Executive Summary: Key Legal and Evidentiary Issues

• Dispute over who bears multimillion-dollar construction cost overruns for a rail terminal and office building under a commercial lease framework.
• Interpretation of article 4.1 of the 2019 lease regarding allocation of construction cost overruns (50/50 split vs. costs attributable solely to tenant-requested plan changes).
• Competing narratives on responsibility for construction delays and financing difficulties, including alleged fragility of Solugaz’s finances and Dumpling’s alleged failure to respect agreed timelines.
• Central procedural question on pre-trial discovery: whether broad financial and banking records of Solugaz constitute relevant, proportionate evidence or an impermissible “fishing expedition.”
• Assessment of whether plaintiffs had pleaded sufficiently precise facts and provided documentary grounding to justify intrusive disclosure into Solugaz’s finances.
• Judicial application of cooperation, relevance and proportionality principles in civil procedure, resulting in most discovery objections being upheld and only limited further undertakings ordered.

Factual background and contractual framework

The dispute arises out of a construction and leasing project in Saint-Augustin-de-Desmaures, Québec, involving a rail terminal (the “Terminal”) and a building intended to house the head office of Solugaz inc. (the “Édifice”), collectively the “Projet.” The land (the “Terrain”) originally belonged to the City (Ville de Saint-Augustin-de-Desmaures). Solugaz is the operating company and intended occupant; Société en commandite 200 rue de Singapour (“SEC Singapour”) and Société en commandite Dumpling (“SEC Dumpling”) are the plaintiff limited partnerships. SEC Dumpling ultimately became owner of the Terrain and bailleur under the key lease. The plaintiffs sue Solugaz for $2,805,973.55, largely representing cost overruns beyond a preliminary construction budget for the Projet. These alleged overruns relate primarily to the construction of the Édifice (Phase 2), although a detailed table of claimed costs (P-17) may also encompass aspects tied to the Terminal (Phase 1), an ambiguity the trial judge on the merits will ultimately have to resolve.

Development of the leasing relationship and the 2018–2019 leases

Solugaz’s business plan was to expand by building a distribution centre for propane at the Saint-Augustin site. Early on, it considered owning both the Terrain and improvements (Terminal and Édifice) but soon moved away from that ownership model and opted instead to participate in the Projet as tenant, to avoid tying up capital and management resources in real estate. In January 2018, the Business Development Bank of Canada (BDC) brokered an introduction between Solugaz and Hugues Harvey, then acting for Société en commandite Veylin (“Veylin”), a real-estate promoter. In written communications in January 2018, BDC’s representative described Solugaz as “en pleine croissance et solide financièrement” and “un très bon locataire potentiel,” reinforcing its perceived financial solidity at that time.
Following this introduction, Veylin conducted its own due diligence on Solugaz. In April 2018, Solugaz supplied financial documents, including its financial statements as at 31 March 2017 and interim results to 28 February 2018, so Veylin could assess risk before committing to the Projet. This due diligence was deemed acceptable from a risk perspective and led to a first commercial lease signed 16 July 2018 (the “Bail 2018”), where Veylin became bailleur and Solugaz locataire. Simultaneously, on 16 July 2018, Veylin and the City signed a promise to purchase the Terrain, with Veylin to acquire the land and construct the Édifice. Under the Bail 2018, Veylin committed to act as bailleur, acquire the Terrain, and build the Édifice at its own expense pursuant to a preliminary construction budget annexed to the lease. Solugaz’s role was that of tenant, with no contractual obligation to finance the building or purchase the Terrain. The Terminal (Phase 1), by contrast, was to be fully financed and managed by Solugaz, although subject to an allocation mechanism set out in Annex D of the later 2019 lease.

Financing issues, change of promoter, and creation of Dumpling

By October 2018, Veylin decided not to proceed with acquisition of the Terrain and the Projet, allegedly because BDC refused financing due to the supposed fragility of Solugaz’s financial position. The plaintiffs’ pleading relies mainly on this alleged refusal of BDC, reported orally to Harvey, as the basis for asserting that Solugaz’s financial health obstructed financing of the Projet. The record, however, shows no documentary confirmation of a BDC refusal or its reasons. Moreover, email exchanges from October 2018 between BDC and Harvey reveal a deteriorating relationship but do not clearly confirm a formal refusal or its basis. At the same time, there is evidence that Desjardins had been prepared to finance the Projet entirely and that BDC had issued an offer of financing to Veylin, which suggests the picture was more complex than the plaintiffs’ bare allegation of “fragility” preventing financing.
After Veylin’s withdrawal, a “plan B” was explored: Solugaz might acquire the Terrain and take over the Projet. Draft deeds were prepared in December 2018, but this avenue collapsed because the parties could not agree on a price for the Terrain. Importantly, there is no evidence that Solugaz undertook concrete financing démarches for a purchase of the Terrain; the trial judge will ultimately weigh these facts against the parties’ competing narratives. Faced with the risk of losing the Projet and given sums already sunk in the Terminal, Harvey and his business partner, Dominique Briand-Hudon, decided to “reprendre le Projet.” A new limited partnership, SEC Dumpling, was created on 12 December 2018 specifically to acquire the Terrain and carry the Projet forward. On 14 December 2018, a convention was signed under which Veylin assigned part of its rights and obligations under the promise to purchase the Terrain to Dumpling, an assignment later ratified by the City.

The 2019 lease and key clause on cost overruns

On 11 February 2019, Dumpling and Solugaz executed a second lease (the “Bail 2019”) to “update” the Bail 2018 in light of the new structure and the events of the previous six months. The Bail 2019 is central to the plaintiffs’ claim. As bailleur, Dumpling undertook to acquire the Terrain and build the Édifice; as locataire, Solugaz remained responsible for constructing the Terminal but not for owning or financing the Terrain or Édifice. Several provisions of the Bail 2019 define the parties’ obligations and timelines. The bail was conditional upon Dumpling acquiring the Terrain, with Dumpling agreeing to pursue that acquisition promptly and to use reasonable efforts to complete it within about four weeks of signature. The term of the bail was linked to completion of the Terminal and the substantial completion and delivery of the Édifice, over a 15-year period. Dumpling undertook to use reasonable efforts to complete construction of the Édifice by 30 June 2019 (pushing back a previous deadline of 1 December 2018).
The most important contractual clause for the cost-sharing dispute is article 4.1 of the Bail 2019, “Condition des Lieux Loués.” It provides that Dumpling, as bailleur, is responsible for constructing the Édifice according to Solugaz’s plans and specifications, adapted to the Terrain and approved by Dumpling, subject to permits and authorizations. The preliminary construction budget is attached as Annex B, and the base rent was determined in reference to that budget. The critical cost allocation mechanism in article 4.1 stipulates that any construction cost exceeding the preliminary budget is to be shared 50/50 between Dumpling and Solugaz, with the tenant’s share payable upon presentation of supporting invoices. The clause also provides that any cost savings below the preliminary budget inure to Solugaz’s benefit for purposes of base rent. Further, “tous les coûts excédentaires découlant de changements aux plans et devis finaux demandés par le Locataire, seront à la seule charge du Locataire.” The bail clarifies that, for these purposes, construction costs include both soft costs and hard costs.
In parallel, the April 4, 2019 deed of sale between Dumpling and the City transferred title to the Terrain to Dumpling and included a resolutory clause: if Dumpling failed to substantially begin and complete the Édifice before 1 September 2019, the City could seek resolution of the sale. Notably, when Dumpling signed the Bail 2019 and later the deed of sale, it did so knowing the deadlines and having already reviewed Solugaz’s earlier financial statements. The Terminal’s construction, fully financed and managed by Solugaz, was practically complete by March 2019, so by then the main risk and responsibility for the Édifice and compliance with deadlines lay squarely with Dumpling as bailleur.

Claims, counterclaim and contested narrative on delays and costs

The plaintiffs’ core theory is that the Projet’s delays and cost escalations stemmed from Solugaz’s fragile finances and lack of collaboration, which allegedly interfered with financing and timely completion. They assert that the BDC’s supposed refusal to finance based on Solugaz’s condition forced Dumpling to take over, causing delay, and that Solugaz contributed significantly to delays through non-cooperation, dealings with third parties, inability to secure financing to buy out Veylin, and threats of litigation. They ultimately seek roughly $2.8 million, arguing that under article 4.1 cost overruns beyond the preliminary budget must be shared 50/50, and that any excess costs attributable to tenant-requested changes are wholly Solugaz’s responsibility.
Solugaz, in turn, defends on the basis that cost overruns are exclusively attributable to Dumpling’s own fault and negligence in failing to respect construction deadlines for the Édifice, which Dumpling alone was responsible to construct and finance as owner and bailleur. Solugaz emphasizes that article 4.1 does not link cost-sharing to fault; in its view, Dumpling voluntarily took on the acquisition and financing risk for the Terrain and Édifice, with only a limited contractual risk-sharing of overruns. Solugaz pleads that under the bail it had no obligation to secure financing for the building or to purchase the Terrain to “save” the Projet. The defence also stresses that Solugaz did not participate in the construction contract for the Édifice and had no control over the construction costs when work finally began in late 2022. On that basis, Solugaz argues that Dumpling alone should bear what it calls an “explosion” of construction costs, which it also characterizes as grossly inflated.
In its counterclaim, Solugaz seeks $824,461.70. This amount reflects, among other things, the balance of the allowance stipulated at Annex D of the Bail 2019 for construction of the Terminal (Phase 1), which Solugaz planned and managed, and additional payments and expenses it says it had to incur because Dumpling failed to deliver the Projet on time. The Projet, initially meant to be delivered in 2019 under article 1.5 of the Bail 2019, was in fact only delivered in 2023.

Procedural setting: objections to undertakings in discovery

The judgment at issue is not a decision on liability or quantum of damages. It is a Superior Court ruling on objections to undertakings (engagements) given during the pre-trial examination of Rock Boulianne, Solugaz’s sole shareholder and director until September 2022. Eighteen undertakings were challenged (ERB-1, 3, 13, 14, 15, 19, 20, 23, 24, 25, 26, 30, 31, 32, 33, 34, 35 and 36). In addition, the plaintiffs asked the court to order Solugaz to answer three other undertakings (ERB-18, 40 and 41) which were not under objection but for which responses had not yet been provided. Solugaz’s objections were based primarily on lack of relevance and allegations that the plaintiffs’ requests amounted to a “fishing expedition” or unfocused general inquiry into Solugaz’s affairs. A secondary objection grounded in “intérêts légitimes importants” (sensitivity of financial information) was initially raised as to two undertakings but abandoned at the hearing, leaving relevance and proportionality as the central issues.

Applicable principles: cooperation, relevance and proportionality

The court revisits and applies core procedural principles. Article 20 of the Code of Civil Procedure (C.p.c.) imposes a mutual duty of cooperation and information between parties to ensure a fair debate and encourages early and complete disclosure of facts and evidence. Relevance remains the cardinal rule for admissibility and for the scope of discovery, codified notably in article 2857 of the Civil Code of Québec and articles 221 and 228 C.p.c. Interrogatories may deal with all facts pertinent to the dispute and supporting evidence and may also serve to obtain documents. However, the Supreme Court in Pétrolière Impériale c. Jacques stresses that the right to disclosure is not unlimited: documents must relate to the dispute, be useful and likely to move the debate forward, and the process must avoid “recherche à l’aveuglette” or “expédition de pêche.” The court also recalls that at the exploratory stage, relevance is interpreted broadly in light of fact-finding, but boundaries remain: vague, sweeping allegations cannot serve as a de facto pre-authorization to rummage through an opponent’s files in hopes of discovering a cause of action. Parties seeking further answers or documents must anchor their requests in sufficiently specific, pleaded facts and at least a minimal documentary basis.
Proportionality, as set out in article 18 C.p.c. and the preliminary provision of the Code, applies at every procedural step. Courts must always weigh the cost, administrative burden and overall impact of discovery orders against their utility for resolving the real issues in dispute. The Supreme Court has described proportionality as a restriction on the parties’ freedom to conduct their case as they wish, placing the assessment firmly within the trial judge’s discretion.

Analysis of the disputed undertakings: financial information and alleged “fragility”

The court organizes the challenged undertakings into thematic “blocs.” Bloc 1 (ERB-1, 19, 20, 23 and 24) sought documents sent by Solugaz and subsequent exchanges with financial institutions or institutional partners concerning the possibility of “financer Solugaz pour le Projet” over roughly 2017–2018. The plaintiffs argued these records were necessary to prove Solugaz’s financial fragility and the resulting difficulties in financing the Projet, which they say caused construction delays. The court analyzes the chronology: by January 2018, BDC’s own representative had written that Solugaz was solid financially and a good tenant; Veylin and later Dumpling had ample opportunity to conduct their own due diligence using Solugaz’s 2017 financials and 2018 interim results; Solugaz had successfully obtained financing from Desjardins for the Terminal; and correspondence from October 2018 suggests Desjardins was willing to finance the Projet entirely and that BDC had made a financing offer. Further, when Dumpling told the City in May 2019 it might miss the 1 September 2019 deadline for substantial completion of the Édifice, it blamed the practical realities of completing plans, calls for tenders and contractor availability, not any financing or solvency issue. When Dumpling later confirmed having obtained financing in 2022, its counsel even indicated Dumpling had the capacity to build the project without financing.
Against this backdrop, the court notes that the plaintiffs’ pleadings contain only one alleged refusal of financing (by BDC), unsupported by documentation and with unexplained reasons. They plead no other concrete steps by Veylin or Dumpling to obtain project financing from other institutions and produce no refusal letters or financial correspondence to substantiate the narrative of a project stymied by Solugaz’s financial weakness. The absence of such foundational documentation – which one would expect the plaintiffs, as promoters and borrowers, to possess – leads the court to view the requested undertakings as an attempt to search Solugaz’s financial dealings in hopes of building a better claim, not to support an already grounded case. Accordingly, Bloc 1 is characterized as an impermissible “fishing expedition,” and the objections to those undertakings are upheld.

Financing of the Terminal and timeline issues (Bloc 2)

Bloc 2 (ERB-3, 25 and 26) targeted communications and document exchanges between Solugaz (or its representatives) and Desjardins (CFE de Charlevoix) between summer 2018 and April 2019, related primarily to the Terminal’s financing. The plaintiffs again argued that these records would show how delays in the Projet resulted from difficulties in financing linked to Solugaz’s condition. The court points out that the relevant pleadings on Phase 1 (Terminal) delays are very general, essentially stating that the first phase was delayed because Solugaz could not obtain financing to acquire the Terrain and continue the Projet, and that Solugaz allegedly contributed to delays through non-collaboration and inability to finance taking over from Veylin. However, the pleadings do not specify the agreed construction schedule for the Terminal, nor do they supply a comparably precise factual narrative or documents showing how financing for the Terminal itself was problematic or late.
The court emphasizes that, by the time the Bail 2019 was signed, the Terminal works (for which Solugaz bore full responsibility, including financing) were almost complete. Therefore, when the parties revisited deadlines in the Bail 2019 and Dumpling undertook to complete the Édifice by June 30, 2019, the Terminal’s timeline was no longer a live issue. From then on, Dumpling had a clear path to proceed with Phase 2 and carry out its construction obligations. Given that Veylin and Dumpling, not Solugaz, were responsible for acquiring the Terrain and financing and building the Édifice, the court concludes that the plaintiffs have not demonstrated how the detailed banking communications with Desjardins on the already built Terminal would be relevant and proportionate to the actual issues in dispute. The objections to Bloc 2 undertakings are therefore also upheld.

Acquisition of the Terrain and exploratory requests (Blocs 3 and 4)

Bloc 3 (ERB-13, 30, 31, 32, 33, 34 and 35) sought all internal and external communications involving Solugaz regarding the possibility of its acquiring the Terrain. With the exception of ERB-13, these requests targeted the period from 19 September 2018 to 4 April 2019, the date on which Dumpling purchased the Terrain from the City. The court acknowledges that, when Veylin withdrew in October 2018, Solugaz briefly considered buying the Terrain to salvage the Projet. However, that path was quickly abandoned when the parties could not agree on price, and the evidence shows no actual financing démarches by Solugaz to that end. The judge stresses that the contractual regime, in both the 2018 and 2019 leases, is clear: Veylin and then Dumpling, not Solugaz, were obliged to acquire the Terrain and construct the Édifice. Solugaz remained a tenant throughout and had no contractual obligation to purchase the Terrain. In that context, the court finds that exploratory requests into all communications about a hypothetical acquisition scenario, which did not materialize into obligations or agreements, are a “recherche à l’aveuglette” and not useful to advance a case grounded in contractual responsibility under the bail. The objections to Bloc 3 are thus allowed.
Bloc 4 (ERB-36) sought responses to any financing applications made by Solugaz to financial institutions between 1 January 2017 and 4 April 2019. At the hearing, the plaintiffs narrowed this to requests linked to potential acquisition of the Terrain, effectively tying this bloc’s fate to Bloc 3. Here, the judge notes that Boulianne already testified clearly that Solugaz had made no financing approaches to purchase the Terrain. As a result, not only is the request non-pertinent for the same reasons as Bloc 3, it is also moot given the answer on record. The objection to ERB-36 is therefore upheld.

Requests for Solugaz’s 2018–2019 financial statements (Bloc 5)

Bloc 5 (ERB-14 and 15) sought Solugaz’s annual financial statements for 2018 and 2019 and its monthly financial statements for October–December 2018. The plaintiffs argued that Solugaz had effectively acknowledged the relevance of its financials by previously providing 2017 annual statements and 2018 interim results (as part of Veylin’s due diligence) and that the later financial statements were needed to substantiate the allegation of financial fragility and its impact on financing and delays. The court rejects this reasoning. The fact that financial statements were shared in April 2018 as part of pre-contractual due diligence (now in evidence as D-17) only shows that Veylin and Dumpling had the chance to assess Solugaz’s viability before taking on obligations; it does not imply that all future detailed financial statements automatically become relevant to the litigation.
Crucially, the court underscores that there is no specific factual or documentary foundation supporting the plaintiffs’ three-fold contention that: (i) Solugaz had a precarious financial status in 2018–2019; (ii) this status actually prevented financing of the Projet; and (iii) this in turn caused delays that led to the claimed cost overruns. In the absence of precise, pled facts and corroborating documents, a request for two years of annual statements and multiple months of detailed interim accounts is viewed as an unjustified incursion into Solugaz’s affairs. The judge again characterizes this as an attempt to “discover” a cause of action rather than to prepare a case already grounded in fact. On that basis, the objections to ERB-14 and ERB-15 are upheld.

Outcome of the objections motion and successful party

In the result, the court “partially” grants the plaintiffs’ motion in the sense of adjudicating the objections, but substantively it upholds Solugaz’s position on every one of the eighteen disputed undertakings. All objections to ERB-1, 3, 13, 14, 15, 19, 20, 23, 24, 25, 26, 30, 31, 32, 33, 34, 35 and 36 are maintained. At the same time, as a case-management measure, the court orders Solugaz to provide answers to undertakings ERB-18, 40 and 41 (which were never under objection) within twenty days of the judgment, to keep the case moving toward readiness for trial. Costs of this motion are reserved: the judge orders that judicial costs will “follow the event,” meaning they will be determined in light of the ultimate outcome of the case on the merits.
Thus, on this procedural step, Solugaz inc. emerges as the effectively successful party, having preserved all of its relevance and proportionality objections and avoided extensive disclosure of sensitive financial materials and historical banking communications. No damages or monetary awards are granted in this interlocutory judgment, and even costs of the objections motion are not fixed here but are left to be decided with the final merits judgment, so the total amount ordered in favour of the successful party cannot yet be determined from this decision alone.