



COURT OF APPEAL FOR
BRITISH COLUMBIA




Citation:



Blue Line Hockey
  Acquisition Co., Inc. v. Orca Bay Hockey Limited Partnership,









2009 BCCA 34




Date: 20090203

Docket: CA035780

Between:

Blue Line Hockey
Acquisition Co., Inc.,

Northland Properties
Corporation,

Kery Ventures Limited
Partnership,

R. Thomas Gaglardi,

Ryan K. Beedie,

True North Hockey
Limited Partnership and

True North Arena
Limited Partnership

Appellants

(
Plaintiffs)

And:

Orca Bay Hockey
Limited Partnership,

Orca Bay Hockey Inc.,

Orca Bay Arena Limited
Partnership,

Orca Bay Arena Corp.,

John E. McCaw, Jr.,

Sportco Investments,
Inc.,

Sportco Investments
II, Inc.,

Francesco Aquilini

Aquilini Investment
Group, Inc.

Vancouver Hockey
Limited Partnership,

Vancouver Hockey
General Partner Inc.,

Vancouver Arena
Limited Partnership,

Vancouver Arena
General Partner Inc.,

Aquilini Investment
Group Limited Partnership,

Tri Power Developments
Limited Partnership,

0783612 B.C. Ltd. and

Vancouver Canucks
Limited Partnership

Respondents

(
Defendants
)




Before:



The Honourable Madam
  Justice Newbury





The Honourable Madam
  Justice Kirkpatrick





The Honourable Mr. Justice
  Groberman









I.G. Nathanson, Q.C.

M.A. Clemens, Q.C.

R.D. Diebolt, Q.C.

S.R.
  Schachter, Q.C.



Counsel for the Appellants





H. Poulus, Q.C.

H. Shapray, Q.C.

D.
  Brown



Counsel for the Respondents





Place and Date of Hearing:



Vancouver
, British Columbia






December 9, 10, 11, 2008





Place and Date of Judgment:



Vancouver
, British Columbia






February 3, 2009









Written Reasons by
:





The Honourable Madam
  Justice Newbury





Concurred in by:





The Honourable Madam
  Justice Kirkpatrick

The Honourable Mr. Justice
  Groberman




Reasons for Judgment
of the Honourable Madam Justice Newbury:

[1]

This appeal turns on the existence
 or non-existence  of a partnership among three Vancouver businessmen who worked
together for some months beginning in November 2003 towards the possible purchase
of a 50% interest in the Vancouver Canucks.  The purchase was to be carried out
not by the three men themselves, but by a tax-effective entity to be formed
later. Negotiations with the vendors principal, Mr. McCaw, were long and
arduous.  One of the three men, the defendant Mr. Aquilini, withdrew from the group
in March 2004.  The remaining two continued their efforts, ultimately expressing
interest in buying 100% of the Canucks and General Motors Place (the Enterprise).  Six months later, at the same time as their final proposal was in the
vendors hands, Mr. Aquilini began discussions directly with Mr. McCaw.  In
very short order, Mr. Aquilini was able to reach an agreement for the purchase
of a 50% interest, and an option to buy the remaining 50% of the Enterprise.  His former associates, the plaintiffs Messrs. Gaglardi and Beedie, claim that
in so doing, he breached a fiduciary duty owed to them as partners, either by
wrongfully competing against them for the very objective of the partnership, or
by appropriating a business opportunity belonging to it.  Accordingly, they say
Mr. Aquilini holds his interest in the Enterprise on a constructive trust for
them.

[2]

A decade ago, such a claim would
have had little or no chance of success.  Courts drew a bright line between intended
partnerships and those that had actually commenced carrying on business.  The
authors of
Lindley on Partnership
expressed this principle the same way
in 1995 in their 17
th
edition as the authors of the 7
th
edition had in 1905:

An agreement between two or more persons to carry on
business at a future time cannot render them partners before they actually
start to carry on that business.
It is the carrying on of a business, not a
mere agreement to carry it on, which is the test of partnership
, hence the
importance of distinguishing between actual and contemplated partnerships.  As
Lord Lindley put it:

Persons who are only contemplating
a future partnership, or who have only entered into an agreement that they will
at some future time become partners, cannot be considered as partners before
the arrival of the time agreed upon.



So long as an agreement to form a partnership remains
executory, no partnership will be created.  Subject to the point noted in the
previous paragraph, intending partners will retain that status if the chosen
commencement date has not yet arrived or if some act still remains to be done
before the business can be commenced.  Precisely the same principle applies as
between the promoters of companies, as will be seen hereafter.  [At 1314;
emphasis added.]

[3]

However, the plaintiffs rely on
more recent case-law for the proposition that a single venture partnership was
formed in this case to pursue the acquisition of the Enterprise by a second
vehicle  likely a limited partnership  that in the end never came into
existence.  Counsel referred to the first partnership as the pursuit partnership
and to the second as the acquisition partnership.  The plaintiffs say that
although the three men never agreed on the shape of the ultimate transaction
that would be acceptable to them or even on whether each of them would ultimately
participate in it, there is now authority that supports the existence of a
pursuit partnership in the circumstances of this case.  They cite the House of
Lords decision in
Khan v. Miah
[2000] UKHL 55, [2001] All E.R. 20 and
other cases involving the establishment of new businesses by two or more
persons, to show that it is not necessary for trading to have commenced for a
partnership to come into existence or for a duty of utmost good faith to arise.

[4]

The trial judge, Madam Justice
Wedge, found that no partnership of any kind came into existence in this case. 
She found that the three men had had only an informal agreement to work toward
the formal arrangement.  That agreement did not give rise to the legal
relationship of partnership with its onerous duties of loyalty and good faith.
 Nor had the parties entered into a joint venture (a term she used to refer
to a contractual relationship that is not a partnership).  Even if a
partnership or joint venture had existed, she found that Mr. Aquilinis
withdrawal had ended the relationship such that he was entitled to compete
against the remaining two.  Nor, she found, had any maturing business
opportunity been developed by the group by the time he departed, so as to
import the application of a
CanAero
-like duty.  (See
CanAero Service
Ltd. v. OMalley
[1974] S.C.R. 592, 40 D.L.R. (3d) 371.)  Thus Wedge J.
stated in summary at paras. 5 and 6 of her reasons:

I have concluded that the relationship among Gaglardi,
Beedie and Aquilini was not one of partnership or joint venture.  The
three pursued the acquisition of the Canucks without an agreement as to their
respective rights and obligations during the pursuit or the terms of a deal
they were ultimately prepared to accept.  Each was free to leave the group
and pursue the opportunity on his own account without regard to the others.

Even assuming the relationship constituted a
partnership or joint venture, it ended when Aquilini gave notice of his
departure.  Any fiduciary obligations arising from the relationship ended
at the same time.  [At paras. 5-6.]

She
dismissed the plaintiffs claims in their entirety.

[5]

In their opening argument on
appeal, the plaintiffs provided us with a list of the errors they alleged were
made by the trial judge.  This list was quite different from the list appearing
in their factum, but counsel for the defendants did not object.  The revised
grounds of appeal were that the trial judge had erred as follows:

1.         She misconstrued the nature of the common
venture;

2.         She misapprehended the evidence as to the
nature of the common venture;

3.         This led her to err in law in her
determination of the agreement required to constitute the partnership;

4.         She erred in law in determining the
essential terms of the partnership contract;

5.         She misconstrued the evidence and
overlooked relevant evidence; and

6.         She erred in law in holding that, if the
parties were partners, Mr. Aquilini owed no fiduciary duty to the appellants
after his departure from the partnership.

It
will be evident that the first four grounds relate to the central question of
the existence of a partnership among Messrs. Gaglardi, Beedie and Aquilini.  Although
the factors to be considered in such an enquiry are a matter of law, the
question of whether a partnership exists in a given instance is generally seen
as one of mixed fact and law:  see
Lindley & Banks on Partnership
(18
th
ed., 2002) at 716.

[6]

The plaintiffs also challenged
various inferences of fact drawn by the trial judge, her analysis of the law
relating to partnerships set forth at paras. 33148 of her reasons, and her
application of the legal principles to the facts she found.  Indeed, as his
oral argument unfolded, Mr. Nathanson on behalf of the plaintiffs left behind
the six stated grounds in favour of a more specific and integrated analysis of
the law relating to partnerships and fiduciary duty, and of the pursuit
partnership theory as a characterization of the relationship among Messrs.
Gaglardi, Beedie and Aquilini.  Mr. Nathanson made it clear that his clients
were not advancing any argument based on breach of confidentiality of
information, and that unless he could persuade the Court that a pursuit
partnership existed, the appeal must fail.  For the reasons that follow, I
have concluded that the trial judge was correct in her conclusions, and that therefore
the appeal must indeed fail.

FACTUAL BACKGROUND

[7]

The trial of this action occupied
several weeks, and the trial judges reasons, indexed as 2008 BCSC 27 and
reported at 40 B.L.R. (4th) 83, are long and detailed.  They recount the
circumstances of the parties first discussions
inter se
; their negotiations
with Mr. McCaw and his representative, Mr. McCammon, of Orca Bay Hockey Limited
Partnership and Orca Bay Arena Limited Partnership (referred to collectively as
Orca Bay); the facts surrounding Mr. Aquilinis departure from the group of three
in March 2004; and his successful discussions with Orca Bay later that year.  Because
of the length and complexity of the facts, I will not attempt to recount them in
these reasons but will assume the reader has read the trial judgment, and in
particular the narration at paras. 149362 thereof.  I will use the same
terminology used by the trial judge in her reasons.

LEGAL FRAMEWORK

[8]

Wedge J. noted at the outset that
although challenges to credibility had been mounted by both sides at trial,
very few of her findings of fact required an assessment of credibility.  (Para. 9.)  At para. 38, she began her analysis of the legal framework of the case by
emphasizing that a partnership (defined by s. 2 of the
Partnership Act
,
R.S.B.C. 1996, c. 348 as the relation subsisting between persons carrying on
business with a view of profit) results from a
contract
between the
partners.  As stated by the Supreme Court of Canada in
Porter v. Armstrong
[1926] S.C.R. 328:

Partnership, it is needless to say, does not arise from ownership
in common, or from joint ownership. Partnership arises from contract, evidenced
either by express declaration or by conduct signifying the same thing. It is
not sufficient there should be community of interest; there must be contract. 
[At 329.]

[9]

Like any contract, Wedge J. observed,
a contract of partnership requires an offer containing all of the essential
terms and an acceptance of the offer, consideration, and the intention to
create legal relations.  Here she quoted from
Whistler Mountain Ski
Corporation v. Projex Management Ltd
. (1994) 90 B.C.L.R. (2d) 283 (B.C.C.A.),
a case that did not involve a question of partnership; and
Surerus
Construction & Development Ltd. v. Rudiger
2000 BCSC 1746, 11 B.L.R.
(3d) 21 (B.C.S.C.), where the Court held that although the parties had
considered themselves partners and held themselves out as such, the essential
terms of the contract of partnership were lacking.  (See also
Milroy v.
Klapstein
2003 ABQB 871, 24 Alta. L.R. (4th) 349.)  Wedge J. also noted
Backman
v. Canada
2001 SCC 10, [2001] 1 S.C.R. 367, where the Court enunciated a
longstanding principle:

As
adopted in
Continental Bank
,
supra
, at para. 23, and stated in
Lindley
& Banks on Partnership
,
supra
, at p. 73:  in determining
the existence of a partnership ... regard must be paid to the true contract and
intention of the parties as appearing from the whole facts of the case. 
In other words, to ascertain the existence of a partnership the courts must
inquire into whether the objective, documentary evidence and the surrounding
facts, including what the parties actually did, are consistent with a
subjective intention to carry on business in common with a view to profit.  [At
para. 25.]

[10]

The trial judge briefly noted the
three elements of the statutory definition of partnership and then turned to the
characteristics of a joint venture, which also has contractual underpinnings: see
Canlan Investment Corp. v. Gettling
(1997) 37 B.C.L.R. (3d) 140, 95 B.C.A.C.
16, at para. 35, and
Zynik Capital Corp. v. Faris
2007 BCSC 527, 30
B.L.R. (4th) 32.  In the latter case, Tysoe J. (as he then was) held that a
memorandum of understanding between two parties that described the basic terms
of a venture pending the execution of a formal agreement, had not created a joint
venture.  The parties had not agreed on the price they would pay for the asset
or even on the maximum price they would be willing to bid for it, and one of
the parties had reserved the right to conduct due diligence.  In these circumstances,
the Court found, no concluded bargain had been reached.  In summary, Wedge J.
observed in the case at bar that while the constituent ingredients of a partnership
differ slightly from [those] of a joint venture, both require as their
foundation a binding contract among the partners or joint venturers which
contains all the essential terms of the agreement between the parties.  (Para. 67.)

A Partnership in This Case?

[11]

The trial judge reviewed the
evidence relevant to the existence of contractual underpinnings in this case at
paras. 171209 and 365391 of her reasons.  The plaintiffs position was that
the three men had formed a partnership at the latest, by November 3, 2003 or if
not by then, within the ensuing days.  Prior to their first meeting on
November 3, Mr. Gaglardi and Mr. Aquilini had been only slightly acquainted
through business dealings between their families.  Mr. Gaglardi did not know
Mr. Beedie (whose name as a possible investor had been suggested to him by KPMG),
and Mr. Aquilini was barely acquainted with Mr. Beedie.  After a couple of
preliminary contacts, the three met for dinner at a restaurant before a Canucks
game and chatted in general terms about the terms of a possible offer and how
much each might contribute in order to make a bid for a 50% interest in the
Canucks.  (Paras. 189190.)  At trial, Mr. Gaglardi was unable to recall any
specific discussion of partnership terms, even though he was familiar with
partnerships and partnership agreements.  Mr. Beedie recalled that the three had
agreed each would own one-third of the interest they hoped to acquire, but had
not discussed other terms of partnership, either on November 3 or at any time
thereafter.  (Para. 194.)  The trial judge wrote:

Gaglardi testified that between November 3 and 13,
2003, he had discussions with Beedie and Aquilini about the proposal they might
make to Orca Bay.  It was understood that none of the three had the
authority to bind the others in any transaction.
They agreed that all
proposals would be in the form of expressions of interest.   Before
any proposal could form the basis of a binding agreement with Orca Bay, a consensus was required among the three of them concerning its terms
.

There was no discussion among the three men as to the
terms they were ultimately prepared to accept in order to complete the
transaction.  They did not discuss the upper limit of the price they were
ultimately prepared to pay for the Enterprise or the maximum interest they were
prepared to purchase.  They deferred any decision on the actual
participants in the proposed transaction.  Beedie, for example, did not
know whether he or his father would purchase the share on behalf of the Beedie
family.  Aquilini did not know whether he would purchase his share
individually or as part of his family.

It was understood that once the transaction took
shape, each member of the group, in consultation with his family, was free to
decide whether or not to participate.  Each would seek the approval of his
family as to whether to proceed with the transaction
.  [At paras. 1968. emphasis added.]

Elsewhere, she stated that it
was understood each was free
at any time
to leave the group.  (Para. 384.)

[12]

The three did agree to retain a
solicitor, Mr. Sehmer, and it appears they at least understood that each would
be responsible for one-third of his fees.  However, neither Mr. Sehmer nor Mr.
Gaglardis advisor, Mr. McRae, brought up the matter of partnership or a partnership
agreement among the three men during their negotiations.  Wedge J. found at
para. 204 that:

There was some discussion about governance within the
purchasing entity once the transaction was concluded.  Beedie and Aquilini
favoured the suggestion that the three interest-holders each have a one-sixth
vote in the affairs of the partnership with McCaw.  Gaglardis view was
that the acquiring entity should vote a 50% interest in the partnership with
McCaw.  In general, the discussion focussed on governance concerning the
entity that would be formed to purchase the Enterprise once all of the business
terms had been negotiated.
There was no discussion about governance
among the three members of the group while they were advancing their proposals
to Orca Bay, with the exception of an agreement that Gaglardi would act as
spokesperson for the group
.  [Emphasis added.]

[13]

Beginning at para. 365, the trial
judge addressed whether the evidence supported the pursuit partnership theory. 
She found that it did not.  At trial, neither Mr. Gaglardi nor Mr. Beedie had described
a partnership that would be distinct from the partnership that would acquire
the assets.  In fact, Mr. Gaglardis evidence was that the two partnerships
were one and the same thing.  (Para. 369.)  When he was asked, for example,
whether when he had used the word partnership in his testimony, he had been
speaking colloquially, he answered:

A          Well,
I don't know that I can agree with that because from the very beginning we
discussed and agreed to use a limited partnership or a general partnership
vehicle to do the deal.  So, you know, from the first BLG meeting we had.  So,
I mean, we were, in my view, partners in a partnership.  And so I don't -- I
don't think I can agree with your characterization of it.

Q         The
partnership that you have just mentioned, is that the partnership that was to
be the purchaser?

A          Yes,
it's the entity that we, you know, would form to buy an interest in the
enterprise.

[14]

The trial judge noted the
importance of identifying the scope of the alleged partnership, as illustrated
by
Khan v. Miah, supra
.  She purported to draw a distinction between
pursuing an ownership interest in the Enterprise and pursuing ownership with
a view to
acquiring
it.  Apparently referring to the acquisition partnership,
she observed at para. 372 that since the objective of the three men was to
acquire
an interest in the Enterprise, they required (at a minimum) an agreement among
themselves as to the nature of their relationship, the rights and obligations they
shared as a result of the relationship, and the business terms with which each
of them was prepared to go forward to conclude a binding transaction involving
a $250 million asset.  In fact, they had not agreed on the multitude of
business terms that would need to be settled, or on the price they would
ultimately be prepared to pay for the Enterprise.  Nor had the identity of the
partners been settled, or even discussed  even though the objective was to
form a partnership with Mr. McCaw, and he would only enter into a partnership
with individuals with whom he was convinced he could work.  (Para. 387.)  Finally,
the trial judge wrote in a passage that is critical to her conclusions:

The decision the three men reached in November 2003
was to defer any agreement on the essential terms of the transaction with Orca Bay to which they would be prepared to commit, as well as the terms pursuant to which they
would do business together as joint owners of the Enterprise.
The
conduct of the parties in the meeting of November 3, 2004 -- and thereafter --
is inconsistent with an intention to enter into legal relations.  Rather,
it is consistent with an informal association created to explore the prospect
of a partnership with McCaw that would not result in binding, reciprocal
promises until the parties had identified and agreed to all of the terms of the
transaction
.

The parties manifested by their conduct after November
3, 2003 that while they shared a common interest in the opportunity, they
understood that any party could resile from the venture without
consequence.  It is telling that when Aquilini told Gaglardi and Beedie in
March 2004 he was leaving the group, they did not suggest to Aquilini that he
was not free to walk away.  They did not suggest at the time that Aquilini
was barred from pursuing the opportunity on his own.  When Aquilini asked
to rejoin the group in August 2004, Gaglardi and Beedie understood they were
free to said no, and did so.

The objective of the three men was to become owners of
the Canucks and partners with McCaw in the operation of the Enterprise.
They
intended to enter into a partnership agreement at that time which would govern
the relationship among themselves and their relationship with McCaw
. 
In the interim, theirs was simply an informal agreement to work toward the
formal arrangements.  That agreement did not give rise to the legal
relationship of partnership with its onerous duties of loyalty and good faith. 
[At paras. 38991; emphasis added.]

[15]

For substantially the same
reasons, she also found that no joint venture had been entered into by the
three men:

I
have concluded the evidence falls short of establishing a binding joint venture
agreement.
Not only was there no agreement as to the identity of the
parties that would hold the interest in the Enterprise, should it be acquired,
there was no certainty of subject matter because the scope of the acquisition
had yet to be determined
.  The parties had yet to agree on the price
they would ultimately be prepared to pay and the host of other conditions that
required agreement in a complex acquisition of the kind they were
contemplating.

In short, the members of the group
had not agreed
to any of the terms necessary to bind themselves to one another in order to
complete a transaction with Orca Bay.

In summary, the relationship among Gaglardi, Beedie
and Aquilini was not one of partnership or joint venture.  None owed
duties of loyalty or good faith to the others.
Each was entitled to
withdraw from the group at any time and pursue the opportunity for himself
. 
[At paras. 398400; emphasis added.]

Post-Dissolution Obligations

The latter part of the trial
judges reasons dealt in the alternative with the consequences of Mr. Aquilinis
departure from the group, on the assumption that there
had
been a
partnership or joint venture.  (At trial, the plaintiffs had taken the position
that the partnership continued in existence after Mr. Aquilinis departure, but
in this court, both the plaintiffs and defendants were content with the finding
that the partnership had indeed terminated in March 2004.)

[16]

In connection with the claim based
on
CanAero
, Wedge J. found that no maturing opportunity had been
developed by the three men at the time of Mr. Aquilinis departure.  Each of
them had learned about the opportunity independently, before meeting the others,
well in advance of their starting to work together.  (Indeed, Mr. Aquilini had
been interested in acquiring an interest in the Canucks for more than two years
before he met with the plaintiffs in November 2003.)  Orca Bays wish to sell the Enterprise had been widely-known in the business community and it had announced
its willingness to disclose its financial information to any credible
potential purchaser.  (Para. 411.)  Each of the three men had signed individual
non-disclosure agreements with Orca Bay before being given access to such
information.

[17]

By the time Mr. Aquilini left the
group in early March 2004, very little progress had been made in the
discussions with Orca Bay for the purchase of a 50% interest.  Things did not
improve after March.  In July, Messrs. Gaglardi and Beedie decided to try a
different tack and to explore increasing the interest they would purchase and the
amount of cash they would pay on closing.  At first, they discussed acquiring
75%, but later in the month, they prepared a Term Sheet that contemplated the
purchase of 100% of the Enterprise.  The opening paragraph of this document made
it clear it was not a binding agreement, but was intended to set out the
principal business terms of an agreement to be negotiated and entered into upon
satisfactory completion of Purchasers due diligence and receipt of all
required assurances, approvals, rulings and consents.  The Purchaser was to be
a limited partnership (yet to be formed) of which the general partner would be
a company controlled by the Gaglardi and Beedie family companies.  Many terms
were left open, but by signing the Term Sheet on August 13, Orca Bay did agree
to deal exclusively with the two men until the termination by Purchaser of its
efforts to purchase the Enterprise; October 1, 2004; or the execution by all
parties of the Definitive Agreement, whichever first occurred.  Mr. Gaglardi
and Mr. Beedie had some preliminary discussions about putting together the
partnership that would acquire the Enterprise.  (Paras. 2734.)

[18]

In the late summer, Mr. Aquilini
called Mr. Gaglardi to enquire about coming back into the transaction.  He was
told that Messrs. Gaglardi and Beedie were now pursuing the purchase of the
entire Enterprise.  Mr. Aquilini expressed an interest in acquiring a 20%
share, but Mr. Gaglardi refused his overtures.  (Para. 278.)  Orca Bay set up a
data room, and having had a falling-out with Mr. McCrae, Mr. Gaglardi began
to perform the due diligence himself.  It took several weeks.  Drafts of the
Definitive Agreement raised longstanding points of contention and Orca Bays solicitor began redrafting it extensively.  The exclusivity period expired but
no renewal was sought.  At a meeting held on October 28 among Mr. McCammon, Mr.
Gaglardi and Mr. Gaglardis father, some personal differences between Mr.
Gaglardi and Mr. McCammon surfaced and Mr. McCammon said he could not recommend
Mr. Gaglardis most recent proposal to Mr. McCaw.  (Para. 304.)

[19]

Meanwhile, Mr. Aquilini called Mr.
McCaw to express his interest in buying a 20% interest.  Mr. McCaw said he
would consider this proposal, and Mr. Aquilini began to discuss possible terms
with his own solicitor, Mr. Knott.  Mr. McCammon provided a proposal to Messrs.
Gaglardi and Beedie that was not acceptable to them, and they countered with a
proposal that Mr. McCammon, at least, took as their final offer.  (Para. 324.)  Following a conversation with Mr. Gaglardi on November 3, Mr. McCaw instructed
Mr. McCammon to begin discussions with Mr. Aquilini about the sale of 20% of
the Enterprise.

[20]

Mr. McCammon met with Mr. Knott
later that day.  Their talks went well, but halted when Mr. Aquilini received
advice that the tax benefits of the transaction (presumably the ability to set
off losses against other income for tax purposes) would be available only if
there was a change of control of the Enterprise.  (Para. 337.)  Mr. Aquilini
and his brother discussed with their family the prospect of bringing their
offer up to 50% and arrived at a plan for financing that might make such a step
possible.  The next morning, they met again with Mr. McCammon and proposed a new
deal.  Mr. McCammon responded positively.  At the end of the day, the
Aquilinis and Mr. McCammon signed an Investment Agreement with a proposed
closing date of March 8, 2005.

[21]

Mr. McCammon had spoken to Mr.
Gaglardi on November 4 and received a fairly negative reaction to the credit
terms Orca Bay had previously suggested.  Mr. Gaglardi told Mr. McCammon that
he would speak to his lawyers and get back to him.  (Para. 339.)  On November 5,
after the Investment Agreement had been signed with the Aquilinis, Mr. McCaw
phoned Mr. Gaglardi to reject the counter-proposal that had been made by
Messrs. Gaglardi and Beedie, and to terminate negotiations with them.  (Para. 345.)  Mr. McCammon did not tell Mr. Gaglardi about Orca Bays agreement with the
Aquilinis, and Mr. Gaglardi suspected that Mr. McCaw was simply ending
negotiations as a bargaining ploy.  The trial judge wrote:

Gaglardi
and Beedie suspected that McCaw had brought negotiations abruptly to an end as
a bargaining ploy, and, for that reason, they did not tell him they were
prepared to accept the October 30 proposal.  Gaglardis evidence was that
they did not want to telegraph to McCaw that they would accept the proposal if
it was tabled.  I view that evidence with some scepticism.  If they
simply wanted McCaw to re-table the proposal so they could accept it, why not
simply tell McCaw it was acceptable?  The evidence is more consistent with
the ongoing view of Gaglardi and Beedie, even in the face of McCaws withdrawal
from the negotiations, that the proposal was unacceptable.  [At para. 355.]

[22]

It was not until several days
later that Mr. Gaglardi heard that Orca Bay was about to announce the sale of
50% of the Canucks.  Subsequent conversations between him and Mr. Beedie on the
one hand and Orca Bay on the other took place, but the die was cast.  The
Aquilini family closed their purchase of the 50% interest in March 2005 and
exercised the option to acquire the remaining 50% of the Enterprise the
following year.

[23]

The trial judge rejected the
plaintiffs argument that (assuming a partnership had existed) their proposed
purchase of the Enterprise had been a maturing opportunity at the time of Mr.
Aquilinis departure in March 2004:

The acquisition the three were pursuing at the time of
Aquilinis departure was one that held no attraction to Orca Bay.  As at March 2004, the chances of acquiring an interest in the Enterprise were remote. 
For that reason, Gaglardi and Beedie changed course and decided to advance a
proposal based on a very different ownership structure than the one advanced
while Aquilini was part of the group.
Any maturing business
opportunity did not materialize, at the earliest, until late July 2004 when
Gaglardi and Beedie began negotiating for 100% of the Enterprise
.

In short,
there was no ripening or maturing
opportunity that existed at the time of Aquilinis departure
.  There
was no transaction begun but unfinished at the time of the partnerships
dissolution.  Significantly, neither Gaglardi nor Beedie suggested
otherwise at the time Aquilini announced his departure from the group. 
When asked whether the alleged partnership had any tangible or intangible
assets, Gaglardi said he could not think of any.

In conclusion,
Aquilini was not bound by any
fiduciary obligation to Gaglardi and Beedie when he entered into negotiations
with Orca Bay in late October or early November 2004
.  [At paras. 4235;
emphasis added.]

[24]

With respect to the claim that Mr.
Aquilini breached a fiduciary duty in competing with the (assumed) partnership
by acquiring the very object it had pursued, Wedge J. found that from the date
of the termination, no member of the group owed fiduciary duties to the others. 
She stated that former partners are free to compete with one another except as
constrained by s. 41 of the
Partnership Act
.  (Para. 418.)  Section
41(1) provides that subject to certain exceptions not relevant here:

after the dissolution of a partnership, the authority of each partner to bind
the firm and the other rights and obligations of the partners continue despite
the dissolution so far as may be necessary to wind up the affairs of the
partnership, and to complete transactions
begun but unfinished
at the
time of the dissolution,
but not otherwise
.  [Emphasis added.]

The
trial judge did not regard the pursuit of the Enterprise as a transaction
begun but unfinished.  If Mr. Aquilini had owed obligations to Messrs.
Gaglardi and Beedie post-termination, she said, they had owed similar
obligations to him, and if they had had ongoing rights to the opportunity in
question, so had Mr. Aquilini.  (Para. 419.)

[25]

In the penultimate paragraph of
her reasons, Wedge J. summarized her conclusions as follows:

1)         No
partnership or joint venture was formed between Gaglardi, Beedie and Aquilini
in November 2003 or at any time thereafter;

2)         Even
assuming the three men entered into a relationship giving rise to fiduciary
duties, the relationship ended in March 2004 as did any fiduciary obligations
arising from it.

3)         Aquilini
owed no duty to Gaglardi and Beedie to refrain from competing with them for the
opportunity to purchase the Enterprise, nor did he owe any duty to advise
Gaglardi and Beedie of his negotiations with Orca Bay.

4)         Because
Aquilini owed no fiduciary duties to Gaglardi and Beedie, Orca Bays actions did not constitute knowing assistance.  Orca Bay entered into negotiations
with Aquilini well after the expiry of the exclusivity period under the Term
Sheet, as it was entitled to do.  [At para. 454.]

ON
APPEAL

[26]

As noted earlier, Mr. Nathanson
did not make specific reference in his oral submissions to the general grounds
of appeal provided earlier.  Instead, he advanced various specific and overlapping
grounds, which I will try to deal with
seriatim
.

Ability to Withdraw Without Consequence

[27]

The most specific error, which I
take to raise a question of fact, alleged by counsel for the plaintiffs relates
to the trial judges finding at para. 384 that there was a common understanding
among the three men that each was free
at any time
to decide whether or
not to go forward .  Mr. Nathanson submits that this is inconsistent with the
finding at para. 198 that 
once the transaction took shape
, each member
of the group, in consultation with his family, was free to decide whether or
not to participate.  I do not agree that the two are necessarily inconsistent,
and in any event, the distinction may be more apparent than real.  Certainly,
as Mr. Nathanson acknowledged, it would not be possible to obtain an order of specific
performance against one of the three who wished to withdraw before the shape
of the transaction was known, so as to force him to participate in negotiations
towards an objective in which he had no interest.  (Nor, I suggest, would
damages be at all likely.)  Counsel suggested that there might nevertheless
have been a contractual obligation to remain in the tent until later, but
could point to no evidence in this regard.

[28]

The trial judge found that the
most telling evidence was to the contrary  the fact that when Mr. Aquilini did
withdraw from the group, neither Mr. Gaglardi not Mr. Beedie suggested to him
that he was not free to walk away.  (Para. 390.)  When Mr. Aquilini asked to
rejoin the group in August 2004, the trial judge said, the others understood
they were free to say no, and did so.

[29]

In all the circumstances, I am not
persuaded that she erred in finding that there was a common understanding that
each member of the group was free to leave at any time.

The Plaintiffs Evidence re Pursuit Partnership

[30]

The plaintiffs also take issue
with

the trial judges conclusion that their evidence was not
consistent with the pursuit partnership theory.  (See para. 13 above.) 
Counsel points to Mr. Gaglardis testimony that at the time of the first
meeting with Mr. Sehmer, the three businessmen had come together to pursue 
an interest in the Enterprise as equal partners and that they intended to use
a partnership, either limited or general to roll the tax losses of the Enterprise  through to each of the partners.  As well, counsel emphasized that Mr.
Aquilini did not object to Mr. McRaes referring to the three men as partners
at the meeting, and Mr. Gaglardis testimony that he was not using the word
partners at trial in a colloquial sense, given the intention to use a
limited partnership or general partnership vehicle to do the deal.  In Mr.
Nathansons submission, this and similar evidence from Mr. Beedie shows that
the plaintiffs clearly differentiated between the pursuit partnership and the
vehicle that would ultimately acquire the Enterprise if the negotiations were
successful.

[31]

It is true, in my respectful view,
that the trial judge did not always distinguish clearly in her reasons between
the concept of a pursuit partnership and that of an acquisition
partnership.  However, the evidence cited by the plaintiffs was simply not
probative of a pursuit partnership.  The testimony of Mr. Gaglardi to which
counsel referred, focussed consistently on the acquisition partnership and made
no reference to an earlier partnership, either in name or conceptually.  Mr.
Beedies testimony also contemplated that until the Enterprise was acquired,
we didnt have a business.  Other facts, such as Mr. McCraes reference to
the three men as partners at the November meeting with Mr. Sehmer, were
consistent with either theory and did not advance the plaintiffs position
materially.  As many courts have noted, the word partner is often used to
describe persons who are not partners at law: see
Ness Training Ltd. v.
Triage Central Ltd.
[2002] S.L.T. 675 (O.H. Scot.) at para. 17;
Bass
Clef Entertainments Ltd. v. HOB Concerts Canada Ltd
. (2007) 31 B.L.R. (4th)
255 (Ont. S.C.J.) at para. 52;
Perreault v. Churchill
[1994] Y.J. No.
121 (S.C.) at para. 19;
Interprovincial Heat Sales Ltd. v. Canada

(M.N.R.)
[2002] T.C.J. No. 632 (T.C.C.) at para. 34.

[32]

Ultimately, I am not persuaded the
trial judge was wrong in finding that the plaintiffs evidence did not support
the existence of a pursuit partnership.

Analysis of Pursuit Partnership

[33]

The plaintiffs more general challenge
to the trial judges conclusions stems from the distinction she drew at para.
370 between pursuing an ownership interest in the Enterprise and pursuing
ownership with view of acquiring it.  The plaintiffs say this shows that the
trial judge did not accept the possibility of a pursuit partnership (a notion
the defendants note was not even enunciated by counsel for the plaintiffs until
late in the trial) or that she misunderstood the concept of a pursuit
partnership as distinct from the entity that would actually acquire the ownership
interest.  While some consensus on the terms of acquisition that would be
acceptable to all three men might be necessary for the formation of the acquisition
partnership, and certainly the identity of the actual members of that vehicle
would have to be known before it could come into existence, Mr. Nathanson
submits there is no reason why a pursuit partnership could not be formed at an
earlier point for the purpose of pursuing and negotiating the terms of the Orca
Bay purchase  an obviously uncertain and dynamic process.

[34]

Not surprisingly, the plaintiffs
relied strongly on
Khan v. Miah
and

similar cases in which
persons who have banded together to go into business have been found to be
partners even though only preparatory steps for the intended business have been
taken.  It is important to note the facts of these cases carefully.  They were
generally not concerned with the intention to enter legal relations or with
sufficiency of terms, but with the statutory definition of partnership, in
particular the requirement that the partners carry on business.  In
Khan
,
the two respondents and the appellant had agreed they would be partners in a
restaurant business and had agreed on their respective roles in such business. 
They found and leased suitable premises, borrowed money for the purchase of the
freehold, opened partnership bank accounts, and entered into various
commitments preparatory to the opening of the restaurant.  The first target
date for the opening of the restaurant came and went.  Problems arose among the
partners, leading to a breakdown in the relationship, which was found to have
determined on January 25, 1994.  On that date the restaurant was not yet open.
 The two respondents nevertheless carried on with their preparations and opened
the restaurant on February 14, 1994, before any accounts had been settled with
the appellant.  He sued for a half-interest in the profits and capital of the
partnership.

[35]

There was no issue, then, that the
three had intended to enter a partnership.  They had held themselves out as
partners and, in the words of the trial judge in
Khan
, had:

so
far advanced towards the establishment of such [a] restaurant as, in my
judgment, properly to be described as having entered upon the trade of running
a restaurant, albeit that it was yet to open and in the event was not opened
for a further two months or slightly more.  [
Supra
, at 23.]

The
Court of Appeal reversed the trial court on the basis that as a
rule of law
,
parties to a joint venture do not become partners until trading actually commences. 
(See [1998] 1 W.L.R. 477.)  Relying on the difference between a contemplated
and actual partnership as described in
Lindley
(see para. 2 above), the
majority of the Court identified the partnerships business as the
carrying
on of a restaurant
.  Since the restaurant was not open for business at the
time the relationship ended, the plaintiffs claim was found to be limited to
damages for breach of contract.

[36]

The House of Lords overruled the
Court of Appeal, taking the view that the majority of the Court of Appeal had
been guilty of nominalism.  In Lord Milletts analysis:

They thought that it was necessary, not merely to
identify the joint venture into which the parties had agreed to enter, but to
give it a particular description, and then to decide whether the parties had
commenced to carry on a business of that description. They described the
business which the parties agreed to carry on together as the business of a
restaurant, meaning the preparation and serving of meals to customers, and
asked themselves whether the restaurant had commenced trading by the relevant
date.
But this was an impossibly narrow view of the enterprise on which the
parties agreed to embark. They did not intend to become partners in an existing
business
. They did not agree merely to take over and run a restaurant. They
agreed to find suitable premises, fit them out as a restaurant and run the
restaurant once they had set it up.
The acquisition, conversion and fitting
out of the premises and the purchase of furniture and equipment were all part
of the joint venture, were undertaken with a view of ultimate profit, and
formed part of the business which the parties agreed to carry on in partnership
together
.

There is no rule of law that the parties to a joint
venture do not become partners until actual trading commences. The rule is that
persons who agree to carry on a business activity as a joint venture do not
become partners until they actually embark on the activity in question. It is
necessary to identify the venture in order to decide whether the parties have
actually embarked upon it,
but it is
not necessary to attach any particular name to it. Any commercial activity
which is capable of being carried on by an individual is capable of being
carried on in partnership. Many businesses require a great deal of expenditure
to be incurred before trading commences. Films, for example, are commonly (for
tax reasons) produced by limited partnerships. The making of a film is a
business activity, at least if it is genuinely conducted with a view of profit.
But the film rights have to be bought, the script commissioned, locations
found, the director, actors and cameramen engaged, and the studio hired, long
before the cameras start to roll.
The work of finding, acquiring and fitting
out a shop or restaurant begins long before the premises are open for business
and the first customers walk through the door. Such work is undertaken with a
view of profit, and may be undertaken as well by partners as by a sole trader
. 
[At 24; emphasis added.]

and:

The question in the present case is not whether the
parties had so far advanced towards the establishment of a restaurant as
properly to be described as having entered upon the trade of running a
restaurant, for it does not matter how the enterprise should properly be
described.
The question is whether they had actually embarked upon the
venture on which they had agreed
. The mutual rights and obligations of the
parties do not depend on whether their relationship broke up the day before or
the day after they opened the restaurant,
but on whether it broke up before
or after they actually transacted any business of the joint venture
. The
question is not whether the restaurant had commenced trading, but whether the
parties had done enough to be found to have commenced the joint enterprise in
which they had agreed to engage. Once the judge found that the assets had been
acquired, the liabilities incurred and the expenditure laid out in the course
of the joint venture and with the authority of all parties, the conclusion
inevitably followed.  [At 25; emphasis added.]

[37]

Counsel referred us to three trial
decisions in this province, one affirmed by this court, in which ventures
have split apart or have been effectively abandoned by one or more members
before the intended business could be established, but partnerships have been found
to exist.  Most notably, in
Davis v. Ouellette
(1981) 27 B.C.L.R. 162,
two men with experience in the mining industry entered into a written agreement
to carry out the mining of certain property, which provided for the sharing of
net profits between them.  Originally, they were interested in the tailings of
a former mine, but samplings carried out by the two men proved much more
promising with respect to the mine itself.  The two decided to make an effort
to gain control of the company that owned the mine.  The trial judge, McEachern
C.J.S.C., found that from that point, they were equal partners in this venture. 
The defendant was able to obtain an option to acquire a control block of the
company for $500,000 and the two men set about raising funds to carry out the
purchase.  Differences and misunderstandings arose between them about the
raising of the money, and in the words of the Court, each went his own way in
attempting to put a deal together.  Eventually, a shelf company controlled by
the defendant acquired the control block and the plaintiff acquired a lesser
number of shares.  He sued for an equal share of the partnerships profits.

[38]

Again, it appears there was no
question as to whether a partnership had existed.  The issue was whether it had
terminated, and if so, when.  The Chief Justice noted s. 35 of the
Partnership
Act
, para. (c) of which provides that a single venture partnership is
dissolved by the termination of the venture.  He observed:

One of the difficulties in these cases is to analyze
what happened in a legal context when that is not likely the way the parties
themselves regarded their affairs. I doubt if they addressed their minds to the
subtleties of a continuing partnership particularly after they abandoned the
tailing operation, although, in a general sense, they described their
relationship in terms of partnership. Certainly, they did not have different
kinds of partnership in mind and they did not have in mind the difference
between a partnership at will and a partnership for a single adventure or
undertaking.

I cannot find any agreement between the parties to
terminate the partnership, and no notice of termination was ever given. As this
partnership was entered into for a single adventure or undertaking, it must
have continued until that single adventure or undertaking was terminated: s.
35(
b
).  [At 172.]

[39]

Since both partners had walked
away from [the project] as a partnership undertaking, however, he ruled that
the single adventure or undertaking
had
come to an end at some point. 
He noted that on dissolution, each partner must make a full and complete
disclosure of all partnership affairs and that a partner who obtains partnership
assets secretly must hold what he has acquired from such assets in trust for
his partner.  (At 174.)  At the same time, he declined to apply
CanAero,
finding
that the possible acquisition of control of the company in this case could
hardly be described as a maturing business opportunity.  He explained:

At
the time the partnership came to an end these parties only had a plan, although
the potential for success improved dramatically in October 1978 when Mr. Kehler
became interested. The final scramble for funds just before the acquisition
demonstrates the uncertainty under which the matter continued right up to the
date of the final closing in July 1979. These matters are always a question of
degree, and while certainty is not required,
it would be unrealistic to
think that the project was anything close to a sure thing, or even a likely
thing, at any time before the partnership terminated
.

I accordingly find that the plaintiff is not entitled
to 50 per cent of the defendant's share position in the company.  [At 176.]

[40]

A more recent decision, post-
Khan,
relied on by the plaintiffs was
Scragg v. Lotzkar
2004 BCSC
1447, 49 B.L.R. (3d) 154, affd. 2005 BCCA 596, 10 B.L.R. (4th) 173.  Notably,
the plaintiff and defendants in that case had agreed to engage in a venture
that would carry out a certain project in Victoria, not in a partnership but by
means of a management company to be formed by one of the parties.  The two
defendants asked the plaintiff to become the sole director and president of the
company.  He accepted the offer and left his existing job in Abbotsford, where
he had worked for the two defendants.  Various delays were encountered and the
plaintiff, who needed income, moved to Edmonton where he found a job, assuring
the defendants he was ready to go [to Victoria] at any time.  Eventually, one
of the defendants told him the project was not going to happen.  In fact it was
completed by the others, without his participation.  He sued for his share of
the management company, evidently relying on partnership law rather than
contract alone.

[41]

The defendants argued that
although they had had a business arrangement with the plaintiff, it had not
been a partnership, and that if it had been, the plaintiffs move to Edmonton had ended the relationship.  The trial judge, Mr. Justice Bouck, found that
Khan
was analogous to the facts before him.  In his analysis:

Applying that law to the facts in this case, it seems
clear that
the venture the parties agreed to engage in was to acquire the
BDL contract, the premises at 2111 Government Street, Victoria, and ultimately,
the equal division of shares in the Management Company
. They did so with a
view to profit. Therefore, they were in partnership. At one time or another,
Mr. Scragg assisted the partnership in getting the BDL contract and acquiring
the premises. Mr. Scragg's partners failed to meet their commitment to hire him
as a manager and allot him his proportion of the shares.  [Para. 33; emphasis
added.]

[42]

On appeal, Ryan J.A. for this
court upheld the judgment in favour of the plaintiff on the basis that Bouck
J.s findings were reasonably supported by the evidence.  Citing
Khan
,
she noted that the ultimate test was that formulated by Lord Millett  namely
whether the parties [had] done enough to be found to have commenced the joint
enterprise in which they had agreed to engage.  (Para. 30.)  As well, she
quoted from
Lindley & Banks
,
supra
:

Clearly
not all preparatory acts will be sufficient for this purpose; equally, a single
act which involves
long-term commercial consequences
,
e.g
., the
acquisition of premises, may in itself be enough.  [At 203; emphasis added.]

[43]

The facts of
Red Burrito Ltd.
v. Hussain
2007 BCSC 1277, 33 B.L.R. (4th) 205, were similar to those in
Khan
,
but again, with the added feature that the parties intended to incorporate a
company to carry on the intended business.  They had entered into a Letter of
Understanding to convert a grocery business into a restaurant in Vancouver which would be owned and operated by the new company, in which they would be
equal shareholders.  The defendant was tasked with overseeing renovations to
the future premises of the restaurant and arranging for the assignment of a
lease thereof to the company.  Although the company was never incorporated and
the lease was never assigned, the restaurant did open in June 2006.  Again,
however, problems arose between the parties and in August, the defendant locked
out the principals of the plaintiff.  The latter had invested a substantial sum
of money in improvements and equipment for the business.  After being locked
out, it received no income or benefit from the enterprise.

[44]

The trial judge, D. Smith J. (as
she then was) stated that a partnership is formed if parties to a venture go
into business together with a view to sharing the ventures profits.  The
partnership exists even in the absence of an express agreement and even where
there is an agreement but all of the terms of the agreement have not been
completed, citing
inter alia,

Khan
.  Then, turning to the
Partnership
Act
, she noted
Continental Bank Leasing Corp. v. Canada
[1998] 2
S.C.R. 298, where:

the
court discussed the essential elements of a partnership in the context of s. 2
of Ontarios then
Partnership Act
, which employed the same language as
s. 2 of the Act.  At para. 22, the court listed the three ingredients
as:  (i) carrying on a business; (ii) in common; (iii) with a view to
profit.  It stated further at para. 23 that, [t]he existence of a
partnership is dependent on the facts and circumstances of each particular
case.  It is also determined by what the parties actually intended.

The
indicia
of a partnership were set out at para.
24.  They include the contribution of money, property, effort, knowledge,
skill or other assets to a common undertaking, a joint property interest in the
subject-matter of the adventure, the sharing of profits and losses, a mutual
right of control or management of the enterprise, the filing of income tax
returns as a partnership and joint bank accounts.  [At paras. 278.]

[45]

Applying the common law and
statutory criteria for a partnership, Smith J. concluded that one had indeed existed
in
Red Burrito:

The Letter of Understanding expressly referred to the joint venture as a
partnership and the parties conducted themselves as one.  Red Burrito and
Hussain planned to carry on business together, as evidenced by the Letter of
Understanding.
They acted on their plans by Red Burrito contributing
the start-up capital to the venture and by Hussain contributing the leasehold
interest.  Both contributed effort, knowledge and skills.  Both were
involved in the management of the joint venture
 Red Burrito as the
managing partner and Hussain as the on-site manager.
The restaurant
was opened and the parties operated the business together from June 29, 2006
,
until on or about August 8, 2006, when Hussain unilaterally locked out the
principals of Red Burrito.  During that period, the revenues from the
joint venture went to pay its expenses.  It was clear the parties intended
to operate the business with a view to sharing in its anticipated profits.  [At
para. 32; emphasis added.]

(See
also
Matthews v. Maurice
[1923] O.J. No. 11, 54 O.L.R. 64 (H.C.J.), where
at para. 14 the Court cited an older line of cases to show that  persons who
are promoters [of a company] may at the same time become so associated by
agreement that they are actually partners.)

[46]

There is no doubt that
Khan
and cases following it have broadened the meaning of carrying on business, but
they do not purport to eliminate that element of the statutory definition, nor to
do away with what the trial judge here referred to as the contractual
underpinnings of a partnership  in particular the subjective intention to
carry on business in common with a view to profit.  (
Backman
,
supra
,
at para. 25.)   In the case at bar, no such intention was evidenced, either by
written agreement or by the parties conduct.  Far from agreeing to acquire or
carry on a business, the parties had only a loose understanding that as long as
all three wished, they would hold exploratory talks with Orca Bay.  Even that was not a binding obligation, since as the trial judge found, any of the
parties could withdraw at any time from the talks without legal consequence. 
They were careful
not
to commit to anything except to the payment of
their lawyers fees in equal shares.  They refrained from entering into any obligations
to third parties (again other than their lawyer).  They did not make any actual
offer to Orca Bay, but simply advanced expressions of interest.  They did not
enter a lease, establish an office, or borrow funds. There was no promise,
explicit or otherwise, to become jointly liable for obligations that they might
incur in connection with the acquisition.  In the language of
Khan,
the
parties had not done enough to be found to have commenced the joint
enterprise.  Most importantly, they had not agreed to engage in, or acquire, that
enterprise or any other.

[47]

Consistent with the lack of any
agreement of partnership, Mr. Aquilinis withdrawal was not met by any
suggestion that he was bound to continue as a member.  Similarly, when he enquired
in August 2004 about being included again and was refused, he did not claim
that the other two were under any obligation to grant his request.  There was
no legal consequence because the parties had not had, or evidenced, any
intention to bind themselves to carry on any business together.  All three men therefore
remained free to pursue their own interests and did so.

[48]

In all the circumstances, it is difficult
to resist the defendants submission that the notion of a pursuit partnership
was an attempt to engineer around the uncomfortable fact the three men
throughout were discussing the prospect of as-yet-unidentified parties entering
into a transaction to purchase an as-yet-unidentified interest at an
as-yet-unidentified price and as-yet-unidentified terms at some indeterminate
date in the future.  If one were to stretch
Khan
so as to infer a partnership
in this case, every two or more people engaging in exploratory discussions with
a third party about a transaction would be regarded as partners, with all the
duties and obligations that concept entails.  Such a result defies commercial
sense.  The reasoning of Sopinka J. for the majority in
Lac Minerals Ltd.

v. International Corona Resources Ltd
. [1989] 2 S.C.R. 574, seems
apposite:

the parties were not
simply negotiating an ordinary commercial contract but were negotiating in
furtherance of a common object. This factor does not particularly distinguish
negotiations in furtherance of any partnership or joint venture.
All such
negotiations seek to achieve a common object, namely the accomplishment of the
business venture for which the partnership or joint venture is sought to be
formed. I do not see how this factor can elevate negotiations to something more
. 
[At 605
6
; emphasis
added.]

A View of Profit

[49]

Given the foregoing, I need not
decide finally whether it could reasonably be said that the pursuit partnership
(had one been intended, and had it embarked on business activity) was formed
with a view of profit.  It does seem doubtful, however, that a partnership
that was never intended to acquire any assets, to receive any revenue, or to
carry on any activity other than negotiating on behalf of another tax-effective
vehicle, would meet the definition in s. 2 of the
Partnership Act.
(See
Lindley & Banks, supra
, at 2-08, quoted in the dissenting judgment in
Continental
Bank Leasing
,
supra
, at para. 43.)  This point seems not to have
been raised in
Scragg
or
Red Burrito
,
supra
.

Other Partnership Issues

[50]

At some points in his argument,
counsel for the plaintiffs seemed to suggest that because a tax-effective
vehicle such as a limited partnership was to be formed at a later date to
acquire the Enterprise, the relationship among Messrs. Gaglardi, Beedie and
Aquilini from November 3, 2003 or thereabouts
must have been
a
partnership.  This assumption may again rest on a misreading of
Scragg
and
Red Burrito
.  They turned on findings of fact that although the
parties had intended ultimately to use a corporate vehicle to carry on
business, their conduct evidenced an intention to carry on business in the
meantime as partners,
and
that they had actually conducted such
business, broadly defined.  For reasons I have already given, I believe the
trial judge was correct not to reach a similar result in this case.  The other possibility,
which is more probable on the evidence, was that the three took a flyer at
exploring, very informally, the acquisition of the Enterprise together.  They
delayed thinking about or forming a partnership until an acceptable deal had
been negotiated and they and their respective families had decided whether or
not to participate.  At that point, it would make sense to incur the legal fees
and to take the time involved in the preparation of a limited partnership
agreement (if that was the vehicle ultimately decided upon) and to settle the
terms of governance of the acquiring vehicle.

[51]

Mr. Nathanson also submitted that
the trial judge conflated the requirement that parties to a contract, including
a contract of partnership, must intend to enter a binding agreement (the
requirement that there be a concluded bargain), with the requirement that the
bargain must settle everything that is necessary to be settled: see
May v.
Butcher
(1934) 2 K.B. 17 (H.L.) at 21, quoted by the trial judge at para.
66 of her reasons.  In counsels analysis, the trial judge failed to find the requisite
subjective intention in this case
because
she did not find that
everything necessary to be settled had been settled.  If the latter conclusion
was wrong, counsel suggested the former would also fall.

[52]

I agree with the plaintiffs that
it is not necessary, at least in a pursuit or single venture partnership,
for the members to agree on the price they would ultimately be prepared to pay to
acquire their objective, or on the other multitude of business terms that
they would eventually need to settle.  A partnership is consensual in that its
members must intend and agree to carry on business together; but that does not
mean they must anticipate and resolve all questions that may arise in future in
the course of the partnerships business.  Having said this, I do not read the trial
judges reasons in the way Mr. Nathanson did; and I believe the trial judge was
correct in finding that
both
the
animus contrahendi
and
sufficiency of terms were lacking in this instance.  A consensus on retaining a
lawyer and appointing Mr. Gaglardi to lead the talks with Orca Bay fell far short of an agreement to carry on business together.

Fiduciary Relationship

[53]

Nor did the relationship found
by the trial judge resemble in any way the kind of relationship from which a
fiduciary duty would normally arise outside the established categories.  I have
already noted that each of Messrs. Gaglardi, Beedie and Aquilini understood
that none could bind or commit the others in any way.  This runs counter to s.
7(1) of the
Partnership Act
, which provides that a partner is an agent
of the firm and of the other partners for purposes of the partnerships
business.  Of course, s. 7(1) would protect any outside party dealing with a
partner without knowledge of an internal prohibition, but the lack of agency is
nevertheless unusual in a relationship that is said to be fiduciary.  Indeed,
in 1881, in
Cassels v. Stewart
(1881) 6 App. Cas. 64, Lord Blackburn
said of a partner that it is "because he is an agent that the fiduciary
character arises".  (At 79; but cf.
Holme v. Hammond
(1872) L. Ex.
218, quoted in
Lindley & Banks, supra,
at 312.)

[54]

More modern authorities, both
academic and judicial, have emphasized other elements of fiduciary
relationships.  Some suggest that such a relationship arises wherever one
undertakes to act in the interests of another: see in particular Austin W.
Scott, The Fiduciary Principle (1949) 37 Cal. L. Rev. 539 at 540, quoted by Leonard
I. Rotman,
Fiduciary Law
(2005) at 93.  In
Hospital Products Ltd. v.
United States Surgical Core
[1984] 55 A.L.R. 417 (Aust. H.C.), Mason J.
stated:

The
critical feature of these relationships is that the fiduciary undertakes or
agrees to act for or on behalf of or in the interests of another person in the
exercise of a power or discretion which will affect the interests of that other
person in a legal or practical sense.  [At 454.]

In
a similar vein, McLachlin J. (as she then was) wrote in
Norberg v. Wynrib
[1992] 2 S.C.R. 226, 92 D.L.R. (4th) 449 that:

Inherent
in the notion of fiduciary duty  is the requirement that the fiduciary have
assumed or undertaken to look after the interest of the beneficiary 
Generally people are deemed by the law to be motivated in their relationships
by mutual self-interest.  The duties of trust are special, confined to the
exceptional case where one person assumes the power which would normally reside
with the other and undertakes to exercise that power solely for the other's
benefit.  [At para. 97.]

(See
also
White v. Jones
[1995] 1 All E.R. 691 (H.L.) at 713, cited by Rotman
at 95; and Kevin P. McGuinness,
The Law and Practice of Canadian Business
Corporations
(2002) at § 8.157.)  In
Lac Minerals
,
supra
,
Sopinka J. stated that [t]he one feature  considered to be indispensable  is
that of dependency or vulnerability.  (At 599.)  A more comprehensive analysis
was of course carried out by Wilson J. in her well-known dissenting reasons in
Frame
v. Smith
[1987] 2 S.C.R. 99, where she suggested as a rough and ready
guide for the existence of a fiduciary duty the elements of (1) scope for the
exercise of a discretion or power; (2) the ability to exercise such power
unilaterally; and (3) a peculiar vulnerability, on the part of the affected
person, to the exercise of the power.

[55]

The concept of reasonable
expectations has also been relied upon by some courts as critical to the
imposition of a fiduciary duty.  In
Lac Minerals
, La Forest J. stated in
his minority judgment that the starting point for ascertaining the existence of
the fiduciary obligation should be whether, having regard to all the facts and
circumstances, one party stands in relation to another such that it could
reasonably
be expected
that the other would act or refrain from acting in a way
contrary to the interests of that other.  (At 663; my emphasis.)  His Lordship
advanced the same argument in his majority judgment in
Hodgkinson v. Simms
[1994] 3 S.C.R. 377, 17 D.L.R. (4th) 161:

The
existence of a fiduciary duty in a given case will depend upon the reasonable
expectations of the parties, and these in turn depend on factors such as trust,
confidence, complexity of subject matter, and community or industry standards. 
For instance, in
Norberg
,
supra
, the Hippocratic Oath
was evidence that the sexual relationship diverged
significantly from the standards reasonably expected from physicians by the
community.  This inference was confirmed by expert evidence to the effect that
any reasonable practitioner in the defendants position would have taken steps
to help the addicted patient, in start contrast to the deplorable expectation
which in fact took place  [At 412.]

[56]

This is now well-tilled judicial
and academic ground (see, for example, the articles cited by P. Percell, at fn.
7 of Fiduciary Obligations or is it a Breach of Fiduciary Duty to Accept an
Appointment to the Bench? (2004) 28 The Advocates Quarterly

471.)  At
the end of the day, no single litmus-test for fiduciary duty will meet all situations. 
One falls back on the truism that the nature of the relationship will depend on
all the circumstances.  As La Forest J. wrote after his lengthy review of the
law of fiduciary relationships in
Hodgkinson v. Simms
:

In summary, the precise legal or equitable duties the
law will enforce in any given relationship are tailored to the legal and
practical incidents of a particular relationship. To repeat a phrase used by
Lord Scarman, [t]here is no substitute in this branch of the law for a meticulous
examination of the facts; see
National Westminster Bank plc v. Morgan
,
[1985] 1 All E.R. 821 (H.L.), at p. 831.  [At 4134.]

[57]

At the core of most fiduciary
relationships, however, is the idea of exercising a discretion that affects
another, and the expectation that this will be done in that others best
interests.  Obviously, this is the opposite of the underlying premise of
commercial relationships.  As Sopinka J. wrote in
Lac Minerals
, it is
rarely necessary to utilize what he called the blunt tool of equity in the
latter context.  He quoted from an article by J. Kennedy entitled Equity in a
Commercial Context in P.D. Finn, ed.,
Equity and Commercial Relationships
(1987) as follows:

It
would seem that part of the reluctance to find fiduciary duty within an arms
length commercial transaction is due to the fact that
the parties in that
situation have an adequate opportunity to prescribe their own mutual
obligations, and that the contractual remedies available to them to obtain
compensation for any breach of those obligations should be sufficient.
Although the relief granted in the case of a beach of fiduciary duty will be
moulded by the equity of the particular transaction, an offending fiduciary
will still be exposed to a variety of available remedies, many of which go beyond
mere compensation for the loss suffered by the person to whom the duty was
owed, equity, unlike the ordinary law of contract, having [
sic
] regard
to the gain obtained by the wrongdoer, and not simply to the need to compensate
the injured party.  [At 595; emphasis added.]

[58]

The parties in this case were experienced
businessmen who were familiar with partnerships and partnership agreements. 
They had legal advice at the outset of their relationship.  There was no
evidence that they discussed or assumed that each of them would act in the
others best interests, nor did any confer a discretion on another to act for
him, thus becoming vulnerable to that others discretion.  None was empowered
to bind the others in their negotiations.  In short, the facts as found by the
trial judge do not establish any of the usual hallmarks either of a partnership
or of a fiduciary relationship generally.

Post-Dissolution Obligations

[59]

Having concluded no fiduciary
relationship existed, it is unnecessary for me to consider at length the
plaintiffs arguments regarding the continuation of fiduciary obligations after
Mr. Aquilinis withdrawal from the group of three in March 2004.  (As mentioned
above, both counsel before us took the position that if there had been a
partnership, it terminated at that time.  I will proceed
arguendo
on
that assumption, although as evident from paras. 99114 of the trial judges
reasons, there is some uncertainty regarding the operation of s. 35(1)(c) of
the
Partnership Act
.)  I do feel constrained to acknowledge some doubt on
my part concerning the trial judges conclusion that no breach of duty occurred
because no ripening or maturing opportunity existed in March 2004 that was
appropriated by Mr. Aquilini in November
.
First, it is not clear whether
the word maturing used by the Court in
CanAero
was intended to
restrict the scope of the corporate opportunity doctrine to opportunities that
are indeed ripe or a sure thing.  Laskin J. (as he then was) himself stated
that the standards of loyalty to which the conduct of a director must conform
must be tested by many factors, including the position held by the director,
the nature of the corporate opportunity,
its ripeness, its specificness
,
the directors relation to it, the amount of knowledge he or she had, the
circumstances in which it was obtained, the time elapsed between the
termination of his or her relationship with the corporation, and the
circumstances of that termination. (At 620; my emphasis.)  As well, his
Lordship said, new fact situations may require a reformulation of existing
principle to maintain its vigour in the new setting.  (At 609.)

[60]

We were not referred to any
Canadian authority in which the question of maturity was directly addressed
post-
CanAero
 although some courts have simply dropped the word
maturing without comment.  U.K. courts have traditionally taken an absolute
view of the no-conflict rule, which does not place a great deal of emphasis on
a distinction between mature opportunities and others.  Although some English
trial decisions did favour the maturing opportunity approach some years ago (see
Island Export Finance v. Umunna
[1986] B.C.L.C. 460 (Q. B.);
Balston
Ltd. v. Headline Filters Ltd.
(No. 2) [1990] F.S.R. 385 (H.C.J., Ch.);
CMS
Dolphin Ltd. v. Simonet
[2001] EWHC 415 (Ch.), the Court of Appeals recent
decision in
Bhullar v. Bhullar
[2003] EWCA Civ. 424, [2003] B.C.C. 711
reverted to the strict
Phipps v. Boardman
approach.  (See [1966] 3 All
E.R. 721 (H.L.); see also Michael Hadjinestoros, Exploitation of Business
Opportunities: How the U.K. Courts Ensure that Directors Remain Loyal to their
Companies [2008] I.C.C.L.R. 70 at 75).  In the U.S., the corporate opportunity
doctrine expanded long ago beyond the so-called interest or expectancy test and
now incorporates a line of business test and a fairness test.  (See David Clayton
Carrad, The Corporate Opportunity Doctrine in Delaware: A Guide to Corporate
Planning and Anticipatory Defensive Measures, (1977) 2 Del. J. Corp. L. 1, Corporate
 Opportunity, (1961) 74 Harv. L. Rev. 765, and Rotman,
supra
, at 4356.)

[61]

If and when the point is ever
argued, then, a Canadian court might well take the view that the appropriation
of an opportunity belonging to a corporation by a director or former director
merits equitable intervention even where the opportunity is not a mature
one.  Certainly if one were to imagine that Messrs. Gaglardi, Beedie and Aquilini
had formed a corporation of which they all became directors, that they participated
in the management of its business and carried on negotiations with Orca Bay to
purchase the Enterprise or an  interest therein, and that Mr. Aquilini then resigned
and six months later, bought the Enterprise for himself, an argument could be
made that his conduct offended the corporate opportunity rule notwithstanding
the proposed changes to the transaction made by Messrs, Gaglardi and Beedie
after his withdrawal.  In this type of situation, the rule against conflicts of
interest ensures that those persons exercising control of a corporations
affairs will do so free of any taint of self-interest.  As noted by Professor
K. P. McGuinness,
supra
, at § 8.158:

Although fiduciary status is exceptional in the
commercial context, it is justified in the case of the relationship between the
corporation and its directors and officers on the obvious basis that they do
not deal with the corporation at arms length.  On the contrary,
they are
the parties who have effective control over the corporation,
and because of
this fact there is a particular risk to the shareholders and other persons
interested in the corporation that their interests will be unfairly disregarded
unless the directors and officers of the corporation are held to the highest
standard of conduct that the law recognizes, namely the fiduciary standard of
honesty, selflessness and loyalty.
The risk to which the shareholders and
other interested persons are exposed arises as soon as the person achieves a
position of control.
Prior to that time there is no exceptional risk and
therefore no justification for imposing a fiduciary obligation, thus it has
been held that there is no such liability in the case of a director-elect.
[Emphasis added.]

A
similar argument could be made in the case of a continuing partnership, again
where the alleged fiduciary was involved in policy- and decision- making on
behalf of the partnership.

[62]

In the circumstances of the
instant case, however, the rationale for the corporate opportunity rule simply did
not arise.  None of the group of three was entrusted to act for the others, none
was at the mercy of the others and none was bound by contract, by statute, or
in Equity to disregard his own interests and act in the best interests of the
others.  This of course brings us full circle, since these are some of the
reasons why no fiduciary relationship was found in the first place.

Mr.
Aqulinis Conduct

[63]

Finally, I am not persuaded that
Mr. Gaglardi could reasonably have been lulled into a position of
vulnerability by Mr. Aquilinis expressed reluctance, for cash-flow reasons, to
contemplate a closing in early 2004, or by his request to rejoin the other two
in August of that year.  On the contrary, Mr. Aquilinis request gave notice
that he was still interested in the Enterprise.  In the absence of a fiduciary
duty, he was, as the trial judge found, just as entitled as the others to
pursue that objective in his own interest.  It must also be said that a false
sense of security felt by Mr. Gaglardi as a result of Mr. Aqulinis request is
not the kind of vulnerability that would lead a court to infer the existence
of a partnership from and after November 2003.

[64]

In the result, I conclude that the
trial judge was correct to dismiss the plaintiffs claims.  I would dismiss
this appeal, with thanks to counsel for their able arguments.

The Honourable
Madam Justice Newbury

I Agree:

The Honourable
Madam Justice Kirkpatrick

I Agree:

The Honourable
Mr. Justice Groberman


