SUPERIOR COURT OF JUSTICE – ONTARIO
COURT FILE NO.: CV-10-406801
DATE: 20130729
RE: ROTEK INVESTMENTS LIMITED
Plaintiff
AND:
2184978 ONTARIO INC. and BAKER SCHNEIDER RUGGIERO LLP
Defendants
BEFORE: CHAPNIK J.
COUNSEL:
Dominique Michaud Kenneth G. Hood
for the Plaintiff for the Defendant
HEARD: JULY 24, 2013
ENDORSEMENT
[1] The plaintiff, Rotek Investments Limited (Rotek) seeks summary judgment pursuant to rule 20.04(1) of the Rules of Civil Procedure against the defendant, 2184978 Ontario Inc. (218) for damages resulting from an aborted real estate transaction.
the facts
[2] The underlying facts are undisputed and can be briefly stated as follows:
The defendant owned 2.7 acres of vacant development land in Mississauga, Ontario (the property).
On July 31, 2009, 218 entered into an agreement of purchase and sale (the Agreement) to sell the property to Rotek for the purchase price of $4,700,000.
Pursuant to the terms of the Agreement, the plaintiff paid $100,000 as a deposit upon execution of the Agreement; and a second deposit of $100,000 on August 31, 2009, after the waiver of certain conditions, making the Agreement firm and binding upon the parties. The intention of the plaintiff was to build a residential condominium on the property.
The closing date for the transaction was set for October 14, 2009. Though the defendant tendered on that date, the purchaser did not close the deal. The purported reason for not closing related to the purchaser’s concerns over a Ministry of the Environment (MOE) noise guideline, NPC-205.
Rotek submits that 218 breached the Environmental condition in the Agreement and as a result, it was entitled to be discharged from the Agreement and 218 is liable for the return of the deposits and the due diligence costs incurred; or in the alternative, it should be granted relief from forfeiture as it would be unconscionable for 218 to retain the deposits.
The defendant takes the position that the said term in the Agreement is a warranty which did not permit the plaintiff to terminate the transaction and thus the plaintiff is not entitled to either the deposits or the due diligence costs. According to 218, the Agreement was terminated due to the default of Rotek and the deposits were forfeited as a result.
analysis
[3] The parties view the issues in this case somewhat differently. The plaintiff asserts that the only issue is whether the City of Mississauga advised it in October, 2009 that they would apply the NPC-205 guideline. If so, they say, they had good reason to terminate the Agreement since the matter of “contamination” (which includes noise contamination), remained a condition of the Agreement until closing and this would impact significantly on their purchase of the property.
[4] The defendant, on the other hand, raises two main issues – first, it contends that the term in the Agreement relied upon by the plaintiff (paragraph 5.01(g)(i)) is a warranty and not a condition; and second, 218 argues that the word “apply” in correspondence from the City did not mean that the NPC-205 guideline would apply to any construction on the property, but only that it would be considered as part of the regular development process. Accordingly, the property at closing did not contain an “adverse environmental condition” that allowed the plaintiff to terminate the Agreement.
[5] Without commenting on the merits of the case, I am satisfied that there are genuine issues that require a trial for their resolution, including the following:
- Was the paragraph in the Agreement relied upon by the plaintiff a condition or warranty? The impugned paragraph is contained in Schedule “A” to the Agreement. It reads as follows:
5:01 The Vendor hereby represents and warrants to the Purchaser that as of the date of acceptance of this Offer by the Vendor and as of the Closing Date (which representations and warranties shall be conditions to the benefit of the Purchaser until Closing); (emphasis added)
g) That:
i) the Property is free of any Hazardous Substances or other adverse environmental condition. “Hazardous Substance” includes, but is not limited to any contaminant, pollutant, dangerous substance, liquid waste, industrial waste, toxic substance, hazardous or toxic chemical, hazardous waste, hazardous material, or hazardous substance either in fact or as defined in or pursuant to any environmental laws. The Property is in compliance with all applicable environmental laws; further, the Vendor does not know, or have any reasonable grounds to know of any facts which could give rise to a notice of non-compliance with any applicable environmental laws;
The plaintiff relies on the above words in para. 5.01 in brackets which state that the representations and warranties itemized are “conditions to the benefit of the Purchaser until Closing”.
However, the heading for this section in the Agreement is: “Vendor’s Representations and WARRANTIES”. Moreover, after listing a number of items under this heading, Article 5.01 concludes with the words:
The Vendor covenants and agrees that the representations and warranties contained herein shall not merge on Closing but shall remain in full force and effect thereafter for a period of five (5) years notwithstanding any inspections by the Purchaser or the Purchaser’s satisfaction or waiver of the conditions herein contained. (emphasis added)
According to the defendant, it would be inconsistent to have a matter that can survive five years after closing termed as a “condition” of the Agreement.
The issue regarding the proper interpretation of these terms in the Agreement remains, in my view, a genuine issue for trial which must be considered within the context of the parties’ intentions, the entire negotiated Agreement and subsequent events related to the property.
- To support its contention of a breach of the noise condition in the Agreement, Rotek relies upon two emails recently received from Peter Griffiths of the City of Mississauga – the first states that in October, 2009 the department “would have applied the Environmental Guideline NPC-205 to the property”. The e-mail in its entirety reads:
Further to your letter dated March 1, 2013 please be advised that based on the correspondence dated October 6, 2009 received from CP Rail’s Mr. Orest Rojik, in response to my e-mail of October 6, 2009; this department would have applied the appropriate Ministry of Environment Guideline (MOE NPC-205) as the criteria for the acoustic analysis of CP Rail operations impacting the proposed residential development at the 570 Lolita Gardens. (emphasis added)
The second e-mail from Mr. Griffiths contains his recollection that “we did disclose the department’s position” to the plaintiff at the relevant time.
The difficulty lies with the interpretation of the word “applied” in this context, particularly given that no documentary evidence exists to confirm the City’s position in October 2009. More importantly, the defendant asserts that the word “apply” in this context does not import the implications attached to it by Rotek. Rather, it means the guideline was a factor to be considered as part of the regular development process and analysis. This view, they say, is supported by the fact that the NPC-205 guideline was not ultimately imposed by the City as a requirement of construction.
This issue, as to how to interpret the statement of the City that, in October 2009, they would have “applied” the guideline to the property; and whether this would reasonably give rise to a breach of the Agreement is another genuine issue that in my view, requires a trial for its resolution.
- The plaintiff’s damage claim for its costs related to “due diligence” consists of a spreadsheet of data, and would require details of when, where and for what the costs were incurred.
This is another issue claimed by the plaintiff that is unproven. A genuine issue exists as to causation, recoverability and proof of this claim.
The plaintiff asserts an equitable claim, in the alternative, for relief against forfeiture in relation to the deposits. This issue too is subject to proof of unconscionability and what is fair and just in all the circumstances.
Other issues arise collateral to these determinations such as the significance of the Noise Report, the plaintiff’s waiver of conditions, the plaintiff’s subsequent offers to purchase the property and the profit earned by the defendant from the subsequent development of the property.
[6] The ultimate question at trial will be whether the purchaser got what it bargained for; or in other words, whether the potential noise issue significantly compromised the purchaser’s intended use of the property and rendered the property unfit for the purpose for which it was purchased.
[7] In my view, a trial is necessary to fully appreciate the evidence and issues in this case and to make dispositive findings. The plaintiff has not satisfied its burden to demonstrate there is no issue requiring a trial within the meaning of Combined Air Mechanical Services Inc. v. William Flesch, 2011 ONCA 764, [2011] CarswellOnt 13515 (C.A.). Accordingly, the plaintiff’s motion for summary judgment is dismissed.
[8] Counsel agreed that a costs award of approximately $28,000 was reasonable for this matter. I have considered their submissions and the cost outline provided by the plaintiff.
[9] Given the criteria set out in rule 57.01 and the prevailing case law (see, for example: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), in my view, a fair and reasonable award of costs would be the all-inclusive sum of $20,000.
[10] An order shall issue for costs in favour of the defendant in the all-inclusive amount of $20,000.
CHAPNIK J.
Date: July 29, 2013