Ontario Civil


Business Associations

Specific matters of corporate organization

Shareholders

There was ambiguity in use of words/phrases “acquire”, “to present”, “all real estate development opportunities” and “typical budget model”

Parties were land developers who entered into joint venture agreement pursuant to which parties undertook developments of student residences. Parties had acrimonious falling out. Plaintiffs brought action against defendants alleging that defendants breached their fiduciary duties as well as non-competition clause of shareholders agreement. Individual defendant brought motion for summary judgment seeking to strike plaintiffs’ claim. Motion granted. Non-competition clause of shareholders agreement was restrictive covenant notwithstanding plaintiff’s position that restrictions were not significant. Clause required particular shareholder to present to corporation all real estate development opportunities it may acquire. There was significant ambiguity in clause. There was ambiguity in use of words/phrases “acquire”, “to present”, “all real estate development opportunities” and “typical budget model”. It was difficult to see how plaintiff’s interests had been damaged by breaches of clause that he alleged. Since parties’ falling out, plaintiff and companies under his control had continued in land development and generates tens of millions of dollars in revenues. Clause was nothing more than agreement to agree. Clause did not have any time limit which was extremely unusual. Plaintiff did not prove limitless time limit was reasonable as being necessary to protect company’s interests. Plaintiff did not personally have claim against defendant for defendant’s alleged breach of clause.

Way v. Schembri (2019), 2019 CarswellOnt 1449, 2019 ONSC 819, James W. Sloan J. (Ont. S.C.J.).

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