Digest: ADAG Corp. Canada Ltd. v SaskEnergy Inc., 2018 SKCA 14

Date:February 23, 2018

Reported as: 2018 SKCA 14

Docket Number: CA17124 , CACV 2714

Court: Court of Appeal

Date: 2018-02-23

Judges:

  • Jackson
  • Ottenbreit
  • Caldwell

Subjects:

  • Statutes � Interpretation � The Partnership Act, Section 7, Section 8, Section 10
  • Partnerships � Limited Partnerships

Digest: The appellants were a partnership comprised of a general partner (ADAG) and 1200 limited partners (GGG No. 10), all of whom were German residents. The limited partners acquired an interest in a limited partnership (LP) as an investment tool. The appellants purchased the SaskOil Building during the 1990s. The building was the LP�s only asset. The LP�s articles, the LP Agreement, provided that a two-thirds majority vote of the limited partners present at any partnership meeting was required to permit the sale of real property. In 2000, ADAG granted a ten-year lease with a right of renewal to the respondent (SaskEnergy). As part of the deal, ADAG executed a document (the Options Agreement) as a schedule to the lease. The lease and the Options Agreement created five possible purchase options, three of which were said to be unconditional and for which the limited partners� approval had not been obtained and would not be sought if the options were exercised. In 2010, SaskEnergy renewed the lease and attempted to exercise one of the unconditional options to purchase the property and tendered the funds. ADAG refused to comply, relying on the LP agreement to insist that all of the options, including the unconditional ones, required limited partner approval. SaskEnergy commenced an action for breach of contract, sought specific performance and monetary amounts to compensate it for loss of income and its continuing obligation to pay rent. The trial judge applied The Partnership Act to the facts as he found them and concluded that the unconditional options created by the Options Agreement were enforceable against the LP without the approval of the limited partners and that they were binding on the firm, and consequently, both the general and the limited partners were in breach of contract to transfer the property to SaskEnergy. He determined that damages were not an acceptable remedy and granted SaskEnergy specific performance (see: 2015 SKQB 143). In a separate fiat, the judge adjusted the purchase price to be paid by SaskEnergy including amounts for rent paid since the attempt to exercise the option to purchase and compensation for other losses. The appellants appealed on the grounds that the trial judge erred: 1) by failing to apply the mandatory protections under the Act in favour of the limited partners; 2) by awarding specific performance; and 3) by concluding that the time passage benefits should be calculated based on SaskEnergy�s borrowing rates with respect to the adjustments to the purchase price. SaskEnergy submitted that if the judge erred in any respect regarding the enforceability of the Options Agreement, the...

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