



COURT OF APPEAL FOR ONTARIO

CITATION:
Simkeslak
    Investments Limited v. Kolter Yonge LP Limited, 2013
    ONCA 116

DATE: 20130225

DOCKET: C54848

Armstrong, LaForme and Hoy JJ.A.

BETWEEN

Simkeslak Investments Limited, Schooner
    Corporation Limited, Petobell Holdings Inc.,
    Jayobell Holdings Inc., Philip Matthews, and
    C. Jane Dobell, and Douglas C. Matthews,               Thomas A. Matthews, and
    The Canada Trust Company, each in  their
    capacities as Estate Trustees for the Estate of Arnold Colton Matthews,
    deceased

Plaintiffs (Appellants)

and

Kolter Yonge LP Limited and Bazis International
    Inc.

Defendants (Respondents)

David P. McCutcheon and Jeremy Millard, for the
    appellants

Fred Myers and Lauren Butti, for the respondents

Heard: February 8, 2013

On appeal from the order of Justice Glenn Hainey of the Superior
    Court of Justice, dated December 8, 2011.

ENDORSEMENT

[1]

The appellants appeal the motion judges order granting summary judgment
    dismissing their claim against the respondent, Kolter Yonge LP Limited
    (Kolter).

[2]

The facts are significant. Briefly, they are as follows.

[3]

A limited partnership was formed to develop the property located at the
    southeast corner of Yonge and Bloor streets in Toronto. The appellants held the
    Class A units of the limited partnership, and through them, a 50 per cent
    interest in the limited partnership. Kolter held the Class B units, and,
    through them, the remaining 50 per cent interest in the limited partnership.

[4]

The development did not proceed as quickly as hoped, and the
    relationship between the appellants and Kolter soured. Twice, the appellants
    and Kolter each offered to buy the others interest. These offers were
    rejected. The appellants also rejected Kolters proposal that they sell the
    property on the open market. The appellants wanted to proceed independently of
    Kolter.

[5]

The appellants approached a third party, Bazis International Inc.,
    about acquiring their 50 per cent interest in the partnership, but Bazis was
    only interested in purchasing a 100 per cent interest in the property.

[6]

The appellants had a tactical advantage. Significantly, they (but not
    Kolter) would shortly have the right to trigger a shot-gun buy/sell provision
    under the Limited Partnership Agreement requiring Kolter to either sell its
    interest to the appellants, or purchase the appellants interests at a price
    specified by the appellants.

[7]

The appellants engaged in negotiations with another third party  Cityzen
    Development Group  with a view to concluding a multi-step transaction,
    utilizing the shot-gun provision if necessary, that would result in Cityzen
    acquiring a 100 per cent interest in the property. If Cityzen was able to
    acquire Kolters interest in the limited partnership below a specified price,
    the appellants would be entitled to a further payment from Cityzen. The
    appellants did not disclose their arrangement with Cityzen to Kolter.

[8]

At the time that the appellants were negotiating with Cityzen, Bazis
    approached them, again expressing interest in acquiring the property. The
    appellants rebuffed Bazis and their spokesman advised that they expected to shortly
    have a committed deal but that, if such does not materialize, I would be
    prepared to give you the exclusive option to purchase the development at a
    price of $90 per square foot...

[9]

As a first step in the proposed transaction with Cityzen, the
    appellants again offered to sell their interest in the limited partnership to
    Kolter, which had a right of first refusal under the Limited Partnership
    Agreement, at a price that valued the property at $80 per square foot.

[10]

After
    receiving the appellants offer, Kolter met with Bazis. Kolter negotiated an
    agreement to sell the property to Bazis at a price of $90 per square foot,
    conditional upon Kolters acquisition of the appellants limited partnership
    interests.  Kolter accepted the appellants offer and completed the purchase of
    the appellants limited partnership interests without disclosing its arrangement
    with Bazis to the appellants.  At closing, the parties exchanged mutual
    releases.  The limited partnership was dissolved. Thereafter, Kolter sold the
    property to Bazis at a profit.

[11]

The
    appellants sought summary judgment, arguing that Kolter: (1) breached its
    fiduciary duty by failing to disclose its arrangement with Bazis and account
    for the profits from that transaction, and (2) breached the terms of  the Limited
    Partnership Agreement by completing the sale to Bazis without their consent.

[12]

The
    motion judge concluded that, while there was a
per se
fiduciary relationship
    between the parties because they were partners, in the circumstances Kolter was
    not required to disclose its arrangement with Bazis or share the profits
    derived from its transaction with Bazis. The appellants take issue with this determination.

[13]

The
    motion judge found, at para. 65, that Kolters negotiations with Bazis took
    place when the parties were clearly acting in their own self-interest with the
    knowledge that the partnership was coming to an end and with the expectation
    that the other partner would act in its own self- interest. There is no basis
    for interfering with this pivotal finding.

[14]

The
    motion judge concluded that this courts reasoning in
Aronowicz v. Emtwo
    Properties Inc
., 2010 ONCA 96 was applicable.

[15]

We
    agree with this, and his conclusion that in the circumstances the actions of
    Kolter did not constitute a breach of fiduciary duty.

[16]

Not
    all actions taken by a person in a
per se
fiduciary relationship  that
    is, in a category of relationship in which a fiduciary relationship has been
    traditionally recognized  attract a fiduciary obligation. The presumption that
    in a
per se
fiduciary relationship one party has a duty to act in the
    best interests of the other is rebuttable:
Hodgkinson v. Simms
, [1994]
    3 S.C.R. 377, paras. 31 and 124. That presumption was rebutted in this case. We
    do not give effect to the appellants first ground of appeal.

[17]

Nor
    are we persuaded by the appellants argument that Kolter breached the Limited Partnership
    Agreement by selling the property to Bazis without their consent.

[18]

Section
    6.08(d) of the Limited Partnership Agreement, relied on by the appellants,
    provides:

No General Partner
    shall []

(d) save as permitted by section 6.02.01 cause the
    Limited Partnership to sell or otherwise dispose of the Property or any part
    thereof without the prior approval of the Limited Partnership expressed by a
    Special Resolution;

[19]

The
    appellants argue that, because Kolter was also a general partner of the limited
    partnership, this section prohibited Kolter from selling the property to Bazis
    after Kolter acquired the appellants partnership interest.

[20]

The
    section speaks to the general partner causing the limited partnership to sell
    the property.  Its clear intent is to provide some constraints on the authority
    of the general partner to deal with the limited partnerships only asset while
    the partnership was subsisting. At the time of the sale, the limited
    partnership had been dissolved. Kolter, and not the limited partnership, sold
    the property.

[21]

The
    appellants also argue that Kolter breached s. 6.03 of the Limited Partnership
    Agreement, which obligates the general partner to act in good faith and in the
    best interests of the limited partnership in managing and operating the limited
    partnership. In responding to the appellants offer, Kolter was not acting qua
    general partner, managing and operating the limited partnership.

[22]

As
    the appellants did not prevail on either of the above issues, it is unnecessary
    for us to address their argument that the release they signed was ineffective
    because of Kotlers breaches of its fiduciary duty and contractual obligations.

[23]

This
    appeal is accordingly dismissed. The respondent shall be entitled to its costs in
    the agreed upon amount of $25,000, inclusive of disbursements and applicable
    taxes.

Robert P. Armstrong J.A.

H.S. LaForme J.A.

Alexandra Hoy J.A.


