Giammarco & Co. (Western) Division Ltd., 1262034 Alberta Ltd. as Trustee for Giammarco & Co. (Western) Division Ltd., v. 1262034 Alberta Ltd., 2016 ABQB 507

Court of Queen’s Bench of Alberta Citation: Giammarco & Co (Western) Division Ltd v TRL Real Estate Syndicate

(05) Ltd, 2016 ABQB 507 Date: 20160915 Docket: 1001 05241 Registry: Calgary Between: Giammarco & Co. (Western) Division Ltd., 1262034 Alberta Ltd. as Trustee for Giammarco & Co. (Western) Division Ltd., and 1262034 Alberta Ltd. Plaintiffs - and - TRL Real Estate Syndicate

(05) Ltd., 12th Avenue Property General Partner Ltd., West Arriva Limited Partnership (now known as 12th Avenue Property Limited Partnership), 12th Avenue Property Limited Partnership, Philip Swift, 693283 Alberta Ltd., Ayrshire Real Estate Investments Inc., Philip Swift as Trustee for SFF Investment Trust (2004), John Doe as Trustee for SFF Investment Trust (2004), and SFF Investment Trust

(2004) Defendants

_______________________________________________________ Reasons for Judgment of J.T. Prowse , Master in Chambers _______________________________________________________ [ 1 ] The plaintiffs (referred to collectively as “Giammarco”) were the vendors under an agreement for the sale of commercial real estate. [ 2 ] The sale failed to close and Giammarco suffered damages as the land dropped in value and could not be re-sold for an equivalent purchase price.

It brings this action to recover the deficiency. [ 3 ] The overall issue in this action is who is liable for the deficiency. [ 4 ] The issue in this application is whether the defendants are required to answer refused undertakings and to produce further documents, which Giammarco says are relevant to the issue of who is liable for the deficiency. [ 5 ] Giammarco says that, unbeknownst to it at the time of the sale, the land was being acquired by a limited partnership, and that the partners of that limited partnership became liable for the deficiency because they had had taken

part in the control of the business of the partnership (see

section 64 of the Partnership Act , quoted later in these reasons). [ 6 ] Giammarco’s present application relates to evidence of other real estate investments of the limited partnership. Giammarco says that documents reflecting the involvement of the limited partners in the control of the business involving those other investments are relevant to the issue raised under

section 64 of the Partnership Act RSA 2000 c. P-3. [ 7 ] The defendants respond that the documents in question are of marginal relevance at best, and they submit that Giammarco should not be entitled to now seek production of these marginally relevant documents which Giammarco requested by way of undertaking four to five years ago, but did not pursue in a timely fashion. [ 8 ] For the reasons which follow I am directing the defendants to produce some of the refused documents.

The facts [ 9 ] On October 23, 2007, Giammarco entered into an agreement to sell development lands in the Victoria Park area of Calgary to TRL Capital Inc. (“TRL Capital”). On December 11, 2007, the parties substituted TRL Real Estate Syndicate

(05) Ltd. (“TRL 05”) as purchaser. [ 10 ] In April of 2008 the purchase failed to close and Giammarco sued TRL Capital and TRL 05. [ 11 ] Subsequently, Giammarco learned that TRL 05 had at one time been the general partner of a limited partnership, previously named West Arriva Limited Partnership, now known as 12 th Avenue Property Limited Partnership (the “Limited Partnership”). [ 12 ] Between 2005 and 2009 the Limited Partnership acquired three commercial parcels of land in Victoria Park commonly referred to as the 300 Block, the 500 Block and the 600 Block, and also acquired a 50% interest in a partnership owning a building in Victoria Park known as the Louise Block. [ 13 ] As a result of learning of the existence of the Limited Partnership, Giammarco commenced this action to recover the deficiency incurred with respect to the Giommarco parcel, this time naming as defendants the Limited Partnership, its current general partner (12 th Avenue Property General Manager Ltd.) and several of its former and current limited partners, including Phillip Swift and entities in which Mr.

Swift was involved (the “Swift defendants”) [ 14 ] Presumably, Giammarco relies on the law concerning undisclosed principals in seeking to impose liability on the Limited Partnership. See Swift v Eleven Eleven Architecture Inc. , 2014 CarswellAlta 153, 2014 ABCA 49 , at para’s 38 to 43. [ 15 ] The Swift defendants sought

summary dismissal of the action against them, primarily on the basis that, even if the Limited Partnership was the undisclosed principal for whom the Giammarco lands were being purchased (which is not admitted) then in any event, Mr. Swift and his related entities were limited partners who did not exercise control of the business of the Limited Partnership so as to incur personal liability pursuant to

section 64 of the Partnership Act RSA 2000 c. P-3. That

section states: A limited partner does not become liable as a general partner unless, in addition to exercising the limited partner’s rights and powers as a limited partner, the limited partner takes

part in the control of the business. [ 16 ] Master Mason rejected the Swift defendants’ application for

summary dismissal. Her reasons are found at Giammarco & Co (Western) Division Ltd. v TRL Real Estate Syndicate

(05) Ltd. , 2015 ABQB 587 , 2015 CarswellAlta 1740. At para’s 61 and 62 of her decision she observed: The evidence before the court supports the conclusion that whether or not the Swift defendants took

part in the control of the West Arriva partnership is an issue of merit that genuinely requires a trial. It cannot be fairly and justly determined on the existing record. The

evidence is open to

interpretation and credibility of the witnesses must be assessed. The application for

summary dismissal on this basis fails.

The refused undertakings [ 17 ] The undertakings seek documents concerning the activities of the limited partners respecting the acquisition and management of other properties by the Limited Partnership, namely the 300 Block, the 500 Block, the 600 Block and the interest in the Louise Block. [ 18 ] If the evidence had been that the investors used a different limited partnership for each parcel of land that they were acquiring in the Victoria Park area of Calgary, then control exerted by a limited partner concerning the land involved in one partnership would not be evidence of control concerning the other land. [ 19 ] But here the evidence is different. [ 20 ] It appears that one limited partnership was used to acquire the various parcels of land in Victoria Park, including the Giammarco lands. [ 21 ] Giammarco is entitled to argue that Mr.

Swift took

part in the control of the Limited Partnership as a whole.

Whether a trial judge would take that view or take the view that only control exercised with respect to the Giammarco lands is not something that I can or should decide. [ 22 ] My role is to determine whether sufficient production of documents has been provided by the defendants such that Giammarco can advance its argument at trial for the broader view. [ 23 ] There is no reason at the discovery/production stage of this action to restrict the evidence of control to evidence of Swift’s involvement with the Giammarco lands only. [ 24 ] Consequently I direct that the defendants produce any documents concerning or reflecting any non-privileged communications to or from the defendant Swift or the Swift defendants prior to January 1, 2009 concerning the subject lands or the other lands acquired by the Limited Partnership, namely, the 300 Block, the 500 Block, the 600 Block and the interest in the Louise Block.

To the extent that privilege is claimed the privileged documents shall be identified to the degree mandated in Canadian Natural Resources Ltd. v ShawCor Ltd. , 2014 CarswellAlta 1582, 2014 ABCA 289 . [ 25 ] My direction is narrower than the production sought by way of undertakings, but I have concluded that the broader request by Giammarco constitutes an overreach. [ 26 ] On the other hand, I disagree with the defendants’ suggestion that the whole request is a fishing expedition. Giammarco has brought forward the evidence of Mr. Torode and Mr. Martin that Mr. Swift took

part in the control of the Limited Partnership, and Giammarco is entitled to review any documents in the defendants’ production which are relevant to that enquiry. [ 27 ] It is not the law that Giammarco must be able to identify a specific document or series of documents in order to obtain production.

Costs [ 28 ] I considered requiring that Giammarco pay the costs of any further discoveries which might result from further production given its tardiness in pursuing the refused undertakings, but I recognize the Giammarco’s reply would be that it would not have been necessary for it to seek the undertakings if the documents had been produced by the defendants in the first place. [ 29 ] Given the mixed success in this application I order that costs shall be in the cause. Heard on the 06 th day of September, 2016. Dated at the City of Calgary, Alberta this 12 th day of September, 2016. J.T. Prowse M.C.C.Q.B.A.

Appearances: James L. Lebo, Q.C.

McLennan Ross LLP for the Plaintiffs Blair C. Yorke-Slader, Q.C. Bennett Jones LLP for the Defendants