Bibeau et al v Chartier et al, 2022 MBCA 2

Citation: Bibeau et al v Chartier et al , 2022 MBCA 2 Date: 20220110 Dockets: AI20-30-09543; AI20-30-09544 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Diana M. Cameron Madam Justice Karen I. Simonsen BETWEEN : ) S. J. Thliveris and ) S. W. Cannon ) for the Appellants ) ) J. A. Mercury and ) M. F. Bokhaut SERGE BIBEAU and 5450943 MANITOBA ) for the Respondents LTD. ) Derrick Chartier, 5900663 ) Manitoba Ltd. and 5802581 ) Manitoba Ltd. (Plaintiffs) Appellants ) ) R. L. Tapper, Q.C. and ) S. R.

McEachern - and - ) for the Respondents ) Marcel Chartier, MCC Holdings ) Inc. and 3997937 Manitoba Inc. DERRICK CHARTIER, MARCEL ) CHARTIER, 5900663 MANITOBA LTD., ) W. R. Gardner and 5802581 MANITOBA LTD., MCC ) A. D.

Pollock HOLDINGS INC., 3997937 MANITOBA ) for the Respondents INC., CHARTIER & ASSOCIATES INC., ) Chartier & Associates Inc. and CAPITAL COMMERCIAL REAL ESTATE ) Capital Commercial Real SERVICES INC. and CBRE LIMITED ) Estate Services Inc. ) ) No appearance (Defendants) Respondents ) for the Respondent ) CBRE Limited ) ) Appeals heard: ) September 3, 2021 ) ) Judgment delivered: ) January 10, 2022 On appeal from 2019 MBQB 189 ; and 2020 MBQB 100 simonsen JA [ 1 ] These appeals stem from a dispute regarding the terms of an oral agreement (the agreement) made in discussions between the plaintiff, Serge Bibeau (Serge), and the defendants, Derrick Chartier (Derrick) and Marcel Chartier (Marcel).

The dispute is about the extent of the interest purchased by Serge (through his co-plaintiff, 5450943 Manitoba Ltd. (545), of which he was the directing mind) as an investment in a development property that lies at the corner of Sterling Lyon Parkway and Kenaston Boulevard, in the City of Winnipeg (the development property). [ 2 ] In their statement of claim, the plaintiffs alleged that they had purchased a larger interest and were, therefore, entitled to a greater return on their investment than the substantial return that they had received, in accordance with the terms of the agreement as

alleged by Derrick and Marcel. [ 3 ] A motion judge (the judge), on

summary judgment, dismissed the plaintiffs’ claim as against all of the defendants. The plaintiffs appeal the

summary judgment. All of the defendants other than CBRE Limited (CBRE) (collectively, the defendants) cross appeal on costs.

Introduction [ 4 ] In June 2016, the plaintiffs issued a statement of claim against Derrick and Marcel, as well as a number of corporations controlled by one or both of them (their companies) on the basis that they too were parties to, or had involvement with, the agreement: the defendants 5802581 Manitoba Ltd. (580); 5900663 Manitoba Ltd. (590); MCC Holdings Inc. (MCC); and 3997937 Manitoba Inc. [ 5 ] Two additional named defendants, Chartier & Associates Inc. (Chartier & Associates) and Capital Commercial Real Estate Services Inc. (CCRES) (collectively, the corporate defendants), were said to be vicariously liable for the actions of Derrick and Marcel.

The plaintiffs alleged that Derrick and Marcel were officers and directors of, and also employed by or acting as agent on behalf of, Chartier & Associates, a commercial real estate brokerage, and that Chartier & Associates had changed its name to CCRES on about June 17, 2015. [ 6 ] CBRE, also named as a defendant, is a New Brunswick company, for which the corporate defendants were said to have acted as agent in Manitoba. [ 7 ] The statement of claim alleged that, in October 2009, the plaintiffs entered into the agreement with Derrick and Marcel (and several of their companies) for the purchase of one-third of a 50% interest in the development property (that property being comprised of approximately 200 acres) for $1,250,000.

The statement of claim included allegations of breach of contract and breach of fiduciary duty.

The plaintiffs asserted that the defendants stood in a fiduciary relationship to them on the basis that they had provided commercial real estate advice in connection with the agreement, the plaintiffs had put their trust in them with respect to the nature and particulars of the investment, and the defendants had control over management of the investment. [ 8 ] The statement of claim further alleged that the defendants had failed to provide “full disclosure and information” concerning the sale and lease of the development property and resulting profits.

The plaintiffs sought an accounting in respect of “all sums misappropriated” and “all amounts, secret profits, kickbacks and/or payments, and/or benefits received or made by the [d]efendants for and on account of the [p]laintiffs.” They also sought, amongst other relief, declaratory relief and payment “of all profits made by the [d]efendants in breach of their contractual, fiduciary and/or equitable duties”. [ 9 ] Derrick and Marcel, together with their companies, defended the claim, taking the position that the agreement was that Serge (through 545) would invest $1,250,000 to share equally with each of the two of them (through MCC) only the interest in the development property that was available to Derrick — which was much less than the 50% interest that the plaintiffs alleged was available.

Derrick and Marcel and their companies denied any wrongful conduct and said that the plaintiffs had been paid proportionately, in accordance with the terms of the agreement. They also said that Serge had agreed that he was not entitled to disclosure of the information sought. [ 10 ] The corporate defendants denied any involvement in the agreement or investment in the development property.

While acknowledging that Marcel was a real estate broker and the principal of Chartier & Associates and that Derrick was formerly an agent of Chartier & Associates, the corporate defendants maintained that they had no involvement in this matter, nor were they vicariously liable to the plaintiffs. In fact, Chartier & Associates ceased carrying on business as a real estate broker in July 2015 and CCRES was not incorporated until December 2014, after the events at issue took place. [ 11 ] When the defendants brought their

summary judgment motions, the judge decided to first proceed with “partial

summary judgment” ( 2019 MBQB 189 at para 108 (the 2019 decision)) regarding the terms of the agreement. The central issue was credibility. Rejecting Serge’s evidence, the judge concluded that there was no genuine issue requiring a trial with respect to the terms of the agreement or the allegations of breach of fiduciary duty. He made a declaration regarding the terms of the agreement consistent with the evidence of Derrick and Marcel, and dismissed the claim for breach of fiduciary duty. [ 12 ] Subsequently, the plaintiffs brought a motion for reconsideration of the 2019 decision. The defendants sought full

summary judgment for the additional relief that had been sought arising from the alleged breach of contract and breach of fiduciary duty. The judge dismissed the motion for reconsideration and granted full

summary judgment, dismissing the plaintiffs’ claim (see 2020 MBQB 100 (the 2020 decision)). He determined that there was no basis for denying full

summary judgment given the 2019 decision. He subsequently concluded, without apparent objection by counsel for the plaintiffs, that the claim should also be dismissed as against CBRE. [ 13 ] The plaintiffs appeal both the 2019 decision and the 2020 decision. [ 14 ] The defendants cross appeal the judge’s decision to award them Class 4 tariff costs (the costs decision), arguing that he erred by not allowing solicitor-client costs or, alternatively, elevated costs. Grounds of Appeal [ 15 ] The plaintiffs appeal on a number of grounds, which they have consolidated into the two questions set out in their factum: 1.

Did the judge err in mixed fact and law by improperly applying the objective reasonable bystander test as set forth in Matic et al v Waldner et al , 2016 MBCA 60 to the action at hand, and improperly granting partial

summary judgment in the 2019 decision?

2. Did the judge err in mixed fact and law, in the 2020 decision, by summarily disposing of the plaintiffs’ action in its entirety on the motion for an order for reconsideration in finding that no contractual, fiduciary and/or equitable duties existed between the parties? [ 16 ] On the defendants’ cross appeals of the costs decision, they contend that the judge erred by relying on irrelevant factors and by failing to identify and properly apply the test for solicitor-client costs. The Facts [ 17 ] Serge is a property developer and investor.

Derrick and Marcel are licensed commercial real estate agents and business partners. Derrick and Marcel have known Serge for many years and they have done many real estate deals together. [ 18 ] In about early 2009, Derrick was approached by a real estate developer (the developer), who had created a limited partnership known as Westhaven Industrial Plastics (NY) Limited Partnership (Westhaven LP) for the purpose of purchasing and developing the development property.

IKEA Properties Ltd. (IKEA) was to acquire an approximately 27-acre parcel of the development property for a 400,000 square foot retail store, and a further 50% interest in the remaining development property (the joint venture lands) in a joint venture with Westhaven LP, on a 50/50 basis.

In the developer’s discussions with Derrick, he imposed a strict requirement of confidentiality. [ 19 ] A limited partnership agreement had been signed in December 2008 that reflected the ownership structure of Westhaven LP, with Westhaven Industrial Plastics GP Ltd. as the general partner (the general partner) and several limited partners, including one of the developer’s companies (5662185 Manitoba Ltd. (566)) as a limited partner with a 37.5% interest.

The general partner was controlled by the developer and it had exclusive authority to manage and control the business of Westhaven LP. [ 20 ] When the developer approached Derrick, he offered him an opportunity to acquire a portion of 566’s existing limited partnership interest. [ 21 ] In about July 2009, after being approached by the developer, Derrick discussed the investment opportunity with his father, Marcel.

Derrick asked whether Marcel would be prepared to become a silent investor in Westhaven LP through Derrick’s corporation, 580, which would acquire a portion of the developer’s limited partnership interest.

Marcel agreed to do so. [ 22 ] As Derrick and Marcel had a long business and personal relationship with Serge, they agreed that Marcel would approach him about the possibility of becoming a second silent investor in 580. [ 23 ] Derrick’s purchase of a portion of 566’s limited partnership interest was reduced to a written agreement dated September 11, 2009, in which 566 agreed to sell 64% of its 37.5% interest in Westhaven LP to a corporation controlled by Derrick (580); Derrick understood the required capital contribution for this purchase to be approximately $3,750,000.

This agreement meant that 580 agreed to purchase a 24% interest in Westhaven LP. Also on September 11, 2009, the limited partnership agreement was amended to add 580 as a limited partner, reflecting that ownership interest. [ 24 ] Thereafter, in October 2009, Derrick and Marcel met with Serge to review his investment opportunity, along with the terms and conditions upon which his investment would be made.

The parties have provided very different versions of what was discussed. [ 25 ] Derrick and Marcel say that Betty Boisvert (Betty), the then office manager and paralegal for Chartier & Associates, was present for these meetings. So does Betty.

Serge denies her presence. [ 26 ] Derrick, Marcel and Betty say that the terms presented were: • an equity investment in the sum of $1,250,000 would be required by Serge to participate in the investment opportunity; • Derrick and Marcel would invest, through MCC, the balance of the funds necessary for the required capital contribution in Westhaven LP; • Derrick would invest the required capital contribution in Westhaven LP though a corporation wholly owned and controlled by him (580); • the profits, losses and cash distributions would be shared in accordance with their proportionate investments; • the investment was silent in nature and strictly private and confidential; • neither Marcel nor Serge (or companies associated with them) would be named as parties to the purchase agreement pertaining to the interest acquired by 580 in Westhaven LP and, therefore, acquired no rights thereunder; • Serge and Marcel would not have the authority to compel the production of any information whatsoever from Westhaven LP; • all information that Serge and Marcel would receive pertaining to the investment would be provided through Derrick or 580; and • there would be a consortium of investors and, pursuant to the agreement, Serge, Derrick and Marcel would be equal investors in Derrick’s limited partnership interest.

Derrick and Marcel did not advise Serge that 580’s interest in Westhaven LP was 24%, but Derrick’s total investment in Westhaven LP, through 580, was to be for about $3,750,000 and he, Marcel and Serge were each to contribute approximately one-third of that amount.

[ 27 ] According to Derrick and Marcel, Serge agreed to invest on these terms. On October 26, 2009, Serge provided, through 545, $1,250,000 to 580 for his investment. Derrick and Marcel say that the agreement was based on trust between them and Serge. [ 28 ] Serge says that it was agreed that he, Derrick and Marcel would each invest $1,250,000 (one-third of $3,750,000) to each acquire one-third of a 50% interest in the whole of the development property, with the developer holding the other 50%. Derrick and Marcel were to provide him with an ongoing accounting, together with his share of the profits.

According to Serge, Derrick told him that he could conservatively expect to receive a return of eight and one-half to nine times on his investment. Serge felt that this was an excellent opportunity given the price and the involvement of IKEA. Serge denies discussion of any of the other terms described by Derrick and Marcel. [ 29 ] Derrick, Marcel and Betty deny that the arrangement alleged by Serge was ever discussed. [ 30 ] The total contribution that the developer required of 580 was reduced from $3,750,000 to $3,439,079.

Neither Derrick nor Marcel mentioned this to Serge, but they adjusted their contributions accordingly, so that they invested, through MCC, a total of $2,189,079. [ 31 ] Together, Serge (through 545) and Derrick and Marcel (through MCC) contributed the $3,439,079 investment that 580 made in Westhaven LP. Based on their respective investments, 545 had a 36.35% share of the 24% interest held by 580 in Westhaven LP. [ 32 ] By October 31, 2014, Westhaven LP had completely disposed of its investment in the project, other than certain recoveries due from the City of Winnipeg.

Each of Derrick and Marcel (through MCC) and Serge (through 545) received a return in accordance with the amount they had invested. The total amount paid to 545 to March 25, 2019 was $3,839,869.88, comprised of the return of its investment plus a positive return of $2,589,869.88.

Recoveries from the City of Winnipeg continue to be paid in accordance with the amounts invested. [ 33 ] Nonetheless, Serge maintained that he, Derrick and Marcel were equal owners of a 50% interest in the development property and that he had not received all of the return to which he was entitled. [ 34 ] Serge pressed for disclosure of documentation.

Notwithstanding the defendants’ position that such documents were confidential and sensitive and that Serge had agreed that he would not be entitled to same, they provided to him, several months before the litigation was commenced, various documents, including agreements pertaining to Westhaven LP, financial statements, corporate income tax returns, banking records and related correspondence. [ 35 ] Serge persisted in his belief that something was missing, that he “want[ed] to see the number” (as he repeatedly stated on cross-examination) and that he was owed money — so he sued.

The Judge’s Decisions The 2019 Decision [ 36 ] At the outset of the hearing of the

summary judgment motions, counsel for the plaintiffs (different than counsel on appeal) conceded that a satisfactory accounting had been provided. The issue was the terms of the agreement. [ 37 ] In the 2019 decision, the judge stated that, prior to the hearing of the motions, he had limited their scope to “partial

summary judgment” (at para 108), such that “the defendants’ requests for

summary judgment may proceed to determine the terms of the oral agreement between [the plaintiffs], Marcel . . . and Derrick . . . only” (at para 5). [ 38 ] In deciding that issue, the judge applied the law regarding the formation of a contract, specifically, the criteria set out in Matic : the intention to contract; the essential terms of the agreement must be discernable, essential terms frequently cited as “parties, property and price” (at para 60); and the terms must be sufficiently certain. The judge also referred to IFP Technologies (Canada) Inc v EnCana Midstream and Marketing , 2017 ABCA 157 at para 79 , noting the law regarding contractual

interpretation and its goal of determining “what a reasonable person would objectively have understood from the contractual document read as a whole, in light of the factual matrix” (at para 62). [ 39 ] As I have stated, credibility was the key factor in determining the terms of the agreement. The judge had before him multiple affidavits, as well as transcripts of the cross-examinations of Serge, Marcel, Derrick, Betty and two accountants. [ 40 ] The judge was satisfied that he was able to make the necessary credibility findings in the context of

summary judgment. He rejected Serge’s evidence, finding that “[t]he best description of [his] evidence [was] pure speculation” (at para 80), and concluded that the terms of the agreement were as described by Derrick and Marcel. [ 41 ] The judge accepted that Westhaven LP was in a 50/50 joint venture with IKEA and that the developer had transferred a 24% interest in Westhaven LP to Derrick’s company, 580. He also found that the plaintiffs had received a 36.35% interest in 580’s share of Westhaven LP (see para 87).

He stated that the plaintiffs “ha[d] not provided any evidence to support [their] claim that Derrick and 580 owned 50 percent of the [development property]” (at para 96). [ 42 ] As a consequence, the judge concluded that there was no genuine issue requiring a trial regarding the terms of the agreement.

He declared that Serge, through 545, was entitled to receive 36.35% of the net profits received by 580 arising from 580’s limited partnership interest in Westhaven LP, and that MCC was entitled to receive 63.65% of those profits. [ 43 ] The judge went on to conclude that there was no genuine issue requiring a trial on the issue of breach of fiduciary duty. He found that there was no fiduciary relationship between Serge, and Derrick and Marcel.

Rather, he stated that the plaintiffs’ position that the agreement involved one party as buyer and another as agent was “unsupported by the evidence” (at para 99), and that the parties

were “sophisticated business people” ( ibid ). The judge also concluded that Derrick and Marcel did not have total control over the investment, as “[t]he only entity that exercised total control over the project [was] the [g]eneral [p]artner” (at para 103). The 2020 Decision [ 44 ] In the 2020 decision, the judge was not satisfied that the test for reconsideration, set out in Willman v Ducks Unlimited (Canada) , 2005 MBCA 13 , had been met. He stated, “The plaintiffs [have] offered no additional evidence other than repeating their position, which this court did not accept in the 2019 [d]ecision” (at para 25).

He concluded that there were no extraordinary circumstances to allow reconsideration of the 2019 decision — such as a patent error on a central point or a determination made on a legal issue which counsel had no opportunity to address. [ 45 ] Counsel for the plaintiffs had urged the judge to reconsider the 2019 decision regarding breach of fiduciary duty on the basis that counsel had not been given the opportunity to address the issue. Despite the judge acknowledging, in the 2020 decision, that he had advised counsel that fiduciary duty would not be dealt with when he considered partial

summary judgment, he was satisfied that counsel had “argued at length” (at para 27) on the issue, such that he had been entitled to deal with it. The judge reiterated that, once the investment of Serge, Marcel and Derrick was made, “any control over the investment for the limited partners was lost” (at para 28). He again noted that the plaintiffs had received a return on their investment based on the actual amount of money invested. [ 46 ] On the defendants’ request for full

summary judgment, the judge concluded that his decision on partial

summary judgment “effectively dismissed all of the other remaining relief sought” (at para 41). Therefore, he granted full

summary judgment dismissing the plaintiffs’ claim. The Costs Decision [ 47 ] In the costs decision, the judge, after considering the wording of the statement of claim and the history of the proceedings, was not satisfied that the situation rose to the level of requiring an award of solicitor-client costs, but stated, “What it may require is double costs, in my mind.” [ 48 ] He then looked at the fact that Derrick and Marcel had not advised Serge that the total amount of 580’s investment had changed, or returned a portion of Serge’s money to reflect that.

He agreed with the concern expressed by counsel for the plaintiffs about any award of costs that would “act as a chill on litigation in general.” [ 49 ] In the end, the judge declined to award double party and party costs. He awarded one set of costs on a Class 4 tariff basis, payable by the plaintiffs, to each of Derrick, Marcel (together with their companies) and the corporate defendants. Standard of Review [ 50 ] The applicable standard of review on

summary judgment is well-established. The decision to grant or deny a motion for

summary judgment is a discretionary decision, reviewed on a deferential standard, and will only be set aside if there is a material error as to the law or the facts, or if the decision is so clearly wrong as to be unjust (see North Portage Development Corp v Cityscape Residence Corp , 2019 MBCA 36 at para 12 ; and Dakota Ojibway Child and Family Services et al v MBH , 2019 MBCA 91 at paras 36- 37 ( Dakota )). [ 51 ] The standard of review applicable to a costs award was restated by this Court in Nash v Nash , 2019 MBCA 31 (at para 42 ): Appellate courts will very rarely intervene in costs awards.

A judge’s decision on costs has been described as “quintessentially discretionary” ( Nolan v Kerry (Canada) Inc , 2009 SCC 39 at para 126 ), and as being generally “insulated from appellate review” ( Little Sisters Book and Art Emporium v Canada (Commissioner of Customs and Revenue) , 2007 SCC 2 at para 49 ). However, a costs award can be set aside on appellate review “if it is based on an error in principle or is plainly wrong” ( ibid ; see also Hamilton v Open Window Bakery Ltd , 2004 SCC 9 at para 27 ; and 232 Kennedy Street Ltd v King Insurance Brokers

(2002) Ltd , 2009 MBCA 22 at para 14 ).

Summary Judgment [ 52 ] In Hryniak v Mauldin , 2014 SCC 7 , Karakatsanis J, writing for the Supreme Court of Canada, described when

summary judgment is appropriate (at para 49): There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for

summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [ 53 ] Effective January 1, 2018, r 20 of the MB, Court of Queen’s Bench Rules , MR 553/88 , which governs

summary judgment, was amended to incorporate the above principles (see Court of Queen’s Bench Rules , amendment , Man Reg 130/2017,

section 8). Current r 20.03(1) (which was numbered r 20.07(1) when these

summary judgment motions were first argued before the judge) states:

Granting

summary judgment 20.03(1) The judge must grant

summary judgment if he or she is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. [ 54 ] As outlined by this Court in Dakota , the persuasive (legal) burden is on the moving party to establish, on a balance of probabilities, that

summary judgment should be granted (see paras 77-79). [ 55 ] The test for

summary judgment, pursuant to the above rule, was also articulated in Dakota (at paras 108-9 ): At the hearing of the motion, the moving party must first satisfy the motion judge that there can be a fair and just determination on the merits (i.e., that the process will permit him or her to find the necessary facts and to apply the relevant legal principles so as to resolve the dispute, and that proceeding to trial would generally not be proportionate, timely or cost-effective). In so doing, the moving party bears the evidential burden of establishing that there is no genuine issue requiring a trial.

If those requirements are met, the responding party must meet its evidential burden of establishing “that the record, the facts, or the law preclude a fair disposition” ( Weir-Jones [ Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 ] at para 32; and Stankovic v 1536679 Alberta Ltd , 2019 ABCA 187 at para 22 ; see also Stankovic at para 29 ) or that there is a genuine issue requiring a trial (e.g., by raising a defence). In other words, the responding party must establish why a trial is required (see Hryniak at para 56 ). If the responding party fails to do so,

summary judgment will be granted. [ 56 ] Under the amended

summary judgment rule, courts are clearly entitled to make findings of credibility. Rule 20.03(2) (previously numbered r 20.07(2)) states: Powers of judge 20.03(2) When making a determination under subrule (1), the judge must consider the evidence submitted by the parties and he or she may exercise any of the following powers in order to determine if there is a genuine issue requiring a trial: (

a) weighing the evidence; (

b) evaluating the credibility of a deponent; (

c) drawing any reasonable inference from the evidence; unless it is in the interests of justice for these powers to be exercised only at trial. [ 57 ] Hryniak addressed the issue of credibility under a comparable Ontario

summary judgment rule (see ON, Rules of Civil Procedure , RRO 1990, Reg 194 ), commenting (at para 44): The new powers in Rules 20.04(2.1) and (2.2) expand the number of cases in which there will be no genuine issue requiring a trial by permitting motion judges to weigh evidence, evaluate credibility and draw reasonable inferences [footnote omitted]. See also Business Development Bank of Canada v Cohen , 2021 MBCA 41 at paras 48-52 . [ 58 ] Before turning to the specific issues raised on these appeals, I make a couple of preliminary comments about the judge’s approach to

summary judgment. [ 59 ] First, despite some of the language the judge used, I am satisfied that he understood and applied the correct test for

summary judgment. [ 60 ] Near the end of the 2019 decision, the judge made clear that he understood and applied the correct test when he referred

to Dakota and concluded that “the moving parties have met their burden on the limited issue herein, and a trial is not required to determine this issue” (at para 107). Then, in the 2020 decision, the judge stated that the plaintiffs had “failed to meet their burden on a balance of probabilities” (at para 45). There is no legal burden on the responding party to a

summary judgment motion. However, I am satisfied from reading the 2020 decision as a whole that the judge understood the test (see paras 39, 40, 42). The reference to the plaintiffs’ burden, read in context, meant that they had not met their evidentiary burden of demonstrating a genuine issue requiring a trial. [ 61 ] Second, I have a concern about what the judge characterized as a partial

summary judgment process. What the judge did, on “partial

summary judgment”, was decide a discrete, albeit important, issue — the terms of the agreement — and make a declaration in that regard. He also dismissed the plaintiffs’ claim based on breach of fiduciary duty. [ 62 ] As the judge correctly observed, there are potential concerns about proceeding with only part of a

summary judgment motion. In the 2019 decision, he stated (at para 60): . . . The court [in Mason v Perras Mongenais , 2018 ONCA 978 ] warned that partial

summary judgment should be rare, reserved for issue or issues that may be readily bifurcated from those in the main action. It should be undertaken where partial

summary judgment would result in an expeditious and a cost-effective hearing. See also Butera v Chown, Cairns LLP , 2017 ONCA 783 . [ 63 ] Granting

summary judgment on part of a claim or in respect of only some of the parties may run the risk of duplicative proceedings or inconsistent findings of fact, and may, therefore, not be in the interests of justice (see Hryniak at para 60 ). In this case, a different problem resulted, which protracted the litigation. Deciding, on a preliminary basis in the context of “partial

summary judgment”, two issues that would effectively dispose of the litigation in its entirety (as the judge later recognized in the 2020 decision) caused the parties to unnecessarily re-attend in order to seek final

summary judgment. Once the judge had rejected Serge’s evidence regarding the terms of the agreement and breach of fiduciary duty, there was no relief to which the plaintiffs were entitled. This is an example of why caution should be exercised before proceeding with partial

summary judgment. The Positions of the Parties [ 64 ] At the hearing of the appeals, counsel for the plaintiffs acknowledged that Serge, through 545, had in fact owned a 36.35% share of a 24% interest in Westhaven LP. He also indicated that there was no issue with respect to an accounting or disclosure of ownership and financial documents. Furthermore, he acknowledged that 545 has received a return commensurate with its ownership interest. Instead, he made clear that the plaintiffs’ focus is on the judge’s determination with respect to the terms of the agreement.

They challenge his credibility assessments and factual findings and say that those could not be made on the record before him — and that a trial was required. (According to counsel for Derrick (and 580 and 590), the result of the plaintiffs’ position regarding the terms of the agreement is a claim against Derrick and Marcel and their companies for in excess of $7 million, in addition to what the plaintiffs have already received by way of return from 580.) [ 65 ] As for fiduciary duty, counsel for the plaintiffs submitted, at the hearing of the appeals, that the judge erred by failing to find that Derrick and Marcel and their companies owed a fiduciary duty to the plaintiffs that required them to disclose the percentage interest of 580’s investment in Westhaven LP and any change in the percentage being acquired by the plaintiffs.

However, counsel for the plaintiffs acknowledged that the plaintiffs had not sustained any loss as a result of any breach of that duty and, thereafter, he did not pursue the matter further. [ 66 ] The plaintiffs’ appeal of the 2020 decision involves essentially a repetition or recast of their position regarding the 2019 decision. [ 67 ] The defendants take the position that the judge made no error in law or fact in either the 2019 decision or the 2020 decision, and that there is no basis for appellate intervention. [ 68 ] On the cross appeal, Derrick and Marcel and their companies assert that the judge, in making the costs decision, erred in principle by relying on the irrelevant factor of their not advising Serge of the change in the amount of the investment required of 580, and by failing to identify and apply the test for solicitor-client costs.

Marcel further contends that the judge erred by preferring how counsel for the plaintiffs characterized the claim to the wording of the statement of claim itself, which contains allegations of fraud that were not withdrawn or proven. They all assert that the costs decision was plainly wrong. [ 69 ] The corporate defendants rely on some of the above arguments and also say that the judge erred by not awarding solicitor-client costs in their favour because there has been no basis ever articulated, including on appeal, for including them in the lawsuit.

In the submission of the corporate defendants, the plaintiffs’ case against them is so lacking in merit that they should be sanctioned by a suitable award of costs. [ 70 ] The plaintiffs say that the judge made no error in principle and that the costs decision is owed deference. Analysis and Decision The Plaintiffs’ Appeals [ 71 ] In addressing the

summary judgment motions, the judge (in the 2019 decision) applied the principles regarding formation of a contract, as outlined in Matic , to the facts that he found. [ 72 ] Although there was no contest before the judge as to the applicable law, the parties, on appeal, generally indicate that,

because there was a valid agreement, the law to be applied is that which governs

interpretation of contracts, rather than formation of contracts. I am satisfied that these appeals can be disposed of without addressing that issue or necessarily endorsing the judge’s decision to analyze the matter on the basis of Matic . That is because, regardless of which law applies, the judge’s credibility findings dictate the result.

And those findings are, as I will explain, without palpable and overriding error. [ 73 ] The judge found that the plaintiffs “failed to present any credible and reliable evidence beyond mere speculation” (the 2019 decision at para 107), and that the only evidence in support of their theory of the transaction was Serge’s “opinion” (the 2020 decision at para 25). He concluded that the plaintiffs’ argument that “there has to be something missing” was “smoke and mirrors” (the 2019 decision at para 91). In my view, there was ample evidence to support these conclusions.

Although the judge did not thoroughly canvass the evidence to explain the basis for his conclusions regarding credibility, his decision must be read in the context of the evidence and counsel’s submissions which well articulated their positions. [ 74 ] Key amongst the considerations available to the judge was that, by written agreement dated September 11, 2009 (before the agreement was made), Derrick (through 580) purchased from the developer a 24% interest in Westhaven LP.

As well, prior to entering into the agreement, Derrick knew that Westhaven LP was in a 50/50 joint venture with IKEA with respect to the joint venture lands. Why would Derrick agree to sell to Serge an interest greater than what 580 actually had? [ 75 ] Furthermore, Derrick, Marcel and Betty all provided consistent versions of their discussions with Serge about the terms of the agreement. [ 76 ] Serge, on the other hand, gave a version of events unsupported by any documents or by others who could provide reliable evidence. [ 77 ] Serge’s son swore an affidavit on the

summary judgment motions, attesting that he attended a meeting with his father and Marcel in the summer of 2009 at which the development project involving IKEA was mentioned, with an indication that further details would be provided in due course. He also swore that, after a second meeting in October 2009, which he did not attend, his father advised him that the developer would own 50% of the development property and that he, Derrick and Marcel would jointly own the other 50%.

The son also said that, on an unspecified later date, he was present when Derrick and Marcel told him and his father that his father could expect a return of eight and one-half to nine times on his investment. However, the fact that the son was only 13 years of age at the time the agreement was made seriously compromises the reliability of his evidence, particularly about a commercial matter of this kind. In any event, the son did not say that he was present when the agreement was made, or provide any specifics about its terms.

And any information given to him by his father is inadmissible hearsay. [ 78 ] The plaintiffs also relied on the affidavit of Rick Potter (Potter), an accountant. However, Potter passed away before he could be cross-examined, and much of his evidence was contradicted by Greg Huzel, another accountant and partner of Potter, who was cross-examined prior to the hearing of the motions. [ 79 ] Crucial support for the judge’s credibility findings comes from the evidence of Serge himself.

He testified that he twice (in 2012 and 2014) provided to financial institutions net worth statements in which he stated that his investment at “Kenaston Blvd & Sterling Lyon (IKEA)” had an “equity value” of $2,500,000 — which is inconsistent with what he says he was told about the anticipated rate of return. Serge explained that these statements were prepared by Derrick and Marcel, with Betty possibly typing them. Betty testified that she typed them based on information from Serge, and that Serge reviewed them and raised no concerns.

In any event, the statements were submitted to the financial institutions to support Serge’s requests for financing, and at least one was initialled by him. Serge also testified that he subsequently made a handwritten change on one of the statements to show a value of $12 million for this investment, but he has been unable to produce the statement where that change was made.

In addition, he explained that, sometime after the agreement was concluded, he recorded a discussion with Derrick in which Derrick confirmed that he could expect a return of eight and one-half to nine times on his investment — but Serge has also been unable to produce that recording. [ 80 ] Significantly, Serge’s version of the agreement was not commercially reasonable. He says that he paid $1,250,000 for one-sixth (or one-third of 50%) of the development property. This means that the entire development property, comprised of approximately 200 acres, would be worth $7,500,000.

However, Serge swore that Derrick told him that the development property would be purchased for “approximately $20 million, or roughly $220,000.00 per acre.” (This, in itself, is a contradiction as a cost of $220,000 per acre comes to in excess of $40 million.) Moreover, a

schedule to the amended and restated limited partnership agreement for Westhaven LP, disclosed to the plaintiffs prior to the commencement of the litigation, indicates that 197.44 acres of land was purchased for $21,639,735 or approximately $100,000 per acre. [ 81 ] Regardless of whether one were to consider the representations as to cost that Serge says Derrick made, or the actual cost expended for the acquisition as shown in the documents of Westhaven LP, it makes no commercial sense that the $3,439,079 contribution made by Serge, Derrick and Marcel could be for a one-half interest in the development property, or that Serge’s investment of $1,250,000 could be for a one-sixth interest.

On cross-examination, Serge was unable to explain how his investment could entitle him to the stake he alleged or where the additional funding for the purchase of the development property would come from. [ 82 ] Finally, on cross-examination, Serge was repeatedly unable to articulate the basis for his continuing complaint.

His evidence throughout, without explanation or detail, was simply that there must be something missing and that he “want[ed] to see the number.” Ultimately, he admitted that, with respect to the alleged kickbacks, secret profits and other payments received by Derrick and Marcel and their companies that they had not accounted for, all he had was speculation. [ 83 ] At the hearing of the appeals, counsel for the plaintiffs argued that a trial was necessary for the sole reason that it would allow for viva voce evidence from Serge’s son. As I have indicated, the son provided an affidavit on the

summary judgment motions, for consideration by the judge. I am not persuaded that cross-examination of him was a basis for requiring a trial. I have already outlined the concerns with his testimony that are readily apparent. [ 84 ] For these reasons, the judge did not err in concluding that he could make the necessary credibility findings in the context of

summary judgment, without viva voce evidence on the motions or at a trial. Nor did he make any palpable and overriding

error in his assessment of credibility or his fact-finding, in the 2019 decision. That decision is not clearly wrong. There is also no basisfor appellate intervention with respect to the judge’s dismissal of the request for reconsideration and his granting full

summary judgment(in the 2020 decision), as those decisions rest on the findings made and conclusions reached in the 2019 decision. The Defendants’ Cross Appeals [85] The plaintiffs raise a preliminary issue regarding costs, namely that the defendants require leave to appeal from thejudge. Section 90(1) of The Court of Queen’s Bench Act, CCSM c C280 states: Consent order, costs not appealable 90(1) An order that is made (

a) with the consent of the parties; or (

b) as to costs only; is not subject to an appeal except by leave of the judge making the order. [86] However, the jurisprudence provides that leave is not required where there is a cross appeal on costs and an error inprinciple is alleged (see Bjorninen v Mercredi (1984), (MB CA), 6 DLR (4th) 241 at 243 (Man CA); T D v Director(Child and Family Services), 2015 MBCA 74 at paras 55-56; and Pollock et al v Human Rights Commission (Manitoba) et al, 2019MBCA 110 at para 73).

That is the situation with respect to Derrick and Marcel and their companies, in that the judge is said to haveerred in principle by taking into account the changed amount of the total investment, and by preferring the submissions of counsel for theplaintiffs to the wording of the allegations in the statement of claim. [87] At the hearing of the appeals, counsel for the plaintiffs acknowledged that, on the issue of leave, the corporatedefendants were in the same position as Derrick and Marcel and their companies, such that if leave was not required for Derrick andMarcel and their companies, so too would it not be required by the corporate defendants. [88] Costs are in the discretion of a judge pursuant to section 96(1) of The Court of Queen’s Bench Act, and that discretion isexercised within the parameters of the factors set out in r 57.01 of the Court of Queen’s Bench Rules, which states, in part: Factors in discretion 57.01(1) In exercising its discretion under

section 96 of The Court of Queen’s Bench Act, to award costs, the court may consider, inaddition to the result in the proceeding and any offer to settle made in writing, . . . (

d) the conduct of any party which tended to shorten or lengthen unnecessarily the duration of the proceeding; (d.1) the conduct of any party which unnecessarily complicated the proceeding; . . . (

e) whether any step in the proceeding was improper, vexatious or unnecessary; . . .

(

h) any other matter relevant to the question of costs. . . . Authority of court 57.01(6) Nothing in this Rule affects the authority of the court, . . . (

c) to award all or part of the costs on a lawyer and client basis. [89] Solicitor-client costs are rare and generally only awarded in circumstances where there has been “reprehensible,scandalous or outrageous conduct on the part of one of the parties” (Young v Young, (SCC), [1993] 4 SCR 3 at 134; seealso Judges of the Provincial Court (Man) v Manitoba et al, 2013 MBCA 74 at para 165 (Provincial Judges); and Nash at para 43). [90] Where allegations of fraud are made unsuccessfully without some foundation, a court can exercise its discretion toaward costs on a solicitor-client basis.

However, an unsuccessful attempt to prove fraud or dishonesty does not inexorably lead to theconclusion that the unsuccessful party should be held liable for solicitor-client costs since not all such attempts will amount toreprehensible, scandalous or outrageous conduct (see Hamilton v Open Window Bakery Ltd, 2004 SCC 9 at para 26). [91] In Manitoba Keewatinowi Okimakanak Inc v McIvor, 2007 MBCA 134 (McIvor), this Court summarized the conclusionof the Supreme Court of Canada in Hamilton (at para 8): Put briefly, that case concluded that while allegations of unproven fraud are serious and harmful, it is not every case where fraud isalleged that must be accompanied with solicitor-client costs.

It is where allegations of fraud are combined with inappropriate conductduring the litigation that such a result should occur.

Every case is different, and it depends on the facts. [92] Unproven allegations of fraud or misconduct that do not rise to the level of reprehensible, scandalous or outrageousconduct can nonetheless lead to an award of elevated costs (see McIvor; Cerasani v Kupfer et al, 2009 MBQB 202; and Tregobov vParadis et al, 2017 MBCA 60 at paras 22, 26). [93] McIvor dealt with an appeal of an award of elevated costs to a successful defendant where fraudulent misrepresentationwas alleged, but not proven.

In the result, Steel JA allowed the appeal and reduced the award of elevated costs to party and party costs,noting that the trial judge had explicitly found no steps in the proceeding that could be described as improper, vexatious or unnecessary.

However, she also indicated that elevated costs could be available where a plaintiff, with more diligent preparation, would have hadaccess to information revealing that the allegations were, at most, a negligent misrepresentation. [94] Let me first say that, in deciding the issue of costs, the judge erred in principle by not considering the corporatedefendants separately from Derrick and Marcel and their companies. There are additional relevant considerations in connection with thecorporate defendants, which make their situation markedly different from the other defendants.

I will say more about this later. [95] Furthermore, I am persuaded that the judge also erred in principle by taking into account an irrelevant factor in hisdetermination of costs with respect to Derrick and Marcel and their companies.

Specifically, he erred by considering the pre-litigationconduct of Derrick and Marcel in not advising Serge that the total amount required of 580 for its investment had changed (to Derrick’sknowledge, several days before 545 provided its $1,250,000) and to, therefore, return some of 545’s money. [96] Although a review of appellate authorities across Canada shows a divergence of approach with respect to the relevanceof pre-litigation conduct to solicitor-client costs, the issue, in Manitoba, is governed by the decision of this Court in Provincial Judges.

In that case, Steel JA concluded that solicitor-client costs are “not usually awarded for pre-litigation conduct” (at para 173), andidentified the limited situations where that conduct can justify such an award. She stated (at paras 178-79): Next, while a rigid rule is not necessary, solicitor-client costs are not generally awarded as a reaction to the conduct giving rise to thelitigation, but are intended to censure behaviour related to the litigation alone.

So, for example, depending upon the nature of the causeof action, it may be possible to compensate the plaintiff by an award of damages or to punish the defendant by a punitive award. It isacknowledged, however, that there may be cases where that is not possible or appropriate. See Siemens et al. v. Bawolin et al., 2002SKCA 84 at para. 118, 219 Sask.R. 282. Some examples of the limited circumstances where solicitor-client costs may be awarded for pre-litigation conduct include issues of

public interest (see Lacombe [Quebec (Attorney General) v Lacombe, 2010 SCC 38] at para. 67), situations where the fruits of thelitigation do not provide any appropriate compensation in relation to the reprehensible conduct (see Sun Life Assurance Co. of Canada v.Ritchie et al, 2000 BCCA 231 at para. 54, 136 B.C.A.C. 215) and situations where the “principle of indemnification for the wrongdoing(and not merely disapproval, however strong, of the wrongdoing) justifies such an order” (see Hashemian v. Wilde et al, 2006 SKCA 126at para. 32, 289 Sask.R. 105).

Indeed, in cases similar to the one at bar, solicitor-client costs were awarded based on conductsurrounding the government’s responses to the compensation committee’s reports. See the Newfoundland Association of ProvincialCourt Judges et al. v. Newfoundland, 2000 NFCA 46 at paras. 301-13, 192 Nfld. & P.E.I.R. 183.

Nonetheless, courts should be carefulto avoid double compensation and not to punish, by way of costs, pre-litigation conduct which could be the subject of other relief. [emphasis added] [97] In my view, the actions of Derrick and Marcel in allowing Serge, through 545, to invest slightly more of the requiredcapital contribution in no way meets the limited circumstances in Provincial Judges. That was an irrelevant consideration to any type ofincreased costs, be it solicitor-client or elevated costs.

The plaintiffs sought punitive damages in the statement of claim, and that wouldhave been the appropriate way to address their complaint about the changed amount of the investment (see Nash at para 44). But thejudge dismissed their claim for punitive damages. [98] As a consequence of these errors in principle, the costs decision is set aside, and I will conduct a fresh analysis. [99] As noted above, the situation regarding the corporate defendants is very different from that of Derrick and Marcel andtheir companies.

With respect to the corporate defendants, not only did the plaintiffs make unproven allegations of misconduct, the claimagainst them was utterly baseless. [100] Where misconduct is alleged and not proven, the word “fraud” need not be used in the pleading to result in an award ofsolicitor-client costs (see Unisys Canada Inc v York Three Associates Inc, 2000 CarswellOnt 3449 (Sup Ct J), varied on other grounds (ON CA), 2001 CarswellOnt 3301 (CA); and Kaymar Rehabilitation Inc v Champlain Community Care AccessCentre, et al, 2010 ONSC 6614). [101] Given Serge’s evidence on cross-examination that the agreement was between him and Derrick and Marcel“[i]ndividually”, and that there was no agreement between him or 545 and either of the corporate defendants (as reinforced by thedocuments that he received before filing the statement of claim), it would have been apparent to him, before the lawsuit was commenced,that there was no basis upon which to allege misconduct on the part of the corporate defendants—or to include them in the lawsuit at all.

Nonetheless, the plaintiffs did not withdraw those allegations or discontinue the claim as against them. [102] While lack of merit alone is not a basis to ground an award of solicitor-client costs (see Young at p 134; West v West,2007 MBCA 62 at para 4; Tofin v Galbraith, 2019 SKCA 35 at para 52; CIBC v Ahmed, 2021 MBCA 25 at para 16; and Henley vHenley, 2021 NLCA 46 at para 36), the jurisprudence recognizes a distinction between cases that are weak or have little merit from thosethat are groundless and wholly devoid of merit (see Petten v EYE Marine Consultants, 1998 CarswellNfld 351 at para 88 (SC (TD)); andInwest Investments Ltd v Canada (National Revenue), 2015 BCSC 2170 at paras 22-23).

A weak claim at the far end of the continuumthat also involves unproven allegations made recklessly without any foundation whatsoever can support an award of solicitor-client costs(see Thompson v Ontario, 1998 CarswellOnt 3824 at para 63 (CA); and Malik v Eagle Mountain Farms (A Partnership), 2021 BCCA379 at para 31). So too, in rare circumstances, can a claim characterized as so utterly without hope that it amounts to misconduct or anabuse of process deserving of rebuke (see Berthin v British Columbia (Registrar of Land Titles), 2017 BCCA 181 at para 53).

Similarly,including a defendant who should not have been joined in an action is both “improper” and “unnecessary” and thus contrary to r 57.01(1)(e), and has been found to be misconduct justifying an award of solicitor-client costs (see Sun Alliance Insurance Co v CommercialUnion Assurance Co of Canada, 1991 CarswellOnt 841 at para 15 (Ct J (Gen Div)); Shepp v Saanich (District) Board of Variance, 1998CarswellBC 2504 at paras 14-15 (SC); and Humby et al v Howitt and Thompson (City), 2006 MBQB 166 at para 15). [103] In this case, the corporate defendants were not part of the agreement, and neither had any interest in Westhaven LP or thedevelopment property.

As well, as previously noted, CCRES was not even incorporated until December 2014, after Westhaven LP haddisposed of its entire interest in the project. [104] Although the corporate defendants did provide real estate sales and leasing services for properties within the joint venturelands, they provided no such services to the plaintiffs—and CCRES provided the services after Westhaven LP had divested itself of itsentire investment in the development property and the general partner had paid 580 on its investment.

There is no evidence of vicariousliability on the part of the corporate defendants for the actions of Derrick or Marcel, or their companies. [105] Throughout the litigation, no case against the corporate defendants was ever articulated, let alone supported by anyevidence. At the hearing of the appeals, counsel for the plaintiffs was unable to provide any basis for their inclusion. Nonetheless, theclaim against them was pursued, all the way through appeal. [106] The plaintiffs’ claim against the corporate defendants should have been addressed separately from the other motions forsummary judgment.

Instead, they have been “along for the ride” in expensive litigation for no apparent reason. [107] In

summary, the claim against the corporate defendants is wholly devoid of merit, involves unproven allegations ofmisconduct clearly made against them, from the outset, without any foundation. It was apparent from the outset that they should nothave been included in the action. Presumably, they were named as defendants based solely on their connection to Derrick and Marcel. This “catch all” approach to litigation is to be deterred and is worthy of rebuke. I would award solicitor-client costs in favour of thecorporate defendants.

[108] As for Derrick and Marcel and their companies and the question of unproven allegations of misconduct made againstthem, counsel for the plaintiffs, at the costs hearing before the judge, submitted that, despite the allegations in the statement of claim,fraud had not been pursued and the case was not really about fraud. In my view, when counsel made that submission, he was likelytrying to tailor the claim for the purpose of limiting his clients’ exposure to costs.

That being said, the judge, who noted that he hadbeen involved with the case for two years, nonetheless made his own, albeit limited, assessment of the situation. He was entitled toobserve that counsel for the plaintiffs had been “very adamant” early on, at the first

summary judgment conference, that he was notpursuing a fraud claim, and that “there [had been] no discussion of fraud during the

summary judgment process”. [109] Furthermore, the plaintiffs’ case against Derrick and Marcel and their companies, while weak, was not so wholly devoidof merit as that against the corporate defendants. In deciding the case against Derrick and Marcel and their companies, the judge wasasked to make assessments of credibility, in order to determine the terms of the agreement.

The agreement was for investment in asophisticated and complex commercial transaction, involved a considerable amount of money, and was made in discussions conductedover just a few days. [110] In all of these circumstances, I am not convinced that an award of solicitor-client costs in favour of Derrick and Marceland their companies is appropriate. While the plaintiffs’ failure to withdraw the allegations of misconduct against them cannot becondoned, it does not necessarily require an award of solicitor-client costs (see Paz v Hardouin (1996), (BC CA), 138DLR (4th) 292 at paras 5-6 (BCCA)).

However, elevated costs are called for. It appears that, but for the judge’s error in principle intaking into account the pre-litigation conduct of Derrick and Marcel, he would have awarded double party and party costs in favour ofeach of them. In my view, such an award is reasonable given all of the circumstances, including the nature of the allegations advanced. Therefore, I would award each of Derrick and Marcel, together with their companies, double tariff costs. Conclusion [111] For the foregoing reasons, the plaintiffs’ appeals are dismissed. The defendants’ cross appeals are allowed in part.

Inboth this Court and the Court below, the corporate defendants will have solicitor-client costs, and Derrick and Marcel (together with theircompanies) will each have one set of double costs in accordance with the applicable tariff. JA I agree: JA I agree: JA