Matco Investments Ltd. v Statesman Group of Companies Ltd., 2013 ABQB 389

Court of Queen ’ s Bench of Alberta Citation: Matco Investments Ltd. v Statesman Group of Companies Ltd., 2013 ABQB 389 Date: 20130809 Docket: 1201 03600 Registry: Calgary Between: Matco Investments Ltd. and Inglewood Quays Ltd. and Riverside Quays Limited Partnership Plaintiffs - and - The Statesman Group of Companies Ltd., Statesman Master Builders Inc. and M. Garth Mann Defendants The Statesman Group of Companies Plaintiff by Counterclaim - and - Inglewood Quays Ltd., Riverside Quays Limited Partnership and Statesman Riverside Quay Limited Defendants by Counterclaim

_______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D.

Macleod _______________________________________________________ [ 1 ] This is an application by the Plaintiffs for: (1) an Order dismissing the Defendants’ Counterclaim in these proceedings, (2) a declaration that the Defendants have no interest in the land which is the subject of the proceedings, (3) an Order directing the Registrar to cancel a Certificate of Lis Pendens filed by the Defendants as Instrument Number 121 141 631, and; (4) costs. [ 2 ] The matter comes before me because I am the Case Manager of several proceedings between what I shall refer to as the “Matco Group” and the “Statesman Group” whose protagonists are Ronald Mathison and Garth Mann respectively.

The litigation has been hard fought on a number of fronts and it arises out of a venture to develop and market a multi-stage, multi-family residential condominium project in the Inglewood area of Calgary. [ 3 ] The development was structured as a limited partnership which was in turn owned by trusts except for one unit which was owned by the general partner.

I am told that the trusts were created as means by which members and friends of the Matco Group and the Statesman Group could invest in units which would be eligible for RSP status and all of the inventors owned units in what has been referred to as the “Income Trust”. Matco and Statesman were the sole shareholders of the general partner. [ 4 ] During the course of construction builders’ liens were filed. This put the project offside conventional financing and necessitated members of the Statesman and Matco groups having to advance funds pursuant to the Shareholders’ Agreement of the general partner.

Under that Agreement these advances, if not repaid, entitled the lenders to further units in the Income Trust. Thus far, however, that has not occurred. The Defendants say that what did occur was an agreement between the general partner and the lenders to mortgage the land in favour of the lenders. The Statesman Group seeks to enforce that agreement and thereby claims an equitable interest in the land. [ 5 ] In its Counterclaim, the Statesman Group seeks a declaration that the Group is entitled to an interest in land in the sum of $2,707,337.87 plus interest.

The Statesman Group argues that the standard for granting

summary relief is very high and the Matco Group must demonstrate that the Statesman Group in this regard are bound to fail. The Matco Group argues that regardless of which evidence is accepted on this point, the claim for a demand mortgage cannot be sustained in law and the Statesman Group is not entitled to claim an interest in land. They cite the case of Tottrup v Clearwater (Municipal District) No. 99 , 2006 ABCA 380 .

The question is not whether the issue of law is beyond doubt, but whether the legal issue can fairly be decided upon on the evidence. [ 6 ] The shareholders of the general partner were obligated to advance the funds utilized to remove the liens and at the time they were not entitled to insist upon a mortgage. Their remedy was to be repaid or, alternatively, to claim further units in the trust. Statesman argues, however, that the general partner agreed to furnish a mortgage in favour of the lenders against the property.

Thus, the issue amounts to whether or not the Statesman Group can argue that the essential elements of an agreement to mortgage existed between the lenders and the general partner in June 2010. The Matco Group argues that on that assertion the Statesman Group is bound to fail.

[7] A review of the emails between the groups over the May-June 2010 period makes it clear that consensus ad idem on theessential points of a mortgage was never achieved. Further, necessary steps were not taken by the general partner by way of director’sresolution .More importantly, after a Receiver for the project was put in place by court order, the Statesman Group filed claims whichdescribed these particular claims as unsecured.

At no time following June 2010 until the issuance of the Counterclaim did the lendersseek to enforce either their rights under the Shareholders’ Agreement to have further trust units issued or to finalize the so called demandmortgage. Indeed, in documents dated January 2012, owners of the Statesman Group, including Garth Mann, executed an unsecuredclaim in which it is said that the creditor does not and has not since December 15, 2010, held any assets as security. [8] In the result the Counterclaim with respect to the demand mortgage is bound to fail and the Counterclaim is accordinglystruck.

It is directed that the Certificate of Lis Pendens be expunged from the Land Titles records. There is no need to consider adeclaration. [9] It is also argued by the Statesman Group that they are entitled to claim an interest in land by virtue of either their status aslimited partners or their status as unit holders in the Income Trust. Under the provisions of the Partnership Act, it is clear that limitedpartners do not own interests in the assets of the limited partnership. (See also Marigold Hldg. Ltd. v Norem Const. Ltd. 1988 ( (AB KB), 60 Alta.

L.R. (2d), 289 QB).) It follows that a unit holder in a trust which in turn owns an interest in the limitedpartnership does not hold an interest in the land owned by the partnership. Accordingly, that argument also fails. [10] In the result the application is granted and the Counterclaim is struck and the Certificate of Lis Pendens is ordered to beremoved. The parties may speak to costs. Heard on the 4th day of June, 2013. Dated at the City of Calgary, Alberta this 9th day of August, 2013. A.D. Macleod J.C.Q.B.A. Appearances: Edward W. Halt Q.C. Peacock Linder & Halt LLP for the Plaintiffs Bradley Y.

Minuk Minuk Law Office for the Defendants