COURT FILE NO.: CV-12-456810
CV-12-466496
DATE: 20130619
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
First Elgin Mills Developments Inc.
Applicant
– and –
Romandale Farms Limited, Angela Maria Roman, Anne Catherine Ruth Roman, David Andrew Roman, Stephen George Roman, and Helen Elizabeth Roman-Barber
Respondents
AND BETWEEN:
Romandale Farms Limited, Peter Roman, Anne Catherine Ruth Roman, David Andrew Roman, Stephen George Roman, and Helen Elizabeth Roman-Barber
Applicants
– and –
First Elgin Mills Developments Inc.
Respondent
John J. Longo, for the Applicant
R. Leigh Youd and Adam J. Wygodny, for the Respondents
R. Leigh Youd and Adam J. Wygodny, for the Applicants
John J. Longo, for the Respondent
HEARD: February 25, 2013
AMENDED REASONS FOR JUDGMENT
Morgan J.
[1] Is an environmental concern over an endangered species of minnow large enough to devour the terms of an agreement to sell certain Ontario farmlands whose streams may form part of its habitat?
I. The Agreement of Purchase and Sale
[2] The Applicant in the first Application herein, Court File No. CV-12-456810, seeks a declaration that the Respondents have been paid the full amount outstanding on a mortgage registered against a property comprised of 71.72 acres of farmland known as the “Triple R Property”. The Applicant also seeks an order discharging the mortgage at the Respondents’ expense.
[3] The Applicants in the second Application herein, Court File No. CV-12-466496, are the Respondents in the first Application, and seek a declaration and order that the amounts owing under the same mortgage became due and payable on their appointed dates. These reasons will consider the two Applications together. For convenience of expression, the parties will be referred to throughout as they are named in the first Application.
[4] On August 29, 2005, the Applicant entered into an Agreement of Purchase and Sale with the Respondents for the Triple R Property (the “Agreement”). The Agreement was amended by the parties on March 14, 2006 (the “Amendment”), and title to the Triple R Property was transferred by the Respondents to an affiliate of the Applicant on March 16, 2006.
[5] The Applicant’s purchase was financed in part by a vendor take-back mortgage (the “Mortgage”). The Agreement provided that the calculation of the purchase price was subject to later adjustment based on a formula which would take into account the ratio of non-developable land (“ND Land”) to the rest of the Triple R Property. ND Land is defined in section 2(a) of the Agreement as:
…land prohibited from development by law, subject to environmental protection requirements, wood lots, land below top-of-bank and the set-backs from top-of-bank, streams and floodplain, existing easements but not including up to half of the existing lake on the subject property to a maximum of two acres”.
[6] The calculation and payment of the purchase price is described in section 3 of the Agreement, as follows:
(a) The purchase price shall be based on the sum of $175,000 per acre which price will be calculated using the existing most recent survey of the subject property which Romandale represents and warrants accurately describes the subject property. The purchase price shall be reduced at the end of the 5th year of the term of the VTB #2 Mortgage (as hereinafter described) by the amount that the acreage of the ND Land within the Triple R Property exceeds 20% of the total acreage. The determination of the amount of acreage of such ND Land shall be made in the same manner as that described in section 2(a) hereof.
(b) [payment]…to the extent of 70% thereof by certified cheque on closing and the balance by way of a vendor take-back mortgage (the VTB #2 Mortgage) with a term of 7 years, bearing no interest, with a balloon principal payment of $1 million at the end of the 3rd year of the term. The price adjustment described in section 3(a) hereof shall be applied at the end of the 5th year of the term, and 50% of the balance owing under the VTB #2 Mortgage shall be paid at the end of the 6th year of the term and the balance at the end of the 7th year of the term.
[7] Section 2 of the Agreement set out a specific procedure for determining the amount of ND Land:
(a) The parties shall each retain their own consultant to determine the acreage of the ND Land and both parties shall agree upon a third independent qualified consultant to determine the acreage of the ND Land in the event that their own consultants cannot agree upon such acreage. In the event of such disagreement, the amount of the ND Land shall be deemed to be the average of the amounts determined by the 3 consultants. Such determination of the amount of acreage of the ND Land shall be final and binding upon the parties, with no rights of appeal therefrom. The parties shall each bear the cost of their own consultant and 50% of the cost of the third consultant.
[8] Finally, section 7(c) of the Agreement provides, in standard language, that “[t]ime shall be of the essence hereof.” Likewise, the Amendment confirmed that “…time continues to be of the essence of the Agreement.”
[9] The gross, unadjusted purchase price of the Triple R Property was $12,550,562.00, based on 71.7175 acres at $175,000 per acre. As indicated, the Agreement was modified in certain respects by an Amendment in March 2006, but the calculation of any future price adjustment in accordance with the ratio of ND Land to the rest of the Triple R Property remained unchanged, as did the timing of that adjustment and the remaining payments under the Mortgage.
[10] After making the payment required under the Agreement and Amendment at the end of the third year of the term of the Mortgage, there was a balance of $1,332,884.48 of principle left to be paid if not further adjusted. As set out in section 3(b) of the Agreement, balloon payments for the outstanding principle owing under the Mortgage, after adjustment, were to be made in equal amounts at the end of the 6th year and 7th year of the term.
II. The Price Adjustment
[11] In February 2005, some five months prior to the date of the Agreement, the Ontario government passed Order-in-Council #208-2005, pursuant to the Greenbelt Act, 2005, S.O. 2005, c. 1 (the “Greenbelt Plan”). As of the date of the Agreement, the Greenbelt Plan had identified just under 23 acres of land on the Triple R Property as being ND Land. The geographic contours and provisions of the Greenbelt Plan, having been promulgated by order-in-council, were subject to change by the provincial government in accordance with ongoing regulatory policy.
[12] The Greenbelt Plan was still in its infancy when the Agreement was signed. Moreover, at the time no development plans had been submitted or approved for the Triple R Property, which was comprised mainly of undeveloped woodland and agricultural lands. It was not certain what type of development would be permitted on the lands in the future, how dense that development might be, how many acres would be consumed by any development, and how many acres might ultimately be undevelopable for various planning and/or environmental reasons.
[13] Accordingly, the future development potential of the Triple R Property was difficult to determine with any precision. As the Applicant puts it in its factum, “when the 2005 Agreement was negotiated and entered into, it was not possible to make a determination of the amount of land on the Triple R Property which was ND Land, as the land development and planning process would occur over a future period of at least several years, involve the Town of Markham and other stakeholders, and require the study of various planning matters and environmental features affecting the limits of development.”
[14] For this reason, a specific time and process for calculating ND Land, and any attendant price adjustment, was set out in the Agreement. As stated in sections 2(a) and 3(a) of the Agreement, the procedure for arriving at the ratio of ND Land to the rest of the Triple R Property was to be done at the end of the 5th year of the term of the Mortgage. At that point, each party could retain an expert consultant to determine the acreage of ND Land. In the event that each party retained a consultant and that the two consultants did not agree, the parties were to appoint a mutually agreed upon third consultant to make a final determination of the ND Land. An adjustment to the purchase price, if any, would then be based on that determination.
[15] The 5th anniversary of the Mortgage came and went at the end of March 2011 without any consultants’ reports being exchanged or any price adjustment agreed upon or even discussed. The Applicant explains in its factum its reason for not having commissioned the relevant report with respect to ND Land: “at the end of the 5th year of the term of the [Mortgage], this was not possible because the planning process was not sufficiently advanced by that time to permit a fully informed determination.”
[16] On January 2, 2012, the Applicant finally provided the Respondents with a consultant’s area certificate showing what it assessed to be the amount of ND Land and its calculation of what it proposed as a price reduction for the Triple R Property. The Applicant’s consultant determined that there were 15.8696 acres of ND Land that should be taken into account in adjusting the purchase price downward.
[17] The Applicant’s proposed adjustment would eliminate the entire outstanding balance of the Mortgage. The Applicant therefore seeks a declaration that the Mortgage is paid in full and an order discharging the Mortgage, arguing that the redemption amount has been reduced to zero.
[18] For their part, the Respondents state that the Applicant missed the March 2011 deadline for a purchase price reduction, and that the Applicant is therefore not entitled to any reduction. They argue that, “[t]here is no air of reality to the Applicant’s explanation for its failure to make a timely request for a deduction in the purchase price…” Specifically, the Respondents contend that, “[t]here are no contemporaneous documents to support the Applicant’s assertion that it was ‘not possible’ to determine the ND Land adjustment by March 2011”.
[19] The Respondents’ position is that time was of the essence in the Agreement, and that the 5 year deadline for calculating the purchase price adjustment cannot be simply ignored. In their factum, the Respondents explain that, “[w]hen the fifth anniversary of the VTB passed without the application [sic] raising the ND Land adjustment Romandale understood that it would receive 50 percent of the outstanding amount of the VTB, specifically, $691,442.24 on the sixth anniversary of the VTB and another payment of $691,442.24 on the seventh anniversary of the VTB.”
[20] As an alternative position, the Respondents also retained a consultant to respond to what it contends was the out-of-time consultant report served by the Applicant. The Respondents’ consultant did its own calculation, and takes substantial issue with the Applicant’s calculation of ND Land. The Respondents therefore submit that, even if the Applicant’s timing could be justified, the Application is premature and that the dispute resolution mechanism contained in the Agreement, under which the two parties agree on a third consultant to determine the relevant amount of ND Land, should now triggered.
[21] As indicated, the Respondents’ primary position is that, having let the 5 year anniversary of the Mortgage pass without invoking the mechanism for seeking a price adjustment, the full outstanding balance of the Mortgage remains unchanged. They submit that the timing was stipulated expressly in the Agreement, and that the court ought not interfere with specifically negotiated terms.
[22] I agree that, “it is not the function of the court to rewrite a contract for the parties. Nor is it their role to relieve one of the parties against the consequences of an improvident contract.” Jedfro Investments (U.S.A.) Ltd. v Jacyk, 2007 SCC 55, [2007] 3 SCR 679, at para 34, quoting Pacific National Investments Ltd. v Victoria (City), 2004 SCC 75, [2004] 3 SCR 575, at para 31. The real question is whether the Agreement, properly interpreted, required the price adjustment to be calculated at the fifth anniversary of the Mortgage, or whether it can be interpreted as authorizing a price adjustment at some other point during the seven year term of the Mortgage term.
[23] I pause here to briefly note that the Applicant argues that the Respondents themselves were not ready, willing, and able to perform their side of the Agreement as they had not retained a consultant to determine the ND Land at the fifth anniversary of the Mortgage. The Respondents reject this argument, stating that the obligation was on the Applicant as the party seeking the price adjustment to retain its consultant, and that it only makes commercial sense for the Respondents to wait for the Applicant to do so before responding with a consultant’s report of their own.
[24] It is clear that the Agreement, which is a sale and vendor take-back mortgage of real estate, must be interpreted in a way that makes business sense of its terms. As Iacobucci J. put it in Eli Lilly & Co. v Novopharm Ltd., 1998 791 (SCC), [1998] 2 SCR 129, at para. 56, “it would be absurd to adopt an interpretation which is clearly inconsistent with the commercial interests of the parties”.
[25] Under the circumstances, it is highly artificial for the Applicant to excuse its tardiness by pointing to the Respondents’ own tardiness. The Respondents’ position regarding the timing of any request for a price adjustment is the same for themselves as it is for the Applicant – i.e. that an expert report on which to base a price adjustment was to be produced at the end of the 5th year, failing which there would be no price adjustment under the Agreement. If the Applicant thought that a price adjustment was called for, it was for the Applicant to have its expert issue a report containing the relevant calculation at the time stipulated in the Agreement, and for the Respondents to respond when and if the report was served on them.
[26] The Applicant’s case, therefore, turns on its assertion that the determination of ND Land was impossible at the five year point. The Applicant must establish that it was necessary, not just for itself but for both parties, to wait until a later date in order to make a definitive determination.
III. The Redside Dace
[27] The Applicant contends that it was delayed in determining ND Land due to ongoing consultations over the protection of an endangered species of minnow – the Redside Dace – in waterways that are either on or that are adjacent to the Triple R Property. It is the Applicant’s position that at the 5 year anniversary of the Mortgage, this concern represented a potential, but as yet undetermined environmental impediment to development that caused it to hold off on its proposed price adjustment.
[28] As the Applicant explains it, the Triple R Property and a nearby property owned by the Respondents are both members of a regional developers’ and property owners’ association known as the North Markham Landowners Group (“NMLG”). The NMLG collectively commissioned various studies related to the development process for its landowner members, and held periodic meetings of its members in order to receive and discuss these ongoing studies.
[29] Among other things, the NMLG had retained consultants to study environmental issues in the region surrounding and including the Triple R Property. In its factum, the Applicant describes these consultations as including studies of “the Greenbelt lands, stream corridor widths and buffer widths, wooded areas (for eg., wood lots) and the habitat of endangered species (for eg., redside dace habitat), all of which are included in the definition of ND Land found in the 2005 Agreement.”
[30] A representative of the Applicant and a representative of the Respondents apparently attended the meetings of the NMLG on a routine basis. The parties’ representatives were, of course, only two of a much larger group of area landowners participating in the NMLG. There is no suggestion that they attended the meetings together or that they interacted directly with each other at these meetings; rather, the Applicant’s point is that they each had a representative present at the meetings and so were each aware of what studies were being conducted.
[31] The minutes of the NMLG meetings show that the group discussed what the Applicant submits would be relevant factors in ascertaining the ND Land. These factors include: (a) that rediside dace was an endangered species, (b) that the Ministry of Natural Resources was involved in the consultations over the habitat of this and other endangered species, (c) that as of March 2011 the Ministry was still receiving comments on the proposed redside dace habitat regulations and related development guidelines, (d) that the redside dace habitat regulations were passed by the provincial government in June 2011, and (e) that in late November 2011 it was concluded that the Triple R Property does not contain redside dace habitat.
[32] The representatives of the Applicant and the Respondents at the NMLG did not discuss with each other the impact of the redside dace habitat, or any other issue, on the determination of ND Land under the Agreement. There is no correspondence or any other communication from the Applicant to the Respondents confirming or even hinting that the ongoing redside dace discussions might impact on a price adjustment determination under the Agreement, or the timing of that determination.
[33] As indicated, the Applicant’s expert report on the ND Land was submitted to the Respondents in early January 2012. As the redside dace habitat was by then determined not to encroach on the Triple R Property, this issue did not ultimately impact on the ND Land or the Applicant’s proposed price adjustment.
IV. Ascertaining Developable and Non-Developable Land
[34] The redside dace studies and consultations were, of course, part of a larger process of determining what lands in this overall area would be available for development.
[35] As set out above, the Applicant argues that the development and planning process for the region was expected to be a lengthy and multi-faceted one. It would inevitably include continuous involvement by the local municipality (i.e. the Town of Markham) and other stakeholders, and would entail a thorough and ongoing consideration of numerous planning and environmental issues.
[36] It is not surprising that at the moment of contracting it might be impossible to predict the true extent of future developable acreage within a larger parcel of agricultural and undeveloped lands. The Supreme Court of Canada has noted that the development approval process “involves broad issues of policy and the principles of municipal governance”. Pacific National Investments Ltd. v City of Victoria, 2000 SCC 64, [2000] 2 SCR 919 at para. 1.
[37] Not only is the development approval process a complex one involving public and private interests, it is also a moving target. Specifically with respect to Ontario’s Greenbelt Plan, the Divisional Court has characterized the process of identifying non-developable lands within the designated Greenbelt as comprised of government determinations in which “the decisions are policy decisions, not decisions on questions of law.” 583753 Ontario Limited v Regional Municipality of York, 2007 Can LIi 40538, at para 11. The entire undertaking is a policy-oriented and at least partly political process, and is inherently unpredictable.
[38] As an illustration of this point, the Ontario Municipal Board (“OMB”) – the provincial agency that oversees municipal land development approvals – often provides only cursory reasons for its development decisions. Zellers Limited v Royal Cobourg Centres Limited, [2001] MPLR (3d) 122 (Ont Div Ct). While like other administrative bodies it is required to give reasons in order to make the rationale for its decisions more transparent to the public, Re Cloverdale Shopping Centre Ltd. (1966), 1966 205 (ON CA), 57 DLR (2d) 206 (Ont CA), those reasons are often sui generis. As explained by Epstein J. (as she then was), “the OMB only need give the general substance of the reasoning behind its decision.” Zellers, supra, at para 14. Decisions about developable lands are not necessarily amenable to the kind of predictability that one might expect of other, more strictly letter-of-the-law decision-making processes.
[39] Indeed, development approval is often a matter of bargaining with the relevant regulatory authority. See City of Toronto v Minto BYG Inc. (2001), 20 MPLR (3d) 123 (Ont SC). Accordingly, developers and regulatory authorities have resorted to fashioning a process composed of “case-by-case evaluations and decisions, where public bodies retain the power to contract [with owners/applicants] as they please.” Stefano Moroni, “Land Use Planning and the Law”, (2007) 6 Planning Theory 107.
[40] Nothing in this process is entirely predictable. Where official plans are in place for a given area, variances from those plans are commonplace. City of Toronto v Romlek Enterprises, [2008] 52618 (Ont Div Ct). Even the distinction between a “minor” variance, which can be granted without approval of the OMB, and a major one, which needs approval of the provincial body, has been described as a “relative expression [that] must be interpreted with regard to the particular circumstance involved.” Perry v Taggart, 1971 488 (ON SC), [1971] 3 OR 666, 668 (Ont SC).
[41] Identifying the quantity of lands in a large property that will be developable in the future would therefore be far more art than science. The approval process itself is an ever-moving one, with new criteria being reviewed as time goes on. Any such assessment would include predicting the future level of “increasingly stringent engineering and design standards, a continuous shifting of the costs of improvements and services from municipalities to developers, and increased public control over all aspects of subdivision.” Eran S. Kaplinsky, From Farms to Suburbs: Controlling Land Subdivision (S.J.D. Thesis, University of Toronto, 2006) [Bora Laskin Law Library, Toronto], at 227.
[42] A definitive conclusion cannot be reached in advance, as the relevant regulatory authority must “have turned its mind to all the factors relevant to the proper fulfillment of its statutory decision-making function.” Oakwood Development Ltd. v St. François Xavier, 1985 50 (SCC), [1985] 2 SCR 164, at para 15. One does not know how the future tension will be worked out “between the owner’s interest in putting its own property to what it regards as the optimal use and the municipality’s interest in having all of the land within its boundaries organized in a plan which it thinks will maximize the benefits and amenities for all inhabitants”. Saint-Romuald (City) v Olivier, 2001 SCC 57, [2001] 2 SCR 898, at para 13. Everything is subject to change, depending on a myriad of factors in the physical, social, and economic environment.
[43] Under the Agreement, in order for the party proposing a price adjustment to assess the quantity of ND Land that the fluid development approval process might produce, the assessment had to be tied to a specific point in time. What is developable today may be only partially developable in five years and entirely non-developable in seven, or vice versa. For this reason, time was of the essence under the Agreement in choosing the 5 year point for the assessment to be done.
[44] It is not accurate to say that the ND Land was indeterminate prior to the conclusion of the redside dace study, but that it became determinate in some definitive way once that study ended. Whether one takes a five year timeframe or a six or seven year timeframe for the Agreement and Mortgage, a definitive determination of ND Land for all time can never be made; rather, a determination can be made at any given point in time, recognizing that it may be different at yet some other point in time.
[45] The Appellant submits in its factum that under the Agreement, ND Land includes: “(a) land prohibited from development by law, (b) land subject to environmental protection requirements; (c) wood lots; (d) land below top-of-bank and the set-backs from top-of-bank; (e) streams and floodplain; and (f) existing easements.” Any of these variables could have changed at any point along the seven year timeline of the Mortgage.
[46] Since there are numerous factors that go into ascertaining whether or not lands are developable, and since any of those factors may be determinate at one stage but indeterminate at either an earlier or later stage, the key to the Agreement is to pick a time and stick to it. Whether tree blight was discovered in the wood lots at year three, or the Greenbelt Plan was revised and expanded at year four, or endangered minnows were discovered in the streams at year five, or an upstream landowner spilled toxins at year six, or the surrounding lands were converted to subdivision housing at year seven, change was inevitable over time. What is relevant to the parties is that they had pre-selected the time for calculating the ND Land and any attendant price adjustment.
[47] Five years under the Mortgage came and went and the Applicant said and did nothing. No communication about the calculation of ND Land was sent to the Respondents, no consultant report was prepared and, in fact, no consultant was retained by the Applicant until the five year point was long gone. The key moment in time for calculating any price adjustment passed the parties by.
[48] As indicated, change in some of the variables that define ND Land was as inevitable as it was unpredictable. For that reason, no change in any one of the variables could displace the chosen five year point for exchanging the expert reports and calculating the ND Land.
[49] In this contractual context, any concern over the endangered minnow is a redside herring. What matters is that a specific time and methodology was set for a determination of ND Land, and that no such determination was made at that time.
V. Disposition
[50] The Application in Court File No. CV-12-456810 is dismissed. The declaration and order sought in Court File No. CV-12-46649 is granted. There is no price adjustment to be made under the Agreement and the payments that were due under the Mortgage in March 2012 and March 2013 are owed in full to the Respondents, with accrued interest until the date of payment.
[51] Counsel for the Respondents has submitted a Costs Outline seeking $4,172.54. Given the time, complexity and amount of money at stake in the Application, this is an eminently reasonable request. It is substantially less than counsel for the Applicant requested in its own Costs Outline.
[52] I note that the Respondents’ Costs Outline includes fees and disbursements, with HST included on the disbursements but not on the fees. The partial indemnity fees requested by the Respondents are in the amount of $3,422.54. HST on this amount comes to $444.93.
[53] The Applicant shall pay the Respondents total costs in the amount of $4,617.47, inclusive of fees, disbursements, and HST.
Morgan J.
Released: June 19, 2013
COURT FILE NO.: CV-12-456810
CV-12-466496
DATE: 20130619
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
First Elgin Mills Developments Inc.
Applicant
– and –
Romandale Farms Limited, Angela Maria Roman, Anne Catherine Ruth Roman, David Andrew Roman, Stephen George Roman, and Helen Elizabeth Roman-Barber
Respondents
AND BETWEEN:
Romandale Farms Limited, Peter Roman, Anne Catherine Ruth Roman, David Andrew Roman, Stephen George Roman, and Helen Elizabeth Roman-Barber
Applicants
– and –
First Elgin Mills Developments Inc.
Respondent
AMENDED REASONS FOR JUDGMENT
E.M. Morgan J.
Released: June 19, 2013