Executive Summary: Key Legal and Evidentiary Issues

• Central dispute involved whether a binding joint venture agreement existed between Terracon and the City of Winnipeg.

• The Mazenod Road Agreement was deemed an unenforceable “agreement to agree” rather than evidence of a completed contract.

• Key terms—including property tax liability and land title retention—remained unresolved throughout the negotiations.

• The trial judge found no palpable or overriding errors in applying the objective contract formation test.

• Terracon’s claims based on fiduciary duty were dismissed and not pursued on appeal.

• The appeal was dismissed with costs, affirming the trial judge’s conclusion that no binding agreement had been formed.

Background and proposed venture

Terracon Development Ltd., a Winnipeg-based real estate development company, identified a 237-acre parcel of City-owned land—referred to as the Prairie lands—for industrial development adjacent to its existing Waters Business Park. By late 2008, Terracon presented a proposal to the City to jointly develop the Prairie lands. The plan included the City retaining title to the land until it was sold to end-users, thereby avoiding property taxes during development. Terracon also proposed a “hybrid design” that included drainage ditches and asphalt roads instead of the City’s standard drainage piping and concrete roads to reduce costs.

To facilitate development, the parties entered into the Mazenod Road Agreement, which governed the cost-sharing and construction of a road extension to provide access to the Prairie lands. The agreement, signed in 2009, included a clause stating the parties would “enter into discussions to draft the business terms of a possible joint venture” and noted that any such venture would require Council approval.

Ongoing negotiations and unresolved terms

From 2010 to 2013, the parties exchanged drafts of a joint venture agreement. Two proposed clauses in the first draft sent by the City on November 18, 2010, proved contentious:

1. Paragraph 1(c)(q), requiring Terracon to pay realty taxes and assessments on subdivided lots.

2. Paragraph 5(c)(i), stating the City would retain title to the land until it was sold to purchasers.

While paragraph 5(c)(i) aligned with the parties' stated goal of avoiding property taxes during development, Terracon viewed paragraph 1(c)(q) as inconsistent with that aim. The City nonetheless maintained that provision in subsequent drafts.

In January 2013, City Council approved a recommendation allowing a joint venture agreement to proceed, subject to terms set by the Director of Planning and the City Solicitor. However, disagreements over Terracon’s hybrid design delayed progress until 2015. Around this time, Parmalat Canada Inc. expressed interest in purchasing a lot, and Terracon indicated it would sign the joint venture agreement once a deal with Parmalat was secured.

Tax liability concerns and breakdown

In early 2015, a City solicitor concluded that under The Municipal Assessment Act, Terracon would be considered an “occupier” and liable for property taxes even if title remained with the City. While the City was prepared to waive its portion, Terracon would still be responsible for school taxes and the provincial education levy. In June 2015, Terracon informed the City it would not proceed with the joint venture. The City later developed the Prairie lands without Terracon.

Trial court findings

Terracon sued, alleging breach of an oral joint venture agreement and fiduciary duty, seeking damages for lost profits. The trial judge rejected Terracon’s claim, concluding that the Mazenod Road Agreement was merely an “agreement to agree” and that no joint venture agreement had been reached. The judge emphasized that unresolved essential terms precluded contract formation and noted that negotiations and communications from 2009 to 2015 showed persistent lack of agreement.

The fiduciary duty claim was also dismissed and not appealed. The trial judge provisionally assessed general damages at $10 million but found no liability and denied any award.

Appeal decision

On appeal, Terracon argued the trial judge erred in evaluating the evidence and misapplied the objective test for contract formation. It maintained that the essential terms had been agreed upon and the written drafts merely documented those terms. The Manitoba Court of Appeal disagreed, finding no palpable and overriding errors in the trial judge’s analysis. The Court upheld the conclusion that no enforceable joint venture agreement existed and dismissed the appeal with costs. 

The appeal was dismissed with costs, but the specific amount of costs was not stated in the decision.