An Ontario Superior Court judge has ordered that an investor in a failed dairy farm is entitled to $560,000 from the proceeds of a milk quota sale, untangling a complex financial dispute between two former business partners whose venture collapsed amidst undocumented transactions and mutual blame1. The decision, released on September 11, 2025, by Justice G. E. Taylor, delved into the brief and troubled history of Legend Dairy Farm Ltd., concluding that the investor, Lawrence Drost, held a beneficial interest in the valuable quota that was legally registered to his partner, Eric Salonen.
The business relationship began in late March 2019. Mr. Drost, an experienced farmer and investor who had recently returned to Ontario after operating agricultural businesses in the United States, met Mr. Salonen, a younger man with a background in farming. Mr. Salonen held a significant opportunity: he was eligible through the Dairy Farmers of Ontario’s New Producer Program to purchase 35 kilograms of milk quota in October 2019 at a set price of $24,000 per kilogram, for a total of $840,000. Seeing an opportunity, Mr. Drost, who was looking to invest, and Mr. Salonen, who needed capital, decided to partner. Their initial plan was to rent a barn, but their ambitions quickly grew.
By June 2019, the pair had entered into an agreement to purchase a farm on Bleams Road in Wilmot Township for $3.1 million. They each contributed $50,000 towards the deposit. To operate the business, they incorporated Legend Dairy Farm Ltd. on August 9, 2019, with each man being issued 100 common shares. Critically, no shareholders’ agreement was ever signed, a fact Justice Taylor noted in his reasons, as both men later claimed it was the other’s responsibility to arrange for the document. The company, Legend, took title to the Bleams farm when the purchase closed on September 4, 2019.
Financing the farm purchase revealed early signs of trouble. Both partners submitted mortgage applications to Cosman Mortgage Capital Corporation that contained significant inaccuracies. Mr. Drost stated his annual income was $200,000, when his Canadian income was actually $23,324 in 2018. He also listed a $2 million farm in Bright, Ontario, as an asset, admitting in court that it was owned by his mother’s company, though he believed it was in the process of being transferred to him. Mr. Salonen’s application also contained questionable figures regarding his income and business equity. Justice Taylor found that Mr. Drost’s errors were “careless and not dishonest,” but noted that Mr. Salonen was aware of the incorrect information and chose to proceed with the venture. The initial financing offer from Cosman was withdrawn and replaced with a more expensive one, a change Mr. Salonen attributed to Mr. Drost’s misrepresentations. Despite these issues, a mortgage was secured, backed by a guarantee from a corporation owned by Mr. Drost’s mother.
The central dispute revolved around the purchase of the $840,000 milk quota in October 2019. According to court records, Mr. Drost provided $590,000 to Legend, which was then used to buy the quota. Mr. Salonen’s initial $10,000 deposit and funds from the mortgage advance were also used. A shortfall remained. The court found that when the partners went to the bank, a cheque Mr. Salonen attempted to deposit was held, requiring Mr. Drost to contribute an additional $60,000 on the spot to complete the purchase. Evidence showed Mr. Salonen had borrowed that $60,000 from an acquaintance, Nico Reyneveld. Mr. Salonen later repaid only $30,000 of the extra contribution to Mr. Drost, leaving Mr. Drost’s net contribution to the quota at $560,000. Due to Dairy Farmers of Ontario regulations, the quota had to be held in Mr. Salonen’s name personally, even though Mr. Drost had provided the majority of the funds. Mr. Drost testified that he never intended to simply purchase the quota for Mr. Salonen.
The business itself was plagued by problems. Renovations to the barn led to a construction lien of over $300,000 being filed against the farm. Mr. Salonen personally borrowed $370,000 from the farm’s previous owners, the Waglers, to inject cash into Legend. The court also heard that milk revenue from DFO was often deposited into Mr. Salonen’s personal bank account. He claimed he used these funds to pay Legend’s creditors, but the judge noted there was no documentary support for these claims. The relationship between the partners deteriorated, with Mr. Drost expressing unhappiness with Mr. Salonen’s management of the farm. In early July 2020, just a few months after milking began, Mr. Drost informed Mr. Salonen he no longer wished to continue with the business.
The farm ceased producing milk in December 2020. The Bleams farm was sold in April 2021, leaving net proceeds of $198,536 to be held in trust. Following a court order, the milk quota was sold in November 2021 for $902,394, with those funds also held in trust pending the outcome of the lawsuit. The case before Justice Taylor was to determine who was entitled to the trust funds and who should bear the costs of the failed business.
Mr. Salonen filed a counterclaim, arguing that Mr. Drost had breached an oral agreement to provide unlimited financing for the business and had made misrepresentations about his financial status. He sought damages for his lost income and the potential growth in his net worth had he pursued the dairy operation on his own. Justice Taylor dismissed the counterclaim entirely. He found that while an oral agreement existed for Mr. Salonen to provide the quota and Mr. Drost to provide financing, its terms were not detailed. The judge found Mr. Drost had fulfilled his obligation by securing the mortgage, while Mr. Salonen had failed to fulfill his, as he did not have the funds to purchase the quota he was meant to contribute. The judge also found Mr. Salonen failed to prove any damages, calling his calculations speculative and without evidentiary foundation.
The judge’s central ruling focused on the legal doctrine of a purchase money resulting trust. He explained that when one person pays for property that is put into another person’s name, the law presumes that the person who paid for it is the true beneficial owner, unless the money was intended as a gift. In this case, Mr. Drost contributed $560,000 directly towards the purchase of an asset, the quota, that was placed in Mr. Salonen’s name. Mr. Salonen provided no evidence to rebut the presumption that this was anything other than an investment by Mr. Drost. As Mr. Drost testified, he was not making a gift. Therefore, Justice Taylor declared that Mr. Drost had a resulting trust interest in the quota proceeds amounting to $560,000.
The court dismissed Mr. Drost’s other claims for payment for cattle, custom work, and forage supplied to Legend by another one of his companies. The judge ruled that those were debts owed by the corporation, Legend, and it would be improper to order Mr. Salonen to pay them personally from the trust funds. The judge also declined to make any orders regarding the numerous unpaid creditors of Legend, as they were not parties to the action. The counterclaim from Mr. Salonen was dismissed. Following the payment of $560,000 to Mr. Drost, the remaining funds from the quota and farm sales remain in trust.
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