Court File and Parties

COURT FILE NO.: CV-18-77263 DATE: 2023/04/21

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

STAYSIDE CORPORATION INC. Plaintiff – and – CYNDRIC GROUP INC. Defendants

Counsel: Peter Liston, Counsel for the plaintiff corporation (responding party) Stéphane Émard-Chabot, Counsel for the defendants (moving party)

HEARD: March 24, 2023

Ruling on Motion (Motion to Remove CPL)

Introduction

[1] The dispute between the parties to this proceeding arises from an agreement of purchase and sale into which the defendant corporation (“Cyndric”) and a numbered company entered in 2014 (“the Agreement”). The numbered company, 6773711 Canada Inc. (“677 Canada”), is not and has never been a party to this action.

[2] The subject property is approximately 100 acres located near Highway 417 in the Township of Russell (“the Property”). Eighty acres of the Property are zoned as “Industrial Park Zone – Un-serviced (MP2)” and form part of the 417 Industrial Park in the Township of Russell. The remaining 20 acres of the Property are zoned as “General Agricultural (A2)” – for agricultural use.

[3] Mr. Menard, the fourth generation of his family to utilize the Property for farming, acquired the Property in 2000. In 2011, Mr. Menard incorporated Cyndric. Mr. Menard transferred title to the Property to Cyndric in 2012; he did so in an effort to leverage the potential for development of the Property.

[4] With the exception of a single-family home on the Property, it is vacant farmland.

[5] The Agreement relates to the western-most 50 acres of the Property. That portion of the Property fronts on St-Guillaume Road and is across the road from the 417 Industrial Park already under development.

[6] The Agreement includes a condition which requires that the 50 acres to be sold be severed from the remainder of the Property. The defendants’ position is that it was ultimately incumbent on 677 Canada to satisfy the severance condition. In 2018, after twice extending the deadline for satisfaction of the severance condition, and without the severance process being completed, Cyndric terminated the Agreement.

[7] In June 2018, the plaintiff corporation (“Stayside”) registered a caution on the title to the Property. [1] In January 2020, Stayside commenced this action and the parties exchanged their initial pleadings.

[8] Stayside subsequently brought a motion for an order permitting it to register a certificate of pending litigation (“CPL”) on the title to the Property. In early 2020, that motion was resolved by a consent order. Stayside was permitted to register a CPL on the title to the Property (“the Certificate”). In addition, Stayside was granted leave to amend its statement of claim.

[9] The amended statement of claim is dated February 2020. The defendants move for summary judgment; they ask the court to (a) dismiss the action, and (b) order that the Certificate be discharged.

[10] This ruling deals with the request for discharge of the Certificate. The motion for summary judgment is adjourned to June 5 and 6, 2023. Before addressing the request for discharge of the Certificate, I will review the history of the action.

[11] The chronology below identifies some of the events leading to the commencement of this action and in the proceeding to date:

• Aug. 13, 2014 – Cyndric and 677 Canada enter into the Agreement.
• Dec. 5, 2014 – The first deadline for conditions to be met passes, without waiver of the still unsatisfied severance condition.
• Feb. 2015 – The parties to the Agreement consent to an extension, to 30 days after the severance approval and the end of the relevant appeal period, of the deadline for satisfaction or waiver of the conditions.
• Feb. 2016 – Cyndric unilaterally sets Apr. 29, 2016 as the deadline for completion of the severance process. Cyndric informs 677 Canada that if the severance process is not complete by that date, Cyndric will treat the Agreement as terminated.
• Mar. 12, 2018 – Cyndric informs 677 Canada that it is not prepared to extend any further the deadline for completion of the severance process.
• Mar. 13, 2018 – The representative of 677 Canada with whom Cyndric has been dealing threatens a lawsuit by Stayside. This is the first time that the representative of 677 Canada has, in discussions with Cyndric’s representative, ever mentioned Stayside.
• Mar. 23, 2018 – 677 Canada is dissolved by Corporations Canada for lack of compliance with reporting requirements.
• Jun. 20, 2018 – Stayside registers a caution on the title to the Property.
• Jul. 25, 2018 – The statement of claim is issued. Stayside seeks specific performance of the Agreement and the registration of a CPL on the title to the Property.
• Jan. 15, 2020 – Cyndric files its statement of defence.
• Jan. 30, 2020 – On the return of Stayside’s motion, the parties consent to the order described in para. 8 above.
• Jan. 30, 2020 – The Certificate is registered on the title to the Property.
• Feb. 4, 2020 – Stayside files its amended statement of claim.
• Jun. 2022 – The parties appear before Fortier A.J. for a case conference. A date is set for the defendants’ motion for summary judgment (Jan. 11, 2023). A timetable is set for the exchange of materials and completion of cross-examinations (the latter, if any).
• Dec. 21, 2022 - Mr. Guilbault is cross-examined on his October 2022 affidavit filed in response to the defendants’ motion. In his affidavit, Mr. Guilbault describes himself as the “Chief Executive Officer” of Stayside.
• Dec. 21, 2022 - Mr. Menard is cross-examined on his April and October 2022 affidavits.
• Jan. 11, 2023 – Following the hearing of a contested adjournment, the defendants’ motion is adjourned to Mar. 23-24, 2023. The adjournment is peremptory to Stayside. The defendants are awarded costs of $4,000 in the cause (i.e., on the summary judgment motion). A timetable is set for the exchange of materials to be completed.
• Feb. 10, 2023 – The deadline for Stayside to file its factum on the defendants’ motion passes with no factum filed.
• Mar. 3 and 6, 2023 – A motion by Stayside’s then lawyer of record for an order removing him from the record is heard and granted.

[12] I turn next to the return of the defendants’ motion for summary judgment and removal of the Certificate.

a) The Return of the Defendants’ Motion on March 23, 2023

[13] The defendants’ counsel filed a motion confirmation form for the summary judgment motion and the request for the removal of the Certificate. That document informed the court that (a) Stayside is now unrepresented, (b) Stayside would be requesting an adjournment of the defendants’ motion, and (c) the defendants oppose the request for an adjournment.

[14] On the return of the defendants’ motion, Stayside is unrepresented. Charles Guilbault attends, identifying himself as involved in the day-to-day operations of Stayside. He is neither an officer nor a director of Stayside. Mr. Guilbault informs the court that Stayside is in the process of retaining a lawyer to represent it in this action. Mr. Guilbault expresses his belief that the lawyer could be “up to speed” in this matter in four months.

[15] The defendants consent to the adjournment of the motion for summary judgment to June 5-6, 2023. The defendants oppose the adjournment of the portion of the motion related to the discharge of the Certificate.

[16] Mr. Guilbault is granted leave to represent Stayside on March 23, 2023, for the limited purpose of making submissions in support of Stayside’s request to adjourn the CPL portion of the defendants’ motion. During his submissions, Mr. Guilbault informs the court that he is in a position to arrange for counsel to attend on March 24, 2023 to represent Stayside on the CPL portion of the defendants’ motion.

[17] The CPL portion of the defendants’ motion is adjourned to March 24, 2023. The parties are ordered to attend on that date, represented by counsel.

b) The CPL Portion of the Defendants’ Motion

[18] In support of their request for an order discharging the Certificate, the defendants rely on the evidence set out in two affidavits from Richard Menard. Those affidavits were sworn on April 11, 2022 and October 21, 2022. The defendants also rely on portions of the transcript from the cross-examination of Mr. Guilbault on his October 2022 affidavit.

[19] Both parties were given the opportunity to call viva voce evidence on the motion. Only the defendants chose to do so; they called Mr. Menard. He testified about events which transpired in 2023 with respect to the Property and his personal financial situation.

[20] The affidavit and viva voce evidence is reviewed in the Analysis section of this ruling.

The Issue

[21] The sole issue to be determined on this portion of the defendants’ motion is whether the Certificate is to be discharged.

The Law

[22] The issuance and discharge of a certificate of pending litigation are governed by s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 (“CJA”). That section provides as follows:

Certificate of pending litigation

(1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).

Registration

(2) Where a certificate of pending litigation is issued under subsection (1) it may be registered whether the land is registered under the Land Titles Act or the Registry Act.

Exception

(3) Subsections (1) and (2) do not apply to a proceeding for foreclosure or sale on a registered mortgage or to enforce a lien under the Construction Act.

Liability where no reasonable claim

(4) A party who registers a certificate under subsection (2) without a reasonable claim to an interest in the land is liable for any damages sustained by any person as a result of its registration.

Recovery of damages

(5) The liability for damages under subsection (4) and the amount thereof may be determined in the proceeding in respect of which the certificate was registered or in a separate proceeding.

Order discharging certificate

(6) The court may make an order discharging a certificate,

(a) where the party at whose instance it was issued,

(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,

(ii) does not have a reasonable claim to the interest in the land claimed, or

(iii) does not prosecute the proceeding with reasonable diligence;

(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or

(c) on any other ground that is considered just,

and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.

Effect

(7) Where a certificate is discharged, any person may deal with the land as fully as if the certificate had not been registered.

[23] The factors which the court must consider on a motion to discharge a CPL are summarized at para. 20 of the decision of Master Glustein in Perruzza v. Spatone, 2010 ONSC 841:

(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;

(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;

(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”;

(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; and

(iv) 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. [2]

[24] I turn next to the positions of the parties.

The Positions of the Parties

a) The Defendants

[25] In support of their request for the discharge of the Certificate, the defendants rely on three grounds.

[26] First, the defendants submit that Stayside does not have a reasonable interest in the Property (s. 103(6)(a)(ii) of the CJA). The defendants highlight that the relief Stayside seeks in this action is specific performance of the Agreement; Stayside is not seeking damages as an alternative form of relief. The defendants submit that Stayside is unable to meet the low threshold for demonstrating a triable issue regarding the claim for specific performance.

[27] Second, the defendants submit that Stayside has failed to prosecute its claim with reasonable diligence (s. 103(6)(a)(iii)). The defendants point to the almost five years which have passed since the action was commenced. The only step taken by Stayside in that period was taken in early 2020. At that time, Stayside amended its statement of claim and registered the Certificate on title to the Property; those steps were taken with the consent of the defendants. In the three-plus years since those steps were taken, Stayside has done nothing to prosecute the action.

[28] Third, the defendants submit that the equities favour discharging the Certificate (s. 103(5)(c) of the CJA). The defendants rely on both (a) Mr. Menard’s financial challenges; and (b) steps being taken by one of Cyndric’s two mortgagors to enforce a mortgage registered against the Property.

[29] The defendants ask the court to consider the circumstances in which each of the defendants find themselves – five years into the action – against the circumstances of Stayside. With respect to the latter, the defendants highlight that, until it was dissolved in 2018, 677 Canada was, nothing more than a shell corporation. 677 Canada is described by Mr. Guilbault as a corporation which purchases land and sells it for a profit. Yet its only activity of that kind is the Agreement. 677 Canada was never involved in any other real estate project.

[30] The defendants submit that the potential harm to them, if the Certificate remains on title to the Property, far outweighs the potential harm to Stayside if the Certificate is discharged.

[31] Relying on any one or more of these three grounds, the defendants ask the court to order the discharge of the Certificate.

b) Stayside

[32] Stayside’s position is that because the Certificate was issued with the consent of the defendants, it must remain on title unless the defendants are able to satisfy the court that there is some evidence of fraud or deceit on Stayside’s part when the order was made permitting the Certificate to be issued. Stayside does not cite any case or other authority in support of that submission.

[33] Alternatively, Stayside submits that by virtue of their consent to the issuance of the CPL, the defendants are deemed to admit that there is a triable issue. Therefore, the merits of the defendants’ position regarding the lack of a triable issue on Stayside’s claim for specific performance should be determined during the summary judgment portion of the defendants’ motion in June 2023.

[34] Stayside did not make any responding submissions regarding the defendants’ position that Stayside has failed to prosecute the action with diligence.

[35] With respect to the equities between the parties, Stayside asks the court to consider the extent to which it appears that the defendants have manufactured the financial circumstances in which they find themselves. Stayside submits that the defendants have orchestrated at least some of their current circumstances in an effort to bolster their position on the CPL portion of their motion.

[36] Stayside asks the court to dismiss the CPL portion of the motion.

Analysis

a) Stayside Failed to Diligently Prosecute the Action

[37] I find that Stayside’s failure to prosecute the action diligently is sufficient, as a singular ground, to support making an order that the Certificate be discharged. For that reason, the relief requested by Stayside in the context of this portion of the motion is granted.

[38] In February 2020, the defendants delivered their statement of defence. That is the last step in the proceeding before the COVID-19 pandemic began. Stayside does not put forward any explanation for its delay in prosecuting the action; there is a complete lack of evidence from Stayside to explain its delay in prosecution of the action.

[39] Stayside does not rely on the pandemic as a reason for any delay in its prosecution of the action. Even had it done so, the pandemic would not be a satisfactory explanation for Stayside’s delay, since the spring of 2020, to take any steps in the proceeding.

[40] I also consider that Stayside’s conduct resulted in two adjournments of the summary judgment portion of the defendants’ motion. The first such adjournment was peremptory to Stayside and resulted in a costs award of $4,000 against it (albeit in the cause on the motion for summary judgment).

[41] Aware that the adjournment of the defendants’ motion from January 11, 2023 to March 23, 2023 was peremptory to it, Stayside chose to attend on March 23, 2023 without counsel. Stayside had more than two weeks, from the date on which its lawyer of record was removed, to arrange for counsel to represent it on the return of the defendants’ motion on March 23, 2023. I note that Stayside was able, on less than a full day’s notice, to arrange for counsel to attend on March 24, 2023, when ordered to do so.

[42] I draw an adverse inference and find that Stayside’s decision to attend without counsel on March 23, 2023, was deliberate and made in an effort to delay the hearing of the defendants’ motion yet again. My finding in that regard is in no way a commentary about the conduct of counsel who ultimately represented Stayside on the CPL portion of the motion.

[43] Stayside is not entitled to sit back, do nothing, and expect the Certificate to remain registered on the title to the Property.

[44] If delay alone were not sufficient to warrant discharging the Certificate, I find that the combination of delay and the equities support the discharge of the Certificate.

b) The Equities Favour Discharging the Certificate

[45] In weighing the equities, I have considered the following uncontradicted evidence and related factors.

[46] First, Mr. Guilbault’s evidence on cross-examination is that he was the sole director and shareholder of 677 Canada – the other party to the Agreement. That corporation was dissolved in March 2018 by Corporations Canada.

[47] In his October 2022 responding affidavit, Mr. Guilbault is silent as to the status of 677 Canada; he does not address the dissolution of 677 Canada. As set out in the chronology, above, the uncontradicted evidence before this court is that 667 Canada was dissolved in March 2018 – approximately four months before the action was commenced.

[48] On cross-examination, Mr. Guilbault admitted that the only “activity” in which 677 Canada was ever engaged was the Agreement; 677 Canada had no other projects and had never previously been involved in projects related to the purchase and sale of real property.

[49] As to whether 677 Canada ever identified any potential clients for the Property (in whole or in part) or with respect to development of the Property, Mr. Guilbault’s evidence on cross-examination was limited to the following: “Well, there were certainly - - people were approached, various companies.” [3]

[50] When pressed on cross-examination as to whether 677 Canada had the funds with which to close the transaction, or as to the method of payment of the purchase, Mr. Guilbault refused to answer the questions. He did so on the basis that the information sought is not relevant to the issues to be determined on the defendants’ motion.

[51] Stayside seeks specific performance but refuses to disclose whether it or 677 Canada is in a position to pay the purchase price if granted the relief it seeks. Despite that refusal, Stayside wants the Certificate to remain on title – “[acting] like an injunction because virtually no one will complete a purchase of the property with an outstanding unresolved claim looming” – see: Pauwa North America Group Co. Ltd. v. Skyline Port McNicoll (Development Inc.), 2021 ONSC 18, at para. 40.

[52] Whether 677 Canada was ready, willing, and able to complete the transaction and the uniqueness of the Property to 677 Canada are both factors relevant to whether there is a triable issue on Stayside’s claim for specific performance. That issue will be addressed on the defendants’ motion for summary judgment. So as to avoid the potential for conflicting findings regarding a triable issue on Stayside’s claim for specific performance, I make no finding in that regard. I do, however, consider the evidence on that issue when weighing the equities.

[53] Mr. Guilbault was also cross-examined regarding his involvement with Stayside. He described himself as the “managing director” [4] of that corporation. That title is different from the title which Mr. Guilbault said, in his October 2022 affidavit, he holds with Stayside.

[54] On cross-examination, Mr. Guilbault was unsure whether he is a director of Stayside; he was certain that he is not a shareholder of Stayside. Christine Brooks is a director and the sole shareholder of Stayside.

[55] As to the relationship between 677 Canada and Stayside, on cross-examination, Mr. Guilbault testified that he understood that 677 Canada entered into the Agreement on behalf of Stayside, to become the beneficial owner of the Property and that there is an assignment agreement of some kind. An undertaking was given to produce a copy of the relevant assignment agreement. There is no evidence before the court that the undertaking in that regard has been satisfied.

[56] It was also Mr. Guilbault’s evidence, when cross-examined, that 677 Canada had not identified a potential purchaser to whom to sell the Property (i.e., assuming the sale from Cyndric to 677 Canada is completed). There is minimal, if any evidence, that 677 Canada had specific plans for the development of the Property.

[57] Balanced against the evidence with respect to the circumstances of 677 Canada and Stayside are the conduct of the defendants over time and the circumstances in which they find themselves in 2023.

[58] Mr. Menard’s evidence is that, in September 2011, he incorporated Cyndric to facilitate the development and/or sale of the Property; the defendants began investigating development opportunities in 2011. The defendants have been interested in selling and/or developing the Property for 12 years. The defendants have been unable to explore such opportunities for more than three years because of the Certificate.

[59] I balance the defendants’ long-standing and genuine interest in selling and/or developing the Property against the interests of a purchaser corporation now dissolved (677 Canada) and a plaintiff corporation (Stayside) which has failed to prosecute its action diligently.

[60] When considered in that light, the equities favour discharging the Certificate.

[61] The court heard viva voce evidence regarding Mr. Menard’s personal financial challenges. Those challenges arise from his status as a party to matrimonial litigation and his self-employment in a brewpub business. Mr. Menard has an ownership interest (through another corporation) in the brewpub business. That business is located in the Township of Russell.

[62] The court also heard viva voce evidence from Mr. Menard about the financial challenges which Cyndric is facing. Those challenges are said by Mr. Menard to stem, at least in part, from loans made by Cyndric to the brewpub corporation, the use of the Property as security for those loans, the demise of the brewpub business as a going concern, and the inability of the brewpub corporation to repay the loans.

[63] Stayside submits that the defendants’ respective financial challenges were, at least in part, orchestrated in early 2023 to bolster the defendants’ position on the CPL portion of the motion. In light of my decision to discharge the CPL for delay alone and, in any event, on the basis of delay in combination with the equities discussed in the preceding paragraphs, it is not necessary for me to consider the evidence regarding the financial challenges faced by each of the defendants.

[64] In considering the equities I have taken one other factor into consideration – the defendants’ proposal that the discharge of the Certificate be on terms. The defendants propose that the discharge include a term requiring the defendants to preserve 50 acres of the Property pending the outcome of the action. The defendants propose that 50 acres in the northwest corner of the Property be preserved.

[65] Preservation of the 50 acres would,

• Exclude both (a) the small section of the Property on which a farmhouse (destroyed by fire) was previously located, and (b) a segment to extend the farmhouse portion of the Property to the actual northwest corner of the Property;
• Provide frontage onto St. Guillaume Road – being meaningful access to the 50 acres – within the 50 acres; and
• Permit the defendants to refinance the Property, address the matrimonial home in the Menard matrimonial litigation, and pursue development opportunities or sale of the remaining acreage.

[66] I find the proposal for the defendants to preserve the 50 acres of the Property described above to be reasonable and fair in the circumstances.

Disposition

[67] For the reasons set out above, I make the following order:

1. The certificate of pending litigation, bearing instrument no. RC 139232, shall be discharged from the title to the property described as “Part Lot 21, Con 6 Russell as in RR169454 save Parts 6 & 7 Plan 50R9306” (“the Property”)
2. Unless otherwise agreed between the parties, the defendants shall, pending the outcome of this action, be prohibited from selling fifty (50) acres of the Property, which fifty (50) acres shall, a) be located in the northwest corner of the Property, and b) exclude the portion of the Property on which a farmhouse was formerly situated and extending therefrom to the northwest corner of the Property.

[68] If the defendants require an order which includes any additional terms – specifically for the purpose of the removal of the CPL – and the parties are unable to agree upon such additional terms, the parties shall arrange a 45-minute case conference before me. The case conference shall proceed virtually.

Costs

[69] The defendants were entirely successful in opposing the request for an adjournment of the CPL portion of their motion and on the CPL portion of the motion itself. They are entitled to their costs of the CPL portion of the motion, payable forthwith.

[70] If the parties are unable to agree upon the scale and quantum of costs payable by Stayside to the defendants, the defendants shall arrange for a one-hour hearing before me for the purpose of submissions with respect to costs. The hearing shall be in person.

[71] If such a hearing is arranged,

• The defendants shall deliver a bill of costs no later than seven clear business days prior to the date on which the hearing with respect to costs is scheduled to proceed;
• If Stayside chooses to do so, it shall deliver its bill of costs (i.e., as a response only for the purpose of submissions on costs) no later than four clear business days prior to the date on which the hearing with respect to costs is scheduled to proceed;
• No written submissions on costs shall otherwise be delivered;
• The parties shall deliver their case and other authorities upon which they intend to respectively rely no later than two clear business days prior to the date on which the hearing with respect to costs is scheduled to proceed. For the case authorities only, “delivery” shall mean service of the authority and uploading it to Caselines (i.e., it is not necessary to electronically file the authorities); and
• For all documents other than authorities, “delivery” shall mean serving the document, filing a copy of the document electronically (in accordance with the governing notice to the profession), and uploading the document to Caselines.

Subsequent Appearances

[72] I remain seized of this matter solely for the purpose of a case conference related to the terms of the order required to effect discharge of the Certificate and/or a hearing with respect to costs, if required. I am not otherwise seized of the matter. The motion for summary judgment shall proceed on June 5 and 6, 2023 as scheduled before any judge of this court.

Madam Justice Sylvia Corthorn Date: April 21, 2023

COURT FILE NO.: CV-18-77263-00 DATE: 2023/04/21 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: STAYSIDE CORPORATION INC. Plaintiff – and – CYNDRIC GROUP INC. Defendants RULING ON A MOTION (Motion to Remove CPL) CORTHORN J. Released: April 21, 2023

Footnotes

[1] Pursuant to s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5.

[2] For ease of reading all citations are omitted from the list of factors.

[3] Transcript of Dec. 21, 2022 cross-examination of Mr. Guilbault (“Transcript”), at p. 14, l. 24-25.

[4] Transcript, at p. 4, l. 4.