COURT OF APPEAL FOR ONTARIO DATE: 20220812 DOCKET: M53509 (C70284) & M53674 (C70880)

Brown J.A. (Motion Judge)

BETWEEN

Tega Homes (Attika) Inc. Plaintiff (Respondent/Responding Party)

and

Spencedale Properties Limited and Markton Properties Limited Defendants (Appellants/Moving Parties)

Counsel: Thomas G. Conway and Kevin Caron, for the appellants David Cutler, for the respondent

Heard: August 11, 2022 by video conference

REASONS FOR DECISION

I. OVERVIEW

[1] The appellants, Spencedale Properties Limited and Markton Properties Limited (the “Appellants”), own two properties in Ottawa: 3 Hamilton Avenue and 233 Armstrong Street (the “Properties”).

[2] In 2013, they entered into an agreement of purchase and sale under which the respondent, Tega Homes (Attika) Inc. (“Tega”), would acquire the Properties (the “APS”).

[3] The APS did not close. Tega thereupon commenced a 2015 action against the Appellants for breach of contract in which it sought specific performance of the APS or, in the alternative, damages.

[4] In 2015, Tega obtained certificates of pending litigation (“CPLs”) in the action, which it registered against the Properties.

[5] In May 2017, Tega amended its pleading to abandon the request for specific performance.

[6] The remaining damages claim proceeded to a summary judgment motion. By reasons dated October 11, 2018, Gomery J. granted summary judgment on the issue of liability, holding that the Appellants had breached the APS: Tega Homes (Attika) Inc. v. Spencedale Properties Ltd., 2018 ONSC 6048.

[7] The assessment of damages took place at a 2021 trial conducted by MacLeod R.S.J. By judgment dated January 5, 2022 (the “Judgment”), the trial judge awarded damages to Tega on its claim and to the Appellants on their counterclaim: Tega Homes (Attika) Inc. v. Spencedale Properties Limited et. al., 2022 ONSC 75. The net award under the Judgment was in favour of Tega, in the net amount of $1,498,026, inclusive of costs and pre-judgment interest.

[8] The Appellants have appealed the Judgment (C70284). Their appeal has been perfected. Tega has not filed a notice of cross-appeal. The appeal is scheduled to be heard on January 16, 2023.

[9] In April 2022, Tega obtained a writ of seizure and sale for the amount of the Judgment (the “Writ”).

[10] The Appellants then moved in the Superior Court of Justice for an order discharging the CPLs registered against the Properties. By order dated June 16, 2022, McLean J. dismissed the Appellants’ motion (the “CPL Order”). The Appellants have appealed that order (C70880). Their appeal from the CPL Order has not been perfected.

II. THE REASON FOR THESE MOTIONS

[11] The Appellants wish to close a sale of the Properties to Taggart Investments Inc. (“Taggart”). The genesis of that transaction dates back to a November 2019 option agreement between those parties, which Taggart exercised. Taggart and the Appellants have extended the closing date of the sale of the Properties several times. The most recent amendment to the option agreement – the Fifth Amending Agreement dated July 7, 2022 – provides for a closing date within a three-month period. A representative of the Appellants deposes that the closing of the sale to Taggart is set for no later than September 10, 2022.

[12] The purchase price for the Properties under the option agreement is approximately $8.5 million. According to the May 2022 Fourth Amending Agreement, on closing Taggart shall pay approximately $2.5 million in cash, with the balance of the purchase price provided by way of a vendor take-back mortgage.

[13] Obviously, the Appellants cannot close the sale unless the CPLs and Writ are removed from title or vacated. To achieve that end, the Appellants are prepared to pay into court the amount of the Judgment pending determination of their appeals.

III. THE APPELLANTS’ POSITION

[14] To vacate the CPLs and Writ, the Appellants have brought these two related motions. In the appeal from the Judgment, the Appellants seek an order that, upon payment into court of the amount of the Judgment under r. 72.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the Writ would be expunged and the CPLs discharged from title. In the appeal from the CPL Order, they move to set aside that order pursuant to s. 134(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”), which permits an appeal court to make “any interim order that is considered just to prevent prejudice to a party pending the appeal.”

[15] As a practical matter, the Appellants’ motions are joined at the hip, as the sale to Taggart cannot close unless the impediments of both the Writ and the CPLs are removed. The Appellants’ substantive argument is based on that linkage. They argue as follows:

• Rule 63.03(6) permits an appellate court judge to set aside a writ of execution where an appellant gives security satisfactory to the court;
• The Appellants are prepared to pay into court the amount of the Judgment, in respect of which the Writ was issued;
• If the court is prepared to set aside the Writ upon the payment into court of such an amount, then practical necessity dictates discharging the two CPLs registered against the Properties in order to enable the sale to Taggart to close. Such a discharge can be ordered under s. 134(1)(c) of the CJA, which authorizes an appeal court to “make any other order or decision that is considered just.” According to the Appellants, the CPLs should be discharged because Tega amended its pleading prior to trial to abandon any claim for an interest in the Properties and, without a claim for an interest in the Properties, the CPLs must be vacated: CJA, s. 103(6)(a)(ii).

IV. THE POSITION OF TEGA

[16] Tega opposes the relief sought by the Appellants. It contends, in effect, that the Appellants should not be permitted to sell the Properties until after the appeal is heard next January. Tega advances three reasons why the motions should be dismissed.

[17] First, Tega argues that the relief sought by the Appellants would contravene the bargain the Appellants struck with it in two March 2016 agreements, which were concluded to facilitate the Appellants’ refinancing of the Properties.

[18] The first March 2016 agreement is styled as the “Corrected Version dated March 22nd, 2016: Agreement”. Paragraph 3 provides:

3. The postponement of the Certificate, the deletion of the Caution and the renunciation to specific performance is to facilitate the refinancing of the properties and for no other or improper purpose. Furthermore, all parties to the agreement consent to maintain the (postponed) Certificate on the titles (no longer for specific performance but for damages) to prevent the sale of the properties until such time as Attika’s damages have been agreed upon, determined by the Court and/or paid. In case a sale occurs before Attika’s damages have been agreed upon, determined by the Court and/or paid, the proceeds of the sale will be payable into Court until the complete resolution of the dispute. [Emphasis added.]

[19] The second agreement, also entered into during March 2016, is titled “Agreement Regarding Surplus on Sale”. Paragraphs 3 and 4 provide:

3. Subject to paragraphs 1 and 2 above, in case a sale occurs before damages have been agreed upon between Tega and the Owner, determined by the Court and/or paid, the proceeds of the sale will be payable into Court until the complete resolution of the dispute;

4. The Owner and Lender agree to not take any steps to discharge the Certificates of Pending Litigation registered as Instrument Nos. OC1690052 and OC1690053, without the consent of Tega. [Emphasis added.]

[20] Second, Tega points out that in 2018 the Appellants brought a motion in the Superior Court of Justice for relief similar to that which they now seek. O’Bonsawin J. dismissed the motion on January 19, 2018, relying in part upon the provisions of the two March 2016 agreements. The Divisional Court denied leave to appeal on May 18, 2018.

[21] Third, Tega complains that the existence of the 2019 option agreement with Taggart was not made known to it until April 2022. Tega contends that, had the sale price of the Properties under the option agreement been made known to it earlier, this might have affected the calculation at trial of the damages for the breach of the APS. As well, the agreements with Taggart suggest that Taggart has paid the Appellants hundreds of thousands of dollars over the past two years, which should have been paid into court in accordance with the March 2016 agreements.

V. ANALYSIS

Tega’s jurisdictional argument

[22] Tega submits that the motion to set aside the CPL Order is not properly before this court because any appeal of that order lies, with leave, to the Divisional Court, not to the Court of Appeal. The Appellants contend that, once the Judgment was entered and the proceeding in the court below came to an end, any later order by a judge of the Superior Court of Justice would be final in nature.

[23] In the circumstances of this case, I see no need to wade into the interlocutory/final quagmire that plagues Ontario’s civil justice system. I shall deal with both motions. As a practical matter, effective relief in one cannot be granted without determining the other.

[24] At the present time in this litigation, the “main event”, so to speak, is the appeal from the Judgment, which is properly before this court. Everything else is ancillary to that appeal. The notice of motion in the appeal from the Judgment seeks an order providing that, upon the Appellants paying the amount of the Judgment into court, the Writ and the CPLs will be vacated. Accordingly, I will deal with the Appellants’ requests for relief in respect of both the Writ and the CPLs.

Identifying the key issues

[25] When one cuts through the tactical arguments advanced on these motions, I see two substantive issues for determination:

• Do the March 2016 agreements preclude the Appellants from seeking and obtaining the removal of the Writ and CPLs on appropriate terms?
• If the Writ and CPLs should be removed, what amount should the Appellants pay into court as security?

The effect of the March 2016 agreements

[26] The two March 2016 agreements clearly contemplate that the Appellants could sell the Properties before the court determines the damages to which Tega might be entitled. Accordingly, for purposes of these motions, I give no effect to Tega’s arguments based on the Appellants’ delay in disclosing the Taggart deal.

[27] That said, I think a reasonable reading of the March 2016 agreements indicates that the parties intended their provisions to remain in effect until there had been a final determination of Tega’s claim to damages. That will not occur until the parties exhaust their appeal rights in respect of the Judgment.

[28] The March 2016 agreements require the Appellants to pay into court the “proceeds of the sale” to Taggart. Yet the Appellants only wish to pay into court the amount of the Judgment, plus amounts to cover the post-judgment interest and Tega’s appeal costs.

[29] On its part, Tega wants to enforce the black letter of the March 2016 agreements, notwithstanding that the parties now know the upper limit of the damages Tega can recover from the Appellants, given that Tega has not brought a cross-appeal from the Judgment. As its primary position, Tega contends that the March 2016 agreements preclude the removal of the CPLs and Writ before the appeal of the Judgment concludes. Alternatively, Tega argues that the March 2016 agreements require the Appellants to pay into court the cash sale proceeds of approximately $2.5 million due on closing.

[30] As mentioned, I do not accept Tega’s primary position: the March 2016 agreements clearly contemplate the Appellants can sell the Properties prior to “the complete resolution of the dispute” provided they post security. Tega’s alternative position regarding the quantum of the security strikes me as unreasonable, as it seeks a disproportionate amount of security, but I acknowledge that it finds some support in the language of the March 2016 agreements.

[31] I also appreciate that O’Bonsawin J. relied on the provisions of the March 2016 agreements to dismiss the Appellants’ earlier motion to discharge the CPLs. However, her endorsement clearly indicates that she anticipated the issue of the continued registration of the CPLs would be revisited during the ensuing summary judgment motions. It appears that, for whatever reason, the issue was not addressed then or during the trial. However, the upper limit of the Appellants’ liability for damages to Tega is now known.

[32] In my view, the situation boils down to the following:

• the March 2016 agreements contemplate that the Appellants can sell the Properties before Tega’s damages are finally determined;
• the Judgment, with accumulated post-judgment interest, has fixed the Appellants’ obligation to Tega at just over $1.5 million;
• Tega has not cross-appealed from the Judgment. Consequently, the appeal from the Judgment is most unlikely to increase the amount of the Appellants’ liability for damages to Tega; and
• to require Tega to pay the full sale proceeds into court in those circumstances would provide Tega with far more security for its Judgment than is reasonably required.

[33] In those circumstances, I think a just order is one that would enable the Appellants to close their sale to Taggart (and thereby avoid the potential prejudice of losing that deal) but would ensure that the Appellants pay into court reasonable security for the Judgment and related costs. From a substantive point of view, that would place the parties in the financial positions contemplated by the March 2016 agreements.

[34] I have carefully considered Tega’s submissions about the Appellants’ failure to disclose information about the Taggart option agreement. Although Tega argues that information should have been made available for the damages trial, there is nothing in the evidence before me about the actual impact such disclosure might have had on the amount of damages awarded. As well, as I have mentioned, Tega has not cross-appealed the Judgment. Further, notwithstanding how one might characterize the conduct of the Appellants, one is still left with the question: What reasonable amount of security would protect Tega’s Judgment pending the disposition of the Appellants’ appeals?

Determining a reasonable amount of security

[35] Tega submits that the Appellants’ proposal to pay into court the amount of the Judgment fails to include the accumulated and accruing post-judgment interest, as well a potential award of appeal costs to Tega. Those are valid concerns, which the Appellants acknowledge.

[36] The appeal from the Judgment will be heard on January 16, 2023. There is every likelihood that it will be determined by the end of June 2023, or approximately 1.5 years from the date of the Judgment.

[37] The net amount of the Judgment in favour of Tega is $1,498,026.

[38] The Judgment awarded post-judgment interest at 2% per annum running from January 5, 2022. I calculate the monthly post-judgment interest to be $2,496.71. Post-judgment interest for 18 months (to the end of the second quarter of 2023) would amount to $44,940.78.

[39] The trial judge awarded Tega costs of $70,000 for a four-day trial in which Tega was the plaintiff. On the appeals, Tega is the respondent. Even making allowance for the possibility of an award of appeal costs on an elevated scale, I think $150,000 would be a more than adequate amount of security to cover such costs.

[40] Adding those three numbers together results in the amount of $1,692,966.78. To arrive at a reasonable amount of security that would balance Tega’s interest in the practical enforceability of its Judgment and the Appellants’ interest in completing the sale of the Properties to Taggart, I would increase that amount to $1,750,000.

VI. DISPOSITION

[41] Accordingly, upon payment by the Appellants into court of the amount of $1,750,000, to the credit of appeal C70284, the Appellants will be entitled to the relief set out in paras. (b) and (c) of their Fresh Notice of Motion dated July 27, 2022, in M53509, which will have the effect of vacating the Writ and CPLs.

[42] The Appellants are entitled to their costs of the motions fixed in the aggregate amount of $5,000, including disbursements and applicable taxes.

“David Brown J.A.”