COURT FILE NO.: 411/07

DATE: 20071219

SUPERIOR COURT OF JUSTICE - ONTARIO

DIVISIONAL COURT

RE: 1357202 Ontario Ltd. v. 1326046 Ontario Limited known as Green Acres, Corey Developments Inc., Southpointe Homes Inc., Lewis Michael Kelly, Stephen E. Mitchell, Carlos A.B. Rumor, and Amavel N. Carvalho

BEFORE: Kiteley J.

COUNSEL: Alfred J. Esterbauer, solicitor for the plaintiff/appellant

Kim Mullin, solicitor for the defendants/respondents Green Acres, Kelly, Mitchell, Rumor and Carvalho

HEARD: September 19, 2007

E N D O R S E M E N T

[1] In an endorsement released August 22, 2007, Belobaba J.[^1] made an order discharging a certificate of pending litigation. This is a motion pursuant to rule 62.02(4)(a) and (b) by the plaintiff for leave to appeal that decision.

Background:

[2] In December, 2001, Green Acres agreed to sell 178 lots/units to Corey. Corey assigned its interest to a related company, Southpointe. In October, 2006, Southpointe assigned its interest in 56 units to 1357202 (represented by Christina Homes). Green Acres’ plan of subdivision was registered on May 16, 2007. On May 22, 2007, Green Acres received a letter from the Town of Innisfil that indicated a building permit application could be submitted. On the basis of that letter, Green Acres fixed the closing date for June 5, 2007. When Homes questioned the adequacy of the letter, Green Acres threatened to treat her objection as anticipatory breach of contract.

[3] On June 1, 2007, an inspection was conducted at the site. Homes observed excess fill, rocks, concrete and asphalt debris on her lots. She questioned the rough grading of the lots.

[4] On June 5, 2007, Homes and Green Acres tendered. Green Acres refused a one day extension to deal with the issue of the availability of the building permit. On June 11, Homes began a specific performance action. On June 12, the Master gave leave to obtain a CPL on motion without notice.

[5] On August 15, 2007, Homes’ motion for summary judgment was heard by Belobaba J. along with the Green Acres’ motion to discharge the CPL. His decision was released the following week.

The Endorsements of Belobaba J.:

[6] The motions judge noted that under the agreement of purchase and sale, Green Acres had the right to set the closing date provided certain pre-conditions were satisfied. Green Acres set the date of June 5 but Homes did not close because she alleged that two of the pre-conditions had not been met: the availability of building permits and the completion of rough grading.

[7] The plaintiff’s motion for summary judgment was dismissed on the basis that the issues of compliance with the two pre-conditions needed to go to trial. The motions judge held that the affidavits and cross-examination transcripts disclosed material facts in dispute.

[8] In considering the motion to discharge the CPL, the motions judge referred to the factors identified in the case law[^2]. He identified the five factors that were the most relevant. First, he concluded that the plaintiff had not demonstrated that the property was unique. Second, he held that damages would be an adequate remedy and were capable of being calculated. Third, he noted that there was no evidence that Green Acres would not be able to pay damages if required to do so. Fourth, he pointed out that the Agreement contained a “no-registration” provision” that was clearly worded and had been negotiated by sophisticated commercial parties with the benefit of experienced legal counsel. He referred to the case law that suggested that the presence of a clearly worded no-registration clause should be determinative but he followed Chiu and added the no-registration clause to the list as an important but not determinative factor. He noted that counsel for Homes had urged him to follow McGrath v. B.G. Schickedanz Homes Inc.[^3] which held that a party seeking to rely on a no-registration clause cannot itself be in default under the agreement. He distinguished McGrath for two reasons: the question of which party is in default would only be determined at trial; and the no-registration clause had been negotiated by sophisticated commercial parties with the benefit of legal counsel.

[9] The fifth issue the motions judge identified was alleged non-disclosure by the plaintiff. At subparagraph 16(5) the motions judge held as follows:

When Christina Homes proceeded ex parte to obtain the CPL, it did not disclose to the court the existence of the no-registration provision. This court has discharged CPL’s in such circumstances: Cimaroli v. Pugliese (1988), C.P.C. (2d) 10; and Tri-Brook Homes (North Hill) Ltd. v. Clint Developments Inc. [1999] O.J. No. 4970.

[10] The motions judge concluded that it was just and fair that the CPL be discharged. And he observed that there was no basis for the suggestion that the law relating to forfeiture applied on the facts. He said that this was not a case where the discharge of the CPL created a result that was unconscionable or unjust.

[11] The day after the endorsement was released, Mr. Kussner on behalf of Green Acres wrote to the motions judge requesting “clarification” with regard to subparagraph 16(5) of the endorsement, where the motions judge indicated that Homes had not disclosed to the Court the existence of the no-registration provision. The solicitor for Green Acres pointed out that Homes had disclosed the existence of the no-registration provision, although he noted that in his submissions he had argued non-disclosure in other respects. Mr. Esterbauer wrote to the motions judge noting that Mr. Kussner had not contacted him before writing. He said that the endorsement was clear and no clarification was needed.

[12] In a letter dated August 23rd, Mr. Herschorn (for Southpointe and Corey) wrote to the motions judge with a question about submissions as to costs. He asked for clarification as to whether he would be permitted to make written submissions.

[13] The motions judge sent to all counsel a letter dated August 24, 2007 in which he “clarified and revised” his endorsement to reflect the following:

(1) Subparagraph (5) in paragraph 16 dealing with the non-disclosure issue will be deleted. I relied on what I thought were counsel’s representation in this regard and I am grateful that the matter has now been clarified. Subparagraph (5) is not at all germane to my decision and I will revise the Endorsement by deleting sub(5).

(2) If counsel for Southpointe wishes to make costs submission, he is certainly welcome to do so.

He attached a revised endorsement which omitted subparagraph 16(5).

[14] In letter dated August 24, 2007, Mr. Esterbauer objected to the revision of the endorsement when the language and intention had been clear. He asked for a fresh hearing before another Court on the issue of the discharge of the CPL.

[15] In a letter dated September 5, 2007, the motions judge wrote the following to Mr. Esterbauer (with a copy to other counsel):

As I understand the law, a judge may revise his or her reasons until the Order is taken out. After the Order in the matter has been issued, revisions can then only be made pursuant to the Rules. If you have any case law supporting your position, I would be pleased to review it.

Good Reason to Doubt the Correctness of the Decision:

[16] Mr. Esterbauer argued that the motions judge erred in finding that no evidence had been provided to show that the property was unique. He asserted that the motions judge had not applied the applicable test and he had ignored the fact that he had found that she had established that there was a triable issue. He took the position that the property was unique in that its replacement was not readily available and it had qualities which made it particularly appropriate for the plaintiff’s purposes.

[17] Mr. Esterbauer noted that while damages may generally be an adequate remedy in a commercial context where the property is sought primarily for capital accumulation, courts have recognized that specific performance would still be available in circumstances where it best serves justice between the parties. He asserted that damages would not be an adequate remedy because Green Acres has no assets other than the lots that were in issue. He took the position that the calculation would be difficult because of the involvement of Southpointe and purchasers of the lots. He argued that the conclusion by the motions judge that “there is no evidence that Green Acres is insolvent or will otherwise be unable to pay the damages award” was contrary to the evidence. Furthermore, he took the position that Green Acres had refused to make financial disclosure on the ground of relevance and it would be inappropriate to allow Green Acres to rely on the assertion that it was capable of satisfying a damage award when disclosure had been refused.

[18] Mr. Esterbauer also submitted that the original endorsement was based “in significant part on an erroneous finding, not argued by any party and contrary to the evidence”. Although the endorsement had been revised, he argued that it was reasonable to doubt the correctness on the basis of that erroneous original finding.

[19] Mr. Esterbauer argued that the motions judge gave inordinate weight to the existence of the no-registration clause.

[20] Last, Mr. Esterbauer took the position that the motions judge failed to apply the requisite standard and did not require Green Acres to establish that there was no triable issue with respect to the specific performance remedy being sought.

There are Conflicting Authorities:

[21] It was the no-registration clause that formed the basis of Mr. Esterbauer’s submission that there is a conflict in the case law with regard to the effect, if any, to be given to such a clause.

Desirability of Granting Leave and Matters of Such Importance:

[22] Mr. Esterbauer agreed that the second criterion in rule 62.02(4)(a) requires that the moving party focus on the perspective of the litigating public, not the parties to the proposed appeal. He submitted that the issues raised on the proposed appeal transcend the interests of the immediate parties and are of broad significance or general application that warrant resolution by a higher level of judicial authority. With respect to the second criterion in rule 62.02(4)(b), he submitted that it would be of significant benefit to litigants, generally, and would assist in the administration of justice to have the conflicting approaches in the case law determined by an appellate court.

Analysis:

[23] On the issues of uniqueness and the sufficiency of damages, the essence of the argument is that the motions judge erred in his findings of fact. The material before the motions judge included 7 affidavits and transcripts of the cross-examination of 5 witnesses. Ms. Mullin pointed out many references in the materials that could have supported the findings made. I agree with Ms. Mullin that the decision whether to discharge a CPL is a matter of discretion. The motions judge adopted the correct approach. He considered the factors and arrived at a conclusion. I am not satisfied that there is good reason to doubt the correctness of the exercise of that discretion on these issues.

[24] On the issue of insolvency and whether the motions judge ought to have arrived at a finding in the face of the refusal by Green Acres to provide disclosure, Ms. Mullin referred to evidence in the record that could have supported the findings made. While I agree with Mr. Esterbauer that it would be unfair to draw an inference helpful to a party when that party had refused to respond to relevant questions, the extensive record indicates that there is evidence on which the motions judge could have exercised his discretion. I am not satisfied that there is good reason to doubt the correctness of the decision on that point.

[25] On the issue of the revision of the endorsement, Mr. Esterbauer provided no authorities to support his position that the revised endorsement relates to the administration of justice and gave the plaintiff reason to doubt the correctness of the decision where the original endorsement contained five reasons yet the revised endorsement contained four reasons. I observe that the test on a motion for leave to appeal is not whether the plaintiff (or defendant as the case may be) has good reason to doubt the correctness of the decision. The test is an objective one. I agree with Ms. Mullin that a judge may revise his or her order at any time until the order is issued and entered. As she observed, the motions judge did not revise the disposition in his original endorsement, he revised one of the five reasons.[^4] It is the correctness of the order that is the issue. The revised endorsement deleted the last of the five factors, leaving four factors which in combination provided a sufficient basis for the exercise of his discretion. I am not satisfied that there is good reason to doubt the correctness of the revised endorsement.

[26] With respect to the no-registration clause, Mr. Esterbauer relied on four decisions to illustrate that there is good reason to doubt the correctness of the decision and that there are conflicting authorities: Chiu v. Pacific Mall Developments[^5]; McGrath v. B.G. Schickedanz Homes Inc.[^6]; Lariat Land Developments Inc. v. Loukras[^7]; and 2033363 Ontario Limited v. Georgetown Estates Corp.[^8] He argued that courts have held that a party seeking to rely on a no-registration clause must not be in default under the agreement. Counsel for the respondents relied on Singer v. Reemark Sterling I Ltd.[^9] and Salna v. Lotfi-Noushad[^10].

[27] Chiu indicates that a clearly worded agreement prohibiting the registration of a CPL may be applied against a purchaser even if the vendor was in breach, while McGrath indicates that an agreement prohibiting registration of a CPL will not be applied against a purchaser when the vendor has terminated the agreement. I note that Cameron J. in McGrath was not referred to Chiu and that Jenkins J. in Lariat and Boyko J. in Salna both followed Chiu while Master Albert followed McGrath rather than Chiu. In Singer, White J. simply adopted the no-registration provision without discussion.

[28] All of these cases speak to the same principle: a no-registration clause is a factor in the determination of whether to grant or discharge a CPL. The emphasis or importance is a matter of discretion depending on the circumstances. I am not satisfied that the correctness of the decision is open to very serious debate.[^11] Furthermore, the mere fact that other courts have exercised the discretion differently to lead to different outcomes does not render the cases “conflicting”.[^12]

[29] Mr. Esterbauer also argued that while no court had adopted the principle that no-registration clauses were invalid as against public policy and therefore there were no conflicting decisions on that point, that the failure to consider the public policy issue constituted good reason to doubt the correctness of the decision. I do not consider that to be a basis upon which to conclude that there is good reason to doubt the correctness of the decision.

[30] I do not agree with Mr. Esterbauer’s position that the onus of proving that there was no triable issue with respect to the specific performance remedy lies on the party seeking to discharge the CPL analogous to that of a defendant seeking summary judgment dismissing a plaintiff’s claim under rule 20. The case[^13] on which he relied dealt with the effect of an unsuccessful motion to discharge a CPL on a subsequent claim for damages under subsection 103(4) of the Courts of Justice Act by the prospective purchasers of the land against which the CPL had been registered. The Court of Appeal held that the finding of the motions judge that the claimant had a reasonable claim to an interest in land was not res judicata on the claim for damages. The court likened it to a rule 20 motion where a motions court judge finds that a genuine issue for trial exists. But that would not support a plea of res judicata at the trial of the issue. The Court of Appeal was not establishing a standard of proof. On a motion to discharge the CPL, the court is still expected to consider the factors such as those enumerated by Himel J.[^14] in exercising the broad discretion under subsection 103(6).

[31] Had I concluded that there was good reason to doubt the correctness of the decision or that there were conflicting decisions, I would not have been satisfied that it was desirable that leave be granted or that the proposed appeal involves matters of such importance that leave ought to be granted. The issues are of considerable importance to the parties. But the issues do not transcend the interests of the parties. As the many authorities indicate, decisions on setting aside a CPL are based on the exercise of discretion in the application of well-known principles to unique facts.

ORDER TO GO:

[32] The motion for leave to appeal and the motion for a stay pending appeal is dismissed.

[33] If the parties are unable to agree on costs by January 7, 2008, written submissions no longer than 3 pages (plus costs outline) shall be made by the solicitor for the defendants/respondents by January 14 and by the solicitor for the plaintiff/appellant by January 21.

Kiteley J.

DATE: December 19, 2007

[^1]: 1357202 Ontario Ltd. v. 1326046 Ontario Ltd. (c.o.b. Green Acres), [2007] O.J. No. 3149 (Sup. Ct. J.). Costs decision reported at [2007] O.J. No. 3599 (Sup. Ct. J.). [^2]: The eight factors suggested by Master Donkin in 572838 Ontario Inc. v. Dhunna [1987] O.J. No. 1073 at p. 3; and the nine factors suggested by Himel J. in Chiu v. Pacific Mall Developments [1998] O.J. No. 3075. [^3]: [2000] O.J. No. 4161 (S.C.J.) [^4]: Tarion Warranty Corp. v. Brookegreene Estates Inc., [2006] O.J. No. 1923 (Div. Ct.) at para 3; Montague v. Bank of Nova Scotia (2004) 2004 27211 (ON CA), 69 O.R. (3d) 87 (C.A.) at 34-36; application for leave to appeal dismissed [^5]: FN 2 [^6]: FN 3 [^7]: [2005] O.J. No. 1030 (S.C.J.) [^8]: [2006] O. J. No. 687 [^9]: [1992] O.J. No. 1083 (Gen. Div.) affirmed [1997] O.J. No. 653 (C.A.) [^10]: [2006] O.J. No. 864 (Ont. S.C.J.) varied [2007] O.J. No. 1856 (Div.Ct.) [^11]: Brownhall v. Canada (Ministry of Defence), 2006 7505 (ON SC), [2006] O.J. No. 672 (S.C.J.) [^12]: Comtrade Petroleum Inc. v. 490300 Ontario Ltd., (1992) 1992 7405 (ON SC), 7 O.R. (3d) 542 (Div. Ct.) at 544 [^13]: G.P.I. Greenfield Pioneer Inc. v. Moore 2002 6832 (ON CA), [2002] O.J. No. 282 (OCA) [^14]: FN 2