ONTARIO – SUPERIOR COURT OF JUSTICE

2013 ONSC 1070

COURT FILE NO.: CV-11-421333
HEARING DATE: February 14, 2013

1751060 Ontario Inc., applicant

v.

Tedford Development Corporation Limited, Snark Investments Limited and Crusader Investments Limited, respondents

Ronald B. Moldaver Q.C. for the applicant

Michael D. Magonet for the respondents Snark Investments Limited and Crusader Investments Limited

Ronald Flom for the respondent Tedford Development Corporation Limited

Reuben M. Rosenblatt Q.C., independent lawyer with carriage

ENDORSEMENT

Master R.A. Muir -

[1] This is an application under the Partition Act, R.S.O. 1990, c. P.4. The applicant and the respondents each held a 25% interest in a 153 suite residential apartment building located at 2548 Kipling Avenue in the City of Toronto (the “Property”).

[2] On July 14, 2011, Justice Pollak granted judgment. A term of that judgment provided that the Property be sold under the direction of the master and that all necessary inquiries be made and accounts taken in order to achieve that objective. On October 4, 2011, Master Glustein made an order appointing me as reference master in connection with this application.

[3] On May 3, 2012 I heard submissions with respect to various issues related to the conduct of the sale of the Property. On May 10, 2012 I released my endorsement in relation to those issues. My endorsement dealt with a number of disputed issues including the appointment of a real estate broker and appointing an independent lawyer to assume carriage of the sale pursuant to Rule 55.06(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. I also approved the conditions of sale and the preferred form of agreement of purchase and sale.

[4] Although it appears that the conditions of sale were never submitted for signing, it is clear that all parties involved with the sale of the Property proceeded to act in accordance with the conditions of sale I had approved as part of my endorsement.

[5] The Property was ultimately purchased by the applicant for a notional price of $16,000,000.00. The transaction was structured so that the three respondents became the vendors and the applicant became the purchaser. An agreement of purchase and sale was entered into on December 13, 2012 (the “APS”). The transaction was completed on February 1, 2013. On closing, the applicant paid $12,000,000.00 for the 75% interest the respondents held in the Property.

[6] Following the completion of the transaction a dispute arose with respect to the parties’ respective obligations to pay the real estate agent’s commission and the post-December 13, 2012 fees of the independent lawyer. Those issues were argued before me on February 14, 2013.

[7] The real estate agent has been paid its commission. The issue before me is not whether the applicant is responsible to the agent but whether the applicant is responsible to its former partners for payment of a portion of the commission. The applicant takes the position that it should not be responsible for payment of any portion of the real estate commission. The APS refers to the respondents as the vendors and the applicant as the purchaser. Paragraph 24 of the APS makes it clear that, as among the parties, the three respondents as vendors are responsible for payment of the real estate commission. It is true that this structure is inconsistent with the conditions of sale, the preferred form of agreement of purchase and sale approved by me and with the listing agreement signed with the agent. However, all of those documents pre-date the APS and appear to be based on the assumption that a non-party would be the purchaser. In my view, all of that changed when the respondents agreed to accept the applicant’s offer and willingly entered into the APS. In my view, the respondents are now bound by the terms of the APS they signed.

[8] During the course of argument, the respondents suggested that they were somehow tricked into signing the APS and assuming the full obligation for payment of the agent’s commission. They submit that it would be unfair for this court to permit the applicant to avoid its obligation to pay its share of the commission. I do not accept this argument. First of all, there is no evidence to suggest that the respondents were somehow misled by the applicant. Second, the respondents are clearly not persons in need of this court’s protection. Far from it. The principals of the respondents are all sophisticated individuals who were fully represented by competent counsel at all times. They presumably reviewed and willingly signed the APS on December 13, 2012. The time for the respondents to object to the terms of the APS was when it was presented to them and not after it had been signed and the sale of the Property had been completed.

[9] It may be that the applicant has a moral obligation to pay its share of the commission. It certainly appears that it has benefited from the agent’s efforts. However, I see no legal obligation for the applicant to pay any portion of the commission.

[10] However, I am of the view that the applicant has a legal obligation to pay its share of the independent lawyer’s post-December 13, 2012 fees. The applicant argues that once it became a purchaser, the independent lawyer was no longer acting for its benefit, but rather for the benefit of the respondents as vendors. The applicant had to retain its own lawyers to complete the purchase, while the independent lawyer completed the sale on behalf of the respondents as vendors. I reject this argument. As my endorsement of May 10, 2012 makes clear, the role of the independent lawyer was to “act impartially to ensure a fair process, obtain the best price for the Property and help to smooth out any differences that may arise among the parties going forward”. The conditions of sale provide that the independent lawyer “shall act for the benefit of and on behalf of” all of the partners. This is precisely what Mr. Rosenblatt has done, both before and after the APS was signed. The conditions of sale contemplated that all of Mr. Rosenblatt’s fees would be shared equally by the partners. No subsequent agreement altered that arrangement in any way. If the applicant had any issues with respect to the independent lawyer’s post-December 13, 2012 fees it could have easily dealt with its concerns through the terms of the APS, just as it did with the agent’s commission. In my view, the applicant is responsible for 25% of Mr. Rosenblatt’s post December 13, 2012 fees and disbursements.

[11] In my endorsement of February 14, 2013 I ordered, among other things, that 75% of Mr. Rosenblatt’s post December 13, 2012 fees and disbursements be paid from the proceeds of sale. The remaining 25%, amounting to $10,370.00, shall be paid to Minden Gross LLP from the applicant’s funds currently being held in escrow by Mr. Rosenblatt. The balance of the funds in the escrow account shall be returned to the applicant.

[12] The costs of the February 14, 2013 hearing are reserved to be dealt with by me at the next return date of this reference. The parties shall contact my assistant trial coordinator within 30 days in order to schedule a telephone case conference to address the remaining issues on this reference.

Master R.A. Muir

DATE: February 19, 2013