Canada: Agricultural Law Netletter - January 21, 2017 - Issue 364

HIGHLIGHTS

* A Justice of the Supreme Court of British Columbia has conducted an in-depth review of the law concerning the formation of partnerships in relation to a proposed partnership to finance and develop an Abbotsford, British Columbia farm for the purpose of growing medical marijuana. The Court concluded that although the parties intended to enter into a written partnership or joint venture agreement, they had not reached a consensus with respect to the essential terms of the agreement, including when it would commence, their respective roles and responsibilities, how revenue and expenses would be accounted for and how they would share profit and losses. Although there had been discussions, they never actually commenced carrying on any business. A Vancouver businessman who had proposed a partnership to the owners of a small Abbotsford farm in financial difficulty, was granted judgment for funds he had advanced to pay down the farmer's mortgage but not for funds expended to improve the land for marijuana production. The farmers' actions for breach of fiduciary duty and breach a duty of good faith, as well as damages resulting from their loss of their farm in a foreclosure action were dismissed. (Ficocelli v. Henderson, CALN/2017-032, [2016] B.C.J. No. 2600, British Columbia Supreme Court)

NEW CASE LAW

Ficocelli v. Henderson;

CALN/2017-032,

Full text: [2016] B.C.J. No. 2600;

2016 BCSC 2295,

British Columbia Supreme Court,

W.J. Harris J.,

December 7, 2016.

Partnerships -- Proof of Essential Elements of the Partnership Agreement.

Michael Ficocelli ("Ficocelli") sued Brian and Nancy Henderson (the "Hendersons") for monies he paid on a mortgage against the Hendersons' farmland, and with respect to expenses he incurred improving buildings and the Hendersons' land to accommodate a proposed legal marijuana grow operation.

The Hendersons counterclaimed against Ficocelli, for breach of an alleged partnership agreement and for breach of alleged fiduciary duties and a duty of good faith.

In October of 2012, Ficocelli placed an advertisement on craigslist seeking a partner to develop a rural property. Ficocelli was a Vancouver businessman who owned an autobody shop and had a marijuana dispensary. Ficocelli was interested in locating rural properties which could be leased to marijuana growers for the purpose of supplying his business.

The Hendersons owned and resided on a 10 acre parcel in Abbotsford.

The Hendersons responded to Ficocelli's advertisement. The Hendersons were in difficult financial circumstances. The property was subject to a $525,000.00 mortgage with payments of $4,311.00 per month, interest only. The mortgage was to mature January 1, 2013. Their property was listed for sale for $997,000.00. It was a term of the mortgage that the property would be listed for sale at 5% below the appraised value.

A number of e-mails and draft agreements were exchanged between Ficocelli and the Hendersons which proposed a partnership between them and which involved cleaning up the property and leasing a barn on the property to designated marijuana growers and leasing out the house and outbuildings on the property for additional income.

No agreements were signed.

When the mortgage came due in January of 2013, Ficocelli paid $10,696.00 in arrears and began paying monthly payments. A 3 month extension was negotiated. A Self- Counsel Press form of partnership agreement was partially completed but never signed.

Ficocelli made 2 offers to purchase the property which were not accepted. A joint venture was proposed pursuant to which Ficocelli would be added as an owner of the property. Ficocelli paid $315,000.00 to the mortgage lender on April 23, 2013. The Hendersons signed a "guarantee" pursuant to which these funds would be paid back to Ficocelli or discounted from the purchase price, if Ficocelli purchased the property.

When the Hendersons did not complete the work to prepare the property for growing medical marijuana, Ficocelli hired labourers to do so. A joint venture agreement was discussed but not was agreed to. Ficocelli made further offers to purchase which were not accepted. On November 15, 2013, the mortgage lender refused to renew the mortgage. In 2015 the property was sold through foreclosure proceedings to a third party for $1,053,888.00.

The Court considered the following issues:

  1. Was there a partnership between Ficocelli and the Hendersons? If so, did the Hendersons repudiate the partnership?
  2. Did Ficocelli owe a fiduciary duty or a duty in good faith to the Hendersons? If so, did Ficocelli breach the duty and did the Hendersons fail to mitigate their loss with respect to any breach?
  1. Was Ficocelli entitled to recover monies paid on the mortgage in the sum of $315,000.00 and the monthly mortgage payments? Was Ficocelli entitled to recover monies paid to improve the Hendersons' property for the proposed marijuana grow op.

Decision: Harris, J. [at para. 172 and 173] granted Ficocelli judgment for the $315,000.00 he paid as well as payments he had made on the Hendersons' mortgage. Ficocelli's claims for unjust enrichment with respect to expenses incurred in cleaning up the property and preparing it for growing marijuana were dismissed. The Hendersons' damage claims were dismissed.

Harris, J. considered the following issues:

1. Partnership:

Harris, J. reviewed the law with respect to the formation and repudiation of partnerships at para. 82 to 96, quoting passages from Red Burrito Ltd. v. Hussain, 2007 BCSC 1277; Blue Line Hockey Acquisition Co. Inc. v. Orca Bay Hockey Limited Partnership, 2008 BCSC 27; Surerus Construction and Development Ltd. v. Rudiger, 2000 BCSC 1746; Cullen v. M.N.R., [1985] 2 C.T.C. 2059; Scragg v. Lotzkar, 2005 BCCA 596; Jacobs v. Yehia, 2014 BCSC 845; and Backman v. Canada, 2001 SCC 10, [2001] 1 S.C.R. 367.

Citing Blue Line [at para. 83] Harris, J. stated:

[83] The law requires cogent evidence establishing the presence of the prerequisites of partnership before imposing the fiduciary duties on partners that flow from partnership. A partnership only exists if there is a valid contract of partnership and the members of the partnership are carrying on business; in common; and with a view to profit...

and also stated, at para. 84 that before a partnership will be found to exist, the following prerequisites must be established:

  1. An offer containing all of the essential terms, and an acceptance of the offer (that is, a meeting of the minds or consensus ad idem);
  2. Certainty of the agreed terms;
  3. Consideration; and
  4. The intention to create legal relations.

Harris, J. observed [at para. 86] that "While the contract need not be in writing, there must be consensus as to the contract's essential terms. Even though parties may have considered themselves to be partners and held themselves out as partners...there must be certainty with respect to the terms of the partnership.

Harris, J. concluded that parties to a partnership must do more than simply agree to carry on a business. They must actually commence carrying on a business, relying on Scragg and Jacobs [at para. 88, 89 and 90].

Relying on Jacobs [at para. 95], Harris, J. observed that there must be cogent evidence to establish the existence of a partnership.

After considering the evidence in some detail [at para. 100 to 142], Harris, J. concluded that a valid partnership had not been established, stating, at para. 140:

[140] ...Although the parties intended to have a written agreement between them, they could not agree on the terms of a written partnership or joint venture agreement. Further, I am unable to find from their oral communications and conduct, considered separately or together, that there was sufficient clarity as to the essential terms of a partnership: its commencement date; their respective roles and responsibilities; how revenue and expenses would be accounted for; and how they would share profits and losses. They had not agreed on the business terms that would need to be settled...

Harris, J. concluded that there was no agreement which obliged Ficocelli to continue to make payments under the mortgage [at para. 145].

Harris, J. also rejected the Hendersons' argument that Ficocelli did not owe them independent fiduciary obligations [at para. 151 and 152], and that if Ficocelli did owe them these obligations, he had not breached them [at para. 153 to 154].

Harris, J. also concluded that the Hendersons had failed to establish Ficocelli was dishonest or had breached a duty of good faith in his dealings with them [at para. 164].

2. Did the Hendersons breach their obligation to repay the $315,000.00 advance?

Harris, J. concluded [at para. 165 to 167] that the Hendersons had breached their obligation under the April 21, 2013 agreement with Ficocelli to repay the $315,000.00 he had advanced to pay down their mortgage.

3. Unjust enrichment

Harris, J. reviewed the law with respect to unjust enrichment at para. 96 to 99.

At para. 169 to 170 she concluded, relying on Pettkus v. Becker, [1980] 2 S.C.R. 834 (SCC), that the Hendersons were obliged to repay the amounts Ficocelli had paid on their mortgage.

At para. 171, however, she concluded that Ficocelli was not entitled to judgment for the amounts he had expended to provide electrical services, fencing, and labour to the land to improve it in anticipation of the marijuana production venture which did not proceed. These expenses did not improve the value of the Hendersons' property, and the Hendersons were not enriched by these expenditures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.