COURT FILE NO.: CV-21-00663825-00CL
DATE: 20221028
SUPERIOR COURT OF JUSTICE - ONTARIO
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 BALANCE FUND, 2830063 ONTARIO INC., 2830064 ONTARIO INC. and 2830068 ONTARIO INC., Defendants by Counterclaim
BEFORE: Justice Cavanagh
COUNSEL: Christopher Naudie, Lauren Tomasich, and Graham Buitenhuis, for the Plaintiffs (Defendants by Counterclaim)
Simon Bieber, Cameron Rempel, and Emma Parry for the Defendants (Plaintiffs by Counterclaim)
Gavin Finlayson and Matthew Smith for non-parties 320 Bronte Road Inc., 27 Harwood Avenue Inc., and 253 Queen Street Inc.
HEARD: October 24, 2022
ENDORSEMENT
Introduction
[1] The trial of this action is scheduled to begin on April 17, 2023. The central issue in the action involves governance of three limited partnerships, whether the defendants, general partners of the limited partnerships, were validly replaced by new general partners which are plaintiffs controlled by the plaintiff TriDelta Investment Counsel Inc.
[2] Two plaintiffs, TriDelta Fixed Income Fund and TriDelta High Income Balanced Fund, contributed money to the limited partnerships and received units in the limited partnerships. The limited partnerships contributed money to three project companies which own properties for development. The limited partnerships received special shares in the project companies. The property owned by one of the project companies has been sold. The other two project companies continue to develop the projects.
[3] The project companies and Mr. Tajbakhsh are not parties to the governance action and no claims are made against them for permanent relief in that action.
[4] The plaintiffs are the moving parties on this motion. They move for an interlocutory injunction pending trial of the governance action restraining the defendants (the general partners of the limited partnerships), the project companies, and their principal, Mahdi Tajbakhsh, from dealing with the unsold properties owned by the project companies. The moving parties also move for leave to issue a certificate of pending litigation for registration against title to the unsold properties owned by the project companies.
[5] For the following reasons, the plaintiffs’ motion is dismissed.
Procedural Background
Parties
[6] TriDelta Investment Counsel Inc. (“TriDelta”) acts as manager and trustee of the TriDelta Fixed Income Fund and the TriDelta High Income Balanced Fund (the “TriDelta Funds”).
[7] The TriDelta Funds are limited partners in three limited partnerships: GTA Mixed-Use Developments L.P., Mixed-Use Developments (Ontario) L.P., and Wasaga Developments and Infrastructure 2021 L.P. (the “Limited Partnerships”). The Limited Partnerships are governed by functionally identical limited partnership agreements. The TriDelta Funds invested approximately CAD $25.5 million in the Limited Partnerships through 2017 and 2018.
[8] When the Limited Partnerships were formed, GTA Mixed-Use Developments GP Inc., Mixed-Use Developments (Ontario) GP Inc. and Wasaga Developments and Infrastructure GP Inc. (the “General Partners”) were the general partners of the Limited Partnerships.
[9] 2830063 Ontario Inc., 2830064 Ontario Inc., and 2830068 Ontario Inc. (the “TriDelta GPs”) are corporations incorporated by TriDelta to act as general partners of the limited partnerships (the “TriDelta General Partners”).
[10] U Developments Inc. (“UDEV”) acts as manager for the Limited Partnerships under management agreements.
[11] The Limited Partnerships’ sole assets are special non-voting shares in three companies: 320 Bronte Road Inc., 253 Queen Street Inc. and 27 Harwood Avenue Inc. (collectively, the “Project Companies”). The Project Companies are single-purpose corporations incorporated for the purpose of acquiring and developing real estate development projects. The real estate development projects are the sole assets of the Project Companies.
[12] Mr. Mahdi Tajbakhsh is the lead officer and director of the General Partners and of the Project Companies. Mr. Tajbakhsh is also the lead officer, director and indirect owner of 100% of the equity in UDEV.
[13] When this proceeding was commenced, the Project Companies owned the real properties municipally known as 320, 338, 346 and 350 Bronte Road, Oakville, Ontario (the “Bronte Road Property”), 27, 29 and 31 Harwood Avenue South, Ajax, Ontario (the “Harwood Properties”), and 253 Queen Street East, Brampton, Ontario (the “Queen Street Property”). The Bronte Road Property has been sold. The Harwood Properties and the Queen Street Properties are referred to, together, as the “Properties”.
The Governance Action
[14] On April 8, 2021, the TriDelta Funds as limited partners exercised voting rights and passed three special resolutions, one with respect to each Limited Partnership, which concluded that each of the General Partners had committed a number of defaults in their obligations under the Limited Partnership Agreements. The special resolutions gave the General Partners 30 days notice to remedy such defaults pursuant to the Limited Partnership Agreements. On the same day, the TriDelta Funds passed three further special resolutions seeking to restrain the conduct of the General Partners and preserve the status quo during the 30-day period in which the General Partners were to remedy their alleged defaults.
[15] The General Partners deny the defaults alleged by the TriDelta Funds. They do not recognize the effect of the special resolutions and assert that they remain the general partners of the Limited Partnerships.
[16] TriDelta, the TriDelta Funds, the TriDelta General Partners, and the Limited Partnerships commenced an application on the Commercial List by Notice of Application issued on June 10, 2021. The Limited Partnerships are named as parties so that they will be bound by the outcome of the trial of the action.
[17] The respondents are the General Partners and UDEV. Mr. Tajbakhsh was not named as a respondent. The Project Companies were not named as respondents.
[18] On November 12, 2021, Justice Conway ordered that the application be converted to an action and scheduled a 5 day trial for the week of June 27, 2022 and one day the following week. I refer to this proceeding as the “Governance Action”.
[19] The central issue in the Governance Action is the validity and effect of the resolutions changing the general partners of the Limited Partnerships from the General Partners to the TriDelta General Partners effective as of May 10, 2021.
Sale of the Bronte Road Property
[20] Around the end of January 2022, TriDelta learned that the Bronte Road Property had been sold on December 24, 2021. TriDelta became aware of this because it requested a search on this property. According to a letter written by counsel for 320 Bronte Road Inc., the sale price was $16,150,000 and the proceeds of sale were used to discharge a first mortgage (for a payment of $11,162,541.03) and a second mortgage held by U Real Estate Group Inc. which is controlled by Mr. Tajbakhsh as the sole director and officer (for a payment of $2,260,000).
Unsuccessful motion for consolidation
[21] Shortly after the application was converted to an action, the General Partners learned that an action had been brought in Brampton by the TriDelta parties against the General Partners, Mr. Tajbakhsh, and other defendants in which it was alleged that there was a conspiracy to harm TriDelta arising from the formation of the Limited Partnerships in the investment of the TriDelta Funds therein.
[22] The General Partners brought a motion to consolidate the two proceedings.
[23] In March 2022, 320 Bronte Road Inc. commenced an action naming certain TriDelta entities as defendants.
[24] At the hearing of the consolidation motion on March 25, 2022, the General Partners and the Bronte Project Company sought to have all three actions consolidated on the basis that they arise out of the same transactions and circumstances.
[25] TriDelta opposed consolidation and maintained that the Governance Action involves in an issue of partnership governance. TriDelta discontinued its claims in the Brampton action against the General Partners and Mr. Tajbakhsh.
[26] On April 6, 2022, the consolidation motion was dismissed by Justice Penny.
Unsuccessful Settlement Discussions
[27] The Governance Action was initially scheduled to be heard in a six-day trial beginning June 27, 2022. Counsel for TriDelta and counsel for the General Partners engaged in settlement discussions while preparing for the upcoming trial. Because it appeared that the parties had reached a deal in principle, the trial was adjourned.
[28] Negotiations ultimately fell apart. On July 19, 2022, TriDelta requested a hearing date for a motion for interlocutory relief and the earliest available trial dates. The motion for interlocutory relief was scheduled for November 15, 2022 and the trial dates were booked starting April 17, 2023.
[29] The defendants refused to agree to TriDelta’s request for interlocutory relief. As a result, TriDelta sought to schedule a motion for interim relief prior to the hearing of the motion for interlocutory relief.
Charge on the Harwood Properties
[30] On August 19, 2022, TriDelta discovered that a new charge had been registered against title to the Harwood Properties on August 18, 2022. The new mortgage loan was also secured by a general assignment of rents. The Harwood mortgage is in the principal amount of $1,500,000 with interest at an annual rate of 9.50% and with a maturity date of September 1, 2023. The Project Company that owns the Harwood Properties, 27 Harwood Avenue Inc., granted Sky Mortgage Corporation a first priority security interest in all of its present and after-acquired real and personal property comprising or otherwise relating to the Harwood Properties. Sky Mortgage Corporation and 27 Harwood Avenue Inc. had entered into a commitment letter on August 4, 2022.
Interim Orders
[31] On August 24, 2022, counsel for the parties appeared before Justice Conway on what was intended to be a scheduling case conference for motion for interim relief pending the hearing of the motion for interlocutory relief. On that day, Justice Conway scheduled a one hour motion for interim relief to be heard on September 12, 2022. Justice Conway included in her endorsement the following statement:
In the meantime, this matter is before the courts. I direct that no disposition or further encumbrance be placed on the partnership properties without the consent of the parties or further court order during that brief interval before the court can consider the motion on its merits.
[32] On September 12, 2022, in a one hour hearing, Justice Kimmel heard submissions from counsel with respect to TriDelta’s motion for interim injunctive relief. Justice Kimmel accelerated the hearing date for TriDelta’s full day motion for interlocutory injunctive relief and arranged for it to be heard on October 24, 2022. Justice Kimmel ordered that Justice Conway’s endorsement continue until that hearing.
[33] In her endorsement, Justice Kimmel granted leave to the Project Companies to appear at the hearing of the motion and to file a brief Aide Memoire setting out their position.
Analysis
[34] The TriDelta parties move for:
a. An interlocutory injunction prohibiting and restraining the defendants and anyone acting on their behalf or in conjunction with them, including the Project Companies and Mr. Tajbakhsh in his capacity as a servant, employee, agent, assign, officer and/or director of the General Partners and the Project Companies from dealing with the Properties pending the trial of the Governance Action, absent the consent of TriDelta;
b. An Order restraining the defendants from taking any action with respect to any funds of the Limited Partnerships pending the trial of the Governance Action, absent the consent of TriDelta;
c. An Order granting the plaintiffs leave to amend their statement of claim in the form of the Amended Statement of Claim appended to their notice of motion;
d. An Order granting the Plaintiff’s leave to obtain and register a certificate of pending litigation against the Harwood Properties and the Queen Street Property; and
e. An Order that funds in the amount of CAD $1,500,000 representing funds received by 27 Harwood Avenue Inc. pursuant to the Harwood mortgage are to be paid into Court forthwith.
[35] In the draft Order filed by the TriDelta parties at the hearing, the injunctive relief is stated not to include “a prohibition against ordinary course transactions, such as the payment of property taxes, insurance premiums, general maintenance expenses and mortgage debt”.
Are the plaintiffs entitled to an interlocutory injunction?
[36] The TriDelta parties submit that an interlocutory injunction is urgently needed to curb what they contend will be further egregious self-dealing behaviour by Mr. Tajbakhsh and the Project Companies in relation to the Properties owned by the Project Companies.
[37] The TriDelta moving parties contend that although the TriDelta funds invested $25.5 million into the Limited Partnerships, there is $4.8 million that, they say, was not used to acquire special shares in the Project Companies and for which the Project Companies have not accounted. They rely on the failure of the Limited Partnerships, since 2019, and the Project Companies, since 2020, to produce financial statements as required by the Limited Partnership Agreements. The point to evidence of related party transactions in the financial statements and contend that this shows self-dealing by Mr. Tajbakhsh. They rely on the sale of the Bronte Road Property (which will result in a significant loss to the TriDelta funds) and the mortgage of the Harwood properties which happened without prior notice to them or with their consent.
[38] The TriDelta moving parties submit that an interlocutory injunction is needed to prevent Mr. Tajbakhsh and the Project Companies from causing irreparable harm to the Limited Partnerships through the siphoning of funds and assets pending the trial of the Governance Action. They submit that if the requested injunction is not granted, the TriDelta Funds will suffer irreparable harm because if the Properties are sold or further encumbered prior to the trial of the Governance Action, their rights following a successful outcome of that action will vanish before they can be vindicated.
[39] The TriDelta moving parties note that the relief they request includes a carveout for ordinary course transactions such as the payment of property taxes, insurance premiums, general maintenance expenses and mortgage debts. They submit the requested relief does not force the Project Companies to abruptly cease all business activity and, instead, strives to impose reasonable restrictions which will protect investment made by the TriDelta Funds and allow the Properties to eventually be sold at a profit.
[40] The defendants, the General Partners and UDEV, submit that the requested injunction would result in a freezing of active development projects of the Properties owned by the Project Companies with budgets of approximately $600 million where the TriDelta moving parties have not named the Project Companies or Mr. Tajbakhsh as defendants in the Governance Action or made claims against them. They contend that the requested injunction, if granted, would cause numerous defaults in the terms of mortgage loans and expose the Project Companies and Mr. Tajbakhsh (who personally guaranteed these loans) to the risk of insolvency.
Effect of status of Project Companies and Mr. Tajbakhsh as non-parties against whom no claim is made in the Governance Action
[41] Section 101 of the Courts of Justice Act provides that in the Superior Court of Justice, an interlocutory injunction or mandatory order may be granted where it appears to a judge of the court to be just or convenient to do so. An order may include such terms as are considered just.
[42] Rule 40.01 of the Rules of Civil Procedure provides that an interlocutory injunction under section 101 of the Courts of Justice Act may be obtained on a motion to a judge by a party to a pending or intended proceeding.
[43] The requested interlocutory injunction is for an order prohibiting and restraining dealings with the Properties pending the trial of the Governance Action. The Properties are owned by the Project Companies. The Project Companies are the main targets of the requested interlocutory injunction and related relief.
[44] The TriDelta parties submit that the distinction between the General Partners and the Project Companies is artificial and is not an impediment to the TriDelta parties’ motion for an interlocutory injunction. They submit that injunctive relief can be ordered against a non-party to the underlying litigation and that, where such an order is sought, the tests established in RJR-MacDonald Inc. v. Canada (Attorney General ), 1994 CanLII 117 (SCC) remain unchanged They submit that the court has the power to issue an injunction, including against non-parties, on any terms it considers just. The TriDelta parties submit that they satisfy the RJR MacDonald tests.
[45] In support of this submission, the TriDelta parties cite Google Inc. v. Equustek Solutions Inc., 2017 SCC 34. In Google, an interlocutory injunction was granted against Google, a non-party to the underlying litigation. The interlocutory injunction against Google flowed from the necessity of Google’s assistance in order to prevent the facilitation of the defendant’s ability to defy court orders enjoining it from selling products made using the plaintiff’s intellectual property and do irreparable harm to the plaintiff. This was so because, without injunctive relief binding Google, it was clear that Google would continue to facilitate that ongoing harm because the defendant against which an injunction had been granted was continuing the violate the injunction using websites on Google’s platform. See Google, at para. 35.
[46] I accept that I have the jurisdiction to grant an interlocutory injunction against non-parties including, on this motion, the Project Companies and Mr. Tajbakhsh. However, in addition to jurisdictional limits, there are limits on a Court’s ability to grant an interlocutory injunction imposed as a matter of practice through principles established by jurisprudence. In Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, the British Columbia Court of Appeal described these limitations, at para. 59:
It is important to recognize that the issue is not, or at least not wholly, one of jurisdiction. Common law courts have limited their exercise of remedial powers, not simply due to concerns about jurisdiction, but also as a matter of curial self-restraint.
[47] One of the limitations imposed as a matter of practice and established by jurisprudence is that where a claimant seeks an interlocutory injunction against another person, the claimant must seek a permanent order for this relief that raises a justiciable issue to be determined at the trial.
[48] This limitation is explained in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., 1995 CanLII 10638 (Ont. Div. Ct.). In Cellular Rental, Borins J. (as he then was), writing for the Court, cited his own decision in Air Canada v. McDonnell Douglas Corp., [1993] O.J. No. 246 where he explained, citing the decision of Carthy J.A. in Ash v. Lloyds’s Corp. (1992), 1992 CanLII 7859 (ON CA), that an interlocutory injunction is not available as a self-supporting cause of action, and there must be a lis between the parties which is deserving of a trial before there can be anything that is interlocutory in the proceedings leading to trial. Borins J. held that the claimant had not claimed a permanent injunction restraining the responding party from doing the act in respect of which an interlocutory injunction was sought and, accordingly, there was no lis deserving of a trial which is necessary before an interlocutory injunction can be granted.
[49] In Veenhof v. Cineplex Odeon, 2016 ONSC 7929, Gordon J. dismissed the defendant’s motion for an interlocutory injunction restraining the plaintiff from engaging in picketing and publishing statements defaming the defendant. Gordon J. held that a request for a permanent injunction is a prerequisite to granting interlocutory relief, citing the decisions of Borins J., as he then was, in Air Canada and Cellular Rental. In his reasons, at para. 24, Gordon J. explained why this is a prerequisite and why he denied the motion for an interlocutory injunction:
When there is no claim for a permanent injunction there is, as Borins J. said, an absence of a lis between the parties. In other words, granting an interlocutory injunction in these circumstances would affect litigants in a profound manner yet there would never be a trial on the merits of that claim. The interlocutory order, in essence, becomes a final order.
[50] In the Governance Action, the TriDelta parties do not make a claim for a permanent injunction prohibiting or restraining the defendants or Project Companies or Mr. Tajbakhsh from dealing with the Properties in any way, including by raising money to fund the development of the Properties through mortgage financing or even selling the Properties. If the Court were to grant the requested interlocutory injunction restraining the Project Companies from dealing with the Properties until the trial of the Governance Action, there will be no judicial determination at trial of whether the TriDelta parties are entitled to a permanent order for this relief because there is no claim for this relief in the Governance Action.[^1]
[51] The TriDelta parties’ motion for an interlocutory injunction is directed at the Project Companies, the owners of the Properties. The distinction between the Project Companies and the General Partners is not artificial, as the TriDelta parties contend. The Project Companies are legal entities which are separate from the General Partners. In any event, in the Governance Action, the TriDelta parties do not seek a permanent order against the General Partners for the relief in respect of which they seek interlocutory injunctive relief.
[52] The absence of a lis between the TriDelta parties and the Project Companies, Mr. Tajbakhsh, and the General Partners in relation to a claim to be made at trial for a permanent injunction in terms of the requested interlocutory injunction is fatal to the TriDelta parties’ motion for an interlocutory injunction against these persons and parties.
[53] As a result of this conclusion, it is not necessary for me to consider the three-part RJR-MacDonald test.
Absence of an undertaking to abide by an order concerning damages
[54] Rule 40.03 of the Rules of Civil Procedure provides that on a motion for an interlocutory injunction, the moving party shall, unless the court orders otherwise, undertake to abide by any order concerning damages that the court may make if it ultimately appears that the granting of the order has caused damage to the responding party for which the moving party ought to compensate the responding party.
[55] The TriDelta parties have not given an undertaking in damages. They ask that I exercise my discretion to dispense with the undertaking. They give three reasons for why I should do so. First, they say that the requested order will allow ordinary course operations for the Project Companies so there should not be any damages. Second, they submit that the Project Companies are using TriDelta’s money, and TriDelta has every interest in being reasonable in relation to any request made to them to consent to dealings by the Project Companies in relation to development of the Properties. Third, they submit that there are exceptional circumstances on this motion that justify dispensing with the undertaking arising from the history of contentious proceedings in this litigation and the events that preceded it that will result in an unmeritorious claim against the TriDelta parties if they give an undertaking.
[56] The discretion that a judge has to relieve a party from the requirement to give an undertaking in damages as a condition of obtaining an interlocutory injunction is a narrow one.
[57] TriDelta’s expectation that the requested interlocutory injunction should not lead to damages is not a reason to dispense with the undertaking. The responding parties have provided evidence that the interlocutory injunction, if granted, may be a default under loan agreements between the Project Companies and their lenders. The TriDelta parties say that the risk of default proceedings by lenders is not significant, and they point to the absence of such proceedings while the interim Orders of Conway J. and Kimmel J. have been in force. On the record before me, I am unable to find that the risk of default proceedings against the Project Companies by lenders is so small that an undertaking in damages is not needed.
[58] In addition to the money received by the Project Companies from the Limited Partnerships, the Project Companies have loans secured by mortgages against the Properties. The fact that the TriDelta parties intend to be reasonable in response to any requests for consent to deal with the projects or the Properties is not a reason that justifies an order dispensing with the undertaking in damages.
[59] The fact that the TriDelta parties fear that there will be an unmeritorious claim to enforce the undertaking in damages also does not justify dispensing with the undertaking.
[60] The TriDelta parties have not shown that this is a case where the court should dispense with the requirement for the moving party to undertake to abide by an order concerning damages.
[61] The absence of such an undertaking is also fatal to the TriDelta parties’ motion for an interlocutory injunction.
Are the TriDelta parties entitled to an order granting them leave to issue a certificate of pending litigation to be registered against title to the properties?
[62] Section 103(1) of the Courts of Justice Act provides for the issuance of a certificate of pending litigation. There is a two-part test. First, the court must be satisfied that the moving party has raised a triable issue as to whether there is a reasonable claim to an interest in land. Second, if the moving party satisfies this requirement, the court must look at all relevant matters between the parties in determining whether the certificate should be granted. See Perruzza v. Spatone, 2010 ONSC 841, at para. 20.
[63] Where a reasonable claim is made to an interest in land based on a constructive trust, the question is whether there is a triable issue in respect of the interest claimed, not whether the plaintiff will likely succeed at trial: First Leaside Wealth Management Inc. v. Phillips, 2012 ONSC 5443, at para. 21.
[64] The TriDelta parties seek leave to amend the statement of claim to, among other amendments, plead a claim for an interim and/or interlocutory order declaring that the TriDelta Funds possess an equitable interest in the Properties on the basis of a constructive or other trust. I consider TriDelta’s motion for leave to issue a certificate of pending litigation on the basis of TriDelta’s proposed amended statement of claim.
[65] In the proposed amended statement of claim, the TriDelta parties propose to plead:
The Defendants each owe equitable obligations to the Plaintiffs. As the lead officer and director of each of the Former General Partners, Mr. Tajbakhsh has a fiduciary duty to manage the Former General Partners in a manner that advances the best interests of the TriDelta Funds as the limited partners. During the period of time that they acted as general partners, the Former General Partners also each owed a fiduciary and contractual duty to act in the best interests of the Limited Partnerships and the limited partners.
Through their CAD $25.5 million investment in the Limited Partnership, the TriDelta Funds financed the purchase of the Properties.
The Former General Partners have misappropriated the investments of the TriDelta Funds by using all of the TriDelta Funds’ investors money to invest in the Project Companies and in turn, the Development Projects, which are not in the best interests of the Limited Partnerships. The special shares that are held by the Limited Partnerships and are directly linked to the Development Projects are the only material assets held by the Limited Partnerships. Despite this, the Former General Partner has refused to provide the limited partners with any information about the Development Projects whatsoever, and has used his unilateral control over the Limited Partnerships and Project Companies to use these downstream assets for his own purposes, including by encumbering the Properties with mortgages with terms well-above market and with no ostensible business purpose.
TriDelta has an equitable interest and/or constructive trust in the remaining Development Projects (i.e., those belonging to 27 Harwood Avenue Inc. and 253 Queen Street Inc.) pending trial. This is by virtue of the fact that TriDelta contributed all or most all of the capital used to fund these Development Projects, and by virtue of the TriDelta Funds’ beneficial ownership of the special shares held by the Limited Partnerships.
[66] TriDelta has provided evidence that the TriDelta Funds contributed $25.5 million to the Limited Partnerships and acquired units in the Limited Partnerships. The Limited Partnerships contributed cash to the Project Companies (totalling $20.7 million) and acquired special shares in the Project Companies. In the proposed amended statement of claim, the TriDelta parties claim an interest in the Properties by virtue of the contribution of cash in exchange for special shares held by the Limited Partnerships.
[67] In John v. Millar, 2011 ONSC 3861, the claimant submitted that there was a triable issue in relation to his claim to an interest in the property in question because he had advanced the funds that allowed the parties to purchase the property. The motion judge, Morawetz J., held that the claimant had not shown that there was a triable issue in relation to his claim to an interest in the property because the claimant had an interest in the corporation that owned the property, not in the property itself. Morawetz. J. at para. 23, held that, essentially, the claimant is asking the court to pierce the corporate veil and give him a remedy that the law does not allow him as a shareholder.
[68] The reasoning in John v. Millar applies to TriDelta’s motion. The TriDelta parties seek a remedy that the law does not allow them where the Limited Partnerships are shareholders of the Project Companies. They have failed to show that there is a triable issue in respect of the interest claimed to the Properties based on a constructive trust.
Should the TriDelta parties be granted leave to amend the statement of claim in the form requested?
[69] The TriDelta parties seek an order granting them leave to amend their Statement of Claim in the form of the Amended Statement of Claim included in the motion materials. The requested amendments include:
(r) An interim and/or interlocutory order declaring that the TriDelta Funds possess an equitable interest in the lands described in Schedule “A” on the basis of a constructive or other trust;
[70] The TriDelta parties plead allegations in support of this claim in paragraphs 103-106 of the proposed amended statement of claim.
[71] The TriDelta parties do not move to amend the statement of claim to seek a final order or judgment declaring that the TriDelta Funds possess an interest in the Properties.
[72] The parties did not include in their factums any submissions on this part of the motion.
[73] At the hearing, the defendants opposed the requested amendments insofar as they make a claim for an interim and/or interlocutory order declaring that the TriDelta Funds possess an equitable interest in the lands described in Schedule “A” on the basis of a constructive or other trust. They submit that assuming the facts pleaded to be true, there is no tenable cause of action for this relief.
[74] I heard the motion on the basis of the proposed amended statement of claim where there was a claim for an interim and/or interlocutory order declaring that the TriDelta funds possess an equitable interest in the Properties.
[75] On the facts pleaded, assuming they are true, the TriDelta parties have failed to plead a tenable cause of action for their claim to an interim and/or interlocutory order declaring that the TriDelta funds possess an equitable interest in the Properties on the basis of a constructive or other trust. It appears that these proposed amendments were sought in relation to this motion, since no final relief is sought. The proposed amendments in respect of this claim are not allowed.
[76] I do not grant leave to the TriDelta parties to amend the statement of claim in the form proposed. The TriDelta parties are, of course, at liberty to seek leave to amend their statement of claim to make proper amendments.
Disposition
[77] For these reasons, the motion by the TriDelta parties is dismissed.
[78] If the parties and non-parties represented on this motion are unable to resolve costs, they may make written submissions in accordance with a timetable to be agreed upon and provided to me for approval.
Cavanagh J.
Date: October 28, 2022
[^1]: The TriDelta parties do not seek a Mareva injunction. Different considerations apply where the injunctive relief is a Mareva injunction which is granted to preserve assets so that they are not dissipated before a money judgment can be enforced. See Pavao v. Ferreira, 2018 ONSC 1573, at para. 84.