The One, a luxury condo development in Toronto co-owned by real-estate developer Sam Mizrahi and road paving magnate Jenny Coco, is photographed on Oct 19, 2023.Fred Lum/The Globe and Mail
An Ontario judge has denied Jenny and Rock-Anthony Coco’s demand for $40-million from the waste management company that bought their family business, forcing the siblings to wait for another lawsuit tied to a luxury condo project in Toronto to be resolved.
GFL Environmental Inc. and a sister company, Green Infrastructure Partners, signed a deal to buy the Coco family’s Coco Paving Inc. in December, 2021, for an undisclosed amount. Two months before the transaction was set to close, GFL learned that Ms. Coco had pledged the paving company as collateral to secure a large construction loan for her condo project, The One, with developer Sam Mizrahi.
Worried about the legal liability, GFL and GIP negotiated to hold back $80-million of the Coco Paving purchase price but agreed to release it in two stages: $40-million, plus accumulated interest, after the purchase’s first anniversary; and the remaining $40-million, plus accumulated interest, after the second anniversary – provided the potential liability had been resolved.
However, less than a month after takeover closed in April, 2022, one of The One’s lead lenders, China-East Resources Import & Export Co., or CERIECO, a state-owned Chinese enterprise, alleged that its loan was in default and sued.
Because the lawsuit was not resolved by the first anniversary of the Coco Paving purchase, GFL and GIP did not release the first $40-million from the liability fund. The Coco family then sued in July, 2023, arguing it had negotiated a release of their paving company’s guarantee for the condo project.
The siblings also alleged GFL and GIP had not met certain technical conditions, such as giving enough notice of holding back the first $40-million payment.
This week, Justice Peter J. Osborne of the Ontario Superior Court dismissed the Coco family’s lawsuit in its entirety, allowing GFL and GIP to keep the entire $80-million in what is formally known as escrow.
“The entire indemnity escrow amount should remain available to respond to the exposure in the CERIECO proceeding. That entire amount is itself less than half of the exposure on the CERIECO Guarantee as claimed,” he wrote in his ruling.
In total, CERIECO lent $213-million to The One, and the project is now in receivership.
The judge also challenged the Coco family’s reasoning for suing in the first place. In the ruling, he noted the Cocos never disclosed the loan guarantee in the first place, and then said their argument that the only way they could have known about CERIECO’s lawsuit was through GFL or GIP was “somewhat artificial at its core.”
As for whether the Coco family ever released itself and Coco Paving from guarantee to The One, the judge noted it is the basis of another lawsuit, and “all of that is for another day.”
Under the Coco Paving purchase agreement, if the legal liability fund is depleted, any additional damages must be paid by the Coco family. CERIECO’s allegations have not been proven in court.
The Coco family is currently involved in multiple interconnected lawsuits, and a common feature of these court battles is their joint-ownership of private debt manager Bridging Finance Inc. At its peak, Bridging managed $2.09-billion on behalf of 26,000 investors, but it collapsed in 2021 and is now under the control of a court-appointed receiver. In May, 2023, the receiver and a senior creditor sued the Cocos for their alleged roles in Bridging’s demise.
Ms. Coco is also involved in multiple lawsuits tied to The One’s development in Toronto’s upscale Yorkville neighbourhood. Ms. Coco is a co-owner of the project with Mr. Mizrahi.
The Coco family’s lawyers did not respond to a request for comment.