CITATION: Lakeshore Landmark Development Corp. v. TCI Realty Holdings Inc., 2016 ONSC 3289
DIVISIONAL COURT FILE NO.: 170/16
DATE: 20160525
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N :
LAKESHORE LANDMARK DEVELOPMENT CORP.
Plaintiff (Appellant)
– and –
TCI REALTY HOLDINGS INC. AND MONDELEZ CANADA INC.
Defendants (Respondents in Appeal)
Tom Arndt, for the Plaintiff (Appellant)
Jason J. Annibale and Cara Zacks, for the Defendants (Respondents in Appeal)
HEARD: May 12, 2016
M. DAMBROT J.:
[1] Lakeshore Landmark Development Corp. ("Landmark" and the "buyer") was incorporated by its principal, Issa El-Hinn, for the purpose of purchasing a large property on the north side of Lakeshore Avenue West in Toronto. The property is where the Christie Bakery manufacturing facility was located before it closed in September 2013. Mondelez Canada Inc. ("Mondelez") is the beneficial owner of the property, and TCI Realty Holdings Inc. ("TCI") is the nominee title-holder of the property.
[2] On March 23, 2015, Mondelez and TCI (collectively, the "sellers") and the buyer entered into an Agreement of Purchase and Sale (the "APS") for the property for $75,000,000, with a deposit of $500,000 and with a closing date of April 30, 2015.
[3] As will be seen shortly, the deal never closed, and, on July 3, 2015, pursuant to an ex parte order of Master Short, the buyer registered a certificate of pending litigation (the "CPL") on the title to the property. On April 5, 2016, Master Wiebe ordered the discharge of the CPL, declared that the buyer had no interest in the property and ordered that the deposits paid by the buyer to the sellers be forfeited.
[4] The buyer has commenced an appeal from the decision of Master Wiebe to the Divisional Court, and brings this motion for a stay of the order of the Master. The sellers bring a cross-motion for security for costs. I heard both motions together.
The Evidence
[5] In addition to the matters I have already set out, and of pertinence in these motions, the APS specified that: (1) time was of the essence; (2) the sellers were to deliver "a statement of adjustments at least five business days before closing and undertake to make re-adjustments, including items inadvertently omitted from the statement"; (3) the APS was the entire agreement between the parties; (4) the APS could not be amended, modified, discharged or waived except by written agreement; and (5) the only remedies available to the buyer in the event of the sellers' default was the return of the initial deposit or an action for specific performance.
[6] On April 23, 2015, the buyer advised the sellers that it could not close on April 30, 2015 because it could not provide its lender with the required key person life insurance required for the financing of the purchase. As a result, the parties negotiated an amending agreement extending the closing to June 1, 2015. Pursuant to this amending agreement: (1) the initial deposit was released to the vendors and became non-refundable; (2) the purchase price was increased by $450,000; and (3) a further deposit (the "replacement deposit") of $300,000 was to be paid on or before May 4, 2015. There was an acknowledgment that no further amendments to the sale documents were required, and there was no expressed clause specifying that time was of the essence or waiving the "time is of the essence" clause in the APS. The replacement deposit was paid on May 4, 2015.
[7] On May 25, 2015, the buyer advised the sellers that it needed another extension of the closing date because its problem in obtaining financing continued.
[8] On June 1, 2015, the second closing day, the parties negotiated and entered into a second amending agreement that extended the closing to June 29, 2015. The second amending agreement specified that: (1) the purchase price was increased by $435,000; (2) the replacement deposit was increased by $85,000; (3) $300,000 of the replacement deposit was to be immediately released to the sellers on a non-refundable basis; (4) the remaining $85,000 of the replacement deposit was to be released to the sellers on a non-refundable basis on or before June 17, 2015; and (5) the sellers were given the right to sell the property to another buyer on or after July 6, 2015. Again, there was an acknowledgment that no further amendments to the sale documents were required and there was no expressed clause specifying that time was of the essence or waiving the "time is of the essence" clause in the APS. The $300,000 portion of the replacement deposit was released on June 1, 2015.
[9] On June 17, 2015, the buyer informed the sellers that it took the position that time was no longer of the essence given the conduct of the parties and that the $85,000 replacement deposit would be paid on June 18, 2015, not June 17, 2015 as specified in the second amending agreement. The sellers responded the same day asserting that time remained of the essence, but that they would accept the $85,000 on June 18, 2015 without prejudice to that position. The $85,000 was paid on June 18, 2015.
[10] On June 19, 2015, three days before the sellers were required by the original APS to deliver a statement of adjustments, they sent a draft statement of adjustments to the buyer and reaffirmed their position that time remained of the essence. The statement erroneously credited the buyer with a payment of the 2015 realty taxes for the property.
[11] On June 23, 2015, the buyer advised the sellers that it was unable to close on the closing date, and sought a further extension. The sellers replied that they intended to close on June 29, 2015 as agreed.
[12] On June 24, 2015, the sellers delivered a revised draft statement of adjustments giving credit to the sellers for paying the 2015 realty taxes. On June 25, the buyer advised that the July 2, 2015 tax instalment had not been paid. The sellers immediately sent a third draft statement of adjustments that reflected this fact.
[13] On June 29, 2015, the sellers purported to be ready, willing and able to close. That same day, the buyer asserted that the sellers' tender was imperfect due to the alleged late statement of adjustments, and that the closing should be extended. The sale did not close.
[14] On July 2, 2015, the buyer commenced an action for specific performance of the APS. On July 3, 2015, on the ex parte motion of the buyer, Master Short granted a CPL, which was registered on July 3, 2015.
[15] On July 6, 2015, the sellers' lawyer sent an email advising of the sellers' intention to attack the CPL. In the same email, he stated that "our clients remain prepared to sell the property on the following terms . . ." There was then a list of terms that included an extension of the closing to 1:00 p.m. on July 16, 2015 with time remaining of the essence. There was no response.
[16] On July 15, 2015, the sellers purported to terminate the APS because of the buyer's inability to pay the purchase price and close, and served their Statement of Defence and Counterclaim.
[17] On September 9, 2015, the buyer sent an email to the sellers stating that "the hurdle had been crossed" presumably meaning that, for the first time, it was in a position to obtain the financing it needed to close the transaction.
[18] On September 29, 2015, Mark Hilson, the managing general partner of Romspen Investment Corporation provided Mr. El-Hinn with a letter stating that Romspen agreed to provide the required financing "upon 30 days prior written notice, provided . . . the Borrower delivers to us an undertaking to comply with the Life Insurance Requirement within a reasonable period of time after closing."
[19] By affidavit sworn October 1, 2015, Mr. Hilson stated:
Romspen is ready, willing and able to provide the Buyer with the necessary funding to close the Transaction in accordance with the Commitment. However, the Buyer has informed me that it is unable to provide Romspen with thirty (30) days clear written notice due to the fact that the Seller has unilaterally terminated the Agreement and refuses to work with the Buyer to determine a new Closing Date.
[20] On October 9, 2015, the sellers entered into an agreement of purchase and sale of the property with a new buyer.
[21] On March 30, 2016, Master Wiebe heard the sellers' motion for an order discharging the CPL. On April 5, 2016, Master Wiebe ordered the discharge of the CPL, declared that the buyer had no interest in the property and ordered that the deposits paid by the buyer to the sellers be forfeited.
The Reasons of Master Wiebe
[22] Before Master Wiebe, the buyer argued that it had a triable issue for a claim to an interest in the property because: (1) the parties, by their conduct, waived the time of the essence clause by the time of the closing on July 29, 2015 and the APS was improperly terminated by the sellers; and (2) if the time of the essence clause was not waived, the sellers did not exercise their right to terminate the APS, but instead waived their right to terminate by making their July 6, 2015 proposal.
[23] The Master concluded that there was no triable issue for the buyer's claim to an interest in the property, and specifically rejected each of the grounds advanced by the buyer.
[24] With respect to its argument that the time of the essence clause was waived by the conduct of the parties, the buyer specifically argued that the parties waived the time of the essence clause by their conduct: (1) by the several extensions of the closing without specific reference to time being of the essence; (2) by the acceptance of late payment of instalments; and (3) by the failure to finalize the statement of adjustments until June 25, 2015, three days after the deadline in the APS. The Master concluded that there was no merit to any of these allegations, for the following reasons.
[25] With respect to the first point, the Master explained that the APS clearly stated that a waiver of a term had to be by agreement and in writing. Each of the two extensions was carefully drafted by the parties as an amendment of the APS, and included a statement that no further amendments of the APS were required. This amounted to a reaffirmation, in both amending agreements, of the time of the essence clause.
[26] With respect to the second point, the first of the two "late" payments was not late at all. The second "late" payment was specifically accepted without prejudice to time remaining of the essence.
[27] With respect to the third point, the buyer's argument was that the requirement in the APS that the sellers were to deliver "a statement of adjustments at least five business days before closing and undertake to make re-adjustments, including items inadvertently omitted from the statement" was a requirement that the final APS had to be delivered before the five-day deadline. The Master said that this argument was untenable, in light of the wording of the APS. The APS refers to the delivery of "a" statement of adjustments, not "the" or "the final" statement of adjustments. In addition, the APS says that adjustments shall be made as of the date of the closing on an accrual basis, and that the sellers must undertake to re-adjust the adjustments, including any items inadvertently omitted. The APS clearly contemplates on-going adjustment of the statement of adjustments up to the closing. The sellers clearly met the deadline for delivering a statement of adjustments, and the time of the essence clause was not waived by the exchange of statements.
[28] The Master then turned to the second argument advanced by the buyer: if the time of the essence clause was not waived, the sellers did not exercise their right to terminate the APS, but instead waived their right to terminate the APS by making their July 6, 2015 proposal.
[29] The Master concluded that there was no triable issue that the sellers were not within their rights to terminate the APS on July 15, 2015. He noted that in their correspondence of July 6, 2015, the sellers' counsel advised the buyer in a lengthy email that they would be attacking the ex parte CPL. They added, at the end of the email, that while the sellers remained concerned that the buyer did not have the funds to close, they "remained prepared to sell the property to your client" on terms that followed, including the ending of the lawsuit and the CPL. On its face, this document was not a waiver by the sellers of their right to terminate the APS. It was an offer to settle the action by extending the closing. Subsequent correspondence clearly underscored the fact that this was an offer to settle.
[30] Finally, the Master determined that having concluded that the buyer has no triable claim to an interest in the property, he had the jurisdiction to declare that fact, and to further declare that the buyer's deposits were forfeited, and did so.
THE MOTION TO STAY THE ORDER OF THE MASTER
The Test on the Motion to Stay
[31] Section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that "A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just." Rule 63.02(a) and (b) of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194, permits a party to apply for a stay of proceedings of a final or an interlocutory Order.
[32] The parties are in agreement that the test for a stay is the same as a test for an interlocutory injunction: see Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.). The moving party must satisfy each of the three criteria in RJR Macdonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. In this case, the buyer must show that: (1) based on a preliminary assessment of the merits of the case, there is a serious issue to be determined on the appeal; (2) the buyer will suffer irreparable harm if the order discharging the CPL is not stayed; and (3) the balance of convenience favours the granting of a stay.
[33] In my view, the buyer cannot meet the first criterion, and it is thus unnecessary for me to consider the remaining two. The appeal is devoid of merit and has no prospect of success.
[34] The buyer argues that there are five serious questions to be tried in this case:
- whether or not the Master erred in finding that there was no triable issue for the buyer's claim to an interest in the property;
- whether or not the Master erred in failing to find that time was no longer of the essence;
- whether or not the Master erred in finding that there was material non-disclosure on the ex parte motion to obtain the CPL;
- whether or not the Master erred in principle in exercising the discretion to discharge a CPL; and
- whether or not the Master erred in purporting to grant final declaratory relief.
[35] I have already summarized the Master's consideration of the first two issues, and will not do so again. In making these arguments, the buyer is grasping at straws in an effort to keep alive an agreement of purchase and sale of property that failed because the buyer was unable to arrange for the financing it needed to pay for the property at closing on July 29, 2015. These two arguments are plainly devoid of merit. In any event, absent a palpable and overriding error, the Master's determination of these issues must stand. They raise no issues of law alone. The Master plainly made no palpable or overriding error.
[36] The third issue simply does not arise on this appeal. While the Master expressed the view that there was material non-disclosure on the ex parte motion to obtain the CPL, a position with which I am inclined to agree, this determination played no part in his decision to discharge the CPL, and is irrelevant to this motion to stay.
[37] The fourth issue also does not arise in light of the Master's determination, with which I agree, that there was no triable issue as to the buyer's claim to an interest in the property.
[38] I agree that the fifth issue is arguable. However the lifting of the stay was inevitable in light of the Master's determination of the other issues raised before him. His determination that there was no triable issue as to the buyer's claim to an interest in the property fully justified the lifting of the stay without the need to make a declaration to that effect.
[39] I note that certain other small matters were raised by the buyer in oral argument, such as the failure of the Master to specifically refer to the Hilson affidavit (although he did refer to the Hilson letter, which covers substantially the same ground) and a suggestion that the Master departed from the triable issue test and instead decided the merits of the appeal (despite some of his language, it is clear to me that the Master understood the test that he was to apply, and did so). In my view, none of these matters are of any consequence on this motion, and I will say nothing further about them.
[40] For these reasons, the motion for a stay is dismissed.
THE CROSS-MOTION FOR SECURITY FOR COSTS
[41] As I have mentioned, the sellers bring a cross-motion for security for costs. They also ask for an order that the hearing of the appeal be expedited.
[42] The motion for security for costs is brought on the basis that there is good reason to believe that the buyer's appeal is frivolous and vexatious and without merit, and there is good reason to believe that the buyer, which is a shell company, and which has not had the financing to pay for the property on closing, has insufficient assets in Ontario to pay the sellers' costs.
[43] The buyer does not resist the making of an order for security for costs. The only issue for me to decide is quantum.
[44] In relation to security for costs, the sellers request an order:
- requiring the buyer to pay into court, within thirty days of the order, security of the sellers' substantial indemnity costs of the proceeding below in the amount of $148,074.07, together with the amount awarded by Master Wiebe in respect of the CPL discharge motion and the sellers' substantial indemnity costs of the appeal in the amount of $38,032.98;
- dismissing the appeal without further attendance or formality if security is not given in accordance with the order; and
- granting leave to the sellers to move for increased security for costs if necessary.
[45] The sellers made no submissions about the appropriateness of this request.
[46] In my view, in all of the circumstances, the sellers' request is reasonable, and I make the order for security for costs that they request.
Disposition
[47] I dispose of these motions as follows:
- The motion to stay the order discharging the CPL is dismissed.
- The motion for security for costs is granted in the terms set out above.
- The hearing of the appeal is ordered expedited.
- Having reviewed the costs outlines provided to me by both parties, I award costs to the sellers fixed in the amount of $20,000, all inclusive, payable forthwith.
Dambrot J.
RELEASED: May 25, 2016
CITATION: Lakeshore Landmark Development Corp. v. TCI Realty Holdings Inc., 2016 ONSC 3289
DIVISIONAL COURT FILE NO.: 170/16
DATE: 20160525
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N :
LAKESHORE LANDMARK DEVELOPMENT CORP.
Plaintiff (Appellant)
– and –
TCI REALTY HOLDINGS INC. AND MONDELEZ CANADA INC.
Defendants (Respondents in Appeal)
REASONS FOR JUDGMENT
M. DAMBROT J.
RELEASED: May 25, 2016