Court of Appeal for Ontario

Date: 2019-06-18 Docket: C66059

Judges: MacPherson, Tulloch and Harvison Young JJ.A.

Between

Genstar Development Partnership Applicant (Appellant)

and

The Roman Catholic Episcopal Corporation of the Diocese of Hamilton in Ontario Respondent (Respondent)

Counsel

Alan Merskey and Geoff Mens, for the appellant

Jonathan Lancaster and Sean Carter, for the respondent

Heard: June 12, 2019

On appeal from the judgment of Justice Andra Pollak of the Superior Court of Justice, dated October 1, 2018, with reasons reported at 2018 ONSC 3702 and 2018 ONSC 4119.

Reasons for Decision

[1] Introduction

[1] The appellant Genstar brought an application for specific performance to enforce its purported right to purchase a block of land from the respondent Diocese, pursuant to an Agreement of Purchase and Sale, dated August 21, 1998, between Imasco Enterprises Inc. (Genstar's purported predecessor) and the Diocese. The Agreement provided Imasco (as vendor) the option to repurchase the property from the Diocese (as purchaser) if the property was not developed as a church within 10 years.

[2] The application judge dismissed Genstar's application, finding that Genstar had not established that it was neither successor to Imasco nor equitable assignee of the repurchase option and, in any event, that its various tenders to the Diocese were deficient. Genstar appeals, arguing that the application judge made palpable and overriding errors of fact on the evidentiary record before her in so concluding. It also argues that she erred in not deciding not to convert the application to an action and in refusing to permit supplementary evidence on the successor/assignee issues.

Background

[3] In 1998, Imasco sold a block of land within a subdivision development to the Diocese, pursuant to an Agreement of Purchase and Sale, dated August 21, 1998. The property was zoned as a "place of worship", and could only be sold to a purchaser who planned to use it for its designated purpose. The purchase price was $576,000. There is no dispute that the purchase price was less than the market value of the property, given the limited pool of potential purchasers for property zoned exclusively for religious purposes.

[4] The Agreement provided Imasco the right to repurchase the property from the Diocese if it was not developed as a church within 10 years or if the property was subsequently not required for a church (the "repurchase option"). Section 5 – the operative provision of the Agreement – provided as follows:

If the Property is not developed for a church within 10 years hereof or if the Property is not required for a church, the Vendor shall be notified thereof and be entitled to repurchase the Property within 90 days of such notification at a price equal to the herein purchase price multiplied by the increase in the Ontario Consumer Price Index between the date of closing hereunder the date of repurchase.

[5] The repurchase option was apparently included because municipal planning rules contemplated that a property initially zoned as a "place of worship" could be re-zoned residential if it was not developed into a place of worship after a certain period of time.

[6] Following the sale of the property to the Diocese, Imasco transferred certain assets to other entities. These transactions were summarized by the application judge at para. 28 of her reasons reported at Genstar Development Partnership v. The Roman Catholic Episcopal Corporation of the Diocese of Hamilton, 2018 ONSC 4119 (the "Second Endorsement").

[7] Pursuant to a Transfer Agreement, dated February 1, 2000 (the "2000 Transfer Agreement"), Imasco transferred certain "Transferred Assets" – defined to be all of Imasco's assets other than the "Excluded Assets" listed in a schedule to the 2000 Transfer Agreement – to Genstar Development Company Limited ("GDCL"). Shortly thereafter, pursuant to a Transfer Agreement, dated January 15, 2001 (the "2001 Transfer Agreement"), GDCL transferred all of its assets to a newly formed partnership – the appellant Genstar. Imasco and GDCL are no longer active corporations.

[8] The Diocese did not develop the property as a church. It also did not give notice after the expiration of the 10 year period referred to in the repurchase option. It appears that nothing of substance happened until 2016, when the Diocese decided to sell the property. The Diocese issued a request for proposals, seeking bids to purchase the property.

[9] Genstar learned that the Diocese planned to sell the property in April 2016. It wrote the Diocese, taking the position that the Diocese had breached the terms of the Agreement and expressing its position that Genstar was entitled to exercise the repurchase option as a successor to Imasco. Significant correspondence between counsel for Genstar and counsel for the Diocese ensued. Genstar twice attempted to tender on the Diocese, but the Diocese refused to close citing deficiencies in the tenders and taking the position it was not obligated to sell the property to Genstar.

[10] Genstar then commenced an application to enforce its rights under the repurchase option. The Diocese defended the application primarily on the basis that:

1. both of Genstar's tenders were deficient, as it had failed to use the Ontario Consumer Price Index to calculate the repurchase price and thus understated the repurchase price by approximately $20,000;

2. Genstar was not Imasco's legal successor; and

3. if Genstar was properly construed as Imasco's assignee, Genstar had failed to give the Diocese notice pursuant to the Conveyance and Property Act, R.S.O. 1990, c. C. 34. In response to this latter argument, Genstar argued that it was an equitable assignee of the repurchase option.

[11] At the hearing of the application, the application judge raised concerns about the sufficiency of Genstar's evidence as to whether Genstar was Imasco's successor or, alternatively, whether Imasco had assigned the Agreement to Genstar. In particular, she noted that Genstar had not included the schedule of "Excluded Assets" to the 2000 Transfer Agreement. She invited the parties to make further written submissions as to whether it was appropriate to convert the application to an action, pursuant to r. 38.10 (b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: see Genstar Development Partnership v. The Roman Catholic Episcopal Corporation of the Diocese of Hamilton, 2018 ONSC 3702 (the "First Endorsement").

[12] In its written supplementary submissions, Genstar acknowledged that the "evidentiary record lacked potentially relevant information" relating to Genstar's status as a successor. It urged the application judge not to take the "draconian procedural step" of converting the application to an action. It requested that the application judge allow it to adduce further evidence, in the context of the application, to cure the deficiencies in the evidentiary record. The Diocese took no position on whether it was appropriate to convert the application to an action, but objected to Genstar's request that it be permitted to file supplementary evidence.

Decision Below

[13] The application judge determined that she would not exercise her discretion to convert the application to the action. However, she also held that it would be unfair to allow Genstar to adduce further evidence on its status as a successor to Imasco. She noted that Genstar "[had] never requested an adjournment and [had] consistently submitted that the Court should proceed on the present evidentiary record": Second Endorsement, at paras. 24, 32. In her view, it would be improper to allow Genstar to introduce new evidence after receiving comments and a ruling from the court. The Diocese was entitled to know the case it had to meet before the conclusion of the hearing.

[14] The application judge held that Genstar had not established that it was a successor to Imasco, because it was not possible to determine which assets had been transferred from Imasco to GDCL, and subsequently to Genstar, in the absence of the schedule of "Excluded Assets" in the 2000 Transfer Agreement: Second Endorsement, at paras. 32-34. She also rejected Genstar's alternate position that it was the equitable assignee of the repurchase option because it was not possible to determine if there was an intention to assign the Agreement in the absence of the schedule of "Excluded Assets" to the 2000 Transfer Agreement: Second Endorsement, at para. 39. As such, Genstar had failed to prove it was entitled to exercise the repurchase option.

[15] The application judge further held, in obiter, that Genstar's tenders were deficient and precluded it from enforcing the repurchase option. Genstar had not used the Ontario Consumer Price Index (as contemplated in the repurchase option) to calculate the purchase price and thus had understated the correct purchase price by approximately $20,000. She held that the Diocese was entitled to insist on strict compliance with the terms of the repurchase option. She also rejected Genstar's argument that correspondence from the Diocese evidenced an anticipatory breach of the Agreement, and thus relieved Genstar of the obligation to tender: Second Endorsement, at para. 42.

Issues on Appeal

[16] Genstar raises the following arguments on appeal:

• The application judge made palpable and overriding errors of fact in not finding that Genstar was the successor to Imasco or, that Genstar was the equitable assignee of the repurchase option;

• In the alternative, the application judge erred in not exercising her discretion to accept additional evidence or to convert the application to an action; and

• The application judge erred in finding that Genstar's tenders were deficient and precluded enforcement of the repurchase option.

[17] For the reasons that follow, we are of the view that the appeal can be resolved solely on the basis of the first two asserted errors. In particular, we would dismiss the appeal on the basis that the application judge was entitled to find, on the record before her, that Genstar had not discharged its onus of proving that it was the successor to Imasco or the equitable assignee of the repurchase option. We also see no basis upon which to interfere with either the application judge's refusal to convert the application to an action, or her refusal to accept supplementary evidence, in the circumstances of this case. In light of these conclusions, there is no need to resolve the question of whether the application judge erred in finding that Genstar's tenders were deficient.

Analysis

[18] As to the first asserted error, we do not agree that the application judge made a palpable and overriding error of fact in finding that the evidentiary record did not establish that Genstar was a successor to Imasco, or the equitable assignee of the Agreement and repurchase option. We note that Genstar agrees that the application judge correctly stated the law relating to succession and equitable assignment.

[19] It was only possible to determine which assets flowed from Imasco to GDCL to Genstar on a consideration of the contractual documents evidencing the transfers – including the schedule of "Excluded Assets" to the 2000 Transfer Agreement. The absence of the schedule of "Excluded Assets" left a critical gap in Genstar's claim that it was a successor because it had "[assumed] the burdens and become [vested] with the rights" of Imasco and its alternative claim that it was an equitable assignee of the repurchase option because the intention was for Genstar to have the benefit of the repurchase option. The application judge could not determine if the Agreement had been transferred to Genstar on the record before her.

[20] Genstar argues that the application judge erred because the uncontested evidence from Genstar's affiant was that Imasco's "real estate contracts" were transferred from Imasco to GDCL to Genstar. We do not accept this characterization of the affiant's evidence. The portion of the affiant's affidavit relied upon by Genstar in this regard – which was also reproduced by the application judge – simply describes and attaches the 2000 Transfer Agreement and 2001 Transfer Agreement. While the affiant states that the "Transferred Assets" in the 2000 Transfer Agreement included Imasco's "real estate contracts" – which is clear on the face of the definition of "Transferred Assets" in the 2000 Transfer Agreement – it is not possible to determine whether the specific Agreement at issue in this appeal was transferred in the absence of the schedule of "Excluded Assets". While Genstar argues that the test for successorship outlined in National Trust Co. v. Mead, [1990] 2 S.C.R. 410, at p. 423 does not require that the purported successor assume all of the predecessor's rights and obligations, it has provided no authority for the proposition that a successor can exercise a right not assumed.

[21] As counsel for the appellant acknowledged during oral argument, Genstar had the burden to establish that it was entitled to enforce the repurchase option as against the Diocese. We are not satisfied that the application judge made a palpable and overriding error in concluding that she could not make a positive finding that Genstar was a successor of Imasco or the equitable assignee of the repurchase option in the absence of the relevant documentary evidence.

[22] As to the second asserted error, we do not agree that the application judge erred in not exercising her discretion to receive additional evidence or to convert the application to an action.

[23] An application judge's discretionary decisions are entitled to significant deference. An appellate court will only interfere where the lower court misdirected itself, came to a decision that is so clearly wrong so as to amount to an injustice, or gave no or insufficient weight to a relevant consideration: Pennyfeather v. Timminco Ltd., 2017 ONCA 369, at para. 135, citing Penner v. Niagara Regional Police Services Board, 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 27.

[24] Here, the application judge raised the issue of the missing schedule of "Excluded Assets" at the hearing of the application. There was no request for an adjournment. She was never provided with the schedule of "Excluded Assets". While Genstar asked to provide additional evidence on the succession issue in its supplementary written submissions, it did not expressly identify what that evidence would be. The application judge was clearly concerned that to allow additional evidence would result in unfairness to the Diocese. In these circumstances, we are not satisfied that the application judge exercised her discretion in such a manner so as to warrant appellate intervention. Moreover, Genstar urged the application judge not to convert the application to an action in its written supplementary submission and, for that reason, it does not lie for it to argue before this court that she ought to have converted the application to an action.

[25] Finally, we are not persuaded that the manner in which the hearing of the application unfolded was procedurally unfair. The issue of whether Genstar was a successor to Imasco, or an assignee of the repurchase option, was put in issue in the parties' written submissions before the hearing of the application. While it is true that the application judge raised the issue of whether it was necessary to convert the application to an action at the hearing of the application – due in large part to the fact that the schedule of "Excluded Assets" to the 2000 Transfer Agreement was not in evidence – the parties were provided an opportunity to make additional written submissions on this issue. We therefore disagree with Genstar's submission on appeal that it was "blindsided" by what it referred to as the application judge's overemphasis on the missing schedule of "Excluded Assets".

Disposition

[26] For the foregoing reasons, the appeal is dismissed. The Diocese is entitled to costs of the appeal in the agreed upon amount of $35,000, inclusive of HST and disbursements.

"J.C. MacPherson J.A."

"M. Tulloch J.A."

"A. Harvison Young J.A."