COURT FILE NO.: CV-19-626144 MOTION HEARD: 20191126 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Vrancor Development Group Inc., Plaintiff AND: Marko Juricic, Brooklyn Contracting Inc. and Laurentian Business Centre Ltd., Defendants
BEFORE: Master Jolley
COUNSEL: Shaun Laubman and Vlad Calina, Counsel for the Moving Party Plaintiff Scott Hutchison and Abhisheh Vaidyanathan, Counsel for the Responding Party Defendants
HEARD: 26 November 2019
Reasons for Decision
[1] The plaintiff brings this motion for leave to have issued a certificate of pending litigation against property located at 3100 Harvester Road, Burlington, Ontario (the “Property”).
[2] In February 2018, the defendant Brooklyn Contracting Inc. (“Brooklyn”) entered into an agreement to purchase the Property. In March 2018, the defendant Marko Juricic (“Juricic”), controller of Brooklyn, approached Darko Vranich (“Vranich”), the sole director, officer and shareholder of Vrancor Development Group Inc. (“Vrancor”), to discuss development of the Property. Here the stories diverge.
Differing Version of Events
Vrancor’s Version
[3] According to Vranich, Juricic approached him to discuss entering into a joint venture to develop the Property. Vranich had many years experience in development and hotel management and it was intended that the Property would be the site of a future hotel and office/light industrial building.
[4] In April 2018 the parties reached an oral agreement to develop the Property as a joint venture through Vrancor and Brooklyn. Each would contribute $12,500 as an initial deposit and each contribute half of the $2,430,000 required on closing. Brooklyn would take legal title to the Property in its name and would hold the Property in trust for itself and Vrancor equally. At closing, Brooklyn would assign its rights to a newco, which would be controlled by Vrancor and Brooklyn. They agreed on the division of management responsibilities for the development and on payment of future construction and development costs. Vrancor would have primary responsibility for overseeing constructing, financing and development and Juricic would have primary responsibility for zoning, permits, liaising with consultants and managing the day-to-day construction activities. Vrancor would ultimately manage the hotel and office building on the Property for a fee and, thereafter, all profits of the joint venture would be divided equally.
[5] After having reached agreement, Vrancor set to work on behalf of the joint venture initiating discussions with various hotel franchises and potential lenders for the construction and operation of the Property. During his weekly meetings with Juricic from August 2018 to January 2019, Vranich requested updates on the status of the application for severance, which Brooklyn was undertaking. Juricic assured Vranich through to January 2019 that he was working diligently on obtaining the severance. Vranich later discovered that Juricic had obtained the severance in November 2018, but had not advised Vranich. Whether he did not do so because their preliminary discussions were at an end or whether he wished to keep the Property for himself is an issue for trial.
[6] In January 2019, Juricic closed the Property, without advising Vrancor and in breach of the agreement. Instead of the Property being held by Brooklyn in trust for itself and Vrancor, legal title was transferred to Laurentian, a company incorporated in September 2018, of which Juricic is the sole director and officer. At no time did Vrancor request return of its deposit. Juricic purported to repay that share of the deposit along with Vrancor’s payment of an appraisal that had been carried out for the Property, by way of a credit for funds owing on another project. This was done in February 2019, not in August 2018 when Juricic says the discussions came to an end.
[7] In its statement of claim, Vrancor alleges breach of trust, breach of fiduciary duty and conversion and claims that the defendants hold the Property as constructive trustee for it.
The Defendants’ Version
[8] The defendants say that the discussions about Vranich’s involvement in the Property were just that, and never got beyond the proposal stage. Juricic alleges that he approached Vranich to discuss an arrangement on terms similar to those of other projects they were developing and which, at least in the case of 154 Main Street, Hamilton, had been committed to writing in the form of a signed “binding letter of intent”. Namely, he proposed that Vranich would responsible for the entire purchase price of the Property and all the development and construction costs of two light industrial buildings to be built there. Juricic, through Brooklyn, would perform project development and construction management services which would be paid for monthly by Vranich, as had been agreed for the Main Street development. In addition Juricic would receive some sort of bonus based on profits.
[9] Unless and until there was an agreement on what the parties were going to develop, Juricic would never have entered into any joint venture agreement with Vranich concerning the Property. Juricic’s financial resources were much more limited that those than Vranich and he would not have agreed to enter into a transaction that required him to cover an equal share of the Property’s purchase and development costs. Further, a large hotel development would have been a non-starter from the outset as Juricic did not have the financial wherewithal for a project of that size. From his perspective, without agreement on the scope of the project, he would not have agreed to share or sell ownership of the Property.
[10] Juricic agrees that, on the basis of the discussions outlined above, the parties took certain steps. While Vranich described them as part performance, Juricic described them as preliminary due diligence focused on what could be done with the Property so that the parties could decide if the venture could be workable for them.
[11] Juricic alleges the idea of a hotel development was only raised in August 2018 and he advised Vranich that he was not interested in such a proposal. He was even less interested when it was coupled with a discussion that he would pay 50% of the costs, as opposed to their initial discussions that Vrancor would pay 100% of the costs, as was done for the Main Street development. This was confirmed in his contemporaneous note “I can’t” referencing sharing the costs equally, as Vranich was now proposing. Without agreement on these two fundamental issues of financing and the nature of the development, the parties abandoned the idea of working together on the Property after this August discussion.
[12] Juricic denies that Vranich made any requests for updates after August 2018, consistent with their understanding that they had mutually abandoned their initial discussions about working together to develop the Property.
Analysis
[13] I have applied the following legal principles set out by Master Glustein (as he then was) in Perruzza v. Spatone 2010 ONSC 841 at paragraph 20:
20(i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL ( Homebuilder Inc. v. Man-Sonic Industries Inc. 1987 CarswellOnt 499 (Ont. Master) (“Homebuilder”) at para. 1 );
(ii) The threshold in respect of the “interest in land” issue in a motion respecting a CPL (as that factor is set out in section 103(6) of the Courts of Justice Act, R.S.O. 1990, c.C.43 is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed ( 1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (Ont. S.C.J. ), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Ont. Gen. Div. [Commercial List]) at para.62;
(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL as “a reasonable claim to the interest in the land claimed” (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (Ont. C.A.) at para. 20 );
(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation; (ii) whether the land is unique; (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the case or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security ( 572383 Ontario Inc. v. Dhunna 1987 CarswellOnt 551 (Ont. Master) at paras. 10-18 ); and
(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated ( 931473 Ontario Ltd. v. Coldwell Banker Canada Inc. 1991 CarswellOnt 460 (Ont. Gen. Div .) ; Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CarswellOnt 1026 (Ont. Div. Ct.) at para. 9 ).
[14] The evidence is to be reviewed in its totality, after cross-examination and, without deciding disputed issues of fact and credibility, the court is to determine whether a reasonable claim to an interest in the Property has been made out (Interrent International Properties Inc. v. 167750 Ontario Inc. 2013 ONSC 4746; Roseglen Village for Seniors Inc. v. Doble 2010 ONSC 3239 at paragraph 11). Some of the Dhunna factors set out in paragraph 13(iv) above may not be as relevant where the claim is based on constructive trust and the plaintiff claims a proprietary interest in the specific property, as is the case here (Guz v. Olszowka 2019 ONSC 5308 at para. 51).
[15] Looking critically at the record, while there is no correspondence between Vranich and Juricic outlining the agreement alleged, there are a number of emails from Juricic to third parties involved in various aspects of the development, where he advises that he and Vranich had purchased the Property. By way of example, I have set out one email from Juricic to two employees in Vranich’s office, copied to Vranich. In that email of 30 April 2018, Juricic wrote:
Please see the attached documents for a property in Burlington.
Darko [Vranich] asked me to tie up this property with the hope of possibly rezoning same and moving Solid Gold [a club owned by Vranich] here. In the interim we will start designs for a light industrial complex.
I’ve submitted an invoice for the deposit I made back in February, along with an accepted APS and a copy of the receipt for the deposit.
I have started to hire Architects, Environmental Consultants for a Phase, survey, appraisal, etc.
Chris, I’ll place everything into Drop Box and send you a link.
Rochelle, if you could kindly process my invoice. Thanks [sic] you.
[16] The email does not state or even imply that payment of the deposit was only the price of admission to start the joint venture discussions and would be returned if no agreement could be reached. Nor does it suggest that the agreement between Juricic and Vranich was conditional on an agreement on what sort of development would take place. The email could even be construed as showing that the parties were flexible on what they would ultimately build. Lastly, the email seems to suggest that Juricic was content to start with a light industrial complex and see what else could be done. While Juricic attempted to clarify the language of the email on his cross examination, that was his best contemporaneous description of the agreement.
[17] While Juricic says Vrancor was to pay all development costs, there is nothing in the record indicating his objection to Vranich paying only half the deposit costs. While it was argued before me that Juricic was not in a position to object to Vranich’s unilateral change, he has not deposed to that on this motion.
[18] Juricic argues that Vrancor is only bringing this action to discourage the defendants from enforcing rights they have under other agreements with Vrancor relating to two other development properties, including the Main Street, Hamilton property. While a party’s general conduct may not be relevant on a motion such as this, its motive for seeking the CPL is relevant; “whether the CPL appears to be for an improper purpose” has been a factor for the court to consider for some time (see Interrent International Properties Inc. v. 167750 Ontario Inc. 2013 ONSC 4746, supra at paragraph 5). I also note the fact that Juricic felt that Vrancor had failed to pay him significant funds for his work on their other properties could equally provide a motive for Juricic taking this joint venture over the Property away from Vrancor for himself, in retaliation. The motives of the parties cannot be determined on a motion such as this and are better left for trial.
[19] At trial, Juricic may succeed in proving that the arrangement never got past the discussion stage or that an agreement on the type of development to be built was a pre-condition to any agreement to deliver up an interest in the Property to the plaintiff. But at this stage of the proceedings, Vrancor need not prove its case. It must satisfy the court that there is a triable issue as to its interest in the Property. Based on the record before me, I am satisfied that it has done so. Further, the defendants have not satisfied the heavy burden of establishing that Vrancor does not have a reasonable claim to an interest in the Property.
[20] As for the issue of prejudice, a certificate of pending litigation may impact the defendants’ ability to finance the development of the Property. This would be the likely outcome of most certificate of pending litigation. Here I keep in mind that Vrancor’s claim is for an interest in the Property, not for monetary damages. It seeks some control over the development and management of the Property. The certificate of pending litigation will preserve the status quo until Vrancor’s claim to its interest in the Property is determined at trial. Absent the certificate of pending litigation, the defendants may either dispose of the Property or unilaterally develop it, either of which scenario would strip Vrancor of its claimed negotiated right to develop the Property through its joint venture with Juricic (see Perruzza v. Spatone 2010 ONSC 841, supra at paragraph 40).
[21] Leave is granted to the plaintiff to obtain and register a certificate of pending litigation against the Property. The parties agreed that the unsuccessful party would pay the successful party $40,000 in costs. The defendants shall pay the plaintiff that sum within 30 days of this decision.