Court File and Parties

COURT FILE NO.: CV-20-650979 MOTION HEARD: 2020-12-17 REASONS RELEASED: 2021-01-02

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

PAUWA NORTH AMERICA DEVELOPMENT GROUP CO. LTD. and NORTHERN CC GROUP INC. Plaintiffs

- and-

SKYLINE PORT MCNICOLL (DEVELOPMENT) INC. Defendant

BEFORE: MASTER M.P. McGRAW

COUNSEL: J. Kulathungam, for the Plaintiffs R. Winterstein and C. Junior, for the Defendant

Reasons For Endorsement

I. Introduction

[1] This is a motion by the Plaintiffs for leave to issue a Certificate of Pending Litigation (“CPL”) with respect to an agreement to purchase over 800 acres of land from the Defendant located in Port McNicoll, Ontario (the “Lands”). The action and motion arise from a dispute over whether the Lands consisted of 859 acres or 829 acres.

[2] The sale did not close as scheduled on August 17, 2020 and the Defendant subsequently entered into an agreement to sell the Lands (the “Third Party APS”) to a third party purchaser (the “Third Party”). The due diligence condition date in the Third Party APS was December 28, 2020 creating some urgency to this motion.

[3] As set out in my Interim Endorsement dated December 24, 2020, the Plaintiffs’ motion was dismissed. Due to technical difficulties affecting the court offices at 393 University Ave. which prevented the release my Reasons For Endorsement that day, full Reasons were to follow on December 29, 2020. However, ongoing technological issues at the court office have further delayed these Reasons.

II. Background

[4] Pursuant to an Agreement of Purchase and Sale dated March 20, 2020 (the “APS”), the Plaintiff, Pauwa North America Development Group Co. Ltd. (“PNA”) agreed to purchase the Lands under power of sale from the Defendant, Skyline Port McNicoll (Development) Inc. (“SPM”). The Lands include over 400 acres of waterfront property on Georgian Bay together with over 400 acres approved for multi-use development for homes, condominiums, a yacht club and a marina. The Plaintiff Northern CC Group Inc. (“NCC”) was to be the assignee of PNA’s rights under the APS.

[5] On July 19, 2017, SPM sold the Lands to CIM Port McNicoll Holding LP (“CIM”) through a company related to CIM, 2564512 Ontario Limited (“256”). The purchase price was $41,965,560 which included a vendor take back mortgage of $37,769,004 (the “CIM Mortgage”). 256 defaulted on the CIM Mortgage on January 20, 2019 and on March 28, 2019, SPM issued a Notice of Sale. SPM listed the Lands for sale with its real estate broker, CBRE Limited (“CBRE”).

[6] In mid-February 2020, Fan Zhou, CEO of the Plaintiffs, learned about the Lands from Helen Min Zou, a principal of CIM. Ms. Zhou visited the Lands in early March 2020. CIM’s representatives advised Ms. Zhou that the Lands consisted of 859 acres.

[7] On March 7, 2020, China Pauwa Group International Share Ltd. (“CPG”), a company related to the Plaintiffs, entered into a Framework Agreement with Foret Capital Inc., a corporation controlled by Ms. Zou which acted as a due diligence consultant to PNA. The Framework Agreement provided that PNA wished to purchase all of the Lands which were comprised of 859 acres and that CPG would fund the purchase.

[8] Immediately after signing the Framework Agreement, Ms. Zhou received a marketing brochure in Chinese prepared by CIM (the “CIM Brochure”). Among other things, the CIM Brochure indicated that the Lands consisted of 859 acres and contained a map highlighting all 859 acres. The CIM Brochure did not state that any of the Lands were excluded however, it indicated that part of the Lands, known as Dock Lane, had been divided into 41 lots and sold and a further 9 lots at a location called Swan Island (collectively with Dock Lane, the “Phase 1 Lands”) had also been sold. Ms. Zhou’s evidence is that the relationship of the Phase 1 Lands to the Lands was not clear to her at the time.

[9] On March 10, 2020, CBRE prepared the MLS listing sheet for the Lands (the “MLS Listing”) which stated that the Lands consisted of 859.4 acres. Similarly, the online listing for the Lands (the “Online Listing”, collectively with the MLS Listing, the “Listings”) contained 7 references to the acreage as 859.4 acres. However, the Online Listing also stated that Phase 1 (comprised of Dock Lane and Swan Island) had been completed and was 80% sold. The Listings did not indicate that any of the Lands were excluded.

[10] On March 10, 2020, PNA was granted access to a data room by CBRE. The data room contained the same map of the Lands (the “DR Map”) which was in the CIM Brochure. The data room also included a brochure prepared by SPM in 2015 (the “DR Brochure”) which stated that prior to the development of Dock Lane and Swan Island, the Lands were comprised of 859 acres but that the current total acreage was 822 acres. The DR Brochure also stated that most of the lots comprising Dock Lane and Swan Island had been sold. A caution at the end of the DR Brochure warned readers not to rely on its contents. PNA submits that because it relied on the DR Map and the DR Brochure which did not explicitly state that the Phase 1 Lands were excluded, it believed that the Lands were comprised of 859 acres when it entered into the APS.

[11] The DR Brochure also referred to the presence of a ship, the S.S. Keewatin (the “Ship”), with historical significance and significant ties to Port McNicoll (the “Ship”). The Ship carried passengers and freight between Port McNicoll and Thunder Bay for almost 60 years before its retirement in 1966. The DR Brochure explained that in 2012, the Ship was acquired by SPM and returned to Port McNicoll from Michigan where it had served as a museum. The DR Brochure further stated that the Ship was run by a non-profit organization, “Friends of the Keewatin”, was moored near a public park and the yacht club and had attracted more than 50,000 people as a historic destination and museum since its return. PNA states that the Ship was important to its development plans to attract Chinese tourists to the Lands particularly given that the Ship transported immigrants, its entire galley crew of 13 cooks were Chinese and there had previously been a station on the Lands for the Trans-Canadian railway (built with significant Chinese labour). PNA alleges that it was led to believe that the Ship would either remain at its current location in Port McNicoll indefinitely or that PNA could purchase it.

[12] On March 10, 2020, PNA signed an offer to purchase the Lands for $43,000,000 including a deposit of $100,000 and a vendor take back mortgage of $25,000,000 (the “VTB Mortgage”). The original closing date was the later of 30 days after the waiver of the Due Diligence Date and May 12, 2020.

[13] Ms. Zhou signed the APS on behalf of PNA on March 20, 2020. PNA was initially represented by 2 lawyers, Francis Fan and Janet Lee. Mr. Fan is fluent in Mandarin and English and translated the terms of the APS for Ms. Zhou prior to signing. On May 6, 2020, Mr. Fan advised SPM that Ms. Lee was no longer retained by PNA and that Brian McCutcheon of Himelfarb Proszanski had been retained. Mr. McCutcheon previously represented CIM when it purchased the Lands in 2017. Mr. Fan and Mr. McCutcheon both represented PNA after Ms. Lee’s departure.

[14] The following terms of the APS are relevant to this motion (Schedule “A” to the APS set out additional terms to the APS and Schedule “B” to the APS contained a legal description (PINS) of the Lands):

i.) SPM made no representations, warranty or condition as to the Lands, including as to title, description, size, quality or quantity (section 18 of Schedule “A”) and the APS did not contain any representations with respect to the boundaries, size or acreage of the Lands;

ii.) the legal description of the Lands set out at Schedule “B” did not include the PINS for the Phase 1 Lands but nothing in the APS, including Schedule “B”, stated that the Phase 1 Lands were excluded;

iii.) PNA agreed that the records, audits, reports, plans and surveys provided to it were for information purposes only and PNA would not rely on them and would rely on its own inspection and investigation and accept the Lands as they existed on the closing date (section 18 of Schedule “A”);

iv.) PNA acknowledged that SPM did not warrant the accuracy of the contents of the data room, much of which would be out of date (section 5(b) of Schedule “A”);

v.) the APS was conditional for a period of 30 days from the execution date which could be extended by an additional 30 days (the “Due Diligence Date”) at the sole discretion of PNA upon PNA satisfying itself as to all aspects of the Lands including zoning, development potential, review of reports, all title and off-title investigations, and any other matter PNA deemed appropriate (section 5(c) of Schedule “A”);

vi.) PNA agreed that as far as the APS contained or implied any conditions, representations or warranties on the part of SPM that PNA’s only remedy for any breach was to give SPM notice terminating the APS for a material breach which must be given at least 15 days before closing with reasonable details which if given and the breach was not remedied within 15 days after the notice, the APS was void and the deposit was to be returned (section 17 of Schedule “A”);

vii.) PNA was entitled to investigate title to the Lands and to submit a written list of issues at any time prior to the Due Diligence Date with SPM required to respond within 3 days and PNA had no other rights with respect to title or submitting title requisitions and PNA agreed to accept the Lands subject to any work orders, open permits, notice or violation of other issues except for those SPM agreed in writing to clear (section 5(d) of Schedule “A”);

viii.) SPM agreed that if the Ship remained in Port McNicoll, it would use reasonable commercial efforts to assist in nominating representatives of PNA to the board of directors of the organization that operated the Ship (section 11 of Schedule “A”), however, the Ship itself was not included in the APS;

ix.) the parties agreed that the APS and Schedules “A” and “B” constituted the entire agreement and that there were no representations, warranties, collateral agreements or conditions which affected the APS other than as set out in the APS.

[15] SPM’s counsel David Epstein alleges that he advised Mr. Fan that the Phase 1 Lands were excluded during a telephone conversation on March 27, 2020. Mr. Fan disputes that this was discussed.

[16] After the APS was signed, PNA’s ability to complete its due diligence was hampered by the COVID-19 pandemic. Federal and provincial restrictions prevented site visits and investors from China were not able to enter Canada to inspect the Lands. Accordingly, on April 15, 2020, Mr. Fan advised that PNA was exercising its right to extend the Due Diligence Date by 30 days. On May 11, 2020, Mr. McCutcheon requested a further 30-day extension advising that PNA had been actively conducting its due diligence since the APS was signed and that it was still reviewing various reports. SPM agreed on May 20, 2020 to further extend the Due Diligence Date to June 19, 2020.

[17] By letter dated June 16, 2020, Mr. Fan requested another extension of the Due Diligence Date by 9 calendar months with an option to extend it by 90 days to June 21, 2021. PNA was prepared to increase the deposit to $1,000,000 and make it non-refundable however it requested that the purchase price be reduced to $35,000,000. On June 18, 2020, Mr. Epstein advised that SPM would not agree to a 2021 closing date. The parties agreed to a two-week extension until July 3, 2020 and continued to discuss a further extension and potential amendments to the APS.

[18] On June 29, 2020, Mr. McCutcheon sent a due diligence report (the “Due Diligence Report”) to Mr. Fan which contained colour reference plans highlighted to show the boundaries of the Lands. A reference plan attached to the Due Diligence Report shows that the Phase 1 Lands were not part of the Lands (the “Reference Plan”).

[19] After further discussions between counsel, the Due Diligence Date was extended to July 7, 2020 and on July 8, 2020, the parties signed an Amendment to Agreement of Purchase and Sale (the “Amendment”) pursuant to which PNA waived the Due Diligence Condition, the purchase price was reduced to $33,500,000 with a VTB Mortgage of $32,500,000, an additional deposit of $200,000 and a closing date of August 17, 2020. Notwithstanding Mr. Fan’s request on June 16 for an extension and purchase price reduction, PNA alleges that the Amendment was initiated by SPM’s real estate agent who approached PNA’s agent on June 30, 2020 indicating that SPM would reduce the purchase price if PNA waived any further due diligence. PNA submits that it had not completed its due diligence at that time but that SPM’s offer to reduce the purchase price by $10,000,000 induced it to do so since PNA was unsure when COVID-19 restrictions would allow it to complete its investigations of the Lands.

[20] On July 17, 2020, Ms. Zhou visited the Ship and met with the CEO of the Friends of the Keewatin. That same day, Mr. McCutcheon advised Mr. Epstein that PNA wanted the Ship to remain at the Lands. On August 2, 2020, PNA entered into a Memorandum of Understanding with the Diane Peterson Keewatin Foundation (the “Foundation”) pursuant to which PNA stated that it wished the Ship to remain at the Lands in perpetuity and agreed to cooperate with the Foundation and provide it with a $100,000 annual performance guarantee for 10 years. The parties also agreed that they would take legal action to ensure that the Ship remained in Port McNicoll indefinitely including registering a lien or seeking an injunction against any removal. On August 3, 2020, PNA entered into a Memorandum of Cooperation with the Delbrook Group (“Delbrook”), under which Delbrook agreed to assist PNA with the development of the Lands. On August 6, 2020, Blake Lyon, President and CEO of SPM, met with Ms. Zhou and Mehdi Shafiei of Delbrook on behalf of CIM to discuss the potential purchase of the Ship by PNA. Mr. Lyon provided an appraisal of the Ship showing a value of $48,500,000 and further negotiations followed, however, no agreement was reached.

[21] Ms. Zhou claims that when she visited the Lands on August 2, 2020, she was advised that there were houses to the north of the Ship that were in the process of being sold. Ms. Zhou and Mr. Fan allege that this is the first time that they and PNA became aware that certain lands may be excluded from the Lands. By email dated August 3, 2020, Mr. Fan advised Mr. McCutcheon as follows:

“Hi Peter/Brian,

This is a new issue discovered today.

There are a number of residential buildings just to the north of the ship – I’ve attached a google map image highlighting these.

The buyer was just told today by Skyline/CIM that these houses had already been sold to third parties, but it appears from the reference plans from our due diligence, and the original business drawings – these lots are supposed to be included in the property.

Brian, did you find anything to suggest that these houses are excluded for some reason? The highlighted reference plans you sent appears to show that they are inside the boundary.

The buyer suggested that if this an additional breach by Skyline we can use it as leverage in the ship negotiation.”

[22] Mr. McCutcheon responded by email dated August 4, 2020:

“Hello Francis. Further to your e-mail below, the property being purchased is the property highlighted in yellow on the reference plans (included in the Due Diligence Report), and does not include the lots that you mention below….

Those lots are units in a registered condominium plan (Simcoe Condominium Plan 340), and are not part of the subject property – see attached PIN maps for additional reference that detail the property being purchased in blue, that were included in the earlier e-mail from June.”

[23] Ms. Zhou’s evidence is that she became concerned with the information PNA had received from Mr. McCutcheon and the language barrier between herself and Mr. McCutcheon. Therefore, PNA retained another lawyer, Jizi Chen, who, like Mr. Fan, spoke Mandarin. Ms. Zhou alleges that it was not until Ms. Chen reviewed the matter that PNA became aware that Schedule B of the APS did not include the Phase 1 Lands.

[24] In correspondence on August 7, 2020, Mr. McCutcheon asked Mr. Epstein to confirm that the APS included the maps and the acreage contained in the marketing materials provided by SPM. Mr. Epstein replied that the marketing and sales materials were for information only, there was no reference to acreage in the APS and the Lands were comprised of the description attached to the APS in Schedule “B”. On August 11, 2020, Mr. Epstein sent a revised list of closing documents and questions. Mr. McCutcheon sent a letter that day confirming that PNA wanted the Ship to stay in Port McNicoll, that a further closing extension was required to finalize the purchase of the Ship and expressed concern that the acreage of the Lands in SPM’s marketing and sales materials was inaccurate.

[25] On August 12, 2020, Mr. McCutcheon advised that PNA was prepared to provide a non-refundable deposit of $100,000 in exchange for a further extension of closing to September 18, 2020. On August 13, 2020, Mr. Epstein replied that SPM would only agree to a short extension to permit an agreement to purchase the Ship to be finalized in exchange for a further deposit of $600,000 payable immediately. Counsel exchanged further correspondence over the following days however no agreement on an extension was reached.

[26] By email dated August 14, 2020, Mr. Fan advised Mr. Epstein that PNA had relied on the Online Listing and other marketing materials that the Lands were 859.4 acres, however, investigations revealed that the Lands were 29.65 acres less than what SPM had represented. Mr. Fan further stated that PNA valued the lost acreage at $17,000,000 and requested a reduction to the purchase price of $8,000,000. Mr. Fan also stated that a local By-Law required SPM to enter into an agreement with the Township to allow for parking for marine heritage use as a condition of allowing the Ship to remain at its current location. Since no such agreement existed, PNA considered the Ship to be illegally parked. As the APS required SPM to provide PNA with vacant possession and remove any moveable objects (paragraph 13 of Schedule “A”), Mr. Fan demanded that the Ship be removed prior to closing.

[27] On August 15, 2020, Mr. Lyon wrote to Ms. Zhou advising that PNA had waived the Due Diligence Condition after numerous extensions and that SPM had always been available to answer any questions. He set out 3 options for PNA: i.) close on August 17, 2020 as agreed; ii.) provide a further $700,000 deposit which together with the existing deposit of $300,000 would be immediately paid to SPM in consideration for a two-week extension to the closing while negotiations for the purchase of the Ship continued; or iii.) PNA could terminate the APS and forfeit the $300,000 deposit so that SPM could move on with another group who had provided SPM with a “significant offer” for the Lands. Ms. Zhou did not respond.

[28] PNA alleges that it subsequently discovered that although SPM negotiated the possible sale of the Ship to PNA, when its related company, Skyline Marine Inc., purchased the Ship it agreed that the Ship would be donated to a charitable foundation named after Ronald J. Petersen and Diane Petersen. Therefore, PNA alleges that it was misled into believing that SPM could sell the Ship but it had no right to do so.

[29] On the closing date, August 17, 2020, Mr. McCutcheon purported to tender PNA’s closing documents by, among other things, emailing copies of a certified cheque in the amount of $673,352.88 and a signed Acknowledgement and Direction with respect to the VTB Mortgage amended to state that due to a dispute regarding the transaction, Mr. Epstein’s Firm was not permitted/authorized to complete the actions required to register the VTB Mortgage without further authorization from Mr. McCutcheon or his Firm. The documents were accompanied by a letter from Mr. McCutcheon advising that PNA relied on materials provided by SPM which represented that the Lands consisted of 859.4 acres while the Lands being conveyed consisted of 829.75 acres. The letter also claimed that the Ship was illegally parked on the Lands and therefore, SPM could not provide vacant possession. SPM tendered all of its closing documents and confirmed that the Ship was parked with the consent of the owner of the Lands.

[30] Counsel corresponded further in attempt to close the sale. By email dated August 17, 2020, Mr. Epstein stated that PNA’s failure to close was a breach of the APS, that it had forfeited the deposit and SPM would take steps to mitigate its losses.

[31] On October 27, 2020, SPM entered into the Third Party APS for a purchase price of $33,500,000. The Third Party APS does not provide a specific acreage and the Lands are still being sold on an “as is, where is” basis. However, the Third Party APS includes provisions confirming that the Lands do not include the Phase 1 Lands and clarifying arrangements and issues with respect to the Ship.

[32] In its Statement of Claim issued on November 9, 2020, PNA claims, among other things: i.) specific performance of the APS but with an acreage of 859.4 acres or in the alternative, specific performance of the APS with an abatement of the purchase price in the amount of $10,000,000; ii.) an interim, interlocutory and permanent order directing the defendant to provide the plaintiff with three Board of Directors seats on the entity that operates the Ship; and iii.) in the alternative, return of the deposit in the amount of $300,000 and damages in the amount of $10,000,000.

[33] PNA first sought the CPL on an ex parte motion brought in writing on November 10, 2020. By Endorsement dated November 12, 2020, given its nature and complexity I refused to consider the motion in writing. PNA was offered the options of scheduling a telephone case conference with me to speak to, among other things, urgency and whether the motion should be brought on notice to SPM; bringing the motion on notice to SPM; or scheduling a telephone case conference including SPM.

[34] PNA elected to schedule a telephone case conference without SPM which proceeded on November 13, 2020. In my Endorsement that day I held that there was insufficient evidence of urgency and that it would be inappropriate in the circumstances to grant a CPL in the context of a significant commercial real estate transaction of this size and complexity between sophisticated parties represented by counsel without providing SPM with an opportunity to make submissions. I was also satisfied that all interests could be protected and positions considered in a fair and reasonable manner by seizing myself of the matter and hearing the motion on an expedited basis. I directed PNA to schedule another telephone case conference including SPM on November 16, 17 or 18, 2020. In the interim, I ordered SPM to not transfer or further encumber the Lands without the consent of PNA or further order or direction of the court (the “Interim Terms”) which were to be spoken to and revisited at the upcoming telephone case conference.

[35] A telephone case conference was held on November 17, 2020 where this motion was scheduled and an expedited timetable was ordered. SPM advised that it was not requesting that I vary the Interim Terms. I directed that the Interim Terms could be spoken to on a telephone case conference at any time.

III. The Law and Analysis

CPL Motions Generally

[36] The court’s jurisdiction to grant leave to issue a CPL is set out in section 103 of the Courts of Justice Act (Ontario). The factors which the court must consider on a CPL motion were summarized by Master Glustein (as he then was) in Perruzza v. Spatone, 2010 ONSC 841 at para. 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 (S.C. - Mast.) ("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 at 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 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. 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 has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (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 ease 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 (S.C. - Mast.) 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 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).”

[37] The court must first determine whether there is a triable issue with respect to PNA’s claim to an interest in the Lands which would support the granting of a CPL (Saggi v. Grillone, 2020 ONSC 4140 at paras. 31 and 55; Zhao v. 8657181, 2020 ONSC 2864 at paras. 9 and 11). The threshold is not, as SPM suggests in its Factum, whether PNA has a “reasonable claim” to an interest in the Lands, which is an issue to be decided at trial or on a summary judgment motion (Zhao at para. 11). The issue here is whether a triable issue has been raised with respect to a reasonable claim in the Lands by PNA (G.P.I. Greenfield at para. 20; Saggi at para. 67; Boal v. International Capital Management Inc., [2018] O.J. No. 1954 at para. 64). Courts have described the “triable issue” threshold as whether the remedy sought, here, specific performance, is a possible remedy at trial or one which may be available to the plaintiff at trial (Sun Rise Elephant Property Investment Corporation v. Luu, 2018 ONSC 5247 at paras. 10-11). It is not the court’s role to determine whether the plaintiff’s claim will likely succeed at trial, but whether a triable issue exists with respect to a reasonable claim to an interest in land (HarbourEdge Mortgage Investment Corp. v. Timbercreek Mortgage Investment Corp. (Trustee of), [2016] O.J. No. 265 at para. 56; Sun Rise at para. 10). The onus is on the party opposing the CPL to show that there is no triable issue (Boal at para. 64).

[38] In determining if there is a triable issue, the evidentiary bar is low (Saggi at paras. 45 and 62; Bains v. Katri, 2019 ONSC 1401 at para. 36). The court is not to assess credibility or decide disputed issues of fact (Huntjens v. Obradovic, 2019 ONSC 4343; Sunrise at para. 10). Rather, the court must examine the whole of the evidence after cross-examination and, without deciding disputed issues of fact and credibility, consider whether on the whole of the evidence the plaintiff’s case constitutes a reasonable claim to the interest in land claimed (Huntjens at para. 21; Boal at para. 64).

[39] A triable issue as to a reasonable interest in land is a gateway requirement for a CPL (Sun Rise at para. 12). If this threshold is met, the court must go on to consider whether it is just and equitable based on all of the circumstances to exercise its discretion to grant a CPL by considering and balancing the equities including the list of factors set out in 572383 Ontario Inc. v. Dhunna, [1987] O.J. No. 1073 (Sun Rise at para. 12; Tribecca Development Corp. v. Danieli, 2015 ONSC 7638; Huntjens at para. 48).

[40] In exercising its discretion, the court must be mindful of the purpose and impact of granting a CPL, in particular, that a CPL effectively acts like an injunction:

“The purpose of a CPL is to provide notice to the world that there is an issue with respect to the title of the property and/or that there is an interest claimed in the property. Once registered, the CPL prevents a subsequent purchaser from asserting the defence of bona fide purchaser for value without notice. It has the same general effect on a subsequent encumbrancer. This has profound consequences for the titleholder; the CPL effectively acts like an injunction because virtually no one will complete a purchase of the property with an outstanding unresolved claim looming. This impact has been judicially recognized: see Matheson v. Gordon at para. 22; Bowbriar Investments Inc. v. Wellesley Community Homes Inc., [1977] O.J. No. 66 (S.C.) at para. 9.” (Middlesex Centre (Municipality) v. McRobert, 2017 ONSC 4552 at para. 12).

[41] For the reasons set out below, having considered all of the relevant factors and circumstances, I decline to exercise my discretion to grant leave to issue a CPL. While I am satisfied that there is a triable issue with respect to whether PNA has a reasonable claim to an interest in the Lands, I have concluded that it would not be just and equitable in all of the circumstances to grant a CPL.

There Is A Triable Issue

[42] In my view, SPM has not discharged its onus to demonstrate that there is no triable issue with respect to whether PNA has a reasonable claim to an interest in the Lands. I am satisfied that the low threshold to establish that the remedy of specific performance may be available to PNA at trial or on a summary judgment motion has been met.

[43] SPM submits that there is no triable issue because the remedy of specific performance is not available to a party advancing a claim based on allegations of misrepresentation. This, SPM says, precludes PNA from obtaining a CPL. Even if I do not accept this proposition, SPM argues that there is no triable issue because PNA was not ready, willing and able to close, there is no evidence that SPM breached the APS and PNA cannot rely on its own breach to claim specific performance. PNA submits that there is a triable issue because the remedy of specific performance is available, it was ready, willing and able to close and the disputed issues between the parties require factual determinations which can only be made at trial on a complete evidentiary record.

[44] SPM relies on Greenway Estate Homes Ltd. v. McDonald et al., 2011 ONSC 1705, where Edwards J. granted summary judgment to the defendant and vacated a CPL where the agreement of purchase and sale incorrectly described the acreage of the property. Edwards J. held as follows at paragraphs 32-35:

“[32] In a situation where the vendor's obligation is classified as a breach of warranty or as a representation and not as a promise, then the purchaser is not entitled to a claim for specific performance, but may have a right to rescission or, alternatively, if the elements of the torts of negligent or fraudulent misrepresentation are satisfied, then the purchaser may have a claim for damages: see 3999581 Canada Inc. v. 1394734 Ontario Inc., [2007] O.J. No. 1570, 2007 ONCA 312. The Court of Appeal in 3999581 Canada Inc. dealt with a situation where the parties had entered into an agreement of purchase and sale which did not say specifically that the purchase price was calculated on the basis of acreage or square footage, but clearly contemplated that it was being sold with an area of approximately 98,590 square feet. The uncontradicted evidence before the court was to the affect that the purchase price was based on the square footage of the land and its intended use as a townhouse development. The Court of Appeal also had before it clear evidence that demonstrated that the professed acreage of the property was a significant factor in both parties' decision to acquire the property.

[33] Applying the basic principle that specific performance with an abatement is an equitable remedy, this court therefore has a residual discretion as to whether to grant an abatement or not with specific performance.

[34] Unlike the facts before the Court of Appeal in 3999581 Canada Inc., supra, the evidence before me does not establish that the plaintiff had bargained for the purchase of the property on the basis of a price per acre. The evidence in my opinion is to the contrary. The assertions of the plaintiff that his lender in this matter (Wildwood) was refusing to advance the funds necessary to close the transaction because of the dispute with respect to the acreage is not made out on the evidence. In fact, there is no evidence from Wildwood to suggest that the acreage dispute was in any way the cause of the delay in funding the transaction.

[35] The Court of Appeal decision in 3999581 Canada Inc., supra, does not overrule earlier decisions of this and other courts where it has been determined that (in the absence of a warranty or collateral agreement, where the sale of a specific property is for a lump sum and there is no evidence that the purchaser and vendor bargained on a price per unit of measurement) the [page345] purchaser is not entitled to an abatement of purchase price where the actual area was less than the purchaser supposed. In that regard, reference can be made to the recent decision of Marchand J. in John Beattie Farms Ltd. v. Stevenson Estate, [2004] O.J. No. 1177, 19 R.P.R. (4th) 303 (S.C.J.), where Marchand J. referred to an earlier decision of Ainsley v. Hicke Real Estate Ltd., [1975] A.J. No. 27 (S.C.), where Laycraft J. of the Alberta Supreme Court Trial [Division] had relied on a number of much earlier decisions of various jurisdictions. To the contrary, the decision of the Ontario Court of Appeal in 3999581 Canada Inc., supra, makes clear that specific performance with an abatement was granted because of the uncontradicted evidence that the professed acreage of the subject property was a significant factor in the purchaser's decision to acquire the property and in the calculation of the price the purchaser was willing to pay.”

[45] However, PNA submits that in claiming specific performance and moving for a CPL, it was availing itself of one of the three options for an alleged misrepresentation set out by Perell J. in Benlezrah v. Dietz, 2017 ONSC 7485. In that case, the plaintiff brought an action for specific performance and an abatement alleging that he had been deceived by the defendants’ real estate agent about the size of the property and had he known the property was smaller he would not have purchased it for the price he did. The plaintiff brought a motion to pay funds into court rather than seeking a CPL. Perell J. denied the motion:

“7 Moreover, there is no precedent in the law of abative real estate transactions for the relief requested. In circumstances like the case at bar of an alleged misrepresentation cause of action, an innocent purchaser has three choices: (1) rescind and refuse to close; (2) close and sue for breach of contract; i.e., for damages; or (3) obtain a certificate of pending litigation and sue for specific performance with an abatement or in the alternative for damages. There is no precedent for the remedy sought in the case at bar.”

[46] In 3999581 Canada Inc. v. 1394734 Ontario Inc., the same proceedings as the 399 Court of Appeal decision referred to in Greenway, Rutherford J. refused to vacate a CPL where the plaintiff asserted a claim for specific performance and an abatement arising from an alleged misrepresentation due to the mis-description of the area of the land in the agreement of purchase and sale. The Court of Appeal ultimately granted the abatement, the sale having closed after the commencement of the litigation. Even if I accept SPM’s characterization of Greenway, I disagree with SPM’s assertion that it is directly on point because PNA did not calculate the purchase price based on the acreage of the Lands. Consistent with Greenway and 339, the evidence before me supports the conclusion, or at least a triable issue, that the acreage of the Lands was a significant factor in PNA’s decision to purchase the Lands.

[47] Accordingly, I am satisfied that the fact that PNA is asserting a claim for misrepresentation with respect to the acreage of the Lands does not in itself preclude its claim for specific performance or the granting of a CPL. I also reject SPM’s submission that there is no triable issue because PNA claimed specific performance of 859 acres in its Statement of Claim (which is not the acreage in the APS) given that it claimed specific performance of the APS (ie. 829 acres) as alternative relief. However, I must still determine if there is a triable issue with respect to a reasonable claim for specific performance which would support the granting of a CPL.

[48] Perell J’s decision in Time Development Group Inc. (In trust) v. Bitton, 2018 ONSC 4384, cited by SPM, provides a helpful overview of the law of specific performance and tendering:

53 In a contract where time is of the essence, where a plaintiff sues for specific performance, the plaintiff must show that he or she was ready, willing and able to close on the date fixed for closing, that the default of the defendant was in no way attributable to the plaintiff's fault, and that he or she continues to be ready, willing and able to perform the contract.

54 For an innocent party to treat the agreement at an end for fundamental breach or repudiation, time must be of the essence. The commonly recited rule for time of the essence is that time may be insisted upon as of the essence only by a litigant: (a) who has shown himself or herself ready, desirous, prompt, and eager to carry out the agreement; (b) who has not been the cause of the delay or default; and, (c) who has not subsequently recognized the agreement as still existing.

55 When both contracting parties breach the contract, the contract remains alive with time no longer of the essence, but either party may restore time of the essence by giving reasonable notice to the other party of a new date for performance.

56 Tender is the act of offering to perform one's contract obligations. By tendering, the innocent party shows his or her readiness and willingness to carry out the contract, that he or she is not the cause of the delay or default and that there has been no waiver. By tendering the innocent party puts himself or herself in the position of relying on time being of the essence.

57 Tender, however, is not a prerequisite to the innocent party enforcing his or her contractual rights. Tender is not required from an innocent party when the other party has clearly repudiated the agreement. Numerous cases have held that the law does not require what would be a meaningless or futile gesture. Moreover, when there is an anticipatory breach, the innocent party need not wait to the date for performance before commencing proceedings for damages or in the alternative for specific performance of the agreement. Despite the absence of any tender, the court may be satisfied by other evidence that the innocent party is entitled to enforce the contract because time is of the essence and there has been a fundamental breach of the agreement by the other party.

58 If one party has indicated that he or she is unable or unwilling to perform, there is some risk associated with the innocent party tendering. The risk is that if his or her offer of performance is not in perfect accord with the agreement of purchase and sale, instead of demonstrating that the party is willing and able to perform its side of the bargain, the act of tendering performance may demonstrate just the opposite. Older case law indicates that tender must be perfect; else it will demonstrate that the innocent party was not in truth ready, willing, and able to close the transaction. The older case law, however, has been overtaken by contemporary case law that infuses the analysis of the positions of the parties with notions of good faith. Thus, curable imperfections in tender will not get in the way of tender achieving its evidentiary purposes. In other words, where the defect in tender is curable or the defect is insufficient to justify a refusal to close the real estate transaction, the innocent party will be able to rely on the tender to show that he or she was in a position to enforce the contract.”

[49] SPM submits that PNA’s tendering of the amended Acknowledgement and Direction which prohibited SPM’s counsel from registering the VTB Mortgage on title demonstrates that PNA was not ready, willing and able to close. SPM argues that PNA’s tender was deficient in that the VTB Mortgage represented 97% of the purchase price and therefore the tender is not “curable” as provided for in Time Development. SPM also submits that the fact that PNA did not close is fatal to its claim to an interest in the Lands (Thiyagarajah v. Mattamy Homes, 2018 ONSC 5089 at paras. 16-19).

[50] However, I am satisfied that PNA only needs to demonstrate that there is a triable issue with respect to whether it was ready, willing and able to close. In 399, Rutherford J., after concluding that there was considerable evidence that the plaintiff wished to close at an abated purchase price, held as follows:

“[14]…Counsel for the defendant argued that because the plaintiff tendered only by fax, and even then only with a reduced purchase price, the plaintiff was not ready and willing and able to close the agreement. Therefore, counsel argued, the plaintiff lost any enforceable interest in the land. He relied upon Kingsberg Developments Ltd. v. K Mart Canada Ltd. (1983), 40 O.R. (2d) 348 (H.C.J.) in which a similar sort of circumstance was considered. At p. 354 White J. said:

It would seem to me that the court would not grant specific performance with abatement unless the purchase had indicated to the vendor the quantum of the abatement he sought and willingness to close the transaction with the specific amount of the abatement being placed in escrow, either by way of it being paid into court or into the hands of a reputable stakeholder, pending an adjudication of whether the amount of the abatement alleged by the purchaser to be appropriate was or was not accurate.

[15] As far as the form of the tender process is concerned, I doubt that it constituted a true tender, however, a true tendering is only one factor in determining whether a party was ready, willing and able to complete a transaction. Tendering is not a sine qua non to pursuit of the remedy of specific performance.”

[51] Similarly, although PNA’s tender may have been deficient, there is evidence before me that it always wanted to close but at an abated purchase price. Time Development provides that it was not necessary for PNA’s tender to be perfect and any defects may be curable. Accordingly, I am satisfied that there is a triable issue with respect to whether PNA was ready, willing and able to close including whether its tender was deficient and if it was deficient, whether it was curable. As SPM alleges that PNA breached the APS by tendering as it did, there is also a triable issue with respect to SPM’s claim that PNA is relying on its own breach to claim specific performance and a CPL. These are all issues to be determined on a complete evidentiary record at trial, or, as they were in Time Development, on a summary judgment motion.

[52] SPM also submits that there is no triable issue because there is no evidence that it breached the APS including that it made any misrepresentations regarding the acreage of the Lands. SPM argues that because the APS provided that it made no representations, the sale was on an “as is where is” basis, the APS was the entire agreement, PNA was not entitled to rely on any information and documentation provided by SPM and was required to perform its own due diligence, that SPM could not have made any misrepresentations prior to signing the APS and there is no evidence that it did so afterwards. SPM also argues that pursuant to section 17 of Schedule “A”, PNA’s only remedy for a material breach of any conditions, representations or warranties was the return of its deposit on condition that it give SPM notice of termination 15 days before closing.

[53] Given the terms of the APS, PNA as a sophisticated party, represented by up to 4 lawyers, a real estate agent and consultants, faces significant challenges in establishing that an actionable misrepresentation occurred. PNA must also overcome references to the sale of the Phase 1 Lands in some documents, the reference to 829 acres in the DR Brochure, the PINS in Schedule “B” and the numerous extensions to the Due Diligence Date and ability to raise issues prior to closing. It does not assist PNA that Mr. McCutcheon understood and reported in the Due Diligence Report and Reference Plan that the Phase 1 Lands were excluded from the APS. However, on the low threshold applicable to this motion, I am satisfied that there is a triable issue. The present case is distinguishable from the numerous summary judgment motion cases referred to me by the parties where the threshold was higher, the records more comprehensive and the court able to resolve disputed facts and assess credibility.

[54] The undisputed evidence is that both the MLS Listing and the Online Listing incorrectly stated the acreage of the Lands. Although the Online Listing also indicated that the Phase 1 Lands had been sold, it incorrectly stated the acreage as 859.4 acres in 7 places. I distinguish the Listings from the CIM Brochure which was not prepared by SPM and the DR Map and the DR Brochure which were part of the marketing materials provided in the data room. The APS does not explicitly refer to listings as documents which PNA was not entitled to rely on. Further, in my view, different considerations may apply to the Listings which, although included with marketing materials, were prepared by CBRE and are part of a formal listing service. As such, it may be the case that any incorrect information or misrepresentations in the Listings may carry greater weight and be treated differently than other documents and materials. This too is an issue for trial.

[55] Further, although the Ship was not being sold as part of the APS, the parties do not dispute that it was an important part of PNA’s decision to enter into the APS. Accordingly, given that there appears to be at least a question as to whether SPM had the right to sell the Ship, this supports the conclusion that there is a triable issue.

[56] The fact that SPM subsequently incorporated terms into the Third Party APS to clarify both the exclusion of the Phase 1 Lands and the detailed arrangements and terms regarding the Ship further supports this conclusion. It is open to PNA to argue, and for the trial Judge to decide, if these or similar provisions should have been included in the APS to provide certainty regarding the terms agreed to by PNA and SPM.

[57] With respect to PNA’s claims for breach of the duty of good faith and honest performance, SPM submits that even if PNA were successful, it would only be entitled to damages, not specific performance. However, in Time Development, Perell J. considered these duties in the context of a claim for specific performance ultimately deciding that the duty of good faith had not been breached.

[58] In all of this, consistent with this Court’s role on this motion, I refuse to draw the many conclusions urged upon me by SPM that would require me to resolve disputed facts and assess credibility. These includes the credibility of Ms. Zhou’s claims regarding language barriers with counsel and her understanding of the APS, reconciling what PNA’s lawyers, Mr. Fan and Mr. McCutcheon, understood with respect to the Phase 1 Lands and SPM’s allegation that PNA is using the acreage issue to “camouflage” its unwillingness to close the sale and its assertion of a damages claim.

The Equities Favour the Defendant

[59] Having considered and balanced the equities, I have concluded that it is not just and equitable based on all of the circumstances to grant the CPL.

[60] In arriving at this conclusion, I have considered the equities as between the parties including the non-exhaustive list set out in Dhunna: (a) whether the plaintiff is, or is not, a shell corporation; (b) whether the land is, or is not, unique; (c) the intent of the parties in acquiring the land; (d) whether there is an alternative claim for damages; (e) the ease or difficulty of calculating damages; (f) whether damages would be a satisfactory remedy; (g) the presence or absence of another willing purchaser; and (h) the harm done to the defendant if the certificate is allowed to remain, or to the plaintiff if the certificate is removed, with or without the requirements of alternative security (Dhunna at paras. 10-18; Saggi at para. 28; Sun Rise at paras 12-17; Huntjens at para. 49; Bat-Amy v. Zribi, 2010 ONSC 1272 at paras 21-22). To the extent not covered by the relative harm, I have also considered the balance of convenience (Bains at para. 37).

[61] In my view, the only factor which favours PNA is that the Lands are unique. This is based on the location of the Lands including the significant waterfront component and the attraction of the area to tourists from China due to the history of the Ship, the railway and other factors. While the uniqueness of the Lands is an important factor, it is not the only one and, balanced with the other relevant factors, is insufficient to lead me to conclude that the overall equities favour PNA.

[62] While PNA is not a shell corporation, it was incorporated only 11 days before the signing of the APS for the purpose of this transaction. It has started to conduct additional business after the APS did not close, but there is no evidence as to the specifics of this business. Further, PNA’s rights were to be assigned to NCC, a related company not incorporated until July 27, 2020 and the purchase price was being paid by yet another related company, CPG. These circumstances favour SPM. The fact that the purpose of acquiring the Lands was an investment also favours SPM.

[63] The presence of an alternative claim for damages in PNA’s Statement of Claim does not automatically favour SPM. However, I am satisfied that damages are calculable given that PNA has quantified them in its Statement of Claim. Whether or not damages would be an adequate remedy is a neutral factor.

[64] In my view, the primary factors which militate against granting a CPL are the presence of the Third Party and the Third Party APS, the balance of convenience and the relative harm if the CPL is granted. PNA was aware as early as August 15, 2020 that there may be another potential purchaser and SPM’s counsel advised on August 17, 2020 that it would take steps to mitigate its damages. However, PNA did not bring this matter before the court until November 10, 2020, almost 3 months later. In the interim, to mitigate its losses and continue its ongoing efforts to sell the Lands, SPM entered into the Third Party APS.

[65] If the CPL is granted, there is a significant risk that the Third Party will not close the Third Party APS. Since the CPL will remain on title, it will also deter other potential purchasers and likely delay the sale of the Lands indefinitely, effectively acting as injunctive relief. The potential harm is more pronounced given that SPM has been trying to sell the Lands under power of sale since March 2019 and will be forced to re-market the Lands during the winter and the ongoing COVID-19 pandemic. If the CPL is not granted and the Third Party APS or another transaction closes, PNA will still be able to assert its damages claim. There is no evidence that SPM would be unable to satisfy a judgment and, in any event, a CPL is not to be used as security for damages (Tribecca at para. 20). In all of the circumstances, I am satisfied that both the harm and inconvenience of granting the CPL would be greater to SPM.

[66] These are largely circumstances of PNA’s own making which it may have avoided had it brought this motion sooner. It is not fair, just or reasonable for PNA to wait almost 3 months to seek equitable relief in the form of a CPL which, operating like an injunction, will likely cost SPM another sale and impede its efforts to sell a distressed asset in the winter during a pandemic. When exercising its discretion in equity, it is not unreasonable for the court to expect a party which claims that it always wanted to close the sale to seek relief sooner than PNA did here especially when it was on notice as to the presence of a potential third party purchaser. While it is acceptable for PNA to take a reasonable period of time to consider its options, a sophisticated commercial party with multiple counsel and advisors should be expected to move in a more timely fashion. Where it does not, it risks tipping the scales in the other party’s favour particularly where another purchaser is found.

[67] In considering the equities and denying leave, I reject SPM’s argument that PNA’s failure to disclose certain correspondence when it brought this motion on an ex parte basis is sufficient to deny a CPL or that it should have any effect in the circumstances.

[68] SPM tries to equate the present case with the more typical scenario where the court grants a CPL on an ex parte basis and the responding party brings a motion to lift a CPL on the grounds that the moving party failed to disclose material facts (Harbour Edge at paras. 75-79). This is distinguishable from the present circumstances where only the Interim Terms were granted on an ex parte basis. Although given numerous opportunities, SPM has not requested that the Interim Terms be varied or set aside. SPM was also unable to refer me to any case law where alleged non-disclosure on an ex parte CPL motion was considered where the CPL was not granted and the motion ultimately heard on notice. In any event, even if there were any basis to consider this argument, I conclude that the documents which PNA did not disclose (comprised mostly of correspondence related to extensions of the Due Diligence Date) were not material and would not have had any effect on the granting of the Interim Terms which were put in place to preserve the status quo for a limited period of 1-3 days.

III. Disposition and Costs

[69] Order to go dismissing the Plaintiffs’ motion.

[70] If the parties cannot agree on the costs of this motion they may file written costs submissions with me, not to exceed 3 pages (excluding Costs Outlines) on a timetable to be agreed upon by counsel. If counsel cannot agree on a timetable, they may schedule a telephone case conference to speak to one.

Released: January 2, 2021 Master M.P. McGraw