Court File and Parties

Citation: 2025 ONSC 4903

Court File No.: CV-25-00738359-00CL

Date: August 27, 2025

Superior Court of Justice – Ontario (Commercial List)

Re: The Morgan Investments Group Inc. Applicant

And: ADI Development Group Inc., Tariq Adi and ADI Morgan Developments (Lakeside) Inc. Respondents

Before: W.D. Black J.

Counsel:

• Tanya A. Pagliaroli, Alexandra Grishanova and Sydney Bristoll, for the Applicant
• Justin Nasseri, Avi Bourassa and Viktor Nikolov, for the Respondents ADI Development Group Inc. and Tariq Adi

Heard: August 20, 2025

Endorsement

Overview

[1] This was a full-day hearing of an application and counter-application relative to a large lake-side condominium development in Burlington, Ontario (the "Project").

[2] The applicant, The Morgan Investment Group ("MIG"), and the respondent/counter‑applicant, Adi Development Group ("ADG"), are each 50% owners of the Project.

[3] As discussed below, the Project is at a standstill, and the parties are at an acrimonious impasse. They seek the court's guidance in determining the way forward.

Background and Structure of the Project

[4] On April 4, 2014, MIG and ADI incorporated Adi Morgan Development Group (Lakeshore) Inc. (the "Corporation"), for the sole purpose of building and operating the Project, a waterfront condominium development in downtown Burlington marketed as Nautique Lakefront Residences.

[5] Tariq Adi is the principal of ADG and a director and president of the Corporation. Nigel Morgan is the principal of MIG and the only other director and officer – the corporate secretary – of the Corporation.

[6] MIG is a private equity firm with significant experience as an investor in condominium development projects. It is the investor of the majority of funds in the Corporation, having contributed almost 90% of the Corporation's equity to date, and, as a result of recent events discussed below, is now, through its affiliates 1001259155 Ontario Inc. ("100 Ontario"), and 1000185781 Ontario Inc. (the "Affiliate Lender"), the first and second secured lenders to the Corporation.

[7] ADG, which has considerable condominium construction and development experience, was tasked, in the understanding between the parties, with overseeing construction of the Project, and, as development manager, overseeing its day‑to‑day operations including acting as the exclusive listing agent responsible for marketing and selling units.

[8] By way of oversimplification, MIG was primarily responsible, in exchange for its 50% interest, for funding the Project, and ADG, for its part, received its 50% interest largely based on its closer involvement and expertise in construction and operations.

[9] The relationship between the parties, and their respective roles and obligations was confirmed in a unanimous shareholders' agreement, also dated April 4, 2014 (the "USA"). The USA has been amended three times: in March 2020, October 2022, and March 2024, (the "First," "Second" and "Third Amendments", and the USA, as amended, will be referred to as the "USA").

[10] For a number of years, the Project proceeded relatively smoothly.

[11] ADG advised MIG, and up until about 2020, it appeared to be the case, that the Project would be completed on time and on (or even under) budget, that the Corporation's loans would be paid back from unit sales, and that there would be significant profits to the shareholders.

Problems Caused and/or Revealed by Pandemic

[12] It is clear, however, that when the Covid-19 pandemic hit, it caused considerable challenges for the Project (and for the condominium market generally).

[13] The impact on the Project drove up costs, slowed sales, thus curtailed revenues, and in turn ultimately threatened the Project's financing.

[14] It is fair to observe that these additional challenges also bred a level of distrust between the parties, progressing over time, yielding increasingly acrimonious accusations and recriminations, to the point that currently, the parties do not communicate, other than through counsel, except occasionally to trade insults.

[15] In fact, the only significant proposition on which the parties seem to agree at this juncture is that they must decouple themselves from one another and go their separate ways.

Necessary Focus on Expeditious Means of Separation

[16] As such, while each party alleges that the other has acted in a manner that is oppressive, (in the full three-pronged conception of oppression set out in section 248 of the Business Corporations Act (Ontario), RSO 1990, c.B.16 ("OBCA")), and each spent considerable ink and airtime on these allegations, the primary issue contested before me concerned the appropriate vehicle for the parties' inevitable parting of ways.

[17] MIG argues that the appropriate mechanism is a court-created "shotgun" buy-sell structure.

[18] ADG says that the proper means of facilitating the required buyout between the parties is by way of s. 207 of the OBCA, under which it proposes to be the buyer at a price based on a valuation report prepared by KSV Soriano Inc. ("KSV" and the "KSV Report").

[19] This focus by each side on the means of a divorce is not to say that the parties have abandoned their respective insistence that the other party is responsible for the current untenable plight. Rather, it bespeaks a recognition that the parties simply cannot go on as matters now stand, that the continued hostilities represent an existential threat to the Project, and that therefore, the first priority is to separate, breaking as "cleanly" as possible.

[20] I agree. It is plainly evident that the relationship between the parties is irredeemably damaged, and that the Project will not advance, and will likely founder, unless and until the parties are pulled apart.

[21] Both parties also agree, and it follows, that they need a decision from the court concerning the means of separation (and related matters), as quickly as possible.

[22] Accordingly, the focus of this decision will relate to the means by which the parties' separation should be achieved.

Discussion of Competing Allegations of Oppression

[23] Before shifting the focus from oppression to the means of a buyout, I note that there is considerable evidence that in fact each side has in various instances acted oppressively toward the other.

[24] In the case of ADG, while I believe that to a large extent the problems grew out of roles that the parties envisioned and assumed, which were not problematic until the cost and revenue pressures borne of the pandemic, I find that ADG, which had control over the day-to-day operations and information flow for the Project, unfairly excluded MIG, once the cash flow for the Project became constrained, from access to such information and participation in significant decision-making. I find that in doing so, ADG frustrated MIG's reasonable expectations to participate in a more fulsome and meaningful way in management, and thereby unfairly prejudiced or disregarded MIG's interests for purposes of s.248 of the OBCA.

[25] Examples of such oppressive conduct include ADG's arrangement of a bulk unit purchase without notice to or concurrence of MIG, entering substantial commercial leases without consulting its partner MIG on terms, excluding MIG from discussions with KingSett – then the Project's senior secured lender – and, instructing the Corporation's solicitor, contrary to MIG's prior objections, not to remit certain sale proceeds to the senior lender, causing a senior loan default.

[26] MIG also alleges oppression based on ADG's unwillingness to lower prices to market the condominiums from time to time. In my view, this in and of itself does not constitute oppression. The parties certainly could have communicated and worked together better on this score, but fundamentally the parties' differing opinions on unit pricing is more in the nature of divergent business judgment than oppressive conduct (see, in this regard, the decision of Chiappetta J. in Corber v. Henry, 2019 ONSC 3518).

[27] In my view, MIG has also committed acts of oppression.

[28] For example, and as found by Steele J. in her decision in this matter granting "standstill" injunctive relief to ADG pending the hearing of this motion before me (The Morgan Investments Group v. ADI Development Group Inc., 2025 ONSC 4344), MIG's act of establishing 100 Ontario and having 100 Ontario take an assignment of the senior loan, "appears to have been done for the purpose of changing the status quo." More specifically, and in relation to the checks and balances evident in the terms of the USA, Steele J. found that "It appears that MIG may have attempted to circumvent these checks and balances in order to gain leverage in these proceedings."

[29] Justice Steele specifically confirmed that she was "not making a finding of oppression at this interim stage" but found a "strong prima facie case that Mr. Morgan, as a director of the Corporation, circumvented and breached the Corporation's USA."

[30] In my view, those and other acts on the part of MIG, under the direction of Mr. Morgan, including the threatened use of 100 Ontario to seek a receivership even as this motion was pending before the court, were an effort to "gain leverage" as found by Steele J., and breached ADG's reasonable expectations and unfairly prejudiced and/or unfairly disregarded its interests.

[31] Again, however, notwithstanding having identified oppressive conduct by each shareholder, it is more pressing and more productive to determine a means of disentangling the parties from one another than to further analyze and assign fault to various conduct on each side.

Competing Proposals to Achieve Separation

[32] As such, I turn now to discuss the competing conceptions of the mechanism for the necessary separation.

[33] As an initial observation on that score, I am satisfied that I have the jurisdiction to impose either a shotgun buy-sell, or a buy-out under s. 207 of the OBCA. The latitude for the court to fashion an appropriate remedy or remedies under s. 248(3) is very broad. While it is not clear that I need find oppression before reaching for such remedies, in this case, in which both sides have acted oppressively, the foundation to order appropriate relief is undoubted.

A. "Shotgun" Proposal by MIG

[34] As noted above, MIG advocates for the court to impose a "shotgun" buy-sell remedy as the fairest means of achieving the break-up.

[35] As a general proposition, I agree that a shotgun has much to recommend it.

[36] A shotgun combines the advantages of a market sale with the benefits of yielding an efficient determination of which side will buy out the other.

[37] Within the context of the unpredictable condominium market in and around the greater Toronto area, it also means, as MIG points out, that "the parties are not saddled with a determination of value by the court in circumstances where there is a volatile real estate market."

[38] In a shotgun, the structure imposes a discipline motivating each party to make their offer as close to market value as possible – taking into account as well factors intrinsic to the business that is the subject of the buy-sell arrangement – because neither party knows whether it will be required to buy or sell.

[39] The simple elegance and appeal of a shotgun structure is aptly captured by Osborne J. in his recent decision in Asha Kher v. Vinod Arora et al., 2024 ONSC 1036, in which His Honour likened the shotgun to "the very same structure designed to incentivize fairness when two children are splitting a piece of cake". In that scenario, Osborne J. notes, "One child cuts the cake, and the other chooses which piece he or she wants."

[40] In that way, Osborne J. observed, the shotgun, like the allocation of cake in the example, is:

"Beautiful in its simplicity, the structure means that the child cutting the cake (i.e. the initiating shareholder under a shotgun buy-sell provision) is incentivized to make the cut as fair as possible lest he or she end up with the smaller piece. But there is no requirement that he cut the cake at any particular place or in any particular way. The consequence lies in the risk that the other child will select the bigger piece, not in a claim for more cake."

[41] Were it not for a certain amount of water under the bridge here, I would readily impose a shotgun structure to the circumstances at hand.

[42] However, in this case, J. Dietrich J. provided informal case management for the parties earlier this year, hosting a number of case conferences in the March through May period.

[43] During the course of those case conferences, ADG advised of its intention to invoke s. 207 of the OBCA and to buy out MIG's interests in the Project.

[44] Importantly, ADG obtained and delivered an expert valuation report, the KSV Report, for that purpose.

[45] The schedule ordered by J. Dietrich J. contemplated and built in sufficient time for the exchange of expert reports, but MIG, having advised that it would be delivering a responding report, ultimately failed to do so.

[46] At no point until shortly before this motion did MIG advise that it would be asking the court to impose a shotgun buy-sell mechanism.

[47] In the circumstances, MIG's late-breaking resort to a shotgun seems like a "Hail Mary", in other words a last-minute reach for a mechanism that had not been contemplated, nor articulated, during the case management process.

[48] While this does not preclude the court invoking a shotgun, it does cause concerns about the fairness of doing so at the last minute when the parties, and in particular ADG, participated in the case management process in good faith. ADG spent time and money on an expert valuation report and, despite the expectation that MIG would do likewise, it did not do so. While ADG's valuation report could of course be used to inform ADG's position in a shotgun buyout, equally MIG would have the advantage in a shotgun scenario of knowing ADG's expert's views on values, whereas ADG would not have the advantage of knowing any parameters of MIG's position.

B. Section 207 Buyout Proposed by ADG

[49] There are other reasons why ADG's proposed s. 207 buyout is preferable.

[50] First, in court-ordered buyouts, there is a clear and generally reasonable tendency to allow the party with the greater role in the day to day operations and management of the project at issue to be the buyer. The notion underlying this evident preference is that the party with the greater knowledge of the inner workings of the business will be better positioned to continue to operate the project seamlessly. Here, ADG is the party with greater knowledge of day to day operations.

[51] In addition, in this case, ADG argues that, as the market-facing entity in the Project, and the party that has dealt with trades, buyers, regulators and others, its brand and reputation are implicated, and at risk of considerable damage if MIG were to take over the Project at this late stage. This is especially so if, as ADG predicts is likely given MIG's relative unfamiliarity with the status and day‑to‑day workings of the Project, MIG stumbles out of the gate (if it were to be the buyer).

[52] In this regard, ADG emphasizes, and the record confirms, that while the Project is largely built, there are nonetheless aspects of construction to be completed, and myriad administrative tasks underway and at various stages of completion, such that if a new construction manager and administrator(s) were brought in now – as would be the case if MIG is the buyer – predictable chaos would ensue.

Order for s. 207 Buyout by ADG

[53] In these circumstances, I am prepared to grant an order pursuant to s. 207 of the OBCA to allow ADG's purchase of MIG's interest in the Project to proceed.

[54] I note that the Corber decision, the decision of Newbould J. in Muscillo v. Bulk Transfer Systems Inc. et al., and the decision of Leach J. in Struthman v. Struthman, 2020 ONSC 759 (see in particular paragraph 34), make clear that s. 207 of the OBCA can be invoked in circumstances in which the court does not find a need for a winding-up, but rather as a mechanism for breaking a hopeless deadlock (as is the situation before me). As noted above, these authorities also confirm that I need not find oppression per se before invoking s. 207. I do find oppression on both sides here, so if that were a pre-condition it would in any event be met here.

Price for Buyout

[55] It remains to determine what price is fair for ADG to pay for MIG's interest in the Project.

[56] ADG's position is that the price should be the lowest-priced option set out in the KSV Report. It justifies that position on the basis that this valuation uses the pricing for the remaining inventory of condominium units that MIG had urged upon ADG in MIG's demands for lower prices, and a resulting truncated timeframe to sell off those remaining units.

[57] In my view, one might equally conclude that, inasmuch as ADG is adamant that it should be the buyer, it would be fair to use ADG's suggested unit prices and timeframe to calculate the buyout amount. These higher prices and longer timeframe result in a higher valuation.

[58] In order to balance those competing considerations, I direct that the price at which ADG is to purchase MIG's interest is the mid-point between the price calculated by KSV for MIG's interest in KSV's scenario one and scenario two (as reproduced in the chart at paragraph 42 in ADG's initial factum for this motion).

Further Case Conference as Required, and No Order as to Costs

[59] Counsel for ADG suggested, and I agree, that with this guidance about the buyout, the parties should attend at a further case conference before me to confirm the details and a schedule for the completion of the buyout. Counsel should first discuss the parameters for the buyout to see what can be agreed and, if necessary, contact the commercial list office to schedule that case conference.

[60] Although ADG is the successful party in terms of the mechanism chosen to facilitate the divorce here, in my view the fact that there has been questionable conduct on both sides, as reflected in my finding that each side has acted oppressively toward the other, means that there should be no order as to costs.

W.D. BLACK J.

RELEASED: AUGUST 27, 2025