COURT OF APPEAL FOR ONTARIO

DATE: 2006-03-15

DOCKET: C42420 C42629 C42630

RE: THREE SEASONS HOMES LIMITED (Respondent) and ROBERT FARIS, CHRIS EFTIMOVSKI, WALLY MAGEE and HORST ROSNER (Appellants)

BEFORE: ROSENBERG, SIMMONS and GILLESE JJ.A.

COUNSEL: Catherine Patterson for the appellants John O’Sullivan and Zirka Jakibchuk for the respondent

HEARD: February 28, 2006

JUDGMENT RELEASED: November 16, 2005

On appeal from the judgment of Justice Donald R. Cameron of the Superior Court of Justice dated August 17, 2004.

E N D O R S E M E N T

[1] On November 16, 2005, we delivered reasons for judgment in which we allowed the appellants’ appeal, set aside the judgment of the application judge and granted the relief requested by the appellants. That relief was an order declaring that the right of first refusal in favour of Three Seasons Homes Limited, which was contained in a Charge registered as instrument number 517607, expired on October 23, 2002, and was not binding on Mr. Faris when Mr. Eftimovski offered to purchase Mr. Faris’s farm. In addition, in the course of our November 16, 2005 reasons, we rejected Three Seasons’ submission that it was entitled to a trial of the issue of whether the right of first refusal was extended by oral agreement.

[2] Three Seasons now brings a motion (the “reconsideration motion”) requesting that we reconsider our decision not to order a trial of the issue of whether the right of first refusal was extended by oral agreement. As part of the reconsideration motion, Three Seasons also asks that we clarify our order that the judgment of the application judge dated August 17, 2004 be set aside, as Three Seasons contends that paragraph 4 of the judgment was not appealed. Finally, Three Seasons requests that we extend the stay of our judgment pending disposition of its leave application to the Supreme Court of Canada and that we grant it leave to register a certificate of pending litigation against the title to Mr. Faris’s farm.

[3] We do not accept Three Seasons’ submission that, in rejecting its request to order a trial of the issue of whether the right of first refusal was extended by oral agreement, we failed to consider certain evidence that related to that issue. In arriving at our decision, we were aware that on February 24, 2003, following the balance due date stipulated in the Charge, Mr. Faris approved in writing a facsimile sent to Three Seasons by Mr. Faris’ real estate agent advising that Mr. Faris had received an offer to purchase the farm and “putting [Three Seasons] on 72 hours notice as per the first right of Refusal in the Charge”. We were also aware that on cross-examination, Mr. Faris admitted that his intention in sending the facsimile was to give Three Seasons notice as contemplated in the right of first refusal contained in the Charge. (See para. 19 of our reasons.)

[4] However, we concluded that there was no evidence in the application record indicating that Mr. Faris and Three Seasons had reached an oral agreement that met the legal threshold for creating an agreement to extend the right of first refusal contained in the Charge, that is, an oral agreement that referred specifically to extending not only the Charge, but also the right of first refusal. In that respect, at para. 47 of our reasons, we referred to the following affidavit evidence provided by Mr. Orsi:

On October 23, 2002, when the [Charge] came due, Faris defaulted and no new mortgage had been negotiated. Faris advised me that he “needed more time” to find a buyer for the Property. In or around the fall of 2002, as the [Charge] was becoming or had recently become due, as an act of forbearance, on behalf of Three Seasons I orally agreed with Faris to extend the [Charge] on all the same terms and conditions as before so that he would be able to find a buyer.

[5] We concluded, at para. 51 of our reasons, that Mr. Orsi’s evidence “[fell] short of alleging that the parties specifically addressed extending the right of first refusal.” Further, although Mr. Faris was cross-examined concerning whether the right of first refusal continued in force, he was not cross-examined about whether he and Mr. Orsi had discussed extending the right of first refusal.

[6] While we agree with Three Seasons that the evidence referred to in para. 3 of these reasons would be relevant in assessing the credibility of an assertion that Mr. Faris and Mr. Orsi reached an oral agreement that specifically addressed extending the right of first refusal, in the absence of evidence asserting an oral agreement, we were not persuaded that the evidence on which Three Seasons relies was relevant. Standing alone, that evidence does not create an inference that Mr. Faris and Mr. Orsi reached an oral agreement that specifically addressed extending the right of first refusal.

[7] In the circumstances, we are not persuaded that we should reconsider our decision not to order the trial of an issue concerning whether the right of first refusal was extended by oral agreement.

[8] Turning to Three Seasons’ request that we clarify our direction that the order made by the application judge be set aside, paragraph 4 of the judgment dated August 17, 2004 provides as follows:

4. THIS COURT ORDERS that the issue of whether any of the respondents, jointly or individually, fraudulently created and sent to Three Seasons a false offer to purchase the Property, and if so, a determination of Three Seasons’ entitlement to punitive or other damages and liability for those damages, shall proceed to trial, and shall be and the same hereby is adjourned to be disposed of by the trial judge. Directions for the trial of this issue may be obtained from the Case Management Master.

[9] We accept Three Seasons’ submission that in their notices of appeal, Mr. Faris and Mr. Eftimovski did not appeal para. 4 of the judgment dated August 17, 2004, and that they raised no issues in their factums establishing a basis for para. 4 to be set aside.

[10] In the result, Three Seasons’ request that we reconsider our judgment is dismissed; however, para. 54 of our reasons dated November 16, 2005 is amended by specifying that paras. 1-3 of the application judge’s judgment dated August 17, 2004, are set aside.

[11] In an endorsement dated December 8, 2005, Feldman J.A. stated that, in her view, a temporary stay of our decision was implicit in our agreement to accept submissions on the reconsideration motion. Despite that endorsement, on December 12, 2005, Mr. Faris transferred title to his farm to CLE72330 Limited. On January 13, 2006, at the request of Three Seasons, we made an order confirming that the order we made on November 16, 2005, was temporarily stayed. Particularly in light of the recent transfer of the property, we consider it appropriate to extend the stay pending disposition of Three Seasons’ leave application to the Supreme Court of Canada and to grant Three Seasons leave to register a certificate of pending litigation against the title to Mr. Faris’s farm. Accordingly, the judgment arising from our reasons dated November 16, 2005, is temporarily stayed pending disposition of Three Seasons’ leave application to the Supreme Court of Canada, and Three Seasons is granted leave to issue a certificate of pending litigation against the title to Mr. Faris’ farm now registered in the name of CLE72330 Limited.

[12] Given that success on the reconsideration motion is divided, there will be no order as to costs of that motion. However, Three Seasons is awarded costs of its requests for a stay on a partial indemnity basis payable by Mr. Faris fixed in the amount of $1500 inclusive of disbursements and applicable G.S.T.

[13] In addition to the foregoing matters, which were dealt with by way of oral argument, we received written submissions relating to the costs of the application heard by Cameron J. As was noted by the application judge, the application was heard in two stages because, near the end of the first stage of the hearing, Mr. Faris raised a new issue concerning the validity of the mortgage and the right of first refusal. The first stage of the application was heard in February 2004 and the second stage was heard in July 2004.

[14] Because of the nature of the issues to be dealt with pursuant to paragraph 4 of the judgment dated August 17, 2004, in our view, the costs of stage one of the application heard in February 2004 should be reserved to the judge disposing of these issues. As the second stage of the application, heard in July 2004, was unnecessary, and as Three Seasons was successful in relation to that stage, Three Seasons is awarded costs of the second stage of the application on a partial indemnity basis fixed in the amount of $40,000 inclusive of G.S.T. and disbursements. In light of the application judge’s findings that Mr. Eftimovski pressed the defences of non est factum and undue influence, both of which were dealt with in the second stage of the application, the costs of $40,000 are payable by Mr. Faris and Mr. Eftimovski jointly, but as between them, in the same percentages as determined by the application judge, namely, 60 per cent by Mr. Faris and 40 per cent by Mr. Eftimovski.

“M. Rosenberg J.A.”

“Janet Simmons J.A.”

“E.E. Gillese J.A.”