Roger writing the LAWmag
Aug 2009

Hockey Ownership, Like Sausages, ‘tis Better Not to See Them Being Made

Lawyers know it as Blue Line Hockey Acquisition Co. Inc. v Orca Bay Hockey Limited Partnership.

But to hockey fans, it’s known as the legal kerfuffle in which Francesco Aquilini emerged as owner of the Vancouver Canucks.

The dispute generated no less than ten published decisions between 2006 and 2009, eight before the poor Supreme Court judge seized with the case, Catherine Wedge.

Supreme Court judges get cranky when much more important family law cases take too much time to make their pitch – say, more than two days.

Gag v Aqu posterBut, for some reason, The Hon. Justice smiled her way through this partnership squabble, wedging in 59 days of valuable court time. It monopolized a judge earning $260,000 a year.

Assuming, generously, that a judge only sits in hearing for half of the available business days, and taking into account statutory holidays, the cost to the BC taxpayer for the judge alone is $125K.

Tell that to the next judge that dares to rush you in Court.

Or show up wearing a Canucks jersey.

In the Blue Line Hockey case, the law was asked to determine whether or not three rich and successful Vancouver businessmen dealings were enough to establish a partnership at law. Partnerships are often readily stated to be by the courts. There are some lottery cases where mere, informal actions have established a partnership from which winnings have been shared (see Partnership Law: The Firm).

At issue in the Blue Line litigation was whether or not Aquilini had to share his new ownership of the Canucks with his two previous partners, Vancouver businessman Ryan Beedie and Tom Gaglardi.

This case had volumes of documents and a bevy of lawyers in from the start, all hopefully conversant with the importance of written documents, especially as regards a proposed limited partnership.

Aquilini’s team was headed by Stikeman Elliot lawyer Hein Poulus, a former executive with the Denver Broncos, and Howard Shapray of Shapray Cramer.

Armani's 2008 men's business wear fashion show was on at the Vancouver Courthouse for this trial. Gaglardi’s family owns the Sandman hotels, Moxie’s Restaurants, the Denny’s Restaurant, and the nightclub chain of Shark Clubs.

Playing goal for the co-defendant Orca Bay was Vancouver lawyer, Robert Sewell who, less than two weeks after the ultimate judgment of his soon to be sister-on-the-bench C. Wedge, was appointed justice of the same court.

Facing off against the Aquilini team was Irwin Nathanson of Nathanson, Schacthter & Thompson. Nathanson’s web profile has the gall to repeat the statement made by the commercial publisher Lexpert, that he is one of Canada’s top 25 litigators! In the January 2009 judgment, the Court noted that the Aquilini family lawyer was William Lyall Knott of Clark Wilson.

Such is life at the Vancouver Club. All know who to take out for lunch: all have received the Provincial Government’s archaic and too-often patronage gift to well-behaved lawyers: Queen’s Counsel.

With the National Anthem played, the first period went back to 2003, when Aquilini, Beedie and Gaglardi salivated together over the purchase of the Vancouver Canucks holding company, Orca Bay, owned since 1993 by Seattle-based businessman, and one of the world's richest men according to Forbes Magazine, John McCaw.

Circa 2003, McCaw wanted to sell his hockey assets worth about $250-million. Since Knott was in with McCaw, he made the necessary introductions, including Canucks’s CEO, Stan McCammon.

Throughout 2003, Aquilini, Beedie and Gaglardi had discussions about buying the Canucks. The trial judgment reveals lunch dates, meetings and hockey games they attended in groups or pairs, as they felt each other out as potential partners and a third-ownership for each. They met with business lawyer Tim Sehmer (note to the Attorney General: Tim hasn’t been QC-ed yet) along with Gaglardi’s personal lawyer Ralph McRae.

A package was put together but rejected by the Canucks’s holding company, Orca Bay, without any counter-proposal. A further proposal was rejected without a counter. By then, according to the trial judgment:

"...Gaglardi, Beedie and McRae had developed a dislike for (Stan) McCammon. They did not trust him. They suspected he had ulterior motives for some of the positions he was advancing on behalf of Orca Bay. Gaglardi viewed McCammon as behaving at times in a deliberately obtuse manner, and at other times in a dishonest manner."

At one meeting held in Los Angeles in January of 2004, "(Stan) McCammon and McRae had an unfriendly exchange."

From that point on, Aquilini distanced himself from Beedie and Gaglardi. In March of 2004, when Gaglardi had an "acrimonious telephone discussion" with him to object to his private meetings with McCammon, Aquilini decided to leave the group.

Gaglardi then tried a direct approach with McCaw, leaving out Aquilini, even giving a written proposal in August of 2004. The Gaglardi-Beedie negotiations with McCaw and McCammon came to a head in October 19 and 20, and then petered out in November, even as the storm of an NHL lockout blew over.

At one point, Gaglardi's said to McCammon, in regards to the Orca Bay self-financing proposals: "I didn’t know we were borrowing from the mob." The comment drew a moment of awkward silence from McCammon, but it was a fatal reaction to Gaglardi hopes.

Meanwhile, Aquilini nourished his own relationship with McCammon through Knott and at the end of October, made inquiries about buying a share of the the Canucks. By then, both McCaw McCammon were happy to turn their spurned financial affections elsewhere. Aquini jumped into the opportunity with a vengeance and money – lots of money. On November 5, the day after the "mob" comment was made by Gaglardi, Aquilini got a deal to buy into the Canucks. McCaw told Gaglardi and Beedie they were out. Gaglardi tried desperately to revive the previous proposals but to no avail. His definitive "Dear John" letter arrived on November 10.

Gaglardi and Beedie then sued Aquilini stating that when he made his successful proposal, he was merely acting for the still-existing earlier partnership, and that as such, his proverbial body parts were held by the legal vice of a partnership: he owed Gaglardi and Beedie a duty of loyalty and good faith.

Funny that. Had Gaglardi and Beedie of been successful in buying the Canucks, how amenable they would have been to Aquilini’s suggestion that they acted on his behalf as a one-third share partner?

Justice Wedge’s judgment is unusual in that rather than state the facts first and then the law, followed by an analysis, as is the judicial standard, she starts off with a lengthy treatise on partnership law, then the facts, then her analysis - which she calls "Discussion". She misspells the surnames of NHL executives "Bettemen" and "Daley".

But in the result, she decided that there had not been a partnership:

"An agreement to work together to pursue the acquisition of an asset does not, of itself, create a partnership....

"(T)here was no agreement concerning the multitude of business terms they would be required to settle in a complex transaction of this nature. There was not even agreement on the price they were ultimately prepared to pay. (T)heirs was simply an informal agreement to work toward the formal arrangements....

"The relationship among Gaglardi, Beedie and Aquilini was not one of partnership or joint venture. None owed duties of loyalty or good faith to the others. Each was entitled to withdraw from the group at any time and pursue the opportunity for himself."

Aquilini 1, Gaglardi-Beedie, 0.

Gaglardi and Beedie appealed and on February 3, 2009, the British Columbia Court of Appeal dismissed the appeal.

Aquilini 2, Gaglardi-Beedie 0. Costs were rising. Even at this point, the legal bills would of been tremendous especially for Gagliardi and Beedie who had to pay their team of lawyers and Aquilini's costs.

They then ran to Ottawa and pounced on the door of the Supreme Court of Canada citing some error of law, by both the BC Supreme Court and the BC Court of Appeal, a total of four esteemed judges.

On July 16, 2009, the Ottawa-based court of final Canadian appeal issued short judgment, sounded the siren of this long hockey game:

"The application for leave to appeal from the judgment of the Court of Appeal for British Columbia is dismissed with costs."

Final score: 3-0, Aquilini.

If the position of Gaglardi and Beedie was really as they argued before Justice Wedge at the relevant times, that there was a partnership, and we are entitled to believe that it a genuinely-held belief, their army of QC’s let something slip in 2003 and early 2004.

Justice Wedge held a microscope to the evidence through a grueling 59-day trial and even at that, could only note that the no document or, indeed, any other evidence established a partnership.

Any lawyer would hate to counsel do-it-yourself law but one can't help but notice that Vancouver's own Self-Counsel Press sells a Partnership Agreement do-it-yourself kit for $16.95 plus taxes, available at any local stationery store.

Anticipating and protecting a client's interests through the use of legally-binding documents?

Dudes: Contract Law 101.


Posted in Commercial Law, Hockey Law

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