COURT FILE AND PARTIES

COURT FILE NO.: CV-10-416517
DATE: 20120718
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2144688 Ontario Ltd., Plaintiff

AND:

1482241 Ontario Limited, Defendants

BEFORE: Carole J. Brown J.

COUNSEL: R. Cohen and Daniel Waldman, for the Plaintiff

L. Viet Nguyen, for the Defendant

HEARD: July 10, 2012

ENDORSEMENT

[ 1 ] The defendant, 1482241 Ontario Ltd. ("the defendant" or the "seller") brings this motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure dismissing the claim of the plaintiff, 2144688 Ontario Ltd., lifting the certificate of pending litigation ("CPL") and permitting the defendant to proceed to sell the property to another prospective purchaser or to deal with the subject property as it sees fit. In June of 2010, the buyer and seller entered into an Agreement of Purchase and Sale of the subject commercial property, located at 240 Duncan Mills Road, Toronto ("the property") in the amount of $15,000,000.00, with the buyer to assume a first mortgage of $9,500,000.00 from the Royal Bank of Canada ("RBC"). The Agreement was subject to terms and conditions, including the Buyer’s Condition, providing the buyer with a period of time to conduct its due diligence with respect to the property. The conditions required the seller to provide documentation to the buyer as specified in the Agreement and permitted the buyer to retain the services of an engineer and other consultants to conduct engineering, soil and environmental tests and an audit, for purposes of completing its due diligence. The closing date of the Agreement was specified to be on the 60th day following the waiver by the buyer of the Buyer's Condition, once its due diligence had been completed. The transaction contemplated by the Agreement did not close and the Statement of Claim was issued by the buyer on December 15, 2010 and the Statement of Defence served and filed on March 4, 2011. Since that time, there have been numerous court appearances for a contested CPL motion, appeal of the decision granting the CPL, and subsequent variation of that Order.

[ 2 ] On this motion for summary judgment, the defendant/moving party takes the position that there are only two issues to be decided, namely whether the conditional period stipulated in the Agreement of Purchase and Sale (“APS”) has run; and whether the purchaser is in default under the Buyer’s Condition set forth in the APS, and that both of these issues can be determined and a full appreciation of the issues can be had on the motion record before this Court. The plaintiff/responding party submits that there are significant material facts in dispute, contested evidence and that it is not possible, nor just, based on the record before this Court to make a final determination in this matter.

[ 3 ] The Agreement of Purchase and Sale sets forth, inter alia , the Buyer’s Condition with respect to the transaction, which reads as follows:

This agreement of Purchase and Sale shall be conditional from the date of mutual acceptance thereof until 5 PM, on the 60th day following delivery to Buyer of all documentation referred to in this paragraph (the “Conditional Period”) upon the Buyer satisfying itself, in its sole and absolute discretion which shall not be subject to review by the Seller, with all aspects of the Property (including but not limited to the leases and rental income, zoning, density efficiencies, physical condition of the property, engineering and environmental matters, and the feasibility of the property for the Buyer’s intended use).

The Seller shall provide (or cause to be provided) within 4 days of mutual acceptance of this Agreement, the following: up-to-date surveys, zoning applications, tax bills for the past two years, and any contracts i.e. Elevator, hvac, the leases for the parking units and all other relevant documentation within its possession or control for the Buyer’s review, including without limitation, copies of all engineering and soil and environmental tests and audits. Unless the Buyer delivers a written notice to the Seller or Seller’s solicitors prior to expiry of the Conditional Period, that the Buyer is satisfied with its due diligence investigations and wishes to proceed with the purchase of the Property and is waiving any and all conditions set forth herein, this Agreement shall become null and void and the Buyer’s deposit shall be returned to the Buyer in full with interest and without deduction whatsoever.

Buyer may, at its sole option and in its absolute discretion, and at its sole cost and expense during the Conditional Period, retain the services of engineers and other consultants to conduct engineering, soil and environmental tests and audits and Seller shall provide Buyer with access to the Property for such purposes.

The Buyer shall have the right to inspect the property four (4) times given the proper notices are provided to the Vendor.

[ 4 ] The closing date of the transaction is stipulated to be on the 60th day following the waiver of the Buyer’s Condition, as described above.

[ 5 ] It is the position of the moving party/seller that it has provided all necessary documentation to permit the buyer to complete its due diligence and to waive the conditional period but that the Buyer has failed to do so. It argues that the conditional period has now expired and the APS is null and void.

[ 6 ] The moving party further submits that the buyer is in breach of the APS as it is unable to satisfy the financing conditions set forth therein, namely to assume the RBC mortgage. It references a letter from RBC to that effect, although I note that the letter from RBC does not indicate the reason for its refusal to approve the assumption of the mortgage by the buyer.

[ 7 ] It is the position of the responding party/buyer that the seller has consistently failed or refused to provide all necessary documentation in order to permit the buyer to complete its due diligence in order to waive the Buyer’s Condition. It relies on the record and the evidence contained therein with respect to its ongoing attempts to obtain all necessary information and documentation in order to satisfy itself with respect to the property. Further, it submits that its experts have been impeded from conducting tests and audits, which it is entitled to do pursuant to the APS. Most particularly, it argues that the seller has prevented the buyer from obtaining a current appraisal for the property which requires the seller to provide additional information. It submits that this is required in order for it to obtain financing. The evidence also indicates that a surveyor was prevented from completing his investigation contrary to the Buyer’s Condition provisions.

[ 8 ] It is further the position of the responding party/buyer that it is able to obtain alternate financing and is ready, willing and able to meet the financing conditions. It relies on correspondence from Richard Monroe of CM Capital Corp. indicating that he believes financing would be obtainable in the range of $9-$11 million.

[ 9 ] The buyer submits that the seller, commencing in August of 2010, orchestrated a course of conduct designed to unlawfully terminate the APS in breach of its contractual obligations, has continued throughout to refuse to provide all necessary documentation requested by the buyer to permit it to complete its due diligence pursuant to the provisions of the Buyer’s Condition in the APS, that the conditional period continues to run until such time as the seller complies with its obligations and provides the documentation sought. The buyer further maintains that it is willing and able to fulfill the financing conditions.

[ 10 ] While the Seller contends that the buyer is in default under the Agreement, the Buyer argues that the conditional period has not yet started to run; the seller argues that it has provided the buyer with all of the required documentation while the buyer continues to maintain that this is not correct; and while the seller argues that the buyer is in breach of the financing conditions as it cannot assume the RBC mortgage and is not ready, willing or able to finance the transaction, the buyer maintains that it is unable to obtain the requisite financing to complete the transaction as the seller’s conduct is responsible for the plaintiff's inability to close. Indeed, I note that in the Appeal from the Master's decision, which was heard before me, I concluded in this regard, based on the evidentiary record before me at the time, which has not been augmented in this regard by the seller, “that the facts and evidence support the Master’s findings that there is a triable issue regarding the plaintiff’s interest in the subject land and that the defendant cannot rely on the plaintiff’s inability to obtain the requisite financing to complete the transaction where its conduct may have been responsible for the plaintiff’s inability to close.”

[ 11 ] Therefore, the material facts in issue are contested and in dispute between the two parties. This is evident from the two affidavits provided by the parties on this summary judgment motion.

The Law and Analysis

[ 12 ] Rule 20 provides for summary judgment where there is no genuine issue requiring a trial with respect to a claim or defence. The Court of Appeal has recently provided guidance with respect to the application of Rule 20 in Combined Air Mechanical Services Inc. et al v. Flesch et al, 2011 ONCA 764 . The Court of Appeal observed that a judge, faced with a summary judgment motion, must focus on whether the case is one which does not require the trial process in the “interest of justice” and in a way that permits a fair and just adjudication of the dispute. The Court of Appeal observed that “the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can a full appreciation only be achieved by way of trial? We think this full appreciation test provides a useful benchmark for deciding whether or not a trial is required in the interest of justice.” The Court observed that the full appreciation test would likely be met in cases that are largely document-driven, with limited testimonial evidence and limited contentious factual issues. In contrast, the full appreciation test would unlikely be met in cases that call for multiple findings of fact on the basis of conflicting evidence from a number of witnesses and a full voluminous evidentiary record.

[ 13 ] I am satisfied, based on the evidentiary record before me, including the affidavits, and the documents relied on by the parties, as well as their submissions, and taking into account the law upon which each party relied, that there are material factual issues in dispute, which must be resolved with the benefit of viva voce evidence from witnesses, including each of the principals of the numbered companies themselves. I note as well that there has been no documentary discovery nor any examinations for discovery in this action. I do not find this an appropriate case for summary judgment. A full appreciation of the evidence and the determination of the issues in dispute cannot be had without the full machinery of a trial, particularly given the factual issues in dispute. As the Court of Appeal observed, "simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute.”

[ 14 ] Accordingly, I dismiss this motion for summary judgment. The parties have provided their bills of costs and given submissions in that regard. I award costs to the responding party/plaintiff on a partial indemnity basis, including disbursements and HST, in the total amount of $14,395.71.

Carole J. Brown J.

Date: July 18, 2012