Court File and Parties

COURT FILE NO.: CV-21-00663825-00CL DATE: 2022-04-06 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: TRIDELTA INVESTMENT COUNSEL INC., TRIDELTA FIXED INCOME FUND, TRIDELTA HIGH INCOME BALANCED FUND, 2830063 ONTARIO INC., 2830064 ONTARIO INC., 2830068 ONTARIO INC., GTA-MIXED USE DEVELOPMENTS L.P., MIXED-USE DEVELOPMENTS (ONTARIO) L.P. and WASAGA DEVELOPMENTS AND INFRASTRUCTURE 2021 L.P., Plaintiffs

AND:

GTA MIXED-USE DEVELOPMENTS GP INC., MIXED-USE DEVELOPMENTS (ONTARIO) GP INC., WASAGA DEVELOPMENTS AND INFRASTRUCTURE GP INC. and U DEVELOPMENTS INC., Defendants/Plaintiffs by Counterclaim

AND:

TRIDELTA INVESTMENT COUNSEL INC., TRIDELTA FIXED INCOME FUND, TRIDELTA HIGH INCOME BALANCED FUND, 2830063 ONTARIO INC., 2830064 ONTARIO INC. and 2830068 ONTARIO INC., Defendants by Counterclaim

BEFORE: Penny J.

COUNSEL: Christopher P. Naudie and Lauren Tomasich for the Plaintiffs Jordan Goldblatt and Cameron Rempel for the Defendants Gavin H. Finlayson and Matthew G. Smith for 320 Bronte Road Inc. Ren Bucholz for Asif Khan

HEARD: March 25, 2022

Endorsement

[1] On March 28, 2022 I dismissed two motions to consolidate other proceedings with this matter, scheduled for a five-day trial to begin on June 27, 2022, with reasons to follow. These are the reasons.

[2] Rule 6.01 of the Rules of Civil Procedure provides that the Court may order proceedings consolidated or heard together if they raise common questions of fact or law, if they seek relief arising out of the same transaction or occurrences, or if there are other reasons why such an order should be made. An order for consolidation is a discretionary remedy and the court may give such directions as are just to avoid unnecessary costs or delay.

[3] Section 107(1) of the Courts of Justice Act provides the authority to consolidate actions pending in different courts.

[4] Tridelta invested in three limited partnerships. The main asset of each limited partnership is special shares in a project company, each of which owns land for the purpose of development. One project company is 320 Bronte Road Inc. Mahdi Tajbakhsh is the principal of each of the general partners and of each of the project companies, including 320 Bronte.

[5] In 2018, Tridelta sought to obtain greater information and transparency about its investment in these limited partnerships. There were disagreements arising out of Tridelta’s inquiries which blossomed into litigation. There is now an irreparable breakdown of trust between Tridelta management and Mr. Tajbakhsh over the operations of the limited partnerships.

[6] As a result of this breakdown, in April of 2021 TriDelta—as the majority unit holder of each limited partnership— purported to exercised its rights under the limited partnership agreements and voted to remove and replace the general partners, who are now defendants in this action. The unitholders right to vote to remove the general partners is premised on the general partners having been responsible for an “event of default” under the terms of the limited partnership agreements. Tridelta alleges twelve such events of default.

[7] The general partners (I will refer to the “former” general partners throughout as the general partners, unless context requires otherwise) refused to recognize the legitimacy of the unitholders’ vote. Tajbakhsh ceased providing any information to the applicants. Tridelta commenced these proceedings, essentially for a declaration that the vote was valid, the former general partners had been removed and Tridelta’s new appointees are the general partners of the limited partnerships.

[8] Among other things, the general partners take the position that they were not in default of any provision of the limited partnership agreements, such that a precondition to the unitholders’ vote to remove them was not met.

[9] Of some importance to the defendants’ motion is their allegation that they negotiated Tridelta’s investment in the limited partnerships with a senior manager at Tridelta by the name of Edward Jong. Mr. Jong has since ceased to be employed by Tridelta. The defendants rely on the actions and knowledge of Jong at the time the investments were made as part of their defence to the allegation that they were in breach of various terms of the limited partnership agreements.

[10] The defendants claim that each of the twelve alleged defaults is the subject of a factual dispute. Many of these factual disputes will be resolved, they say, by the interpretation of the limited partnership agreements in the context of circumstances in which the limited partnership agreements were made, including those relating to Jong’s participation.

[11] Because of these alleged factual disputes, in November 2021, the general partners successfully moved before Justice Conway to have the proceeding converted to an action. Conway J. granted this relief, however, on the basis of a highly expedited pleading and discovery process and the fixing of a 5-day trial commencing June 27, 2022.

[12] Since that order was made, the defendants have unsuccessfully sought on two occasions to adjourn the June trial.

The Brampton Action

[13] In order to preserve limitation periods, Tridelta initiated an action against Jong and Asif Khan (said to be a trusted adviser who was also involved in Tridelta’s eventual investment in the limited partnerships) in Brampton. In that action, Tridelta claims damages for breach of fiduciary and negligent against Jong and Khan, who, it is alleged, were working for Tridelta at the time and owed various duties to it. This claim is, in effect, “in the alternative” to the remedies Tridelta is seeking against the defendants in this action. The Brampton action is not yet out of the pleadings stage.

[14] Nevertheless, the defendants argue that Jong and Khan will have to be material witnesses in this action as their testimony will form part of the basis for the defendants’ defences to the alleged events of default. For this reason, they say that the Brampton action should be consolidated with this action for reasons of judicial economy and the avoidance of potentially inconsistent findings.

[15] I am unable to agree with this argument.

[16] The issues in the two proceedings are completely different. This action is about the governance of the limited partnerships and whether the vote to remove and replace the general partners was valid. The Brampton action is about whether former employees or advisors breached any duties owed to Tridelta causing money damages.

[17] The trial of the governance action was fixed in November 2021. The defendants were forced to concede at the argument of this motion that the June 2022 trial could not possibly proceed if the consolidation order were granted. In any event, depending on the outcome of this proceeding, and other factors, the Brampton action may never proceed.

[18] All of the parties to the Brampton action (that is, Tridelta, Jong and Khan) are opposed to any order for consolidation.

[19] While there may be some overlap between the testimony of Jong and Khan might give in this action and the testimony they might give in the Brampton action, it is by no means clear what the extent of that overlap is. In this proceeding, the evidence of Jong and Khan is, at best (as characterized by counsel for the defendants), evidence of the factual matrix at the time the limited partnership agreements were negotiated and entered into. It seems likely that the admissibility of at least some of this evidence will be challenged as infringing the parol evidence rule against evidence of subjective intentions.

[20] All of this is to say that whether and to what extent there may be time savings by having Jong and Kahn testify in one proceeding is extremely unclear. This theoretical “benefit” must be weighed against the certainty of long delays in the prosecution of this action and the unwieldy trial, of effectively two entirely different proceedings, that would have to be managed and conducted if the two actions are consolidated. There is no question in my mind that the factors of time and judicial resources favour no consolidation and the governance action proceeding as scheduled in June 2022.

[21] Similarly, there is also a theoretical possibility of inconsistent findings of fact and/or credibility where there might be overlapping evidence from Jong and Khan in two proceedings. I use the word “theoretical” advisedly, however, because certain undertakings have been given by Tridelta to Jong and Khan to avoid or mitigate any prejudice to them from this potential problem. Thus, while the problem of potentially inconsistent results hypothetically exists, it is not a factor that weighs heavily in favour of consolidation.

[22] For all these reasons, the defendants’ motion to consolidate this action with the Brampton action is dismissed.

The 320 Bronte Action

[23] As noted earlier, 320 Bronte is one of the three project companies which own land for development by the limited partnerships. 320 Bronte’s shares are owned by the general partner of GTA LP, that is, GTA Mixed-Use Developments GP Inc. Tajbakhsh is the principle of both companies.

[24] On March 11, 2022, 320 Bronte issued a claim on the civil list against the three TriDelta entities and 2830063 Ontario Inc., which are parties to this action. 320 Bronte’s action alleges misconduct by TriDelta and unlawful interference in the course of the breakdown within the limited partnerships relating to GTA LP and 320 Bronte. The allegation is essentially that TriDelta failed to fulfill its commitment to fund the 320 Bronte project through its investment in GTA LP and that TriDelta took unlawful steps to interfere with 320 Bronte’s business.

[25] 320 Bronte brought two motions in respect of this matter returnable on March 25, 2022. The first motion seeks leave to intervene in this proceeding. The second motion seeks an order for consolidation, with this proceeding, of not only 320 Bronte’s action but the Brampton action as well. Neither of 320 Bronte’s motions was scheduled through the Commercial List office, although counsel taking instructions from Mr. Tajbakhsh was present at the last case conference before Conway J. 320 Bronte was, as a result, an uninvited guest, or “gate-crasher”, at the defendants’ consolidation motion.

[26] I raised with counsel for 320 Bronte the failure to follow Commercial List scheduling protocols and the fact that, based on the estimated time for oral argument by Mr. Goldblatt and Mr. Naudie, there would be little or no time for oral submissions from 320 Bronte. Mr. Finlayson advised that he sought only 5 to 10 minutes to speak to the need for the intervention (as a means of putting his client’s consolidation motion before the court) and was content to rely on his written record and factum for the merits of his client’s motion for consolidation. That is how the matter proceeded, although Mr. Naudie took the position that 320 Bronte’s motion was not before the court and ought not to be dealt with at all. For reasons that will become apparent below, I declined to follow Mr. Naudie’s approach.

[27] The motion to intervene was simply a devise, an ill-advised device I might add, to get around the fact that 320 Bronte’s motion was not properly booked through the Commercial List office. The practice of “piling on” unscheduled matters with those properly scheduled is one to be denounced in the strongest possible terms.

[28] The way to bring 320 Bronte’s concerns before the court by way of motion was not to move to intervene in this proceeding but to bring a motion in 320 Bronte’s proceeding for that relief, and to schedule that motion by following proper scheduling protocols for matters on the Commercial List.

[29] All that said, I took Mr. Finlayson up on his invitation, have read his motion record and factum, as it relates to the merits of 320 Bronte’s consolidation motion, with great care and will deal with the motion on the merits. The motion, as I said on March 28, 2022, has been dismissed. I did so largely for the same reasons I dismissed the defendants’ motion in this action.

[30] While 320 Bronte is a corporation with distinct legal status, it cannot be forgotten that Tajbakhsh is the directing mind of not only the three general partners but the three project companies, including 320 Bronte, as well. The Tridelta action has been outstanding since May 2021. It has not been explained why 320 Bronte waited until March 2022, a couple of weeks before this motion, to commence these proceedings and seek to consolidate them with this action.

[31] Again, if the 320 Bronte motion were granted, the June 2022 trial could not possibly proceed. The timing of the commencement of the 320 Bronte action and its motion appears designed to delay the trial of this action in June 2022.

[32] The causes of action, and many of the issues that would have to be decided in the two proceedings, are quite different.

[33] I accept that Tajbakhsh, and likely others, may ultimately give evidence in both proceedings. I also accept that there may be overlap in the subject matter of that testimony. However, again, the 320 Bronte claim to judicial economy etc. stands the principles underpinning consolidation of their head; 320 Bronte’s proposal inverts the claimed benefits and will produce “short term gain for long term pain”. The practical risk of inconsistent findings is equally remote and tangential in the 320 Bronte case, given Tajbakhsh’s role as the directing mind of both GTA Mixed-Use and 320 Bronte. Again, accepting this as a relevant factor, it is vastly overwhelmed by the problems associated with delay in the prosecution of this action and the sprawling, unwieldy claims that would have to be managed and tried if the 320 Bronte motion were granted.

[34] For these reasons, even if I were to grant 320 Bronte’s motion to intervene, I would dismiss its motion for consolidation of its claim with both this action and the Brampton action.

Defendants’ Document Requests

[35] Although not part of the scheduled motion for consolidation, the defendants nevertheless requested an order concerning certain document requests it had made. Their factum sets out a brief summary of the type of documents sought and why. I directed Tridelta to prepare a similar summary to enable me to usefully consider the defendants’ request.

[36] Justice Conway has already given direction about document requests to the parties during the January 6, 2022 case conference. On that basis, I decline to provide any further rulings at this time. The parties should follow the direction of Conway J. and take things from there.

Costs

[37] Tridelta is entitled to partial indemnity costs payable by the defendants in the amount of $20,000. Contrary to my direction, Tridelta declined to provide any cost summary in respect of the 320 Bronte motion. As no costs were sought, none are awarded.

Penny J. Date: April 6, 2022