.

(c) Cash Flow Default

[162] The defendants submit that the plaintiffs defaulted by not sending the amendment to the Primary Investor agreement.

[163] Mr. St-Jean had confirmed in writing that the cash flow would continue until the sale.

[164] The agreement also stated that the cash flow would continue while the defendants were the titled owners.

[165] As noted above, I found the defendants caused the breach by resiling from the agreement to sell. The defendants may not engineer a cash flow default by refusing to allow the sale and forcing the plaintiffs to continue to have him as legal owner when he is no longer needed or wanted.

[166] I consider this a fundamental breach of the agreement by the defendants that would disentitle them to the cash flow after their breach. As the mortgage and all expenses have continued to be paid by the plaintiffs, the defendants have not suffered. It was the conduct of the defendants that stopped the cash flow. It does not sit in the defendants mouths to claim a default by the plaintiffs.

(d) Involvement of other Venturers

[167] The defendants submit that the RRSP investors who funded the balance of the purchase of the property were not “venturers” as AGA was not asked to sign and approve them as venturers.

[168] The defendants submit that the purported agreements by venturers Ms. Howard and Mr. Redding violated clause 5.01(b) of the agreement as follows: “This agreement may not be amended, altered or modified except by a written agreement by all parties.”

[169] The agreement however adds ambiguity to this statement by giving the Financial Manager (the plaintiff company) the authority to enter into agreements and contracts unless expressly “disapproved”.

[170] The evidence is that Mr. Vaidya was aware of the other venturers and considered it the plaintiffs’ “job” to take care of this. Mr. St-Jean sent email discussions about the RRSP holders, Ms. Howard and Mr. Redding to Mr. Vaidya in 2014. Mr. Vaidya never objected to their involvement.

[171] The agreement as a whole contemplated additional venturers beyond AGA.

[172] I find that Mr. Vaidya fully understood this and left it up to the plaintiffs to do the work and take care of all the “hassles”. In essence, he authorized Mr. St-Jean to act as he did.

[173] There is no evidence that the defendants were prejudiced or harmed by the manner in which the venturers were added.

(e) Failure to Attempt to Mediate

[174] Clause 5.13 provides the following:

If a dispute arises relating to this Venture, and if said dispute cannot be settled through negotiation, the Parties agree to attempt to settle the dispute by mediation through the independent services of Canadian Dispute Resolution Corporation, before resorting to arbitration, litigation or some other dispute resolution procedure.

[175] The defendants submit that the plaintiffs’ refusal to participate in mediation was a breach of the agreement.

[176] The Canadian Dispute Resolution Corporation was no longer in business in 2018 so this clause may not be strictly enforced.

[177] The evidence is that the defendants stopped responding to the plaintiffs. They did not respond to lawyer Rothman’s suggestion to mediate on July 4, 2018.

[178] There is no evidence that the defendants suggested a mediator. It requires two to mediate and there is no evidence that Mr. Vaidya made overtures to mediate other than his trial evidence that he had wished to mediate.

[179] After Mr. St-Jean’s emails begging for Mr. Vaidya’s cooperation, he later wrote in August 2018 that he did not wish to meet with Mr. Vaidya.

[180] The statement of claim was not issued until November 2018.

[181] The mediation clause spoke of an obligation of both to attempt to mediate after a dispute. I am not satisfied there was a breach since the mediation company chosen no longer existed and as it was a joint obligation.

Did the Plaintiffs Default on the NOTL Agreement?

(a) How 879 was Supposed to Purchase

[182] The defendants note that Mr. St-Jean’s testimony was that 879 would buy the property as beneficial owner and find a new primary investor. The defendants submit that this makes no sense.

[183] I find that it does make sense, however, as both of these properties were purchased in this very manner. The agreements provided that in the venture the Primary Investor was purchasing only as legal owner with no obligations plus a service fee and the plaintiffs were getting the property as beneficial owner for which any gain or loss on the sale accrued to the plaintiffs

[184] The defendants submit that 879 as beneficial owner cannot buy the beneficial ownership from itself. The defendants provide no authority for this. The plaintiffs have shown the manner in which this can be done by the way in which they purchase properties using the services of primary investors, such as the defendants.

[185] The defendants submit that one option was to extend the agreement to allow 879 extra time to buy the property and that it was intended that 879 become both the legal and beneficial owner. This plaintiff company did not need extra time as they had other primary investors ready.

[186] This would have resulted in the property being sold, the plaintiff company would obtain the equity from the sale, and the defendants would be discharged on the mortgage and paid their final proceeds. 879 would succeed in purchasing their beneficial interest by using the primary investor model as the new legal owner.

[187] The defendants submit that the third option under the agreement was to sell to a third party but they submitted this meant that 879 would sell its beneficial interest.

[188] The defendants somehow objected to 879 setting up the purchase where they collect on the gain on the property but maintain a beneficial interest.

[189] The manner in which the purchase was made would not have any financial implications on the defendant. On the sale to a primary investor or a stranger third party, the results for the defendants would be the same. I consider it unreasonable to object to the manner of sale in this way.

[190] The defendants further submit that the word “buy” in the agreement is commonly understood as a person becoming a full owner of a property (beneficial and legal ownership). This ignores that properties may be purchased in trust for others. Again, no authority was provided by the defendants for their proposition.

[191] As noted above, this agreement for services by the defendants to act as legal owner had been satisfied by the plaintiffs and the term completed. The two parties were not able to agree on terms for a new agreement. The agreement contemplated a sale to 879 on which 879 was ready to proceed. It is odd that Mr. Vaidya was so offended by Mr. St-Jean stating that the deal was “DONE”.

[192] It was the defendants’ non-cooperation that breached the agreement which was intended to run four years and then result in a sale of the property.

[193] Mr. St-Jean even explained why he wished to maintain his beneficial interest in the property as it was next door to his own. He also needed the sale quickly to obtain the equity “to stay afloat”.

[194] The defendants’ position that they only agree to selling if the title passed to either 879 or to a third party without allowing a beneficial ownership to 879 is not as the agreement reads and it is contrary to the understanding and intentions of the parties to this business model.

(b) Cash Flow Default

[195] The defendants submit that the plaintiffs defaulted on the agreement by not continuing to pay the cash flow after July 2018.

[196] The cash flow was stated in the agreement as a payment for service as acting as the legal owner. At the end of the four years the plaintiffs no longer needed them to serve as legal owner. The defendants were asked to cooperate with the sale wherein they would be paid their $3,664 proceeds on disposition.

[197] It was the defendants’ breach which left them on title since that time as they tied the hands of the plaintiffs.

[198] Again, I note that since July 2018 the plaintiffs have continued to pay the mortgage, taxes, and insurance such that the defendants have not been prejudiced while in place as legal owner.

(c) Failure to Attempt to Mediate

[199] For the reasons set out above regarding the failure to attempt to mediate the Clarence Creek dispute, I similarly find there is no breach of the mediation clause by the plaintiffs in the NOTL agreement.

(d) Involvement of Other Venturers

[200] As noted above, regarding the Clarence Creek agreement, the defendants submit that there was a breach as the defendants never signed the amended agreement to add Ms. Boyle with her RRSP agreement on the property.

[201] Mr. Vaidya testified that Ms. Boyle, who held the RRSP mortgage agreement, was not a venturer and was just a lender.

[202] The defendants also submit that the default clause was triggered as the plaintiffs presented unreliable documents in an effort to make Ms. Boyle a “venturer”, “even though her interests were never discussed.

[203] The venturer agreements filed involving Ms. Boyle contained a number of discrepancies of signatures and dates. Mr. Vaidya testified that he never signed any of these agreements for AGA.

[204] For the same reasons discussed above, I do not consider this a breach, as the defendants were aware that this was the way the properties were purchased and other venturers were contemplated under the agreement with the plaintiff company as Financial Manager having the authority to make these agreements.

[205] AGA signed the RRSP agreement by its lawyer when the venture was started. Mr. Vaidya testified that it was the plaintiffs’ “job to arrange this”.

[206] This is supported by the email explanations of October 31, 2013, and November 20, 2013, by Mr. St-Jean, before the agreements were signed:

We will be looking for people to buy one, two, three properties with an 80% mortgage, we will find RRSP mortgages for the rest. We will hold those properties for 3 to 5 years so we can benefit from the mortgage paydown, the appreciation and the cash flow over 3 to 5 years.

We will manage everything.

We will be looking for Primary Investors (they buy the house, but don’t invest any cash), RRSP Investors (for RRSP 2nd mortgages), CASH Investors (investing cash in properties for 3 to 5 years) and BRIDGE Investors (investing cash for 4 to 6 weeks so we can close the deals).

[207] Even though the defendants did not sign the subsequent agreements, as a passive investor, they were aware of others’ involvement and were complicit in letting the plaintiffs make all the arrangements.

[208] I do not consider that the plaintiffs are in default on this basis.

[209] I note that all the other venturers, or lenders as the defendants describes them, have been awaiting the sales of both properties. None have taken other action to exercise their rights to redeem the investments which have matured. I do not consider that the defendants have acted reasonably or fairly to the other parties by refusing the sales.

The Counterclaim Seeking Beneficial Ownership on Breach

[210] As set out above, I am not satisfied that the plaintiffs breached either agreement.

[211] Further, in the circumstances of this case wherein the defendants have not had to spend a penny, have not been harmed, have been paid in full for the two contracts, and acted unreasonably toward all parties concerned, I would consider it a commercial absurdity for them to receive the beneficial ownership.

[212] For these reasons, I dismiss the defendants’ counterclaim.

Rude Behaviour of the Plaintiffs

[213] The defendants point to Mr. St-Jean’s rude, bullying and sometimes foul correspondence, which began in April 2018 through to August, as being contrary to reasonable business practice.

[214] I find that the correspondence demonstrates Mr-St. Jean’s impatience and frustration with the defendants at the end of these agreements, who were no longer acting as passive investors.

[215] Mr. Vaidya testified that AGA purchased the property and paid for it. The reality is that the defendants have never had to spend a penny, and that AGA held legal title for the benefit of the plaintiffs. The defendants acted as a bare trustee.

[216] Mr. Vaidya testified that the cash flow paid each month was not a “service fee” as stated in the agreement. He said the cash flow was the “profit”. The reality was that it was a guaranteed payment whether there was profit or not.

[217] Mr. Vaidya testified that the plaintiffs acted as a three-in-one service provider to the defendants; that the plaintiff companies acted as a realtor to find the property, a mortgage broker to help with the down payment, and a property manager to collect rents and deal with tenants.

[218] The reality was that the plaintiffs created the deals to provide safe investments with a high rate of return for their investors while earning profits on buying and selling real estate. The plaintiffs did not “serve” the defendants.

[219] Mr. Vaidya testified that the agreements were a “joint” effort rather than the plaintiffs’ “deal”. The reality was that it required no effort by the defendants as passive investors for which they enjoyed a guaranteed income.

[220] When the plaintiffs were explaining these investment opportunities to the defendants in November 2013, before the deals were signed, Mr. St-Jean’s signature for his company was:

Daniel St-Jean

Professional Real Estate Investor, Catalyst, and Educator

Safe & Sound Real Estate Investment Group,

Will help you build your wealth with high-return

Real estate investment opportunities that are as

HANDS-OFF, HASSLE-FREE, PREDICTABLE, AND SECURE

[221] Mr. Vaidya’s same day email response was, “Thanks for the info and the story…. I don’t know about others but for me its only 2 things above market ROI (return on investment) with very low hassles.”

[222] As it turned out, the only hassles which occurred were created by the defendants, by objecting to the manner in which the NOTL property was sold, and by resiling from the agreement to sell Clarence Creek.

[223] Mr. Vaidya testified that he was involved in a high-risk venture holding a mortgage at 80 percent and the balance funded by RRSP mortgages, if the market went down.

[224] The reality was that the plaintiffs set up the agreements to give security to their investors. The agreements provided that the mortgages would be registered on title; that the plaintiff companies would pay any shortfall on the mortgages; and further that the plaintiffs, Mr. St-Jean and Ms. Simmons, personally guaranteed any shortfall.

[225] I consider any of the alleged breaches by the plaintiffs inconsequential in comparison to the fundamental breaches by the defendants.

[226] The plaintiffs are entitled to relief and resolution on both agreements.

No Allegations of Fraud

[227] The plaintiffs’ submissions dealt with allegations of fraud by the defendants.

[228] Neither in the defendants’ pleadings nor the trial proceeding was there evidence or arguments that the plaintiffs were guilty of fraudulent behaviour. The defendants pointed to Mr. St-Jean instructing the Clarence Creek tenants to deny there had been an offer to extend the agreement and to not speak to Mr. Vaidya. This was not an allegation of fraud. The defendants were simply raising issues of credibility and high-handed behaviour.

[229] Similarly, there was no evidence or allegations of fraudulent behaviour by the defendants.

Is Mr. Vaidya Personally Liable?

[230] The plaintiffs seek relief against both the corporation AGA and Mr. Ali Vaidya personally.

[231] There is no doubt that the registered owner and primary investor of the NOTL property was intended and shown to be the company, AGA. Mr. Vaidya signed as officer of AGA. AGA is mentioned 15 times throughout the agreement.

Was the Contracting Party on Clarence Creek Mr. Vaidya, Personally?

[232] The plaintiffs submit that they thought Mr. Vaidya personally was the registered owner of the Clarence Creek property and that they did not find out that AGA was the registered owner until provided with the title abstract just before trial.

[233] The plaintiffs point to the one line in the Clarence Creek agreement, Schedule D, which states that the legal owner of the property is “Ali Vaidya”. Everywhere else in the agreement (14 times) it refers to AGA. The agreement was drafted by the plaintiffs and signed on the same day as the NOTL agreement with AGA.

[234] Mr. St-Jean admitted to typos and messy, sloppy paperwork. The evidence supports that the one line stating that Ali Vaidya was to hold legal title was a typo and the intention was that AGA would be the Primary Investor and legal owner.

[235] Mr. St-Jean’s own affidavit signed November 4, 2019, stated that AGA was recruited to take out a mortgage and become the legal owner.

[236] I am satisfied on the evidence that the plaintiffs well knew they were dealing with the corporation, AGA.

[237] It is notable that the plaintiffs did not provide any evidence that the cash flow on Clarence Creek was paid to the person Ali Vaidya rather than the corporation AGA.

Is There a Basis to Pierce the Corporate Veil?

[238] Mr. Vaidya is the sole director of AGA and his personal residence is the same as the corporate address of AGA.

[239] The plaintiffs propose that this is an appropriate case to lift the corporate veil to impose personal liability on Mr. Vaidya, as set out in Parkland Plumbing & Heating Ltd v Minaki Lodge Resort 2002 Inc., 2009 ONCA 256, 305 D.L.R. (4th) 577, para 50:

The courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct […]

[240] I do not consider that the uncooperative behaviour of Mr. Vaidya on behalf of AGA rises to the level of fraud nor does it yield a result “too flagrantly opposed to justice” as set in the Parkland decision.

[241] There is no evidence that the corporation here was used as a shell for improper activity. As discussed in Yaiguaje v Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1, “corporate separateness is the rule” unless it is abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct: see para. 70.

[242] The plaintiffs suggest that any judgment for damages as against the corporation may not be collectable. I have no evidence of the financial strength of the corporate defendant. This alone cannot justify piercing the corporate veil.

[243] Accordingly, I dismiss the claims in paragraphs 1(a)(b)(c)(d)(f)(g) in the statement of claim insofar as they relate to Mr. Vaidya personally rather than as agent for AGA.

Remedies

[244] The plaintiffs seek orders for specific performance for the sale of each of the properties. The defendants did not submit that such orders were not appropriate apart from the orders directed at Mr. Vaidya, personally.

Listing and Sale of Clarence Creek

[245] To achieve the sale of Clarence Creek the plaintiffs ask the court to order Mr. Vaidya on behalf of AGA to sign the listing agreement and any subsequent purchase and sale documents.

[246] For the reasons set out above, I order that AGA sign a listing agreement for the property at 1574 Bouvier Road, Clarence Creek, Ontario, and an agreement of purchase and sale as presented by the plaintiffs.

[247] I order the defendant AGA to sign all necessary documents to effect the sale of the property and discharge the encumbrances.

Sale of NOTL

[248] The plaintiff 879 similarly sought an order that Mr. Vaidya, on behalf of the legal owner AGA, sign an agreement of purchase and sale of the NOTL property.

[249] For the reasons set out above, I order that the defendant AGA sign an agreement of purchase and sale as presented by the plaintiffs.

[250] I order the defendant AGA to sign all necessary documents to effect the sale of the property at 7 Keith Crescent, Niagara-on-the-Lake, Ontario, and discharge the encumbrances.

[251] In the event that there are any issues arising from this judgment for specific performance, the parties may return before me for directions.

Damages re Clarence Creek

(a) Unanticipated Costs

[252] The plaintiffs seek an order for additional costs of $14,125.28 on the basis that they would not have been incurred if the defendants had cooperated with the sale.

[253] These costs, though claimed, were not supported by evidence, apparently due to the short trial time under the summary procedure rules. It is unfortunate for the plaintiffs but the court may not order special damages that have not been strictly proven. These claims are denied.

(b) Daily Costs

[254] The plaintiffs seek an order for damages calculated at $92.24 per day from June 28, 2018, until the property is sold, on the basis that the property was untenanted and costs continued to accrue. This amounts to a claim of $2,805.63 per month.

[255] The only evidence as to the breakdown of these figures is as set out in Mr. St-Jean’s email dated July 3, 2018. He wrote as follows:

First Mortgage payment $1,181

Second Mortgage payment $234

Property Tax $410

Insurance $183

Heat/Cooling System $214

Ali’s Cash flow $550

Water/Garbage/Electricity when

House is empty-approx. $100

Total $2,872

[256] None of these expenses were questioned by the defendants, however, Mr. St-Jean has not paid the $550 cash flow to either “Ali” nor to AGA since June 28, 2018. This reduces the monthly expenses to $2,322 or $76/day.

(c) Mitigation

[257] The defendants did not mention the term “mitigation of losses” but there was evidence that if Mr. St-Jean had found a tenant, even on a month to month basis, this could have reduced these losses.

[258] Mr. St-Jean testified that he did not even look for a potential tenant. He expected a quick resolution of the problem.

[259] The evidence is that there was no response from the defendants in the months that followed the dispute and in November 2018 the plaintiffs issued their claim. It should have been apparent to the plaintiffs that the matter was not resolving and they should have made efforts to reduce their losses by seeking a tenant for the new year by January 2019.

[260] Mr. St-Jean stated that the house was out in the country and would be difficult to rent. He suggested that even if rented he would have losses of $900 to $1200 per month. Mr. St-Jean did not testify as to what rent he could reasonably have obtained. The only evidence of the rent potential was Mr. St-Jean’s email of July 3, 2018, where he stated that perhaps he could get $1,600 to $1,900, plus utilities.

[261] On this evidence, I find that reasonably the plaintiffs could have found a tenant to pay $1,750/month or $57.53/day to mitigate their losses pending trial or other resolution.

[262] The defendants submit that the losses and expenses of holding the property are somehow set off by the appreciation in value of the property, of which there is no evidence other than the expectations of the parties.

[263] I am satisfied that if the property has gained in value upon sale, the profit has been reduced by the behaviour of the defendants in delaying the sale.

[264] The defendants also submitted that there may have been overlap in the litigation claims brought against the tenant-buyers, St-Pierre. The evidence largely shows that the plaintiffs suffered significant losses related to issues with the tenant-buyers, with the claims related to these tenants pre-dating July 2019. The claims in this litigation commenced July 2019. I am not persuaded that any evidence supports an overlap of the claims which I have allowed below.

(d) Additional Expense

[265] Mr. St-Jean’s evidence was that they had spent $5,000 after the tenant-buyers moved out to prepare the property for sale and this would be a loss if they put new tenants in. The evidence was not disputed or cross-examined upon by the defendants.

[266] I accept that a similar expense would be incurred after the month to month tenants left had the property been rented pending trial, including a termination of such tenancy. The $5,000 spent in 2018 to ready the property for sale was therefore a cost thrown away and is to be included in the damages claim.

(e) Calculation of Losses

[267] The monthly expenses of $2,322 from July 2018 to December 2018 come to $13,932.

[268] From January 2019 to this judgment is a period of 29 months. Had the plaintiffs mitigated the loss by obtaining rental income of $1,750 this would have reduced their loss of $2,322/month to $572/month. The loss of $572 for 29 months amounts to $16,588.

[269] With the costs thrown away of $5,000 the total net damages amount to $35,520 to the date of judgment.

(f) Defendants’ Proceeds as a Credit

[270] On the sale of Clarence Creek, AGA would have been owed $3,664 on closing day. On the sale of NOTL, AGA would have been owed $10,500, on closing day.

[271] I find that these total proceeds of $14,164 are not to be paid on closing and are to serve as a credit against the damages claim of $35,520 owed by AGA to the plaintiffs.

[272] The net damages claim as against AGA is accordingly $21,356. I order the defendant AGA to pay $21,356 to the plaintiffs forthwith.

(g) Length of the Claim for Daily Costs

[273] The plaintiffs had sought the damage claim on a daily basis to continue until the property was sold.

[274] If the defendants had cooperated with the sale as of June 28, 2018, Mr. St-Jean had expected that the property would take three to four months to sell. He planned for it to be untenanted to get the best price.

[275] From the time of the sale being authorized to the actual sale, the plaintiffs were going to sustain monthly losses unrelated to the defendants’ actions.

[276] As this judgment authorizes the sale, I am not prepared to order ongoing damages to the date of the sale.

Costs

[277] If the parties are unable to settle costs, the plaintiffs may file written submissions on costs within 14 days of this judgment. The defendants may file responding submissions seven days thereafter. The plaintiff, if required, may file reply submissions five days thereafter.

[278] Written submissions are not to exceed three pages but may attach cost outlines, applicable offers, and case law.

[279] Submissions are to be sent to my chambers in St. Catharines.

[280] Failing receipt of costs submissions within 40 days of this judgment, the issue of costs will be considered settled and the file closed.

M. J. Donohue J.

Released: April 19, 2021