CITATION: Airport Business Park v. Huszti Holdings, 2021 ONSC 4276
DIVISIONAL COURT FILE NO.: DC 40/19
London
DATE: 20210614
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D.L. Corbett, Newton and Kristjanson JJ.
B E T W E E N:
AIRPORT BUSINESS PARK
Myron W. Shulgan, Q.C., for the Appellant
Applicant / Appellant
- and -
HUSZTI HOLDINGS INC., THE
Niklas Holmberg, for the Respondent
CORPORATION OF THE CITY OF
WINDSOR, YOUR QUICK GATEWAY
(WINDSOR) INC. and ATTORNEY
GENERAL OF CANADA
Respondents / Respondent
Heard by videoconference:
November 26, 2020
REASONS FOR DECISION
D.L. Corbett j.:
Background
[1] The applicant (“ABP”) agreed to purchase a piece of commercial property (the “Property”) from the respondent (“Huszti”) for $4.42 million. The property was subject to an easement (the “Easement”) in favour of the City of Windsor and Your Quick Gateway (Windsor) Inc. (collectively, the “Dominant Tenement Owner”).
[2] Prior to closing of its purchase of the Property, ABP requisitioned discharge of the Easement from Huszti. The Easement was not discharged as of closing and instead the parties closed the transaction on the following basis. Huszti took a vendor take-back mortgage for $2.92 million on closing. Huszti agreed to secure and register on title a good and valid transfer, release and abandonment of the Easement within one year (by December 30, 2016), failing which the mortgage would be reduced by $442,000:
In the event that [Huszti] fails to secure and register on title a good and valid Transfer Release and Abandonment relating to the Additional Grant of Easement registered on title as R334811 on July 13, 1965… the principal balance outstanding at that time shall be automatically reduced by the amount of Four Hundred and Forty Two Thousand Dollars ($442,000.00).
[3] The Dominant Tenement Owner declined to release the Easement voluntarily. Huszti brought legal proceedings to extinguish the Easement. Huszti prevailed by order of Heeney RSJ made on December 28, 2016 (2016 ONSC 8130).
[4] The Dominant Tenement Owner appealed the decision of Heeney RSJ. The Court of Appeal dismissed that appeal on September 12, 2017 (2017 ONCA 708).
[5] ABP took the position that Huszti failed to meet the requirement to register a good and valid transfer of the Easement by December 30, 2016. Consequently, it says, the principal amount of the mortgage was automatically reduced by $442,000. Huszti took the position that the order of Heeney RSJ was registered on title by the deadline and met the requirement to transfer good and valid transfer of the Easement. ABP paid the disputed amount into trust pending final determination of this issue, which proceeded by way of application before Patterson J. on October 29, 2018.
Decision of the Application Judge
[6] There were two issues before Patterson J.:
(i) whether obtaining and registering the order of Heeney RSJ satisfied Huszti’s obligation to obtain a release of the Easement; and
(ii) whether obtaining and registering the order of Heeney RSJ two days before the contractual deadline met the deadline to obtain a release of the Easement when appeal rights from the order of Heeney RSJ subsisted after the deadline.
[7] Patterson J. answered both questions in the affirmative and directed that the $442,000 and accrued interest be paid to Huszti (2018 ONSC 7576). ABP appeals to this court.
Issues on Appeal
[8] The Appellant raises five issues:
Issue 1. Did the Application Judge commit errors of law by failing to apply, consider, or even mention, binding legal authority decided by the Ontario Court of Appeal and the Supreme Court of Canada, which have already established that a contractual deadline is not satisfied by the last moment obtaining of a court order unless the prospect of appeal of such order is merely ephemeral?
Issue 2. Did the Application Judge commit an error of fact or an error of mixed fact and law by failing to recognize that the VTB did not provide for the obtaining of a court order at all, but called for the securing and registration of a specific instrument, namely a good and valid Transfer Release and Abandonment which has never taken place?
Issue 3. Did the Application Judge commit an error of law, or an error of mixed fact and law by failing to recognize that the Contested Court Order did not deliver certainty, finality, or “good and marketable title” whereas the securing and registration of a good and valid Transfer Release and Abandonment would have?
Issue 4. Did the Application Judge commit an error of law or a mixed error of fact and law by basing his decision on his perception that Business Park wanted both the release of Windsor Airport’s Easement, and the amount of $442,000.00.
Issue 5. Did the Application Judge commit an error of fact by failing to recognize that Huszti’s continued involvement, and contestation of the Dominant Tenement Owner’s appeal of the Contested Court Order, was clear and dispositive evidence that Huszti had not achieved full contractual compliance prior to Huszti’s One Year Deadline?
[9] I do not accept the appellant’s statement of the issues. Appellant’s issues 1, 3 and 5 are aspects of the second issue before Patterson J. Issue 2 is a restatement of the first issue before Patterson J. Issue 4 is irrelevant to the disposition of the two issues before Patterson J., but would be relevant to an application for relief from forfeiture (which was not made in this case).
Jurisdiction and Standard of Review
[10] This appeal was brought to the Court of Appeal and transferred by direction from that court to the Divisional Court. The decision of the application judge is reviewable in this court on a standard of correctness for questions of law and on a standard of palpable and overriding error on questions of fact. Mixed questions of fact and law are reviewable in this court on a deferential standard except in respect to “extricable questions of law”, which are subject to a correctness standard.[^1]
Issue #1: whether obtaining and registering the order of Heeney RSJ satisfied Huszti’s obligation to obtain a release of the Easement?
[11] The short answer to this question is “yes”. The appellant has provided no authority to the contrary, and the appellant’s authorities respecting the timeliness of the order of Heeney RSJ and the effect of appeal rights presuppose that a court order is sufficient if it is obtained in time and any appeal rights are merely “ephemeral” or have been extinguished.
[12] If the order of Heeney RSJ had been obtained a month after closing and all appeal rights had been extinguished before the one-year deadline, the discharge order would have had the same effect as a voluntary discharge of the Easement. The appellant would not have been entitled to keep the $442,000 because the form of the document registered on title was a court order rather than a discharge, when both documents had the same effect. Patterson J.’s conclusion to this effect was correct.
Issue #2: whether obtaining and registering the order of Heeney RSJ two days before the contractual deadline met the deadline to obtain a release of the Easement when appeal rights from the order of Heeney RSJ subsisted after the deadline?
[13] I would answer this question in the negative and allow the appeal for the following reasons.
[14] The term agreed between the parties required that the Easement be discharged by registration of a valid “transfer, release and abandonment” of the Easement. As stated in my answer to the first issue, the form of the document registered on title discharging the Easement is not essential, so long as the effect of that document is to extinguish the Easement to the same effect as a discharge.
[15] In 1974, in Smith v. Tellier, in a similar context, the Court of Appeal held that a trial decision is “in a sense interlocutory” and “does not possess the element of absolute finality” until appeal rights have been exhausted.[^2] The Supreme Court of Canada reversed this decision, but on a narrow basis that qualified but did not displace this principle:
An order which is subject to appeal cannot be said to be effective for all purposes, even in respect of third parties, before the time for appeal has run. On the other hand, the fact that the time for appeal has not yet run will not invariably stay the full effectiveness of the order, even as against third parties if there is only an ephemeral prospect of appeal.[^3]
[16] At the time of Smith v. Tellier, there was an automatic stay pending appeal. An order that is stayed is, by definition, not “fully effective” so long as the stay is operating. This is not the case today. The order of Heeney RSJ was not subject to an automatic stay if an appeal was brought. When the order was appealed, no stay order was sought or obtained. Thus, the application judge was correct in finding that the order of Heeney RSJ was effective in accordance with its terms as of the date it was registered on title, and this effectiveness was not impaired as a result of a stay order.[^4] Does this finding displace the principle stated in Smith v. Tellier?
[17] The appellant argues that it did not receive what it bargained for – the order of Heeney RSJ could have been overturned on appeal, and it could not deal with its property free and clear of the Easement so long as the removal of the Easement was still contingent. That is the logic of Smith v. Tellier: the decision of Heeney RSJ was “in some sense interlocutory” until appeal rights had been extinguished. The Supreme Court of Canada’s decision carved out a limited exception to this principle: where “the prospect of an appeal” was ephemeral. “The prospect of an appeal” is not a matter of assessing the underlying merits of an appeal, but rather assessing whether anyone will bring an appeal. In Smith v. Tellier, no one opposed the original court order, and there was no reason to imagine that anyone would appeal it. No one did. In the case at bar, the application before Heeney RSJ was contested vigorously by sophisticated parties. The “prospect of appeal” was not “ephemeral”. And the appeal was, in fact, brought. Even when the Court of Appeal dismissed the appeal in a brief endorsement, the discharge order remained “in some sense interlocutory” pending a possible motion for leave to appeal to the Supreme Court of Canada.
[18] The respondent argued that the elimination of a stay pending appeal is a basis for distinguishing Smith v. Tellier, and pointed to a BC trial decision, Hydro Fuels Inc. v. Mid-Pacific Services Inc., in support of this argument. Hydro Fuels does make this distinction, but it is rather difficult to discern the effect of the finding in that case.[^5] The case seems to have concerned a contested right of first refusal that the court concluded should bind title, so the effect of the decision was to uphold a defect in title, not to remove it. Thus, the underlying principle in Smith v. Tellier does not appear to have been engaged in Hydro Fuels. If Hydro Fuels cannot be distinguished in this way then, with respect, I would decline to follow it: Smith v. Tellier is binding authority on this court and the underlying mischief to which it is addressed is not affected by a change in the Rules respecting automatic stays pending appeal.
[19] To be clear, Smith v. Tellier must be read in its very specific context: it holds that a “final” decision from the Superior Court is “in some sense interlocutory” pending extinction of appeal rights in matters concerning title to land where the parties have bargained for extinction of a blot on title, without contingency. Smith v. Tellier does not impugn the final effect of court orders generally, pending appeal, in the absence of a stay. Orders are effective from the time that they are made and do not have to await the end of all appeals or potential appeals to come into effect, and Smith v. Tellier did not hold otherwise. However, there remains a contingency (that the decision may be overturned on appeal) that leaves parties at risk until appeal rights have run. In title matters, parties are entitled to, and do, allocate risk and the price of assuming risk.
[20] The appellant bargained for good title, not subject to any contingency that the Easement might remain on title. The result – the order of Heeney RSJ – did not provide the appellant with what it bargained for until the decision of the Court of Appeal was rendered and the time to seek leave to appeal from that decision to the Supreme Court of Canada had expired. This did not happen until almost a year after the deadline by which the respondent was to have extinguished the Easement absolutely.
[21] The respondent relies upon registration of the order of Heeney RSJ to distinguish Smith v. Tellier, where the order had not been registered. I agree that this is a distinction, but in my view it is a distinction without a difference if it still remained open to the Court of Appeal to reverse Heeney RSJ with the effect of requiring that the order of Heeney RSJ be removed from title. No authority was provided to this court that the order could not be removed as a result of a successful appeal, and thus the contingency that lay at the heart of the parties’ bargain is not affected by registration of the order.[^6]
[22] The respondent argued that this court should not consider the appellant’s argument that “good and marketable title” was not received by the appellant, in accordance with the bargain between the parties, because this argument was not made to the application judge. I do not accept this argument. The “good and marketable title” argument is the very essence of this case – the very point of Smith v. Tellier, and the core reason the appellant was correct below and prevails in this court. This was an old Easement and the purpose for it had disappeared because of technological change (it was granted out of anticipated requirements of Windsor Airport in the 1960’s which no longer existed in the 21st century). However, the Easement was still on title. Purchaser agreed to pay a price for the land without the Easement. It agreed to pay a reduced price if risk remained that the Easement would continue to exist on the first anniversary of closing. By one year after closing, the risk had been reduced but not eliminated. On the bargain between the parties, the appellant was entitled to the reduction in the purchase price.
Disposition
[23] For these reasons I would allow the appeal, reverse the order of the application judge, allow the application, grant the relief claimed in para. 1(a) of the Notice of Application, and direct that the disputed funds be paid to the appellant, including accrued interest. The respondent is to pay costs of the appeal in the agreed amount of $16,500, inclusive. If the parties cannot resolve the issue of costs before Patterson J., then they may arrange a teleconference with D.L. Corbett J. no later than June 30, 2021 to obtain directions on that issue.
D.L. Corbett J.
I agree: _______________________________
Newton J.
I agree: _______________________________
Kristjanson J.
Released: June 14, 2021
CITATION: Airport Business Park v. Huszti Holdings, 2021 ONSC 4276
DIVISIONAL COURT FILE NO.: DC 40/19
London
DATE: 20210614
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D.L. Corbett, Newton and Kristjanson JJ.
BETWEEN:
Airport Business Park
Applicant / Appellant
- and –
Huszti Holdings Inc., The Corporation of the City of Windsor, Your Quick Gateway (Windsor) Inc. and The Attorney General of Canada
Respondents / Respondent
REASONS FOR DECISION
D.L. Corbett J.
Released: June 14, 2021
[^1]: Cite to Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, para. 37; Housen v. Nikolaisen, [2002] SCR 235, paras. 8, 10, 19, 26-37.
[^2]: Smith v. Tellier, [1974] OJ No. 1933, paras. 5 and 9 (CA).
[^3]: Smith v. Tellier, [1975] SCJ No. 75.
[^4]: Airport Business Park Inc. v. Huszti Holdings Inc., 2018 ONSC 7576, para. 3.
[^5]: Hydro Fuels Inc. v. Mid-Pacific Services Inc., 1999 6523, paras. 10-14 (BC SC).
[^6]: Land Titles Act, RSO 1990, c. L.5, ss. 25, 69 and 78; Regal Constellation Hotel Inc., Re, 2004 206 (ON CA), 2004 CarswellOnt 2653, paras. 35-37.