SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-12-0136-00
DATE: 2012 07 04
RE: Craig Walton, Susan Walton, and Forest View Lodge Limited, Plaintiffs
AND:
Group of Seven Cottage Owners Association, BP Capital Corporation, Chandler Point Corporation, Chandler Point Developments Inc. and John Puffer, Defendants
BEFORE: The Honourable Mr. Justice R. F. Scott
COUNSEL:
Michael J. Pretsell, for the Plaintiffs/Responding Parties
Megan Marrie, for the Defendants/Moving Parties
HEARD: June 19, 2012
E N D O R S E M E N T
[ 1 ] This is a motion by the defendants, [1] John Puffer (“Puffer”), Group of Seven Cottage Owners Association (“the Association”), Chandler Point Corporation (“Chandler Point Corp”) and Chandler Point Developments Inc. (“Chandler Point Dev.”) for an order:
Discharging a Certificate of Pending Litigation;
In the alternative, limiting the Certificate of Pending Litigation to a specific parcel of land and an interval or time share parcel associated with that parcel; and
Costs.
The Facts
[ 2 ] The plaintiffs (the Waltons) are husband and wife and purchased the subject lands in 1985. The subject lands comprise 12.5 acres and are located on the shores of Baptiste Lake north of Bancroft, Ontario. The subject property was the home to the plaintiffs and their children and consisted of their own home, 11 rental cottages, 35 campsites, a licensed restaurant and a small marina.
[ 3 ] Puffer, a recreational time share developer, approached the Waltons in 2003 and on several occasions thereafter from 2003 to 2010 seeking to purchase the Walton’s property. In 2003, Puffer offered the Waltons $1,000,000.00, however, it was not until 2010 that the Waltons’ agreed to sell to Puffer after the Waltons had difficulties in meeting their financial obligations.
[ 4 ] Puffer offered the Waltons and the Waltons accepted $700,000.00 for the property together with other attractive inducements which such inducements would realize during and upon the fruition of the proposed project more monies for the Waltons including jobs, sales commissions, profit sharing and a time share or interval ownership in a portion of the project “special” to the Waltons. The affidavit material of plaintiffs which is not in conflict, indicates that the Waltons have a daughter who is deaf, blind and non-verbal. This child is emotionally attached in a very positive manner to a portion of the lands abutting what has become “Cottage 5” in the Puffer development. This latter consideration as you will read later, I found to be real and significant to the Waltons but very difficult to quantify in terms of a monetary value.
[ 5 ] Puffer who has and had considerable expertise in this type of development presented the Waltons with a series of closing documents including:
An agreement of purchase and sales for the subject lands dated December 16, 2012 (“the APS”);
A construction management and sales administration agreement dated January 6, 2011 (“the Term Sheet”);
A construction management and sales administration agreement dated February 15, 2011 (“the Construction Management Agreement”); and
A property management agreement made as of February 22, 2011 (“the Property Management Agreement”).
[ 6 ] The parties agreed to the respective terms and conditions of these documents and, it appears, at least that the APS was reviewed by the Waltons’ solicitor prior to execution and closing.
[ 7 ] These Agreements involved the transformation of the subject lands into a series of seven cottages including a confederation log cottage that the Waltons had had built in 2006 for their family at a cost to them of $300,000.00. The project was named “The Group of Seven”.
[ 8 ] Purchasers were to be sold “Intervals” which provided the purchaser with a membership in “the Association” and reserved for that purchaser the use of a specific cottage for a specific number of weeks (5) during the course of the year. Each cottage was divided and sold into 10 such intervals.
[ 9 ] The Waltons assumed their respective responsibilities in January 2011 and, the project was even more successful than anticipated.
[ 10 ] On January 11, 2011, the Waltons say that they discussed with Puffer a two week vacation to Florida by the Waltons and, they say that Puffer agreed.
[ 11 ] Puffer indicates otherwise. He says that it was only a matter of days prior to the Waltons’ departure to Florida that he was unilaterally notified by the Waltons.
[ 12 ] To my way of thinking, not a lot of importance is invested in either version.
[ 13 ] Short of the completion of their vacation, the Waltons received from Puffer an email terminating their employment and their incentive agreements including the transfer of title to the two “Intervals” in Cottage 5.
[ 14 ] After the termination, Puffer sold to a third party or parties these two “Intervals” however, to date, Puffer has not closed on this transaction.
[ 15 ] As well, Puffer acknowledged early on that he owes money to the Waltons for services rendered but there are issues relating to the quantum on all of the contracts.
The Test to Discharge a Certificate of Pending Litigation
[ 16 ] There is no argument that s. 103(6) of the Courts of Justice Act provides the court with a wide discretion in equity to discharge a Certificate of Pending Litigation and in so doing, the court must look at the relevant matters between the parties.
[ 17 ] Master Donkin in 572383 Ontario Inc. v. Dhunna [1987] O.J. No. 1073 , sets out some of the factors to be considered by a judge in discharging a Certificate of Pending Litigation. It reads:
While the decided cases contain statements of general consideration entering into the decision of a motion which as this, most of them contain a combination of facts not present in this case. Further, the presence or absence of some particular factors give grounds to remove the certificate, but do not require that the certificate be removed. The claim of damages in the alternative does not bind the Court to vacate the certificate, see Pete & Martys (Front) Ltd. v. Market Block Toronto Properties Ltd. 1985 5 C.P.C. (2d) 97 at 102 . The factors taken into account in the decided cases appear to include:
Whether the plaintiff is, or is not a shell corporation Pete & Martys (Front) Ltd. v. Market Block (1986) 5 C.P.C. (2d) 97 at 99 .
Whether the land is, or is not unique (ibid) bearing in mind that in a sense any parcel of land has some special value to the owner – Clock Investments v. Hardwood Estates Ltd. (1977) 16 O.R. (2d) at 674.
The intent of the parties in acquiring the land – Tru-Style Designs Inc. v. Greymac Properties Inc. (1987) 56 O.R. (2d) 482 at 479 .
Whether there is an alternative claim for damages.
The ease or difficulty of calculating damages – Holden Corp. v. Gingerfield Properties Ltd. (1987) 59 O.R. (2d) 304 at 310.
Whether damages would be a satisfactory remedy Pete & Martys (Front) Ltd. v. Market Block (supra) at 101 to 102.
The presence or absence of another willing purchaser Holden Corp. v. Gingerfield Properties Ltd . (supra) at 310.
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 requirement of alternative security – Heron Bay Investments Ltd. v. Peel Elder Developments Ltd. (1977) 2 C.P.C. 338 at 339 .
[ 18 ] In dealing with these factors, certain obvious comparisons may be drawn.
Shell Corporation
[ 19 ] Although reference is made to whether the plaintiff is a “shell corporation”, it is equally relevant as to whether the defendant is a “shell corporation” at least in the consideration of the issue of damages as an alternative claim.
[ 20 ] The affidavit of the plaintiff, Craig Walton sworn the June 12, 2012, speaks at paragraph 16 thereof to the defendant “Puffer” moving large sums of monies between corporations and that he may do so to defeat the claim by the plaintiffs.
[ 21 ] Certainly if this is a factor, it does not favour these defendants.
Uniqueness of the Land
[ 22 ] It appears that the two “intervals” intended for the plaintiffs as part of their original agreement with Puffer which agreement was reduced to a contract, has a particular value to the plaintiffs through their daughter who has special needs. This was known to Puffer from the outset.
[ 23 ] When coupled with actions by Puffer following the termination of the contracts with the plaintiffs wherein they sold the plaintiffs’ intervals to a third party (but which transfer has not closed to date). Puffer and certain of the other defendants intended to remove the plaintiffs from the lands. Any consideration of this factor does not favour the defendants.
The Parties Intent in Acquiring the Land
[ 24 ] It seems obvious that both parties intended to profit from the sale/purchase of the lands, however, it is equally relevant when considering this factor to include my earlier analysis relating to the uniqueness of the property. Therefore, this factor draws neutral or does not favour the defendants.
Alternative Claim for Damages, Ease in Calculation, and Damages as a Satisfactory Remedy
[ 25 ] There exist a number of levels of relief sought by the plaintiffs, one of which is for damages. Certainly, some of the claims by the plaintiffs are able to be calculated in damages, however, their claim to the intervals in Cottage 5 is not easily calculated, nor would damages be a satisfactory remedy relating to the transfer of these “intervals”.
[ 26 ] Again, these factors do not lend themselves to the defendants’ position.
Presence of a Willing Purchaser
[ 27 ] Obviously, there exists another willing purchaser for not only the intervals associated with Cottage 5 intended to be purchased by the plaintiffs but the intervals associated with the other cottages some not completed.
[ 28 ] Given this consideration alone, it favours these defendants.
Harm to the Defendants
[ 29 ] In the initial motion material including the affidavit of John Puffer sworn the 8 th day of June, the day before the hearing, these defendants describe the “urgency” of their motion and the harm caused by the registration of the Certificate of Pending Litigation.
[ 30 ] The following is set out in paragraph 17 of the Notice of Motion dated June 8, 2012:
- This motion is urgent and, if the CPL is not discharged, the defendants will suffer significant harm as:
a) Several intervals are scheduled to close on June 20, 2012 for a total purchase price of $1,202,546.00, which funds are required to complete the Project;
b) Delayed sales may be lost for the year, as the selling season for interval properties is the beginning of summer;
c) Chandler Point Corp. will suffer a loss as a result of having paid commission to its sales manager on intervals scheduled to close June 20, 2012;
d) Future sales of intervals in Cottage 7 will be hindered; and
e) Puffer’s reputation and that of Chandler Point Corp. will be harmed and they will suffer additional and continuing damages as a result of lost sales, lost profit and loss of reputation.
[ 31 ] At paragraphs 33 through 38 of the Affidavit of Puffer sworn June 8, 2012, he states:
This motion is urgent.
Construction on and sales of the Project are on-going. Cottages 1, 2 and 3 are completely built, with all intervals sold. Construction has begun on Cottages 6 and 7, with intervals still for sale. Cottages 4 and 5 (5 being the cottage in which the plaintiffs claim a right) are close to complete, with all intervals sold pursuant to signed sales agreements. As of the date I swear this affidavit, sales of the intervals in Cottages 4 and 5, with the exception of the two intervals in which the plaintiffs claim a right, are scheduled to close June 20, 2012.
The total purchase price of the June 20, 2012 closings, including HST, is $1,202,546.00. These funds are necessary for the completion of the Project.
If the sales are delayed, they may be lost for the year, as the selling season for interval properties is the beginning of summer. Chandler Point Corp. will suffer a loss as result of having paid commission to its sales manager on the intervals set to close on June 20, 2012, in the amount of $39,890.13 including HST.
Future sales of intervals in Cottage 7 will also be hindered if the CPL is permitted to stay on title.
In addition to the issues outlined above, I believe that my reputation and that of Chandler Point Corp. will be harmed and that we will suffer additional and continuing damages as a result of lost sales, lost profit and loss of reputation.
[ 32 ] As well, these defendants conclude their Factum with similar concerns relating to the harm caused by the actions of the plaintiffs in having registered the Certificate of Pending Litigation against the subject lands. Paragraph 44 of the Factum reads:
Harm to the Defendants
- Should the CPL remain on title, the Defendants will be severely harmed. In this respect:
a) Several intervals are scheduled to close on June 20, 2012 for a total purchase price of $1,202,546.00 which funds are required to complete the Project;
b) Delayed sales may be lost for the year, as the selling season for interval properties is the beginning of summer;
c) Chandler Point Corp. will suffer a loss as a result of having paid commission to its sales manager on intervals scheduled to close June 20, 2012;
d) Future sales of intervals in Cottages 6 and 7 will be hindered; and
e) Puffer’s reputation and that of Chandler Point Corp. will be harmed and they will suffer additional and continuing damages as a result of lost sales, lost profit and loss of reputation.
[ 33 ] The implication by the defendants as to the harm to these defendants and the urgency in discharging or expunging the Certificate of Pending Litigation, is clearly that the intervals that were to close on June 20, 2012 would not be able to close at all due to title problems and that all of the monies from the intended sale for that day being $1,202,546.00 were necessary for the completion of the Project. As well, these defendants also stressed that as a result of the delay in the project, future sales would be compromised and that the defendants would suffer a loss having already paid its sales manager approximately $40,000.00 on the intervals that were to close on June 20, 2012. Lastly, Puffer and Chandler Point Corp. will suffer damages including loss of reputation.
[ 34 ] By a further affidavit sworn by Puffer on June 18, 2012, the day prior to the return of the motion, he describes that those intervals intended for closing on the June 20, 2012, would now all close as the defendants had agreed with the purchasers of such intervals to hold sufficient monies in trust to satisfy the plaintiffs’ lawsuit in return for the closings proceeding on June 20, 2012.
[ 35 ] With some prompting from the bench, the Court was advised that the amount retained was $250,000.00 which would be held in trust by the defendants’ solicitors to satisfy any successful claims against “the Association”.
[ 36 ] Although these defendants did not provide the court with anything of any particular detail as to the actual or expected costs to complete the last two of seven cottages, I estimate based on the sketchy information provided by these defendants that such costs will not exceed $500,000.00 or $600,000.00.
[ 37 ] This cost to complete the remaining two cottages is in keeping with the earlier estimates by the defendants of the costs associated with the entire project however without the assistance of these defendants in regards to such costs, the cost to complete could vary somewhat. Again by my calculation, there exists at least a further $300,000.00 or $400,000.00 beyond all costs including the holdback to complete.
[ 38 ] Certainly, the urgency and harm against one no longer factor to consider and as such do not favour the defendants.
[ 39 ] Based on all of the factors, from an equity perspective, these defendants do not satisfy the requirements necessary for the discharge of the Certificate of Pending Litigation.
Other Considerations
[ 40 ] As well, I would like to deal with one other submission put forward by these defendants, namely, that the proposed sale of the intervals in Cottage 5 does not constitute a transfer of ownership in the lands but is merely a license or permission to occupy a specific cottage for specific dates, and as such does not deal with land and is not subject to a Certificate of Pending Litigation. As explained by these defendants, the purchaser, (the plaintiffs) are not buying an “interest in the land” but are buying time rather than real property.
[ 41 ] These defendants also submit that the plaintiffs’ claim should have been advanced pursuant to the Construction Lien Act but was not done so within the limitation period of 45 days as set out in the subject Act. I agree that a portion of the claims made by the plaintiffs are for work and materials provided to the site, however that is not the extent of the plaintiffs’ claims. As well, claims that lend themselves to construction matters are not limited to the confines of the Construction Lien Act.
[ 42 ] The plaintiffs submit that the defendants in compensating the plaintiffs for their work intended that the same be an “interest in the lands”. In support of this, the plaintiffs further submit that the wording which the defendants employed when dealing with the 2 intervals in Cottage 5 specifically employed land conveyancing terms including “title transferred” as found in the “Compensation” paragraph of the Construction, Management Agreement between the plaintiffs and the Developer, a document prepared by the defendants.
[ 43 ] Further, the plaintiffs submit that the Certificate of Pending Litigation is appropriate because the plaintiffs are seeking a claim for unjust enrichment for services rendered.
[ 44 ] Given all of the circumstances, on this motion, the plaintiffs have made claims which raise a trialable issue as to a reasonable interest in the land, in particular Cottage 5.
Conclusion
[ 45 ] It appears from the materials that the plaintiffs’ claims are able only to be partially satisfied by pecuniary damages. The matter of the transfer of title to the intervals in Cottage 5 is properly the subject of the Certificate of Pending Litigation.
[ 46 ] If it is possible from a conveyancing perspective to confine the Certificate of Pending Litigation, then I am prepared to order the same. The parties may agree to this and may also agree to limit the Certificate of Pending Litigation even further by stipulating the same only applies to “Two (2) intervals with weeks two and Three in Cottage 5”.
[ 47 ] With respect to the balance of the relief sought, I find that the same may be satisfied with an order requiring the said $250,000.00 presently being held in trust for the benefit of the action until such time as this court orders otherwise.
[ 48 ] On a without prejudice basis to both parties, I invite your comments as to how the registration of the Certificate of Pending Litigation might be best achieved failing which, the Certificate of Pending Litigation shall remain registered in same form and cover the same lands as presently exist.
[ 49 ] You may speak to my assistant at your convenience to arrange for a suitable time to speak with me.
[ 50 ] As to costs, the plaintiffs have been successful and I would ask for your respective submissions unless you are able to arrive at an agreement.
Scott, J
DATE: July 4, 2012
[1] Based on the Notice of Motion, the defendant, BP Capital Corporation is not a moving party. I am not certain if this was an oversight or intended.