Court File and Parties

CITATION: Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, et al 2014 ONSC 3785

COURT FILE NO.: 34/13

DATE: 20140620

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT AT TORONTO

RE: Fram Elgin Mills 90 Inc. (formerly Frambordeaux Developments Inc.) Plaintiff/Respondent

AND:

Romandale Farms Limited, Jeffrey Kerbel, 2001251 Ontario Inc. and First Elgin Developments Inc., Defendants/Appellant/Respondents as follows:

Romandale Farms Limited, Defendant/Appellant

Jeffrey Kerbel, 2001251 Ontario Inc. and First Elgin Developments Inc., Defendants/Respondents

BEFORE: Kiteley J.

COUNSEL: Sara J. Erskine, for the Plaintiff/Respondent

Ranjan Das, for the Defendant/Appellant, Romandale Farms Limited

Martin J. Henderson, for the Defendants/Respondents Jeffrey Kerbel, 2001251 Ontario Inc. and First Elgin Developments Inc. (“the Kerbel defendants”)

HEARD: March 31, 2014

ENDORSEMENT

[1] This is an appeal by Romandale Farms Limited from the order of Master Graham dated December 21, 2012 whereby he dismissed Romandale’s motion seeking, inter alia, leave to amend the Statement of Defence, and to commence a counterclaim. For the reasons that follow, the appeal is dismissed.

Background

[2] Pursuant to two written Co-Owner Agreements, the plaintiff is a joint owner to the extent of 5% and the defendant Romandale is a joint owner to the extent of 95% of two large parcels of development land in Markham. In an agreement dated August 29, 2005, Romandale purported to sell all of its remaining interests in the lands to the Kerbel Defendants. The plaintiff discovered the existence of that agreement in 2007 and issued a statement of claim in which it alleged that the 2005 agreement constitutes a breach of the Co-Owner Agreements which entitled the plaintiff to require Romandale to sell all of its interest in the lands to the plaintiff for 95% of the fair market value. The plaintiff sought a declaration that the 2005 Agreement was void and should be set aside and claimed damages for breach of contract and misrepresentation against Romandale, and damages as against the Kerbel defendants for inducing breach of contract, conspiracy to injure and misrepresentation. On July 26, 2007, Forestell J. granted an interlocutory injunction enjoining the defendants from dealing with or disposing of the lands until trial.

[3] In September 2010, on the eve of the original trial date, the plaintiff and the Kerbel defendants entered into a settlement agreement which provided that the plaintiff will not seek a declaration that the 2005 Agreement is void and it is contemplated that that agreement will be performed by the parties to it; the plaintiff will not seek any relief as against the Kerbel defendants and will discontinue the actions against them; the Kerbel defendants granted to the plaintiff an option to purchase a 50% interest in Romandale’s remaining interest in the lands once the Kerbel defendants acquire that interest from Romandale pursuant to the 2005 Agreement, so that after the plaintiff exercises its option, the plaintiff and the Kerbel defendants will each own 50% of the lands and will be responsible to pay their proportionate share of the costs and expenses.

[4] By order dated November 29, 2011, Spence J. granted the plaintiff’s motion and the actions were discontinued as against the Kerbel defendants and the claims against Romandale were modified. In his endorsement, Spence J. noted that Romandale had raised the prospect of prejudice if the action was discontinued as against the Kerbel defendants and that if Romandale wanted to keep the Kerbel defendants in, it could move to do so by way of a cross-claim or a third party claim or a counterclaim whichever would be applicable in the circumstances.

[5] Romandale sought leave to amend its statement of defence and issue both a cross-claim and a counterclaim. The proposed amendments assert that:

(a) the settlement agreement constituted a breach of the 2005 agreement because:

• the settlement was not an unconditional consent of the 2005 agreement as required under that agreement;
• contrary to the terms of the 2005 agreement, the settlement contemplates an assignment of the 2005 agreement; and
• by agreeing to the settlement agreement, the Kerbel defendants have fundamentally breached the 2005 agreement;

(b) in the alternative, if the settlement is an immediate and unconditional consent then the Kerbel defendants must pay $160,000 per acre to Romandale under the terms of the 2005 agreement;

(c) as a result of the settlement:

• neither Romandale nor the plaintiff will be required to, or be able to exercise the buy-sell provision in the Co-Ownership Agreements and therefore the buy-sell provisions can be and should be initiated immediately;
• the plaintiff interfered with Romandale’s contractual relations;
• by encouraging the plaintiff to enter into the settlement, the Kerbel defendants interfered with Romandale’s contractual relations;
• pursuant to the Co-Owner Agreement, the plaintiff had made an election in which it sought specific performance not damages and therefore the plaintiff is estopped from pursuing a claim for damages. By entering into the settlement, the plaintiff has demonstrated that the election was a sham although the plaintiff had relied on the election to obtain the injunction;
• it constitutes a termination of the Construction Management Agreements and the Co-Owner Agreements.

[6] In the proposed counterclaim, Romandale sought a declaration that the Co-Ownership Agreements are terminated and sought damages as against the plaintiff in the amount of $45 million for breach of contract and/or wrongful interference with contractual relations.

[7] In the proposed cross-claim, Romandale sought a declaration against the Kerbel defendants that the 2005 agreement was terminated and sought damages as against those defendants in the amount of $45 million for breach of contract and/or wrongful interference with contractual relations.

Decision of the Master

[8] In an endorsement that dismissed the motion, the Master found that the settlement between the plaintiff and the Kerbel defendants did not amount to a breach of the 2005 agreement and therefore the proposed amendments and proposed cross-claim and counterclaim were not tenable in law.

Issues in this appeal

[9] Counsel for Romandale takes the position that the Master:

(a) Erred in law by not adjudicating on all of the proposed amendments but instead limited his analysis to one issue;

(b) Erred in law by making determinative factual findings on a motion to amend pleadings and in the absence of any evidence to substantiate the findings that he made; and

(c) Erred by failing to apply the appropriate test regarding amendments to pleadings.

[10] Counsel for the plaintiff and for the Kerbel defendants agree in their opposition to the appeal.

Analysis

[11] The parties agree that the standard of review on this question of law is correctness.

[12] Counsel for Romandale concedes that the Master identified the proper legal principles in paragraph 7 of the endorsement. He takes the position that the Master did not properly apply those principles.

[13] Contrary to the assertion on behalf of Romandale, a complete copy of the settlement agreement was in the material before the Master. Leaving aside the 6 paragraphs of preamble, there are 6 operative paragraphs in the settlement agreement. It is clear that the essential element of the agreement was that (one of) the Kerbel defendants granted an option to the plaintiff to purchase a 50% interest under certain conditions. The Master did not find as a fact that that was the case. Rather, he assumed the facts as pleaded, which included the settlement agreement.

[14] As he indicated, the Master was required to scrutinize the proposed amendments and to refuse them if they are not tenable in law[^1] and he must not conduct a detailed examination of the merits.[^2] A review of the settlement agreement demonstrated that it was plain and obvious that the proposed pleading would not survive rule 21. Furthermore, the Master correctly held that the plaintiff was not estopped from pursuing a claim for damages even though it had earlier pursued specific performance.

[15] The Master focused on the settlement agreement because it was the foundation of the motion. However, that did not mean that he erred by failing to consider the other causes of action proposed. His conclusion with respect to the settlement agreement meant that it was unnecessary to deal with the other proposed causes of action. The Master could readily conclude that the proposed amendments were not tenable, nor was the proposed cross-claim and counterclaim since both depended on the asserted interpretation of the settlement agreement.

[16] I am not persuaded that the Master erred in law in dismissing the motion.

ORDER TO GO AS FOLLOWS:

[17] Appeal is dismissed.

[18] If by June 26, 2014 counsel have not agreed as to costs, then by July 1, 2014 counsel for the plaintiff and the Kerbel defendants shall deliver written submissions not exceeding 3 pages plus costs outline; and by July 8, 2014, counsel for Romandale shall deliver written submissions not exceeding 3 pages.

Kiteley J.

Date: June 2014

[^1]: Keneber Inc. v. Midland (Town) (1994), 16 O.R. (3d) 753 (Gen.Div.)

[^2]: Plante v. Industrial Alliance (2003), 66 O.R. (3d) 74 (S.C.J.)