Stewart v, 2023 MBCA 72

Citation: Stewart v 6551450 Manitoba Ltd et al , 2023 MBCA 72 Date: 20230911 Docket: AI22-30-09802 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Jennifer A. Pfuetzner Madam Justice Karen I. Simonsen Madam Justice Lori T. Spivak BETWEEN : heather anne stewart ) ) (Plaintiff) Respondent ) ) F. J. Trippier and - and - ) I. Vakurova ) for the Appellants 6551450 manitoba ltd., susan auch ) holdings ltd. and SUSAN AUCH ) ) R. Y. Mamucud (Defendants) Appellants ) for the Respondent ) H. A. Stewart - and - ) ) PEGUIS FIRST NATION, CHIEF PEGUIS ) D. W. Chornopyski and INVESTMENT CORP. and 6223291 ) Z.

Kadhim MANITOBA LTD. ) for the Respondents ) Peguis First Nation, Chief (Third Parties) Respondents ) Peguis Investment Corp. ) and 6223291 Manitoba AND BETWEEN : ) Ltd. ) 6551450 manitoba ltd. ) ) Appeal heard: (Plaintiff) Appellant ) March 20, 2023 ) - and - ) ) Judgment delivered: PEGUIS FIRST NATION, CHIEF PEGUIS ) September 11, 2023 INVESTMENT CORP., 6223291 MANITOBA ) LTD. and HEATHER STEWART ) ) (Defendants) Respondents ) On appeal from 2022 MBQB 84 pfuetzner JA [ 1 ] This litigation arose out of a failed effort by the plaintiff, Heather Anne Stewart (Stewart), to sell her farmland (the Rosser land) in the Rural Municipality of Rosser, Manitoba (the RM) for development as a quarry. [ 2 ] The trial judge granted judgment against 6551450 Manitoba Ltd. (655), Susan Auch (Auch) and Susan Auch Holdings Ltd. (Holdings) (collectively, the Auch defendants) in favour of Stewart in the amount of $600,000 with interest in respect of a loan.

He dismissed a related claim by 655 against the Peguis parties (as defined below at para 4) for damages for breach of the terms of a joint venture agreement and breach of fiduciary duty. The Auch defendants appeal. [ 3 ] The appeals raise interesting legal issues regarding piercing the corporate veil and the nature of a bare trust. However, as I will explain, the trial judge made no errors requiring appellate intervention and I would dismiss the appeals.

Background [4] As described by the trial judge, he heard two related claims (at paras 2-3): In the “Stewart claim”, Stewart claims for $600,000 plus interest as against 6551450 Manitoba Ltd. (“655”), Susan Auch (“Auch”) andSusan Auch Holdings Ltd. (“Holdings”) arising from a loan that Stewart says she made to 655 in or about December 2013 to assist 655with expenses related to obtaining approval from The Rural Municipality of Rosser (“the R.M.”) to operate a quarry on the Rosser land.

In the “655 claim”, 655 claims against the Peguis First Nation (“the First Nation”), Chief Peguis Investment Corp. (“CPIC”) and6223291 Manitoba Ltd. (“622”) (collectively “the Peguis parties”) for breaching fiduciary and contractual duties in connection with thefailed purchase of the Rosser land in March 2015. [5] After an eight-day trial, the trial judge distilled the voluminous documentary and other evidence into concise reasons.

The Stewart Claim [6] In respect of the Stewart claim, the trial judge granted Stewart judgment against the Auch defendants, jointly andseverally, for $600,000 with interest at 10% from March 31, 2015. In doing so, he found that the true nature of the transaction betweenStewart and 655 was a loan and that the terms of the loan were sufficiently certain.

He rejected 655’s argument that Stewart was merelyfacilitating a flow through of funds from the First Nation to 655, both of whom, together with CPIC, were involved in a joint ventureestablished to purchase the Rosser land from Stewart and to operate it as a limestone quarry. [7] In holding Auch and Holdings jointly and severally liable with 655 for the loan, the trial judge found that the test forpiercing the corporate veil set out in Transamerica Life Insurance Co of Canada v Canada Life Assurance Co, (ONSC), 1996 CarswellOnt 1699 (Ct J (GD)); and Yaiguaje et al v Chevron Corp, 2018 ONCA 472, had been met.

The 655 Claim [8] 655 brought a claim for damages against the Peguis parties for breaching the terms of the joint venture agreement andfor breaching the fiduciary duty it alleged was owed to 655. One of the Peguis parties, 622, was incorporated solely to acquire legal titleto the Rosser land as bare trustee for the purposes of the joint venture. Members of council of the First Nation were the directors of 622. 622 was party to an agreement of purchase and sale of the Rosser land with Stewart (the 622 purchase agreement).

The 622 purchaseagreement was conditional on the RM approving the operation of the Rosser land as a quarry prior to March 31, 2015 (the condition). [9] The trial judge found that the First Nation and 622 breached their fiduciary duty to 655 by failing to disclose allrelevant information to 655 in a timely manner—in particular that the First Nation was not willing to waive the condition when the RMapproval could not be obtained. However, he found that the First Nation’s fiduciary duty did not extend so far as to obligate it to carryout the desire of 655 to waive the condition and close the 622 purchase agreement.

The trial judge determined that 655 did not have thefinancial resources to be able to purchase the Rosser land on its own and, as a result, did not suffer any loss due to the breach of fiduciaryduty. [10] Next, the trial judge considered 655’s claim that the First Nation breached the joint venture agreement by failing togive 655 reasonable notice of its intention not to acquire the Rosser land so that 655 would have a meaningful opportunity to do so on itsown.

He was not persuaded that such a breach occurred but that, if it did, no damages flowed from the breach. [11] Ultimately, the trial judge dismissed the 655 claim with costs. The Auch defendants now appeal the judgment dealingwith both claims and raise 30 overlapping grounds of appeal, which will be distilled into their key points.

Analysis—The Stewart Claim Nature of the Agreement [12] The Auch defendants assert that the trial judge erred in finding that a loan agreement existed between Stewart and 655and in finding that there was no ambiguity in the terms of the agreement. [13] The trial judge’s finding that the transfer of $600,000 from Stewart to 655 was pursuant to a loan agreement, the termsof which were sufficiently certain, is one of mixed fact and law and will only be disturbed on appeal if tainted by palpable and overridingerror. [14] The trial judge was presented with two alternative ways of looking at the transfer of funds from Stewart to 655.

Stewartargued that there was a binding contract which included the basic terms of a loan from her to 655.

The Auch defendants asserted thatthere was no loan agreement and that Stewart was merely acting as an intermediary to allow funds to be transferred from the First Nationto 655 as the terms of the First Nation’s Treaty Land Entitlement Trust (the TLE Trust) would not allow it to use funds in this manner. [15] In Matic et al v Waldner et al, 2016 MBCA 60, this Court stated that the test for determining whether a bindingcontract, either oral or written, has been reached “is whether an ‘objective reasonable bystander’, looking at all the material facts, wouldsay so” (at para 55). [16] The focus of the inquiry is not on the subjective intention of either party to the alleged contract but on their manifestedjoint intention based on their communications, written exchanges, actions and any other relevant circumstances (ibid at para 64).

Asfurther explained in Matic (at para 71): The test required that the trial judge consider all of the facts and circumstances, other than the subjective intention of the parties, through

the lens of an objective reasonable bystander, to determine if an unconditional agreement had been reached, the essential terms of which can be determined with reasonable certainty. The purpose of the objective reasonable bystander test is to determine the manifested intentions of the parties, rather than their subjective intentions. [emphasis in original] [ 17 ] Here, the evidence overwhelmingly supported the trial judge’s finding that this was a loan.

This included Stewart’s evidence, which was accepted by the trial judge, that Auch’s husband, Floyd Campbell (Campbell), asked her to loan funds to 655 so that it could pursue the RM approval of the quarry.

The trial judge rejected Campbell’s and Auch’s denials as “disingenuous” (at para 45) as he was entitled to do. [ 18 ] Moreover, the documentary evidence, which includes the following, supported the trial judge’s findings: (1) the promissory note signed by 655 promising to pay $600,000 to Stewart and referring to her as the “Lender”; (2) the minutes of the directors of 655 dated December 20, 2013 noting that Stewart “has or may in the future lend the sum of $600,000 to [655] (collectively, the ‘Stewart Loan’ )” and authorizing both the Stewart Loan and the granting by 655 “of a promissory note evidencing the Stewart Loan”; and (3) the personal guarantee signed by Campbell and two others in favour of Stewart in order to “guarantee the due and punctual repayment” of 655’s loan of $600,000. [ 19 ] The vigorous arguments made at trial and on appeal that there was no loan between Stewart and 655, but rather a flow-through arrangement, were doomed to fail.

While there was evidence to support the Auch defendants’ position that they formed the subjective intention, together with the First Nation, to use Stewart as an intermediary to get $600,000 from the TLE Trust to 655, there is no evidence that their subjective intention was ever communicated to Stewart. All of the documents and correspondence to which Stewart and her counsel were privy at the time that she transferred $600,000 to 655 are consistent only with it being a loan. The manifested intention of Stewart and 655 was that this was a loan, despite 655’s uncommunicated subjective intention otherwise. [ 20 ] In

summary, the trial judge made no palpable and overriding errors in finding that the true nature of the agreement between Stewart and 655 was a loan and in finding that the terms of the loan were settled and sufficiently certain. There is ample support in the record for the trial judge’s findings and I would dismiss this ground of appeal. Piercing the Corporate Veil [ 21 ] I will now consider the Auch defendants’ characterization of the trial judge’s reasons as finding that Auch had committed fraud and their argument that he erred in doing so.

They also submit that the trial judge erred in finding personal liability for the loan on the part of Auch and Holdings by ignoring the separate legal personality of 655 and piercing the corporate veil. [ 22 ] As observed by Hourigan JA in Chevron , “corporate separateness is the rule” (at para 70).

Courts should not be quick to deviate from that principle unless “the corporate form is being abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct” ( ibid ). [ 23 ] The legal test in Canada for when it is appropriate for a court to pierce the corporate veil has been well-established since the decision of Sharpe J (as he then was) in Transamerica . He noted that there are three circumstances where courts should pierce the corporate veil.

The first and third circumstances are concerned with legislative exceptions to the rule of separate corporate personality and cases where the corporation is acting as an authorized agent of its controllers (see para 19). [ 24 ] In the present case, we are concerned only with the second circumstance—that is, “[w]hen the court is satisfied that a company is a ‘mere façade’ concealing the true facts” ( ibid ). A review of the many reported cases on piercing the corporate veil shows that the decisions are highly fact-driven.

As a result, barring error on an extricable question of law, such a decision should not be interfered with on appeal unless there has been a palpable and overriding error. [ 25 ] In these circumstances, the party seeking to pierce the corporate veil must establish two elements. First, that the corporation is “completely dominated and controlled”. This “requires more than ownership”.

There must be “complete domination” such that the “company does not, in fact, function independently” ( ibid at para 22). [ 26 ] The second element is that the corporation is “being used as a shield for fraudulent or improper conduct” ( ibid ). The nature of the conduct required for the test to be met is described in Transamerica as “conduct akin to fraud that would otherwise unjustly deprive claimants of their rights” and as “using [a corporation] as a shield for some nefarious purpose” (at para 23).

In the recent decision in FNF Enterprises Inc v Wag and Train Inc , 2023 ONCA 92 , Zarnett JA wrote that the meaning of “fraudulent or improper conduct” has been expanded to include circumstances where “those in control expressly direct a wrongful thing to be done” (at para 21). [ 27 ] The phrase “fraudulent or improper conduct”, which is commonly used in the jurisprudence, is disjunctive and it is clear that a finding of fraud is not required in order for the test to be met. [ 28 ] The result of piercing the corporate veil is that the person who engaged in the fraudulent or improper conduct is prevented from asserting that the liabilities resulting from that conduct are those of the corporation only ( ibid at para 20). [ 29 ] Importantly, for the issues raised in the present case, Zarnett JA explained in FNF that the second element of the test for piercing the corporate veil “requires fraudulent or improper conduct, and contemplates that it is that conduct that has given rise to the liabilities the plaintiff seeks to enforce” (at para 20).

Accordingly, there must be a “nexus between the liability the plaintiff [seeks] to recover by piercing the corporate veil and the wrongful conduct directed by the individual in control of the corporation that [gives] rise to that very liability” (at para 27).

[ 30 ] In FNF , the plaintiffs had leased commercial premises to the defendant corporation, who occupied the premises and paid rent for several years. The plaintiffs alleged that, one year prior to the termination of the lease, the defendant corporation abandoned the premises and stopped paying rent. The plaintiffs sought to pierce the corporate veil and hold the sole director and shareholder of the defendant corporation personally liable for damages for breach of the lease as they claimed that she “stripped value from [the defendant corporation] knowing of its lease liabilities” (at para 26).

Zarnett JA concluded that it was not appropriate to pierce the corporate veil in those circumstances because it was not the act of removing value from the defendant corporation that gave rise to the liability to the plaintiff—it was the breach of the lease. Moreover, “[i]t [was] not alleged that [the defendant corporation]’s entering into the lease was an abuse of the corporate form or a shield for fraudulent or improper conduct” ( ibid ). [ 31 ] The Auch defendants raise two issues.

They argue that they were denied procedural fairness as the trial judge made findings of fraud on the part of Auch when this was neither pled nor raised until closing arguments. While they do not claim that the trial judge stated or applied the wrong legal test for piercing the corporate veil, they submit that the pleadings and evidence were not sufficient to satisfy the test. [ 32 ] I will address the fairness concerns first. [ 33 ] To begin, the trial judge did not strictly make a finding of fraud, nor is such a finding required to meet the legal test for piercing the corporate veil, as I have explained.

His findings of “improper, if not fraudulent, conduct” and “improper conduct which is akin to fraud” (at para 60) come directly after he had reviewed the leading cases, Transamerica and Chevron , both of which refer to the requisite behaviour as “fraudulent or improper conduct” (at paras 22 and 70 respectively). [ 34 ] The Auch defendants correctly observe that a finding of fraud is a very serious one. Here, since the trial judge did not technically find that fraud had occurred and fraud was not pled, it may have been preferable for him to have limited his findings to improper or wrongful conduct.

However, he chose to align his reasons with the language used in the leading cases and he made no error in doing so. [ 35 ] Next, I am not persuaded that the Auch defendants were not put on notice of the case that had to be met. They were given fair notice that Stewart alleged improper conduct sufficient to pierce the corporate veil in her statement of claim (“Auch is personally liable for the loan as . . . the funds were used for personal expenses”). By agreement, we were provided with various case conference and pre-trial motion briefs.

These also demonstrate that the Auch defendants were properly notified of the case against them: “these funds were misappropriated and used for [Auch’s] or [Campbell’s] personal expenses”; “the use of the Loan funds is improper”; “[i]n order for [Auch] to be found personally liable, this court would have to ‘pierce the corporate veil’ and remove the separate legal personality of 655 [and] Auch Holdings”; and “Auch exercised complete control and authority over 655 [and] . . . [t]hat control and authority was exercised by [Auch] in an improper manner for the improper purpose of obtaining the Loan funds . . . [and] [t]his misconduct was the exact cause of [Stewart’s] loss.” [ 36 ] In addition, in his opening statement at trial, counsel for Stewart said “you will hear evidence of how [Auch] and her husband . . . misappropriated corporate trust funds for their own use and unrelated debt, deceiving not only their co-venturers but, ultimately, [Stewart].” In closing arguments, Stewart’s counsel did not assert that Auch had committed fraud, instead stating that the allegation was that “Auch used 655 and [Holdings] as mere bank accounts for [the] improper purpose of obtaining those monies from [Stewart].” [ 37 ] The Auch defendants’ counsel (not counsel on appeal) did not raise any concerns regarding lack of notice of the allegations at trial.

He simply argued that “the basis as pleaded for the claim against [Auch] in person, as a matter of principle, [was] insufficient.” He submitted that there was no principled basis to say that, in every case where a corporation borrows money and the director knows that it will be used for a purpose different than disclosed to the lender, the director will automatically be personally liable. [ 38 ] Having addressed the fairness of the process, I turn to the argument that the pleadings and evidence do not satisfy the Transamerica test. [ 39 ] As previously indicated, I am not convinced that Stewart’s statement of claim did not plead facts sufficient to ground piercing the corporate veil.

Indeed, it was specifically pled that, when 655 borrowed $600,000 from Stewart, the conditions of their agreement included that the sum would be used exclusively to advance the quarry approval process with the RM and not for any other purpose and that Auch, as the directing mind of 655, knew that the funds were used instead for her personal expenses or those of her immediate family. [ 40 ] As was described in FNF , in order for the evidence to satisfy the test for piercing the corporate veil in the present case, it must be shown that Auch and Holdings engaged in improper conduct that gave rise to the liability to Stewart.

Here, the liability to Stewart arose from the loan she made to 655, not from the subsequent use that 655 made of the loan proceeds. Therefore, the trial judge’s decision to pierce the corporate veil must be based on a finding that the loan itself was entered into improperly by Auch and Holdings using 655 as a shield. The trial judge made the necessary factual findings, stating (at paras 58-59): Stewart agreed to loan 655 $600,000 for the purpose of obtaining R.M. approval. I accept that this is what she was told by Campbell and it was the basis upon which she advanced the funds. . . .

However, when the funds were received by 655’s lawyer, Auch, the directing mind of the majority shareholder, directed him to disburse all of the funds to pay off personal debt. . . . Stewart did not lend $600,000 to 655 for that purpose, and I accept that she would not have done so had Campbell and Auch been honest about their intentions . [emphasis added] [ 41 ] The trial judge’s findings are amply supported by the evidence, as is his finding that “655 was used by Auch and Holdings to facilitate improper . . . conduct which has caused loss to Stewart” (at para 60 ). Moreover, the Auch defendants’ continuous

insistence that the arrangement was not a loan but a way to flow money from the First Nation via Stewart to 655 only supports the trial judge’s decision to pierce the corporate veil and find personal liability on the part of Auch and Holdings. As I have explained, there is absolutely no evidence that Stewart knew of the flow-through plan. Indeed, the scheme was pitched to her as a loan for a legitimate purpose that would assist in her goal to sell the Rosser land. The trial judge found as a fact that she would not have participated otherwise.

If the sale of the Rosser land to 622 had closed as planned, the reality of this scheme likely never would have seen the light of day. [ 42 ] In conclusion, there is no basis to intervene in the trial judge’s findings in respect of the Stewart claim and I would dismiss the appeal. Analysis—The 655 Claim [ 43 ] Turning to the 655 claim, it contends that the trial judge erred in finding that the First Nation did not breach the terms of the joint venture agreement. It alleges three interrelated breaches of the joint venture agreement by the First Nation relating to the failure to close the 622 purchase agreement.

One of these breaches is argued for the first time on appeal. In each case, 655 takes the position that the First Nation had an obligation to 655 under the joint venture agreement to close the 622 purchase agreement.

It seeks damages for breach of contract in the amount of $18.75 million based on an expert report presented at trial. [ 44 ] 655 also submits that the trial judge erred by failing to find that damages flowed from 622’s and the First Nation’s breach of fiduciary duty based on the restitutionary nature of such damages. [ 45 ] The trial judge’s finding that the Peguis parties did not breach the terms of the joint venture agreement is one of mixed fact and law and will not be overturned absent palpable and overriding error or an error on an extricable question of law. [ 46 ] I note at the outset that the terms of the joint venture agreement clearly indicate that the joint venture is to be comprised only of 655 and CPIC.

Article 24.15 states that the First Nation is a party to the joint venture agreement only for the purpose of certain covenants it provided in

article 2 but that it “shall not for any purposes whatsoever be, or be deemed to be, a joint venturer”—a fact that seems to have escaped notice at trial. However, I am not persuaded that for purposes of the appeal anything turns on the distinction between the roles of CPIC and the First Nation as they are closely related. Breach of Contract—Management Committee Direction [ 47 ] Under the terms of the joint venture agreement, a management committee of four individuals was established to jointly conduct the management and control of the joint venture.

Auch and Campbell were the management committee representatives of 655 and Whelan Sutherland and Rob Magnusson (Magnusson) were the CPIC representatives.

On February 17, 2015, an email from Magnusson, on behalf of the management committee, was sent to the chief of the First Nation recommending that the condition in the 622 purchase agreement be waived. [ 48 ] 655 argues that the trial judge erred by failing to find that the recommendation of the management committee was binding on the First Nation and, once the recommendation was made, the First Nation had a contractual obligation to 655 to direct 622 to waive the condition and close the 622 purchase agreement. [ 49 ] While 655 made this same submission at trial, it was not addressed by the trial judge in his reasons—the focus of which were on 655’s arguments regarding breach of fiduciary duty.

That the trial judge did not specifically deal with this point is not surprising considering that 655’s trial counsel described its position that 622 was a fiduciary that had breached its duty to 655 as the “crux” of its claim. It can be presumed that the trial judge rejected this argument. [ 50 ] In any event, 655’s assertion can be dealt with now. The question of whether the management committee’s recommendation that the condition be waived was binding on the First Nation and on 622 is one of contractual

interpretation of the joint venture agreement.

The goal is to give effect to the intentions of the parties gathered from the words they have used, consistent with the surrounding circumstances known to the parties at the time the contract was formed (see Elias v Western Financial Group Inc , 2017 MBCA 110 at para 68 ; and Vesturland Development Ltd et al v Gimli (Rural Municipality) et al , 2021 MBCA 45 at para 37 ). [ 51 ] Reading the joint venture agreement as a whole, my view is that it contemplated that the primary role of the management committee was to run the day-to-day business of the joint venture after title to the Rosser land was acquired—which never happened.

However, fundamental decisions regarding the acquisition of the Rosser land or termination of the joint venture were reserved to the parties to the joint venture agreement. [ 52 ] In coming to this conclusion, I have considered several provisions of the joint venture agreement. First,

article 8.03 provides that each joint venturer will be bound by the votes of its appointed management committee representative who will possess authority to act for it with respect to its participation in the joint venture “unless otherwise provided for” in the joint venture agreement. [ 53 ]

Article 8.04 sets out the powers of the management committee, which include such things as determining the time, place and procedure for its meetings; acting on all matters pertaining to the limestone quarry business; entering into banking arrangements; appointing auditors; and hiring subcontractors. The management committee is also granted certain powers with respect to the Rosser land, such as subleasing it or granting security over any part of it. However, the consent of 622 is specifically required before the management committee can exercise those powers. [ 54 ]

Article 9.05 of the joint venture agreement (which I will discuss in more detail later) contemplates the circumstances that occurred in the present case—the condition was not satisfied because the RM approval was not obtained. In that event, the joint venturers may agree not to proceed with the purchase and may terminate the joint venture agreement or, if only one wishes to proceed it can do so and terminate the joint venture agreement. The management committee has no input into the decision-making process of either of the joint venturers in this circumstance.

[ 55 ] Finally, the balance of

article 9 and articles 11, 12, 14 and 15 of the joint venture agreement gives the joint venturers, not the management committee, the power to make other fundamental decisions outside of the scope of the day-to-day business contemplated by the joint venture agreement.

These include rights of first refusal for interests in the joint venture, events of default and call options, termination of the joint venture, rights to partition or sale and appraisal. [ 56 ] To conclude, the trial judge did not err by failing to find that the First Nation was bound to direct 622 to waive the condition as recommended by the management committee. There was no breach of the joint venture agreement in this regard. Breach of Contract—Waiver Occurred [ 57 ] 655 makes a related or alternative argument regarding waiver of the condition.

It asserts that a valid band council resolution was passed by the First Nation approving waiver of the condition on March 23, 2015 and that this waiver was communicated to Stewart, making the 622 purchase agreement binding as between Stewart and 622.

On March 24, 2015 a new chief and council were elected by the First Nation who subsequently passed another band council resolution revoking the prior resolution and deciding not to waive the condition or close the 622 purchase agreement in light of the RM approval having not been obtained. [ 58 ] Although counsel for 655 and counsel for the Peguis parties spent considerable time both at trial and on the appeal addressing the validity of the disputed March 23, 2015 band council resolution, in my view nothing turns on this.

Whether or not a valid decision to waive the condition was ever made by the First Nation, the trial judge made no palpable and overriding error in finding that no communication of any such waiver was made to Stewart. As a result, his finding is determinative of this issue. Breach of Contract—New Issue [ 59 ] 655 makes an alternative argument in the event that the trial judge was correct to find that waiver of the condition was not communicated to Stewart.

It maintains that, once the decision to waive the condition was made by band council resolution on March 23, 2015, the First Nation was bound to this position vis-à-vis 655, and was obligated to communicate the waiver to Stewart and to close the 622 purchase agreement. 655 contends that the failure to take these steps was a breach of

article 9.05(

b) of the joint venture agreement. 655 submits that the First Nation had effectively given notice to 655, as one of the joint venturers, that it intended to close the 622 purchase agreement and was bound by that position. [ 60 ] This argument was not made by 655 at trial and, as a result, was not addressed by the trial judge. [ 61 ] Generally speaking, an issue not raised in the trial court should not be entertained on appeal. Like most general rules, there are exceptions.

For example, a new issue on appeal will be considered where there is a risk of an injustice and the issue can be decided without further evidence or procedural prejudice to any party ( Samborski Garden Supplies Ltd v MacDonald (Rural Municipality) , 2015 MBCA 26 at para 27 ). [ 62 ] In my view, there are no circumstances here warranting entertainment of this new argument on appeal. There is no risk of an injustice because 655’s argument is without merit, as I will explain. [ 63 ] In considering 655’s argument, it will be helpful to set out the salient portions of

article 9.05(

b) of the joint venture agreement, which read: 9.05 If the purchaser’s conditions precedent under the [622] Purchase Agreement are not satisfied (that is, no Permit is obtained), then: . . . (

b) if either Joint Venturer gives notice to the other Joint Venturer that it wishes to proceed with the purchase of the [Rosser land], and the other Joint Venturer does not wish to proceed , then the Joint Venturer wishing to proceed may elect to immediately terminate the Joint Venture.

If [655] is the party so electing, [CPIC] shall execute all documents and do all things as [655]’s solicitors may reasonably request in order to immediately assign the [622] Purchase Agreement to [655]. [655], on completing the purchase of the [Rosser land] in such circumstances, shall assume all payment obligations in respect of the mortgage loan to [CPIC] and the [financing required to close], if any . . .. [emphasis added] [ 64 ] The plain language of

article 9.05(

b) of the joint venture agreement, read in light of the entire agreement, does not support 655’s assertion that any decision of the First Nation on March 23, 2015 to waive the condition had the result of irrevocably binding it and/or CPIC to that position as against 655. The purpose of

article 9.05(

b) is to protect a joint venturer who gives notice to the other joint venturer that they want to proceed with the 622 purchase agreement without the RM approval and to allow that party to go it alone if the other party is not willing to continue. In that case, the first step is for the party wishing to proceed without the RM approval (here, 655) to give notice to the other party (here, the First Nation) who must then determine whether or not it also wishes to proceed and advise 655 accordingly.

There is no evidence that 655 took that first required step of advising the First Nation that it wished to complete the purchase itself and to terminate the joint venture. Rather, its strategy throughout was to repeatedly urge the First Nation to direct 622 to waive the condition and to marshal the funds from the TLE Trust required to close. [ 65 ] My conclusion that the plain language of

article 9.05(b), read in light of the entire agreement, does not support the

interpretation urged upon this Court by 655—that a party is bound to maintain its position on waiver of the condition once that position is stated to the other joint venturer—is enough to refuse to entertain this argument. [ 66 ] Moreover, in my view, the proper construction of

article 9.05(

b) of the joint venture agreement is not inconsistent with the trial judge’s finding that the

article “carries with it the implied condition” that the First Nation was required to give 655 reasonable

notice of whether it was willing to waive the condition, and that, in the circumstances of this case, it did so (at para 102). He made no palpable and overriding error in so finding. Breach of Fiduciary Duty [ 67 ] I now turn to the final issue raised in this appeal—whether the trial judge erred in failing to find damages for a breach by 622 and the First Nation of a fiduciary duty he found that they owed to 655. [ 68 ] I previously indicated that 655 asserted at trial that breach of fiduciary duty was the “crux” of its case. This focus changed on appeal.

At the hearing, counsel for 655 agreed that this is squarely a contractual case, but nonetheless maintained the position that the trial judge erred in not ordering damages for breach of fiduciary duty, having found such a breach. [ 69 ] The trial judge found that the First Nation “was imbued with fiduciary duties” as it was “an agent and trustee of 655” (at para 66). He found that the First Nation had “an obligation to disclose all relevant information to 655 in a timely manner so that 655 could offer its input in matters affecting its interests” (at para 69).

Ultimately, the trial judge found that “the First Nation and 622 failed to discharge their duty to disclose all relevant information to 655 in a timely manner” (at para 94), but that the First Nation had no duty to carry out of the wishes of 655 to close the 622 purchase agreement.

The trial judge found that no damage flowed from the breach of fiduciary duty because “[t]he First Nation gained nothing from the breach and the loss sustained to 655 arose from the failure of the transaction to close” (at para 101), not from the failure of the First Nation to provide timely information. [ 70 ] This ground of appeal can be dealt with summarily and I would dismiss it on the basis that the trial judge made no palpable and overriding error in finding that no damages flowed from the specific breach of fiduciary duty that he found had occurred. [ 71 ] Having said that, I feel that I must comment on the trial judge’s foundational finding that 622 and the First Nation were fiduciaries to 655 despite the fact this is not under appeal.

It is a finding that has a very shaky foundation in law and reflects what seems to be a misunderstanding of the nature of a bare trust (see Nash v Nash , 2019 MBCA 31 at paras 26-27 , 30). [ 72 ] In fairness to the trial judge, his finding appears to have arisen from his acceptance of 655’s arguments at trial—to which the Peguis parties essentially did not respond and, as a result, effectively conceded. [ 73 ] The trial judge’s reasons for finding a fiduciary relationship are brief and I will set them out in full (at paras 65-66): In its Statement of Defence, 622 admits that it was the agent and trustee of 655 in relation to the agreements with Stewart for the sale and purchase of the Rosser land.

Such a relationship gives rise to fiduciary duties. (D.W.M. Waters, Waters’ Law of Trusts in Canada , 3rd at p 38) As noted earlier in these reasons, 622 was a bare trustee for the First Nation for the purpose of acquiring the Rosser land. The First Nation was the operating mind and decision maker with respect to the purchase of the Rosser land.

Accordingly, I find that the First Nation was likewise an agent and trustee of 655 and was imbued with fiduciary duties. [footnote omitted] [ 74 ] Respectfully, there are several difficulties with these passages. [ 75 ] First, 622’s admission in the pleadings was not as extensive as indicated by the trial judge.

The Peguis parties admitted the allegation made by 655 that 622 entered into the 622 purchase agreement with Stewart “as agent and trustee on behalf of the Joint Venturers.” [ 76 ] One must look to the joint venture agreement to understand 622’s role with respect to the First Nation and the joint venturers. 622 is not a party to the joint venture agreement, but is referred to in both the recitals and in

article 2.01. The recitals indicate the parties’ intention that, upon the purchase of the Rosser land, 622 “shall hold legal title . . . for and on behalf of [the] . . . First Nation in accordance with the Peguis Treaty Entitlement Agreement and shall lease the [Rosser land] to the joint venture comprised of [CPIC] . . . and [655]”.

Article 2.01 similarly provides that “[u]pon [622] acquiring fee simple title to the [Rosser land], it is understood that [622] shall hold such title . . . in trust for and on behalf of [the] . . . First Nation and shall enter into the Ground Lease with the Joint Venture”. [ 77 ] That is the extent of 622’s duties—to hold bare legal title to the Rosser land upon its acquisition (an event that did not occur) and to lease the Rosser land to the joint venture.

The nature of 622’s limited role was indeed acknowledged by the trial judge when he noted that the joint venture agreement reflected that 622 “would be taking title to the Rosser land” and that “622 was a bare trustee created solely for that purpose” (at para 18). [ 78 ] Second, the trial judge’s statement that “[s]uch a relationship gives rise to fiduciary duties” (at para 65) is overbroad. [ 79 ] A bare trustee whose only duty is to hold legal title to land at the direction of the beneficial owner has limited, if any, fiduciary duties as it has no independent powers or discretion.

This was described in HAJ Ford & WA Lee assisted by Peter M McDermott, Principles of the Law of Trusts , 3rd ed (North Ryde, NSW: LBC Information Services, 1996) (loose-leaf updated 1996, release 1), ch 1 at 3, as follows: “At one extreme it is possible to impose on the fiduciary owner or trustee no duties beyond the duty of transferring ownership when called upon to do so. In such a bare or passive trust, the trustee does little more than hold title” (at

section 1000). See also Scoretz v Kensam Enterprises Inc , 2018 BCCA 66 at para 23 ; and Nash at para 27 . [ 80 ] As noted by Professor Waters in Donovan WM Waters, Mark R Gillen & Lionel D Smith, Waters’ Law of Trusts in Canada , 5th ed (Toronto: Thomson Reuters, 2021): “Whatever other fiduciary duties, aside from holding and in appropriate circumstances maintaining the specific property, a bare trustee has is an open matter depending on the particular facts” (at 33-34, n 63).

[81] So what are the particular facts here? It is clear from the joint venture agreement that 622 had no duties other than tohold legal title, once acquired, as bare trustee and enter into a ground lease with the joint venture in accordance with the terms of the jointventure agreement. It had no independent duties or autonomy. The fact that 622 was named as the purchaser in the 622 purchaseagreement does not, without more, indicate otherwise.

It was a mere placeholder for the First Nation—a nominee whose sole purposewas to take legal title to the Rosser land and to lease it to the joint venture. [82] In this respect, the trial judge was correct to state that “622 was a bare trustee for the First Nation for the purpose ofacquiring the Rosser land” (at para 66). [83] Third, the trial judge’s factual finding that “[t]he First Nation was the operating mind and decision maker with respectto the purchase of the Rosser land” does not logically lead to his conclusion which immediately follows: “Accordingly, I find that theFirst Nation was likewise an agent and trustee of 655 and was imbued with fiduciary duties” (at para 66). [84] The first statement is a noncontroversial finding of fact by the trial judge.

The second finding is given some context bythe trial judge’s footnote that “[a]s 622 was a bare trustee and was controlled by the First Nation, I will refer to both parties simply as‘the First Nation’, except if the context requires otherwise” (at n 2). However, as I have explained, 622 had highly circumscribed, if any,fiduciary duties. The trial judge’s finding that 622’s duties are imputed to the First Nation cannot, as a matter of logic, expand thoseduties beyond maintaining legal title to the Rosser land, once acquired, for lease to the joint venture.

Moreover, 622’s limited dutieswere never triggered as it never acquired title to the Rosser land. [85] There is simply no basis in law or fact to find that the First Nation had any fiduciary duty to 655 derived solely from622’s role as a prospective bare trustee of legal title to the Rosser land. Additionally, as will be seen, such a fiduciary duty does not arisefrom the nature of the relationship established between CPIC, the First Nation and 655 under the joint venture agreement. [86] At common law, joint ventures do not presumptively create a fiduciary relationship between the joint venturers.

This isunlike partnerships, which have long been recognized to be presumptively fiduciary (see, for example, Guerin v The Queen, (SCC), [1984] 2 SCR 335 at 384; Frame v Smith, (SCC), [1987] 2 SCR 99 at 146-47; Visagie v TVX Gold Inc (2000), (ON CA), 187 DLR (4th) 193 at para 25 (ON CA); and Filkow et al v D’Arcy & Deacon LLP, 2019 MBCA 61 at para58). [87] As joint ventures are not per se fiduciary, a fiduciary relationship between joint venturers can only be found on an adhoc basis after a review of all of the specific facts and circumstances. [88] This Court has recently reviewed the hallmarks and essential elements of an ad hoc fiduciary relationship (see Filkow atparas 63-66) so I will not do so here, other than to note that at least one critical essential element is missing in the present case—anundertaking on the part of any of the Peguis parties to exercise a discretionary power solely in the interests of 655.

As noted byCromwell J in Galambos v Perez, 2009 SCC 48, the law is “clear that fiduciary duties will only be imposed on those who have expresslyor impliedly undertaken them” (at para 71). [89] The trial judge made no finding that any of the Peguis parties expressly or impliedly agreed to put the interests of 655before their own, nor would the record support such a finding.

The joint venture agreement, which establishes the relationship between655 and the Peguis parties, was negotiated by them at arm’s length and contains the following provision: 3.01 Nothing contained in this Agreement will create or be interpreted or construed as creating any permanent relationship between theJoint Venturers or limit their respective rights to carry on their individual businesses, outside of the scope of the purposes of the JointVenture set out in the

preamble hereof. It is agreed that no partnership is created by this Agreement, and nothing in this Agreement willor will be deemed to constitute the Joint Venturers as partners nor as agent of the other, nor any other relationship whereby either couldbe held liable for any act or omission of the other. [90] The parties to the joint venture agreement intended to create a commercial relationship for the purposes of acquiring theRosser land and operating it as a limestone quarry. The Peguis parties did not agree to put the interests of 655 before their own.

Asnoted by Binnie J in Cadbury Schweppes Inc v FBI Foods Ltd, (SCC), [1999] 1 SCR 142, “the policy objectivesunderlying fiduciary relationships [do] not generally apply to business entities dealing at arm’s length” (at para 30). [91] There is no basis to intervene in the trial judge’s dismissal of the 655 claim and I would dismiss the appeal. Conclusion [92] For all of these reasons, I would dismiss the appeals with costs. JA I agree: JA I agree: JA