COURT OF APPEAL FOR ONTARIO
CITATION: Canadian Imperial Bank of Commerce v. Urbancorp (Leslieville) Developments Inc., 2020 ONCA 449
DATE: 20200709
DOCKET: C67779
Strathy C.J.O., Lauwers and van Rensburg JJ.A.
BETWEEN
Canadian Imperial Bank of Commerce
Applicant
and
Urbancorp (Leslieville) Developments Inc., Urbancorp (Riverdale) Developments Inc., & Urbancorp (The Beach) Developments Inc.
Respondents
Application under section 243 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended, section 68 of the Construction Lien Act, R.S.O. 1990, c. C.30, and under section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43
R. Brendan Bissell, for the appellant, Terra Firma Capital Corporation
Megan Mackey and Thomas McRae, for the respondents, the Certain Curzon Purchasers
Chris Burr, for Alvarez & Marsel Canada Inc. in its capacity as both Receiver and Manager, and Construction Lien Trustee of the Assets, Undertakings and Properties of Urbancorp (Leslieville) Developments Inc., Urbancorp (Riverdale) Developments Inc., and Urbancorp (The Beach) Developments Inc.
Heard: in writing
On appeal from the order of Chief Justice Morawetz of the Superior Court of Justice, dated October 10, 2019, with reasons reported at 2019 ONSC 4971.
REASONS FOR DECISION
[1] The motion judge found that the respondent residential condominium purchasers, known as the “Certain Curzon Purchasers,” were not obliged to pay to the Receiver their proportionate share of the notional value of land conveyed to the City of Toronto to meet the condominium developer’s parkland obligations. The ranking creditor, Terra Firma Capital Corporation, appeals. For the reasons that follow, the appeal is dismissed.
The Factual and Procedural Context
[2] Under s. 42 of the Planning Act, R.S.O. 1990, c. P.13, a municipality in which land is to be developed – in this case the City of Toronto – may require the developer to convey land to it for parkland purposes, or instead may require the payment of cash in lieu of land. The motion judge noted: “Although the conveyance of parkland had not been finalized at the time of approval of the Opt-In Leslieville Purchaser [Agreement of Purchase and Sale], the documents establish that the City was likely going to require a conveyance of parkland in order to comply with section 42 of the Planning Act”: at para. 48. As expected, the City required a transfer of 700.09 sq. meters to it for parkland purposes, not a cash payment-in-lieu of the conveyance.
[3] The developer experienced financial difficulties, which led to the Receiver’s appointment. In the course of refinancing the development, the Receiver renegotiated the agreements of purchase of sale with each of the Certain Curzon Purchasers, increasing the cost per unit by about $255,000.
[4] The development was completed. When the conveyances were ready to proceed, the Receiver required purchasers, including the Certain Curzon Purchasers, to pay a proportionate share of the value of the land transferred to the City for parkland purposes (calculated as a share of the value of the released letter of credit provided to the City to secure the transfer of the land). In doing so, the Receiver invoked a clause in the renegotiated agreements of purchase and sale and demanded that the Certain Curzon Purchasers pay additional amounts per unit of between about $13,000 and almost $18,800 in order to close their condominium purchases. They then pursued reimbursement.
[5] The parties asked the court to determine this issue: “Was the Parks Levy properly charged by the Construction Receiver to the Certain Curzon Purchasers, pursuant to the terms of their respective agreements of purchase and sale?”
[6] The motion judge held that the Parks Levy had not been charged properly to the Certain Curzon Purchasers and required the Receiver to reimburse to them the amounts they had paid in order to close their purchases.
The Decision under Appeal
[7] The decision turns on the proper interpretation of clause 7(d)(iii) of the court-approved agreements of purchase and sale:
The Purchaser shall be responsible for the amount of any parks levy or any charges pursuant [to] a Section 37 Agreement (pursuant to the Planning Act), levied, charged or otherwise imposed with respect to the Condominium, the Property or the Unit by any governmental authority, which is equivalent to the common interest allocation attributable to the Unit as set out in Schedule “D” to the Declaration. [Emphasis added.]
[8] The motion judge took the view that: “While the plain meaning of the document provides for an adjustment where there has been a payment-in-lieu, it does not follow that there is to be an adjustment where there has been a conveyance of land”: at para. 63. He found that the clause does not “clearly state that the Certain Curzon Purchasers are responsible for ‘park levy’ charges in circumstances where there has been a conveyance of land and not payment-in-lieu”: at para. 55. The motion judge construed the language of the provision, at para. 60:
I must consider the plain and ordinary meaning of the contractual provision read in context with the rest of the contract. One consideration here, in addition to the dictionary definitions offered by the Parties, is the wording of the entire Parks Levy Clause. The Clause states that it is the “amount of” any parks levy, rather than, for example, the “value of” any parks levy that is to be the subject of an adjustment. In my view, this language is indicative of a payment of cash-in-lieu rather than a conveyance. [Emphasis added.]
[9] The motion judge noted that the language of the clause on which Terra Firma relies replicates the terms of the Tarion Addendum (the Tarion Warranty Corporation Statement of Critical Dates and Addendum to Agreement of Purchase and Sale) and must accordingly be given the same consumer protective interpretation: at paras. 5, 50, citing Reddy v. 1945086 Ontario Inc., 2019 ONSC 2554, at para. 21. He observed, at para. 65:
In considering the factual matrix at the relevant time, it is necessary to focus on Schedule “B” of the Tarion Addendum and its purpose and to acknowledge Tarion’s mandate to protect new home buyers. Any price adjustments need to be clearly set out. In this case, the proposed “park levy” adjustment is not clearly or expressly set out. This favours the position of the Certain Curzon Purchasers.
[10] The motion judge’s conclusion was that the provision does: “not require the Certain Curzon Purchasers to pay for the notional value of parkland transfers to the City”: at para. 70.
Analysis
[11] Terra Firma makes three arguments. First, it argues that the motion judge misconstrued the meaning of the word “levy,” and submits that its interpretation must reflect “the established use of the term ‘levy’ as applying to the taking of property and not just the payment of money.” Terra Firma acknowledges that “levy” is a term that it is used in land development, but points out that “none of the applicable legislation and the Planning Act or Toronto Municipal Code defines what a ‘parks levy’ is (nor even uses that term).”
[12] Accordingly, Terra Firma argues that an alternative interpretation is superior, which is that “the conventional use of that term can refer to the taking of money, but also includes the appropriation of property other than money.” In support of this argument, Terra Firma refers to ss. 32(2) and 32(3) of the Commercial Tenancies Act, R.S.O. 1990, c. L.7, which uses the term “levy” to describe what a landlord does in distraining a tenant’s goods for arrears of rent. Terra Firma also refers to s. 15 of the Warehouse Receipt Act, R.S.O. 1990, c. W.3, which exempts goods held by a storer from being “levied under an execution, unless the receipt is first surrendered to the storer.”
[13] That is not how the motion judge interpreted the term “levy”. His reasoning is set out at para. 60, quoted above. The motion judge’s conclusion, in working through the language of the provision, was that: “this language is indicative of a payment of cash-in-lieu rather than a conveyance”: at para. 60. Before embarking on this analysis, he summarized the parties’ positions and pointed to the Receiver’s acknowledgement that s. 42 of the Planning Act, and in particular the definition of a “parks levy”, has received scant judicial consideration: at para. 29. The Receiver pointed out that Gemterra Developments Corp. v. Toronto (City), 2017 ONSC 1776, 66 M.P.L.R. (5th) 102 was the closest the court had come to defining the term. In that decision, Perell J. stated that “a payment in lieu of a conveyance… is commonly referred to as a ‘park levy’”: Gemterra Developments, at para. 8.
[14] Terra Firma’s argument does not overcome the motion judge’s interpretation. A levy is more commonly understood to be a financial charge, particularly in the land development context, as noted in Gemterra Developments. The references to “levy” used by Terra Firma are not apt. The statutes to which Terra Firma refers use the term “levy” as a verb, not as a noun.
[15] We agree with the motion judge’s disposition of this argument.
[16] Second, Terra Firma submits that the motion judge’s interpretation does not accord with “sound commercial principles and good business sense,” because it creates rather than avoids a “commercial absurdity”: Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24.
[17] Terra Firma argues that the land conveyed to the City had value and its conveyance therefore imposed a cost on the Receiver. Terra Firma disputes the motion judge’s statement that: “The result is neutral to the developer, or in this case, the Receiver. Conversely, the result urged by the Receiver could result in a windfall for the Receiver”: at para. 68.
[18] We do not accept this argument because it is inconsistent with the factual matrix in the land development context, as the motion judge noted at paras. 67-68:
In considering the principle of commercial efficacy, a result that favours the Certain Curzon Purchaser[s] is, in my view, reasonable. While I accept that it is commercially reasonable for the developer to seek to recover the additional expense of the consideration paid to the City where there has been a payment-in-lieu in compliance with section 42, the developer does not incur additional costs where compliance has been achieved through the conveyance of land.
The land is part of the project and is conveyed to the municipality for park or other public recreational purposes. There is no evidence of any additional costs which have to be recovered from the purchasers. In my view, this scenario is not commercially unreasonable. The result is neutral to the developer, or in this case, the Receiver. Conversely, the result urged by the Receiver could result in a windfall for the Receiver. A result that favours the Certain Curzon Purchaser[s] is, in my view, reasonable.
[19] Terra Firma asserts: “had the Receiver not conveyed the land, it logically would have been in a position to either develop more units or even just sell a sizeable amount of land to a third party.” This assertion is not consistent with the way in which land is developed in Toronto. The municipal permissions, which enabled the development and the number of units (giving it the value that the Receiver reaped), depended on the developer’s compliance with s. 42 of the Planning Act, which, as noted, provides either for the conveyance of land for parkland or cash-in-lieu, according to the City’s choice.
[20] Against that backdrop, Terra Firma posits this scenario:
Now, it is likely that not conveying land to the City would have resulted in the City asking for a monetary payment for park issues as a term of any development. That hypothetical situation illustrates, however, the anomalous commercial results that flow from the Decision’s interpretation of clause 7(d)(iii), because if the Receiver had made such a monetary payment then:
a) the Decision holds that the Receiver could have adjusted for that payment under clause 7(d)(iii), and
b) the Receiver would then have been able to also generate more revenue through either developing more units or selling the land to a third party.
[21] Terra Firma argues that this scenario would lead to a commercial absurdity, which the principles of contractual interpretation were designed to avoid: the outcome in which all the costs would be “borne by the developer for a conveyance of land in kind but no loss (and in fact further profit from the land not conveyed) for payment of a monetary fee…[.]”
[22] Terra Firma’s hypothetical rests on the plainly erroneous premise that the developer could have refused to convey the land to the City and could have insisted on paying cash-in-lieu. The motion judge saw it differently. The conveyance was the predictable result of ordinary land development, he noted at paras. 67-68, quoted above. In short, the hypothetical scenario is unrealistic and speculative; it should not drive the analysis.
[23] Third, Terra Firma argues that the motion judge improperly applied the contra proferentem principle against it, because the renegotiated agreements of purchase and sale were actively negotiated and the Certain Curzon Purchasers were legally represented. Terra Firma relies on Ironside v. Smith, 1998 ABCA 366, 223 A.R. 379, at para. 67:
The use of contra proferentem is contingent on an absence of meaningful negotiating ability. So long as a party is permitted to participate in real negotiations, even if he chooses not to do so, it is inappropriate to invoke the rule.
[24] We do not see this as a traditional application of the contra proferentem principle. The motion judge was making the point that the developer, in whose shoes the Receiver stands, knew all along that the City would require the conveyance of land, not payment of cash-in-lieu. In that circumstance, the Receiver could have taken the opportunity in renegotiating the agreements of purchase and sale to bargain for the transfer of the cost and the risk of the land conveyance to the purchasers, and thereby have taken this issue off the table. The motion judge noted: “The language … could have been drafted to expressly cover the conveyance of land scenario -- but it was not”: at para. 49.
[25] The invocation of the contra proferentem principle was not the core of the motion judge’s analysis. He turned to it only after concluding that a result favouring the Certain Curzon Purchasers was “reasonable”: at paras. 59, 67-69. While other provisions in the agreements of purchase and sale were negotiated, this clause was not. The motion judge was alive to the consumer protection purpose of the Tarion Addendum, which the clause replicates: at para. 56. He observed that: “Any price adjustments need to be clearly set out”: at para. 65. He added: “In this case, the proposed ‘park levy’ adjustment is not clearly or expressly set out”: at para. 65.
[26] In our view, all of Terra Firma’s arguments fail. Terra Firma relies on a tortured and unpersuasive interpretation of a clause that does not clearly require the purchasers to pay a proportionate share of the cost of the conveyance of land to the City for parkland purposes. We agree with the motion judge’s analysis and disposition.
The Standard of Review
[27] This is an unusual case, in that the clause on which it turns is the replica of a provision in a standard form Tarion Addendum in wide use in Ontario pursuant to legislation. It would be legally incongruous for the interpretation of the provision in this case to be different from its usual interpretation. For this reason, the normal posture of deference to the motion judge’s interpretation pursuant to Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 is displaced. The interpretation of a standard form contract has precedential value, so that its “interpretation is better characterized as a question of law subject to correctness review”: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 46; see also MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, 127 O.R. (3d) 663, leave to appeal refused, [2016] S.C.C.A. No. 39.
[28] That said, in our view, the motion judge’s interpretation was correct, as we have said. On the deference standard, the motion judge identified the appropriate principles of interpretation and had regard to the factual matrix, evident from his reliance on Ventas. Terra Firma has not demonstrated that the motion judge made any palpable and overriding errors in his assessment of the evidence, nor did he make any extricable errors of law.
Disposition
[29] The appeal is dismissed with costs payable by the appellant to the Certain Curzon Purchasers in the amount of $12,000 as agreed.
“G.R. Strathy C.J.O.”
“P. Lauwers J.A.”
“K. van Rensburg J.A.”