Executive Summary: Key Legal and Evidentiary Issues

• Dispute arose between equal shareholders in a joint venture condo development over control and financial maneuvers.

• ADG sought injunctive relief to preserve the status quo after MIG-affiliated entities assumed a senior loan without unanimous board approval.

• The court analyzed the enforceability of unanimous shareholder agreement provisions and potential breaches of fiduciary duties.

• Assignment of the senior loan to a MIG-controlled entity raised concerns of circumvention of governance safeguards.

• Standstill terms were granted under sections 101 of the Courts of Justice Act and 248 of the OBCA to prevent irreparable harm.

• ADG was awarded $135,000 in fixed costs after successfully obtaining the injunctive relief.

Facts and outcome

This case involves a heated dispute between business partners in a joint venture real estate development project known as Nautique Lakefront Residences. The project is managed by Adi Morgan Developments (Lakeshore) Inc., a single-purpose corporation jointly owned by ADI Development Group Inc. (ADG) and The Morgan Investments Group Inc. (MIG), each holding a 50% interest. The relationship between the two shareholders deteriorated, leading to dueling applications under section 248 of the Business Corporations Act (Ontario) (OBCA), scheduled for hearing on August 20, 2025.

Tensions escalated when MIG, through an affiliated company, 1001259155 Ontario Inc. (“100 Ontario”), assumed a senior loan originally held by KingSett Mortgage Corporation. MIG’s principal, Nigel Morgan, created 100 Ontario in June 2025 specifically to assume this debt. ADG alleged this was done without required unanimous director approval, contrary to the parties' Unanimous Shareholder Agreement (USA). ADG argued that the transaction fundamentally altered the power dynamics between the shareholders and threatened the integrity of the joint venture, especially with the pending oppression applications.

ADG brought an urgent motion seeking injunctive relief to maintain the status quo until the hearing on the merits. ADG sought a series of “Standstill Terms” that would prevent 100 Ontario and MIG from enforcing the senior and subordinate loans or altering key reporting mechanisms until the applications were resolved.

Justice Steele granted the motion. The court held that ADG met the three-part test for an interlocutory injunction under section 101 of the Courts of Justice Act and affirmed that section 248 of the OBCA provided broad remedial authority even on an interim basis. Justice Steele found that there was a serious issue to be tried, particularly whether MIG had circumvented corporate governance rules under the USA by assigning the loan to a related entity without proper approval.

The court also found a risk of irreparable harm to ADG, including loss of control rights and reputational damage, which could not be compensated through damages. The balance of convenience favored maintaining the status quo, especially as the matter was set for a full hearing within a month. The judge rejected MIG’s position that the transaction did not violate the USA and noted that the intent behind the assignment appeared to be to gain an upper hand in the ongoing dispute.

Justice Steele ordered that the parties abide by the proposed Standstill Terms, including a bar on enforcing the loans or initiating receivership proceedings before the hearing. The order preserved corporate governance balance and protected the joint venture’s stability during the ongoing litigation.

Finally, the court awarded ADG $135,000 in fixed costs, payable by MIG and 100 Ontario, recognizing ADG as the successful party on the motion. The decision emphasizes the court’s willingness to intervene where shareholder disputes involve procedural manipulation and the risk of unilateral control in closely held corporations.