Woronuk et al. v. Woronuk et al., (2015) 605 A.R. 367 (QB)

• Judge: Nixon, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 18, 2013
• Citations: (2015), 605 A.R. 367 (QB);2015 ABQB 116

Woronuk v. Woronuk (2015), 605 A.R. 367 (QB)

MLB headnote and full text

Temp. Cite: [2015] A.R. TBEd. MR.087

Dennis Woronuk and Cybercorp. Inc. (plaintiffs) v. David Varley Woronuk, Niclaus Dean Woronuk, Douglas Woronuk, Sharon Helene Woronuk, Diane Isabel Woronuk, Lisa Woronuk, MegaSys Enterprises Ltd., Worth Ventures Ltd. and 683696 Alberta Ltd. (defendants)

(0101 18428; 2015 ABQB 116)

Indexed As: Woronuk et al. v. Woronuk et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Nixon, J.

February 13, 2015.

Summary:

The plaintiffs were Woronuk and his company. The defendants were three brothers (Woronuk's cousins), their wives and respective companies. Two of the brothers were involved since 1988 in a joint venture involving a proprietary network management system to manage traffic flow on fibre optic cables. In 1996, the plaintiffs and the two brothers signed a Memorandum of Understanding (MOU) outlining Woronuk's decision to become involved with the brothers in the joint venture. That relationship terminated in 2000 at the end of the four year term of the MOU. The plaintiffs sought declaratory relief that the wording of the MOU entitled them to a 20% ownership interest in the joint venture and that the plaintiffs and defendant had created a co-existing partnership which gave rise to fiduciary obligations and rights under the Partnership Act. The defendants agued that the MOU merely entitled the plaintiffs to 20% of joint venture profits for the four year period, with the plaintiffs and defendants to thereafter negotiate the plaintiffs obtaining an ownership interest (i.e., an agreement to agree).

The Alberta Court of Queen's Bench dismissed the plaintiffs' action. Respecting an ownership interest, the MOU was an agreement to agree and not a binding contract giving the plaintiffs an immediate ownership interest. There was no co-existing partnership. The MOU provided a four year period for Woronuk to provide his exclusive services to expand the business, for which he would be paid 20% of the joint venture profits. During that four year period, it was open to the plaintiffs and defendants to negotiate an ownership interest for the plaintiffs. No such ownership interest was ever negotiated. At the end of the four year period, the relationship terminated and the plaintiffs had no further entitlement respecting the joint venture.

Contracts - Topic 1444

Formation of contract - Agreements which are not contracts - Agreements to agree - The plaintiffs were Woronuk and his company - The defendants were three brothers (Woronuk's cousins), their wives and respective companies - Two of the brothers were involved since 1988 in a joint venture involving a proprietary network management system to manage traffic flow on fibre optic cables - In 1996, the plaintiffs and the two brothers signed a Memorandum of Understanding (MOU) outlining Woronuk's decision to become involved with the brothers in the joint venture - That relationship terminated in 2000 at the end of the four year term of the MOU - The plaintiffs sought declaratory relief that the wording of the MOU entitled them to a 20% ownership interest in the joint venture and that the plaintiffs and defendant had created a co-existing partnership which gave rise to fiduciary obligations and rights under the Partnership Act - The defendants agued that the MOU merely entitled the plaintiffs to 20% of joint venture profits for the four year period, with the plaintiffs and defendants to thereafter negotiate the plaintiffs obtaining an ownership interest (i.e., an agreement to agree) - The Alberta Court of Queen's Bench dismissed the plaintiffs' action - Respecting an ownership interest, the MOU was an agreement to agree and not a binding contract giving the plaintiffs an immediate ownership interest - There was no co-existing partnership - The MOU provided a four year period for Woronuk to provide his exclusive services to expand the business, for which he would be paid 20% of the joint venture profits - During that four year period, it was open to the plaintiffs and defendants to negotiate an ownership interest for the plaintiffs - No such ownership interest was ever negotiated - At the end of the four year period, the relationship terminated and the plaintiffs had no further entitlement respecting the joint venture - See paragraphs 259 to 355.

Contracts - Topic 1444

Formation of contract - Agreements which are not contracts - Agreements to agree - The Alberta Court of Queen's Bench, in determining whether a Memorandum of Understanding was a binding contract or an agreement to agree, stated that "i. Agreements to agree or negotiate are not enforceable contracts. ii. In order to have a binding contract, the parties must agree on all of the essential terms. Whether a term is essential depends on the nature of the contract and the context at the time the agreement was made. iii. A contract may be too general or uncertain to be valid. iv. A preliminary contract is not enforceable if the understanding or intention of the parties is that their legal obligations are to be deferred until a formal contract has been entered into. The key consideration in determining whether an agreement is enforceable, or is an agreement to agree, depends on whether the parties intended to be bound and merely delayed settling the details, or whether they only agreed to continue negotiations." - See paragraph 271.

Contracts - Topic 1446

Formation of contract - Agreements which are not contracts - Agreement to negotiate - [See both Contracts - Topic 1444 ].

Joint Ventures - Topic 5

General principles - What constitutes a joint venture - [See first Contracts - Topic 1444 ].

Joint Ventures - Topic 5

General principles - What constitutes a joint venture - The Alberta Court of Queen's Bench stated that "A joint venture is not itself a legal entity capable of entering into a contract. It takes one of three forms: - a corporate joint venture, where a separate company is set up for the joint venture; - a partnership among joint venture participants; or - a contractual joint venture where parties proceed with a joint venture based upon agreement." - Requirements for a joint venture were "(a) A contribution by the parties of money, property, effort, knowledge, skill or other asset to a common undertaking; (b) A joint property interest in the subject matter of the venture; (c) A right of mutual control or management of the enterprise; (d) Expectation of profit, or the presence of 'adventure', as it is sometimes called; (e) A right to participate in the profits; (f) Most usually, limitation of the objective to a single undertaking or ad hoc enterprise." - See paragraphs 316, 319.

Joint Ventures - Topic 650

Creation of relation - Elements of relation - Mutual control or management - [See second Joint Ventures - Topic 5 ].

Partnership - Topic 10

Partnership - What constitutes - [See first Contracts - Topic 1444 ].

Partnership - Topic 10

Partnership - What constitutes - The Alberta Court of Queen's Bench stated that the three essential ingredients of a partnership were: "(1) a business, (2) carried on in common, (3) with a view to profit" - See paragraph 325.

Cases Noticed:

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 53 O.A.C. 314; 79 D.L.R.(4th) 97 (C.A.), refd to. [para. 261].

Zynik Capital Corp. et al. v. Faris et al., [2007] B.C.T.C. Uned. C57; 2007 BCSC 527, refd to. [para. 262].

Drew Oliphant Professional Corp. et al. v. Harrison et al., [2011] A.R. Uned. 283; 2011 ABQB 216, refd to. [para. 265].

Hepas v. Gosine et al. (2010), 477 A.R. 63; 483 W.A.C. 63; 2011 ABCA 118, refd to. [para. 266].

Georgian Windpower Corp. et al. v. Stelco Inc., [2012] O.T.C. Uned. 3759; 2012 ONSC 3759, refd to. [para. 267].

Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co. et al. (2000), 189 N.S.R.(2d) 1; 590 A.P.R. 1; 2000 NSCA 95, refd to. [para. 269].

Graham v. Central Mortgage & Housing Corp. and Bras d'Or Construction Ltd. (1973), 13 N.S.R.(2d) 183; 9 A.P.R. 183; 43 D.L.R.(3d) 686 (T.D.), refd to. [para. 319].

Volzke Construction Ltd. v. Westlock Foods Ltd. (1985), 62 A.R. 199 (Q.B.), revd. (1986), 70 A.R. 300 (C.A.), refd to. [para. 320].

Pen-Bro Holdings Ltd. et al. v. Demchuk et al. (2007), 419 A.R. 313; 2007 ABQB 282 (Master), refd to. [para. 320].

Continental Bank Leasing Corp. v. Minister of National Revenue, [1998] 2 S.C.R. 298; 229 N.R. 58, refd to. [para. 325].

Kulak et al. v. Clark (A.G.) Holdings Ltd. et al. (2013), 564 A.R. 287; 2013 ABQB 360, refd to. [para. 326].

Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc. et al. (2012), 538 A.R. 145; 2012 ABQB 277, revd. (2012), 539 A.R. 68; 561 W.A.C. 68; 2012 ABCA 328, refd to. [para. 327].

Blue Line Hockey Acquisition Co. et al. v. Orca Bay Hockey Limited Partnership et al., [2008] B.C.T.C. Uned. 985; 2008 BCSC 27, affd. (2009), 266 B.C.A.C. 71; 449 W.A.C. 71; 2009 BCCA 34, leave to appeal denied (2009), 400 N.R. 386; 286 B.C.A.C. 319; 484 W.A.C. 319 (S.C.C.), refd to. [para. 328].

Canlan Investment Corp. v. Gettling (1977), 37 B.C.L.R.(3d) 140 (B.C.C.A.), refd to. [para. 330].

Backman v. Minister of National Revenue (2001), 266 N.R. 246; 2001 SCC 10, refd to. [para. 334].

Authors and Works Noticed:

Alberta Law Reform Institute, Final Report on Joint Ventures, Final Report 99, pp. vii [para. 318]; 5 [para. 323].

Flannigan, Robert, The Legal Status of the Joint Venture (2009), 46 Alta. L. Rev. 713, para. 18 [para. 321].

Reiter, Barry J., and Shishler, Melanie A., Joint Ventures: Legal and Business Perspectives (1999), p. 9 [para. 316].

Williston, Samuel, Williston on Contracts (3rd Ed. 1975), vol. 2, p. 563 [para. 319].

Counsel:

C.J. Hookenson and O. Fuldauer, for the plaintiffs;

P.D. Wilson, Q.C., and M. Deacon, for the defendants.

This action was heard between November 18, 2013, and December 6, 2013, before Nixon, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following judgment on February 13, 2015.