155569 Canada Ltd. v. 248524 Alberta Ltd. et al.

• Jurisdiction: Alberta
• Court: Court of Queen's Bench of Alberta (Canada)
• Judge: Veit, J.
• Citation: (1995), 170 A.R. 183 (QB)
• Date: 01 May 1995

155569 Can. Ltd. v. 248524 Alta. Ltd. (1995), 170 A.R. 183 (QB)

MLB headnote and full text

155569 Canada Limited (plaintiff) v. 248524 Alberta Ltd. (defendant)

248524 Alberta Ltd. (defendant/plaintiff by counterclaim) v. Eli Adler and Eli Adler through or in the name of D.F.C. Diversified Financial Corp., Canpro Investments Limited, 155569 Canada Limited, Trans-America Investments Ltd., Ellis Developments Ltd., Samuel Shapiro, Darene Investments Ltd., and Cambridge Builders Inc. (defendants by counterclaim)

(Action Nos. 8703-00674; 8803-03147)

In The Matter Of the Trustee Act, the Business Corporations Act, and the Partnership Act, Revised Statutes of Alberta 1980 as amended

374363 Alberta Ltd. (applicant) v. 248524 Alberta Ltd., G.S.I. Guaranteed Syndicated Investments Ltd., Receiver of Ellis Developments Ltd., Anne Reeves, Peat Marwick Limited, Receiver of Darene Investments Ltd., Ellis Developments Ltd., Darene Investments Ltd., 155569 Canada Limited, Canpro Investments Ltd., Cambridge Builders Inc., Eli Adler, and Eli Adler through or in the name of D.F.C. Diversified Financial Corp. (respondents)

(Action No. 8903-17603)

Indexed As: 155569 Canada Ltd. v. 248524 Alberta Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Veit, J.

May 1, 1995.

Summary:

Adler and Shapiro, through their com­panies, Ellis Developments and Darene Investments, built a shopping mall. To obtain permanent financing, Adler decided to sell limited partnership units. Adler and Shapiro sold their interest in the mall to a company (248524), in which they each held 50% of the shares. They were to be paid by a $10 million mortgage and the sale of 120 limited part­nership units. The partnership gave Ellis and Darene a general assignment of rents and leases. Adler was the managing officer of 248524. Adler, Shapiro, Ellis and Darene went bankrupt. The receivers became the directors of 248524. Adler remained a limited partner. The assignees of the mort­gage started fore­closure proceedings. Trans-America, a company controlled by Adler, negotiated the purchase of the security for $7,500,000. Trans-America assigned its rights to 155569, a company controlled by Azrieli. 155569 com­menced fore­closure pro­ceedings. 248524 contested its obligation to pay the mortgage and counterclaimed for damages, claiming misrepresen­tation, fraud and conspiracy.

The Alberta Court of Queen's Bench allowed the foreclosure action. The court dismissed 248524's counterclaim because it had no status to bring the claims. The court ordered Ellis and Darene to transfer their shares in 248524 to a successor manager.

Fraud and Misrepresentation - Topic 2502

Misrepresentation - General principles - Elements of actionable misrepresentation - Adler was replaced as a director of the general partner of a limited partnership but remained a limited part­ner - Adler, through his company Trans-America, nego­tiated a settle­ment whereby the assignees of a $10 million mortgage would sell their security for $7,500,000 - Trans-America assigned its rights to 155569 - Adler told the limited partners that he had no interest in Trans-America or 155569 - Adler had an indirect contin­gent interest in 155569 - The partnership claimed misrep­resentation - The Alberta Court of Queen's Bench held that Alder misspoke with respect to Trans-America and lied with respect to 155569 - The court dismissed the claim because there was no reliance on either statement - See para­graphs 231 to 246.

Fraud and Misrepresentation - Topic 2825

Misrepresentation - Defences - Lack of reliance - [See Fraud and Misrepresen­tation - Topic 2502 ].

Mortgages - Topic 5520.1

Mortgage actions - Action for foreclosure and sale - Defences - Adler and Shapiro proposed to raise permanent financing for a mall by selling limited partnership units - They sold their interest to a general partner of the limited partnership (248524) and were paid by a $10 million mortgage and the sale of 120 limited part­nership units - Adler was the managing officer of 248524 - 155569, the eventual mortgagee by assignment, sought foreclos­ure - 248524 alleged that the mortgage was unenforce­able because of serious con­trac­tual and secu­rities law improprieties by com­panies controlled by Adler and Shapiro and breach of fiduciary obliga­tions to the general partner by Adler - The Alberta Court of Queen's Bench held that 248524 did not have a defence to the mortgage - See paragraphs 168 to 182.

Partnership - Topic 3926

Relations between partners and third parties - Legal action by limited partner­ship or partners - Adler and Shapiro pro­posed to raise permanent financing for a mall by selling limited partnership units - They sold their interest to a general partner of the limited partnership (248524) and were paid by a $10 million mort­gage and the sale of 120 limited partner­ship units - Adler was the managing officer of 248524 - 155569, the eventual mortgagee by assignment, sought foreclos­ure - 248524 counterclaimed, alleging misrepresenta­tion, fraud and conspiracy in the initial distribu­tion - The Alberta Court of Queen's Bench held that 248524 did not have status to bring the claims because they were prop­erly claims of the individual limited part­ners and not the general partner - 248524's only possible claim was barred by the limitation period - See paragraphs 118 to 167.

Partnership - Topic 5006

Relations between partners - General - Duties of partners - Opportunities - Adler was replaced as a director of the general partner of a limited partnership but remained a limited part­ner - The assignees of a $10 million mortgage com­menced foreclosure proceed­ings - The general partner asked the limited partners to obtain a settlement with the assignees - Adler negotiated a settle­ment whereby the assignees would sell their security for $7,500,000 to a com­pany he controlled (Trans-America) - Trans-America assigned its rights to 155569 - The Alberta Court of Queen's Bench held that Adler did not steal an opportunity from his fellow limited part­ners to make a re-fi­nancing deal with the assignees - The other partners were entitled to negotiate their own deals - See paragraphs 209 to 230.

Partnership - Topic 5166

Relations between partners - Fiduciary duties - Between limited partners - Adler, a developer, arranged permanent financing for a mall by a mortgage and the sale of limited partnership units - Adler had finan­cial problems and was replaced as the managing officer of the general partner - He remained a limited partner - Adler, through his com­pany Trans-America, nego­tiated a settle­ment whereby the assignees of the mort­gage would sell their security for $7,500,000 - Trans-America assigned its rights to 155569 - The general partner claimed that Adler breached his fiduciary obliga­tions - The Alberta Court of Queen's Bench held that a limited part­ner did not owe a fiduciary duty to the limited part­nership or to fellow limited partners and there were no unique circum­stances to permit impos­ing fiduciary duties on Adler - See para­graphs 183 to 209.

Practice - Topic 180

Persons who can sue and be sued - Part­nerships - Limited partnerships - [See Partnership - Topic 3926 ].

Cases Noticed:

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Evans, Colman & Evans Ltd. v. Nelson (R.A.) Construction Ltd. (1959), 16 D.L.R. 123 (B.C.C.A.), refd to. [paras. 36, 253].

Canadian Imperial Bank of Commerce v. Fahlman Enterprises Ltd. et al. (1989), 96 A.R. 172; 66 Alta. L.R. 180 (C.A.), refd to. [paras. 36, 253].

Workers' Compensation Board (Alta.) v. Alberta (Provincial Treasurer) (1967), 59 W.W.R. 298 (Alta. C.A.), refd to. [paras. 36, 253].

Toronto-Dominion Bank v. Associated Decorators Ltd. et al. (1980), 23 A.R. 583 (Q.B.), refd to. [paras. 36, 253].

Tri-Lateral Enterprises Ltd., Re (1977), 74 D.L.R.(3d) 517 (Ont. H.C.), refd to. [para. 36].

Canadian Imperial Bank of Commerce v. Smith Estate, [1976] 1 S.C.R. 341; 7 Nfld. & P.E.I.R. 179; 3 A.P.R. 179, refd to. [paras. 36, 37, 253].

Canadian Imperial Bank of Commerce v. Sitarenios (1976), 73 D.L.R.(3d) 663 (Ont. C.A.), refd to. [paras. 36, 37].

Hudson v. Toronto-Dominion Bank (1976), 22 C.B.R.(N.S.) 55 (Alta. S.C.), refd to. [paras. 36, 253].

Midcon Oil & Gas Co. v. New British Dominion Oil Co. (1958), 12 D.L.R.(2d) 705 (S.C.C.), refd to. [para. 36].

Lehndorff General Partner Ltd., Re (1993), 17 C.B.R.(3d) 24 (Ont. Gen. Div.), refd to. [paras. 36, 197].

337965 B.C. Ltd. v. Tackama Forest Prod­ucts (1992), 91 D.L.R.(4th) 129 (B.C.C.A.), refd to. [paras. 36, 174].

Aydelotte et al. v. Great Basins Petroleum Co. Liquidating Trust (1987), 82 A.R. 241; 55 Alta. L.R.(2d) 248 (Q.B.), refd to. [para. 36].

Peso Silver Mines Ltd. v. Cropper (1966), 56 W.W.R.(N.S.) 641 (S.C.C.), refd to. [para. 36].

Exco Corp. Ltd. et al. v. Nova Scotia Savings & Loan Co. et al. (1987), 78 N.S.R.(2d) 91; 193 A.P.R. 91; 35 B.L.R. 149 (T.D.), refd to. [para. 36].

Brant Investments Ltd. et al. v. KeepRite Inc. et al. (1991), 45 O.A.C. 320; 3 O.R.(3d) 289 (C.A.), refd to. [para. 36].

Trimac Ltd. v. C-I-L Inc., [1990] 1 W.W.R. 133; 99 A.R. 30 (Q.B.), refd to. [para. 36].

Bank of Montreal v. Aitken (1988), 29 B.C.L.R.(2d) 136 (S.C.), refd to. [para. 36].

Tri-Grove Centre City Ltd. v. Silldorf, Burdman, Duignam & Eisenberg (1989), 265 Cal. Rptr. 330 (Cal. App. 4 Dist.), refd to. [paras. 36, 202].

Monetary Group and the Securities Group, Re (1993), 2 F.3d (11th Cir.), refd to. [paras. 36, 202].

Minister of National Revenue v. Alberta (Treasury Branches) (1994), 149 A.R. 34; 63 W.A.C. 34 (C.A.), refd to. [para. 36].

Schwartz et al. v. Stinchcombe et al. (1994), 152 A.R. 241 (Q.B.), refd to. [para. 36].

Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191; 145 D.L.R.(3d) 385, refd to. [para. 36].

Skolny v. Richter (1910), 124 N.Y. Supp. 152 (C.A.), refd to. [paras. 36, 195].

Alley v. Clark (1947), 71 F.Supp. 521 (N.Y. Dist. Ct.), refd to. [paras. 36, 196].

Union Circulation Co. v. Hardel Publishers Inc. (1957), 6 Misc.2d 340 (N.Y. Co. Sup. C.), refd to. [paras. 36, 196].

Evans v. Galardi (1976), 128 Cal. Rptr. 25 (Sup. C.), refd to. [paras. 36, 196].

Klein v. Weiss (1978), 284 Md. 36 (C.A.), refd to. [para. 36].

Allen v. Amber Manor Apartments Part­nership (1981), 420 N.E.2d 440 (Ill. App. Ct.), refd to. [para. 36].

Friedman v. Colorado National Bank of Denver (1981), 825 P.2d 1033 (Col. C.A.), refd to. [para. 36].

Abbey Glen Property Corp. v. Stumborg et al., [1978] 4 W.W.R. 28; 9 A.R. 234 (C.A.), refd to. [para. 37].

Abbey Glen Property Corp. v. Stumborg, [1976] 2 W.W.R. 1 (Alta. S.C.), refd to. [para. 37].

Aberdeen Railway Co. v. Blaikie Brothers (1854), I Macq. 461 (H.L.), refd to. [para. 37].

Abacus Cities Ltd. v. Aboussafy, [1981] 4 W.W.R. 660; 29 A.R. 607 (C.A.), refd to. [para. 37].

Agnew v. McKenzie Ellis Wood Co. (1913), 7 Sask. L.R. 26 (C.A.), refd to. [para. 37].

Air Canada v. M & L Travel Ltd., Martin and Valliant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1, refd to. [para. 37].

Duff (Alex) Realty Ltd. v. Eaglecrest Holdings Ltd. et al. (1983), 44 A.R. 67 (C.A.), refd to. [para. 37].

Schmidt (Andrea) Construction Ltd. v. Glatt (1979), 104 D.L.R.(3d) 130 (Ont. H.C.), refd to. [para. 37].

Bank of British Columbia v. TRI Holdings Ltd. (1992), 17 B.C.A.C. 264; 29 W.A.C. 264; 71 B.C.L.R.(2d) 58 (C.A.), refd to. [para. 37].

Barnes v. Addy (1874), 9 Ch. App. 244, refd to. [para. 37].

Beaman v. A.R.T.S. Ltd., [1949] 1 All E.R. 465 (C.A.), refd to. [para. 37].

Bedard v. James (1986), 32 B.L.R. 188 (Ont. Dist. Ct.), refd to. [para. 37].

Belmont Finance Corp. v. Williams Furni­ture, [1979] 1 Ch. 250 (C.A.), refd to. [para. 37].

Bentley v. Craven (1853), 18 Beav. 75, refd to. [para. 37].

Cairney v. Golden Key Holdings Ltd. (1988), 40 B.L.R. 289 (B.C.S.C.), refd to. [para. 37].

Calmont Leasing Ltd. et al. v. Kredl et al., [1993] 7 W.W.R. 428; 142 A.R. 81 (Q.B.), refd to. [para. 37].

Cameron v. Willis (1908), 9 W.L.R. 224 (Alta. T.D.), refd to. [para. 37].

Campbell v. Read, [1983] 3 W.W.R. 236 (B.C.C.A.), refd to. [para. 37].

Canada Safeway v. Thompson, [1951] 3 D.L.R. 295 (B.C.S.C.), refd to. [para. 37].

Canada Trustco Mortgage Co. v. Skoretz, [1983] 4 W.W.R. 618; 45 A.R. 18 (Q.B.), refd to. [para. 37].

Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592, refd to. [para. 37].

Canson Enterprises et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1; 85 D.L.R.(4th) 129; [19­92] 1 W.W.R. 245, refd to. [para. 37].

Potter (Carl B.) v. Mercantile Bank of Canada, [1980] 2 S.C.R. 342; 41 N.S.R.(2d) 573; 76 A.P.R. 573; 33 N.R. 175; 11 B.L.R. 193; 112 D.L.R.(3d) 88, refd to. [para. 37].

Citadel General Assurance Co. v. Lloyds Bank Canada, [1993] 8 W.W.R. 118 (Alta. Q.B.), refd to. [para. 37].

Colonial & Home Fuel Distributors v. Skinners' Ltd., [1964] S.C.R. v, refd to. [para. 37].

Colonial & Home Fuel Distributors v. Skin­ners' Ltd. (1963), 46 D.L.R.(2d) 695 (Man. Q.B.), refd to. [para. 37].

Colonial & Home Fuel Dis­tributors v. Skinners' Ltd. (1963), 39 D.L.R.(2d) 579 (Man. Q.B.), refd to. [para. 37].

D'Amore v. McDonald, [1973] 1 O.R. 845 (H.C.), refd to. [para. 37].

Dean v. MacDowell (1876), 8 Ch. D. 345 (C.A.), refd to. [para. 37].

Denison v. Fawcett (1958), 12 D.L.R.(2d) 537 (Ont. C.A.), refd to. [para. 37].

Derry v. Peek (1889), 14 App. Cas. 347 (H.L.), refd to. [para. 37].

Doyle v. Olby (Ironmongers), [1969] 2 Q.B. 158 (C.A.), refd to. [para. 37].

Miller (Ed) v. Caterpillar Tractor Co. (1994), 151 A.R. 1 (Q.B.), refd to. [para. 37].

Elliott v. Dobson, [1952] O.W.N. 51 (H.C.), refd to. [para. 37].

Erlanger v. New Sombrero (1878), 3 App. Cas. 1218 (H.L.), refd to. [para. 37].

Fonthill Lumber Ltd. v. Bank of Montreal (1959), 19 D.L.R.(2d) 618 (Ont. C.A.), refd to. [para. 37].

Frame v. Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84; 42 D.L.R.(4th) 81, refd to. [para. 37].

Glaeser v. Klemmer (1914), 26 O.W.R. 787 (K.B.), refd to. [para. 37].

Gluckstein v. Barnes, [1900] A.C. 240 (H.L.), refd to. [para. 37].

Gould v. Close (1874), 21 Gr. 273 (Ch.), refd to. [para. 37].

Grey v. Pearson (1857), 6 H.L. Cas. 61 (H.L.), refd to. [para. 37].

Groves-Raffin Construction Ltd. v. Cana­dian Imperial Bank of Commerce, [1976] 2 W.W.R. 673 (B.C.C.A.), refd to. [para. 37].

Guaranty Trust Co. of Canada v. 208633 Holdings Ltd. (1982), 19 Alta. L.R.(2d) 151 (Q.B. Master), refd to. [para. 37].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161; [1985] 1 C.N.L.R. 120, refd to. [para. 37].

Henry Electric Ltd. v. Farwell (1986), 5 B.C.L.R.(2d) 273 (B.C.C.A.), refd to. [para. 37].

Henry Electric Ltd. v. Farwell (1987), 75 N.R. 160 (S.C.C.), refd to. [para. 37].

Hitchcock v. Sykes (1914), 23 D.L.R. 518 (S.C.C.), refd to. [para. 37].

Hongkong Bank of Canada v. Wheeler Holdings Ltd., [1993] 1 S.C.R. 167; 148 N.R. 1; 135 A.R. 83, refd to. [para. 37].

Hongkong Bank of Canada v. Wheeler Holdings Ltd. (1991), 112 A.R. 85; 78 Alta. L.R.(2d) 236 (C.A.), refd to. [para. 37].

Hulkenberg v. ITT Commercial Finance Ltd., [1987] 2 W.W.R. 83; 77 A.R. 74 (Q.B.), refd to. [para. 37].

James, Ex parte (1803), 32 E.R. 385 (L.C.), refd to. [para. 37].

John v. Dodwell & Co., [1918] A.C. 563 (P.C.), refd to. [para. 37].

John M.M. Troup Ltd. v. Royal Bank (1962), 34 D.L.R.(2d) 556 (S.C.C.), refd to. [para. 37].

Joncas v. Pennock (No. 2) (1961), 37 W.W.R.(N.S.) 134 (Alta. C.A.), refd to. [para. 37].

Jones v. Lipman, [1962] 1 All E.R. 442 (Ch. D.), refd to. [para. 37].

Kaps Transport v. McGregor Telephone & Power Construction Co. (1970), 73 W.W.R.(N.S.) 549 (Alta. C.A.), refd to. [para. 37].

Keech v. Sandford (1726), Sel Cas. Ch. 61, refd to. [para. 37].

Kepic v. Tecumseh Road Builders (1987), 18 C.C.E.L. 218 (Ont. C.A.), refd to. [para. 37].

Kepic v. Tecumseh Road Builders (1985), 29 B.L.R. 85 (Ont. H.C.), refd to. [para. 37].

Kitchen v. Royal Air Force, [1958] 1 W.L.R. 563 (C.A.), refd to. [para. 37].

Kosmopoulos et al. v. Constitution Insur­ance Co. of Canada, [1987] 1 S.C.R. 2; 74 N.R. 360; 21 O.A.C. 4; 34 D.L.R.(4th) 208, refd to. [para. 37].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1; 44 B.L.R. 1, refd to. [paras. 37, 204].

Lee v. Block Estates Ltd., [1984] 3 W.W.R. 118 (B.C.S.C.), refd to. [para. 37].

Maghun v. Richardson Securities of Canada Ltd. (1986), 18 O.A.C. 141; 34 D.L.R.(4th) 524 (C.A.), refd to. [para. 37].

Maize v. McFarlane (1919), 16 O.W.N. 349, refd to. [para. 37].

Marigold Holdings Ltd. et al. v. Norem Construction Ltd. et al., [1988] 5 W.W.R. 710; 88 A.R. 81 (Q.B.), refd to. [paras. 37, 165].

Molchan v. Omega Oil & Gas Ltd. et al., [1988] 1 S.C.R. 348; 83 N.R. 25; 87 A.R. 81; 57 Alta. L.R.(2d) 193, refd to. [paras. 37, 186].

Moody v. Cox and Hatt, [1917] 2 Ch. 71, refd to. [para. 37].

Moreira v. Dasilva (1977), 5 C.P.C. 73 (Ont. H.C.), refd to. [para. 37].

MacDonald v. Hauer, [1977] 1 W.W.R. 51 (Sask. C.A.), refd to. [para. 37].

MacDonald Estate, Re (1993), 89 Man.R.(2d) 161 (Q.B.), refd to. [para. 37].

MacMillan Bloedel Ltd. v. Binstead (1983), 22 B.L.R. 255 (B.C.S.C.), refd to. [para. 37].

MacNeill v. Stewart (1932), 3 M.P.R. 581 (P.E.I.C.A.), refd to. [para. 37].

Newfoundland v. Newfoundland Railway Co. (1888), 13 App. Cas. 199 (P.C.), refd to. [para. 37].

Nichols v. Guiel, [1983] 4 W.W.R. 175 (B.C.S.C.), refd to. [para. 37].

Tri-Lateral Enterprises Ltd., Re (1977), 74 D.L.R.(3d) 517 (Ont. H.C.), refd to. [para. 37].

Twyford v. Bishopric (1914), 7 W.W.R. 102 (Alta. C.A.), refd to. [para. 37].

Twyford v. Bishopric (1913), 14 D.L.R. 320 (Alta. T.D.), refd to. [para. 37].

Uren v. Fairfax (John) & Sons Pty. Ltd. (1965), 66 N.S.W.R. 223 (N.S.W.C.A.), refd to. [para. 37].

Valley Vu Realty (Ottawa) and Victoria & Grey Trust Co., Re (1984), 44 O.R.(2d) 526 (H.C.), refd to. [para. 37].

Valley Vu Realty (Ottawa) and Victoria & Grey Trust Co., Re (1984), 47 O.R.(2d) 544 (C.A.), refd to. [para. 37].

Volzke Construction Ltd. v. Westlock Foods Ltd., [1986] 4 W.W.R. 668 (Alta. C.A.), refd to. [para. 37].

Vorvis v. Insurance Corp. of British Co­lumbia, [1989] 1 S.C.R. 1085; 94 N.R. 321; 58 D.L.R.(4th) 193; [1989] 4 W.W.R. 218; 36 B.C.L.R.(2d) 273; 90 C.L.L.C. 14,035; 25 C.C.E.L. 81, refd to. [para. 37].

Christie (W.J.) & Co. v. Greer et al., [1981] 4 W.W.R. 34; 9 Man.R.(2d) 269 (C.A.), refd to. [para. 37].

Walker v. Janzen Buildings Ltd., [1985] 1 W.W.R. 529 (B.C.S.C.), refd to. [para. 37].

Watson et al. v. Imperial Financial Ser­vices Ltd. et al. (1994), 40 B.C.A.C. 174; 65 W.A.C. 174 (C.A.), refd to. [paras. 37, 165].

Weagle v. Weagle, [1955] 3 D.L.R. 58 (N.S.S.C.), refd to. [para. 37].

Luscar Ltd. and Norcen Resources Ltd. v. Pembina Resources Ltd. (1992), 131 A.R. 79 (C.A.), refd to. [para. 38].

Ramrakha et al. v. Zinner (1994), 157 A.R. 279 (C.A.), refd to. [para. 38].

Olson v. Gullo Estate (1994), 71 O.A.C. 327; 17 O.R.(3d) 790 (C.A.), refd to. [para. 38].

Sherman v. Drabinsky (1994), 20 O.R.(3d) 228 (C.A.), refd to. [para. 38].

R. v. St. Pierre (1995), 178 N.R. 241; 79 O.A.C. 321 (S.C.C.), refd to. [paras. 38, 193].

Bosse v. Mastercraft Group Inc. (1995), 80 O.A.C. 185 (C.A.), refd to. [paras. 38, 154].

Statutes Noticed:

Bankruptcy Act, R.S.C. 1985, c. B-3, sect. 66(1), sect. 178(1) [para. 37].

Business Corporations Act, S.A. 1981, c. B-15, sect. 117, sect. 234 [para. 37].

Judicature Act, R.S.A. 1980, c. J-1, sect. 13(2), sect. 17(2), sect. 17(3), sect. 17(4), sect. 21(1) [para. 37].

Limitation of Actions Act, R.S.A. 1980, c. L-15, sect. 4, sect. 31, sect. 40, sect. 41 [para. 37].

Partnership Act, R.S.A. 1980, c. P-2, sect. 7, sect. 12, sect. 14, sect. 15, sect. 31, sect. 32(1) [para. 37]; sect. 33 [paras. 37, 188]; sect. 48, sect. 55(d), sect. 56 [para. 37]; sect. 57(b) [paras. 37, 186]; sect. 59 [para. 187]; sect. 63 [para. 37].

Rules of Court (Alta.), rule 80 [para. 37].

Securities Act, R.S.A. 1970, c. 333, sect. 41, sect. 42, sect. 65 [para. 37]; sect. 107 [para. 150].

Trustee Act, R.S.A. 1980, c. T-10, sect. 1, sect. 16 [para. 37].

Authors and Works Noticed:

Alberta Corporations Manual, pp. 18, 19, 20 [para. 37].

Anson, W.R., The Law of Contract (25th Ed. 1979), pp. 148, 149, 150, 151, 159, 260, 261, 262, 263, 264, 268 [para. 37].

Canadian Encyclopedic Digest (West)(3rd Ed. 1991), c. 1, p. 4, §§ 321, 322, 328, 331; c. 7, p. 35, § 856; c. 11, p. 44, §§ 3, 14, 15, 149; c. 15, p. 67, §§ 25, 30; c. 26, p. 107, §§ 24, 27, 97, 159, 163 [para. 37].

Demystifying the Fiduciary Mystique (1989), 68 Can. Bar Rev. 1, p. 7 [para. 36].

Ellis, Mark Vincent, Fiduciary Duties in Canada, pp. 3-2, 3-7, 3-9, 3-10, 12-2, 12-3 [para. 37]; 18-1 [para. 36]; 20-29 [para. 37].

Fridman, G.H.L., The Law of Agency, p. 153 [para. 37].

Fridman, G.H.L., The Law of Torts in Canada (1990), vol. 2, p. 265 [para. 37].

Goff and Jones, The Law of Restitution (2nd Ed. 1978), pp. 493, 499, 507 [para. 37].

Kalinowsky, The Constructive Trustee: A Stranger's Knowing Participation in the Breach of Trust, 7 B.F.L.R. 383, p. 426 [para. 37].

McCamus, Remedies for Breach of Fiduciary Duty, L.S.U.C. Special Lec­tures (1990), generally [para. 37].

Price & Trussler, Mortgage Actions in Alberta (1985), pp. 86, 87, 88, 89, 312, 313 [para. 37].

Spry, I.C.F., The Principles of Equitable Remedies (3rd Ed. 1984), pp. 82, 83, 174, 175, 297 [para. 37].

Counsel:

D.R. Cranston, and M.J. McCabe, for 155569 Canada Ltd.;

R.J. Young and R.N. Fotty, for 248524 Alberta Ltd.;

Dr. E. Adler, on his own behalf.

This case was heard on September 1 to 30, 1993, October 18 to 30, 1993, November 1 to 5, 8 to 10, 15 and 17, 1993, and May 9 to 13, 16 to 20, 24 to 27, 1994, by Veit, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following judgment on May 1, 1995.

                                                 

Index

Summary 191

Cases and Authority Cited   196

1. Background 199

a) Initial Financing 200

(i) Decision to use

limited partner­ships 200

(ii) Role of the Alberta

Securities Com­mis­sion 200

(iii) Sale of limited

partnership inter­ests 201

(iv) Features of the limited

partner­ship units 202

(v) Financial troubles of

Ellis and Darene 203

b) The General Assignment of

Rents and Leases 204

c) The Manitoba monies 204

d) Mortgage foreclosure/Acquisi-

tion of the mortgage by 155569

Canada Ltd. 205

e) Relationship between Adler &

Canpro 207

f) Share control action 207

g) Pretrial process 209

(i) Costs 209

(ii) Interests of individual

limited part­ners 209

(iii) Disclosure 209

h) General comments about the

format of the decision 210

2. Status of 248524 Alberta Ltd.

to main­tain the counterclaim 210

a) Equity/debt shift 212

b) Minimum subscription was not

met 213

c) All 120 units were not sold 214

d) Conflict of interest between

Adler & the partnership 214

e) Time limit for the sale of the units 214

f) Breaches of Securities Act 214

g) Limitation of actions 216

3. Do the circumstances surrounding

the sale of the limited partnership

units relieve 248524 Alberta Ltd. of

its obligation to pay the mort­gage? 217

a) Set-offs against the mortgage 218

(i) General assignment of rents

and leases 218

(ii) Cash flow guarantee 218

b) Fraud and misrepresentation 219

c) Complicity of 155569 Canada Ltd. 219

4. Does Adler, as a limited partner,

have a fiduciary duty to the partnership

and his fellow limited partners? 220

a) The Partnership Act 220

b) The common law 221

c) Unique circumstances relating to

limited partnership 223

5. Did Adler steal an opportunity

from the limited partners to re-finance

with the banks? 224

6. Did Adler misrepresent his position

with Trans-America? 228

7. Is 155569 Canada Ltd. a co-con-

spirator with Adler in a fraud

designed to injure the general

partner or the limited part­ners? 229

8. Effect of the Adler bankruptcy 231

9. Monies from the General

Assignment Rents and Leases 231

10. Monies from the Manitoba

partnerships 232

11. Share control action 232

12. Interlocutory costs 232

13. Costs 232

Appendix 1 -- Chart showing

progression of interests

Appendix 2 -- Alberta Securities

Commis­sion ruling

Appendix 3 -- Time line of events