ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-CV-422478
DATE: October 10, 2013
BETWEEN:
EMPIRE GLOBAL ACQUISITIONS GROUP
Plaintiff
– and –
MIKE JOBB, 2271379 ONTARIO INC. and METROPOLITAN COMMERCIAL REALTY INC.
Defendants
– and –
JAY ROSENBLATT, SIMPSON WIGGLE LAW LLP, and BARRY ROSENBLATT
Third Parties
David Preger and Mrody Mednick for the Plaintiff
Kevin Sherkin for the Defendants
HEARD: October 3, 2013
PERELL, J.
REASONS FOR DECISION
[1] This litigation is a prototypical abortive real estate transaction case. The vendor, Empire Global Enterprises, sues Mike Jobb, who signed the agreement of purchase and sale, and it also sues 2271379 Ontario Inc., the purchaser by assignment, for its alleged failure to close the transaction.
[2] In this motion for summary judgment, 2271379 Ontario Inc. submits that it was justified in refusing to close the transaction because of Empire Global’s breach of contract, and it counterclaims for a refund of a $250,000.00 deposit and for a dismissal of the action. For his part, Mr. Jobb submits that, in any event, the action should be dismissed as against him because he assigned the purchase agreement to 2271379 Ontario Inc.
[3] As I will quite briefly detail below, 2271379 Ontario Inc. advances four justifications for its demand for a return of the deposit and for its request that the action be dismissed; namely: (1) Empire Global entered into new leases and modified leases without 2271379 Ontario Inc.’s consent; (2) Empire Global misrepresented the rent roll; (3) Empire Global failed to deliver estoppel certificates; and (4) Empire Global failed to include personal guarantees in the leaseback.
[4] Empire Global disputes each of the alleged justifications. Alternatively, it submits that the alleged justifications were manufactured, trivial, immaterial, and incapable of supporting a refusal to close the transaction. Empire Global submits that the Defendants acted deceitfully and not in good faith.
[5] On this summary judgment motion, I can and do decide that one of the four alleged justifications (the guarantor issue) was no justification at all. Further, I can and do decide that Mr. Jobb should be out of the action.
[6] However, with those two exceptions, I agree with Empire Global’s submissions that this is not an appropriate case for a summary judgment and that there are genuine issues requiring a trial about Empire Global’s forfeiture of the deposit, about its claim for damages, and about 2271379 Ontario Inc.’s counterclaim and the defence that it was justified in refusing to close the transaction.
[7] I, therefore, dismiss the action as against Mr. Jobb, but, otherwise, I dismiss the motion for summary judgment, and I exercise the court’s power under rule 20.05 to rule what facts are not in dispute and to define the issues to be tried.
[8] In these Reasons for Decision, I will not describe the factual background in any detail because my essential conclusion is that the main issues in this action should be decided by a trial judge and not in a summary fashion.
[9] Although I do not need to rely on it, there is an additional reason for dismissing the motion for a summary judgment, for directing a trial, and for being parsimonious in fact-finding on this motion for summary judgment. The additional reason is that a summary judgment would complicate and might compromise the third party claim brought by the Defendants against their lawyers.
[10] In this last regard, it should be noted, as also is prototypical, that the vendor’s and purchaser’s decisions about whether to close or not close or to refund or forfeit the deposit were influenced by the lawyers retained for the transaction. On this summary judgment motion, Empire Global’s evidence came from its lawyer, Marc Lean, but the Defendant’s evidence came from Mr. Jobb, likely because he has sued his lawyers, Jay Rosenblatt, Barry Rosenblatt, and Simpson Wiggle Law LLP.
[11] A trial judge would benefit from the full appreciation of having the lawyers for both lawyers explain what happened in the abortive closing of the real estate transaction.
[12] Turning then briefly to the factual background, on November 19, 2010, Empire Global entered into an Agreement of Purchase and Sale with Mr. Jobb, in trust for a Company to be incorporated.
[13] The subject matter of the agreement was a commercial rental property at 501 Alliance Avenue in Toronto, Ontario. The property is a three-story 300,000 square foot commercial/industrial building with underground parking. The purchase price was $6.9 million, with a deposit of $100,000.00 payable upon acceptance and a further deposit of $150,000.00 due upon waiver of conditions. The closing date was initially scheduled for February 14, 2011, but it was later extended to February 18, 2011, with time to be of the essence.
[14] The agreement of purchase and sale contained an assignment provision. Paragraph 8 of Schedule A stated:
It is understood and agreed that the Buyer, until closing, shall have the right to assign this Agreement of Purchase and Sale to a corporation or corporations, individual or individuals to be designated by the Buyer, and upon such assignment, the Buyer shall be relieved of all liabilities and obligations under the provisions of the Agreement with the intent and purpose that this Agreement shall be construed and read as though it had been executed in the first instance by the assignee or assignees designated.
[15] In what is an awkwardly expressed promise found in paragraph 4.0 of Schedule A of the Agreement, Empire Global agreed to be tenant of the entire third floor (a lease back) at a gross rent of $695,000 and the agreement provided: “the Lease shall be personally guaranteed by the principles of Global Empire Acquisitions Corporation and the Tenant, Cambridge Education Group [Canada] Inc. and its parent company...” This provision was made a condition of the closing of the transaction by a subsequent amendment to the agreement of purchase and sale.
[16] Before moving on in the narrative of facts, it is convenient to address the matter of the guarantors to the lease back. As appears, it was envisioned that the lease back would be secured by some personal guarantees. Based on the review of the documents registered on the title of the 501 Alliance Avenue property, a corporate search, and an annual report of Empire Global that was filed with the U.S. Securities and Exchange Commission dated April 15, 2006, Mr. Jobb believed – and I underscore the idea of believed – that guarantees should be forthcoming from Hoi Ming Chung and Florence Tsun as the principals of Empire Global.
[17] The truth of the matter, however, is that only Hoi Ming Chan is the principal of Empire Global Acquisition Corp. and Cambridge Education Group Inc. Mr. Chan did sign the guarantee required under the agreement of purchase and sale. It follows that it cannot be disputed that the guarantee issue does not provide a justification for refusing to close the transaction.
[18] Moving on, other provisions of Schedule A that ultimately will be relevant to the trial of the main action, counterclaim, and third party claim are paragraphs 3 (a), 3 (h), and 7 (h), set out below:
- The Seller represents covenants and warrants to the Buyer which representations or warranties are relied upon by the Buyer and without which representations or warranties the Buyer would not have executed the Agreement, as follows:
(a) The Rent Rolls provided to the Purchaser are true, accurate and up-to-date
(h) The Seller will not enter into any new leases or alter tenancy arrangements without the Buyer’s written consent by the Buyer, if applicable
- The seller agrees to deliver the following to the buyer on or before closing: …
(h) All other documents which are required and which the Purchaser has reasonably requested and the Seller’s Solicitor agrees, acting reasonably on or before closing to give effect to this transaction: without limiting the forgoing, Estoppel Certificates from all tenants, statutory declaration confirming the accuracy on closing of the representations, warranties and covenants in Schedule “A”, paragraph 3.0.
[19] Paragraphs 3 (a), 3 (h), and 7 (h) of Schedule A of the agreement are the crucial terms upon which this action, the counterclaim, and the third party claim will turn. 2271379 Ontario Inc. submits that these provisions of the agreement were breached or not-satisfied and the breaches provide a justification for not closing the transaction. Empire Global differs and submits that it was 2271379 Ontario Inc. that deceitfully breached the agreement. In the competing positions of the parties, there are genuine issues requiring a trial.
[20] Returning to the narrative, on January 13, 2011, the conditions precedent in the agreement were waived by the purchaser.
[21] Following the waiver, in accordance with paragraph 8 of Schedule A, set out above, all rights, title and interest in the agreement were assigned and transferred to 2271379 Ontario Inc. by written agreement dated January 19, 2011.
[22] Again, before moving on in the narrative of facts, I note that the documents for the closing of this transaction were prepared with 2271379 Ontario Inc.
[23] Based on my review of the evidentiary record, I conclude, therefore, and hold that in accordance with paragraph 8 of Schedule A, set out above, Mr. Jobb is relieved of all liabilities and obligations under the agreement with the intent and purpose that the agreement shall be construed and read as though it had been executed in the first instance by 2271379 Ontario Inc.
[24] On February 18, 2011, Mr. Jay Rosenblatt attended the office of Mr. Lean at approximately 3:00 p.m. There was a tender. The transaction did not close.
[25] Subsequently, the parties had their lawyers write the prototypical lawyer’s letters making allegations of breach of contract followed by this action, counterclaim, and third party proceeding.
[26] As I have already indicated above, it would not be appropriate for me to say any more about the facts or the law to be applied in this case.
[27] I simply conclude that I should grant a partial summary judgment dismissing without costs the action against Mr. Jobb and I direct that there is no issue about the propriety of the guarantees provided.
[28] In other respects, the motion for summary judgment is dismissed with costs in the cause.
[29] Order accordingly.
Perell, J.
Released: October 10, 2013
COURT FILE NO.: 11-CV-422478
DATE: October 10, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
EMPIRE GLOBAL ACQUISITIONS GROUP
Plaintiff
‑ and ‑
MIKE JOBB, 2271379 ONTARIO INC. and METROPOLITAN COMMERCIAL REALTY INC.
Defendants
– and –
JAY ROSENBLATT, SIMPSON WIGGLE LAW LLP, and BARRY ROSENBLATT
Third Parties
REASONS FOR DECISION
Perell, J.
Released: October 10, 2013.