SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 09-238 (Owen Sound)
DATE: 2013-10-25
RE: Talisman Resort GP Inc. v. Wolfgang Kyser, Gary Usling, Bruno Arnold, Marcus Arnold, Timothy J.W. Hodges, Euromart Realty Group Inc., Ambiance Capital Corp. and KHB International Corp.
BEFORE: Fragomeni J.
COUNSEL:
Julia E. Schatz, for the Plaintiff
Tanya A. Pagliaroli, for the Defendant Kyser
P. James Zibarra and Karen Sanchez, for the Defendant Usling
Maureen L. Whelton, for the Defendants Arnold and Euromart
HEARD: May 30, 2013, in Owen Sound, Ontario
June 4, 2013 – Milton, Ontario
ENDORSEMENT
[1] The defendants bring two motions:
dismissing or striking the summary judgment motion brought by the plaintiff; and
security for costs.
Plaintiff’s Summary Judgment Motion Initially Returnable February 24, 2011
[2] The initial motion for summary judgment brought by Talisman against the defendants requested the following relief:
(a) specific performance of the Agreement in their personal capacities on a joint and several basis;
(b) in the alternative, general damages in the amount of $6,662,379.00 for breach of contract;
(c) in the further alternative, judgment for the unpaid deposit of $750,000.00; and
(d) in addition and in the further alternative, damages for fraudulent misrepresentation in the amount of $811,379.00.
[3] The plaintiff sets out the following grounds in support of its position as set out in its Notice of Motion for Summary Judgment dated December 15, 2010:
On April 13, 2009, Talisman, as vendor, and Euromart, in trust for Ambiance, entered into a Letter of Intent (“LOI”) with respect of the physical assets of Talisman Resort Village, including the lands, the hotel, the ski resort and the golf course (the “Property”), but not the operations of the resort. The LOI required the parties to negotiate an Agreement of Purchase and Sale in good faith.
On May 1, 2009, Talisman, as vendor, and Ambiance and KHB (in trust for a corporation to be incorporated), as purchasers (collectively, the “Purchasers”), entered into an Agreement of Purchase and Sale for the Property (the “Agreement”).
The Agreement was executed by William Minnis, as president of Talisman, and the Defendant, Usling, as the President of Ambiance and KHB.
The purchase price was Sixteen Million Dollars ($16,000,000) (the “Purchase Price”).
The broker of the transaction, Euromart, was to be paid a commission of six percent (6%) of the Purchase Price, plus GST.
Time was of the essence in the Agreement.
The Individual Defendants represented to Talisman that they and Euromart acted for an unnamed Middle Eastern purchaser (the “Middle Eastern Purchaser”) who was very interested in the Property. Accordingly, KHB was agreeing to purchase that Property on behalf of that unnamed Middle Eastern Purchaser, together with Ambiance. Ambiance was, at all material times, a direct party to the Agreement.
Pursuant to section 5.02 of the Agreement, the Purchasers were required to complete the purchase, unless they delivered a written notice to Talisman that the Purchasers had elected to terminate the Agreement on or prior to the expiration of the due diligence period, being twenty (20) business days from the date of execution of the Agreement, or June 1, 2009 (the “Due Diligence Period”).
On May 4, 2009, authorized representatives and employees of the Purchasers attended at the Property, and reviewed the due diligence documents. Bruno Arnold, Kyser and Marcus Arnold each indicated to Minnis that they were impressed with the Property and that the sale would close.
The representatives of the Purchasers then failed to return to the Property to complete their due diligence review, despite making arrangements to do so.
Instead, during the week of May 18, 2009, Euromart informed Talisman that the Middle Eastern Purchaser had pulled out of the deal but that they had found a replacement purchaser, Kerry Lum (“Lum”), who was willing to purchase the Property on an “as is, where is” basis.
Talisman did not waive its rights under the Agreement, but did allow Lum to inspect the Property.
The Purchasers failed to pay the first or second deposit, contrary to subsections 2.03(a) and (b) of the Agreement.
In each case, upon learning of the Purchasers’ failure to pay the deposits by the specified time, Talisman advised the Defendants that it was not treating the Agreement as having been terminated, instead relying upon the representations of the Individual Defendants that there was a bona fide Purchaser and that the transaction would be completed and that the Purchase Price would be paid on closing.
Notwithstanding the Defendants’ failure to pay the deposits and the suggestion that the Middle Eastern Purchaser had pulled out of the deal, Talisman did not receive a notice of termination from the Purchasers on or before June 1, 2009, the expiry of the Due Diligence Period.
On June 2, 2009, while attending at the Property, Lum told Talisman that he had never contemplated accepting the Agreement “as is”.
On June 3, 2009, two (2) days after the expiry of the Due Diligence Period, Talisman advised the Defendants that the Due Diligence Period had expired without any notice of termination having been delivered by the Purchasers. Accordingly, the transaction was unconditional and was to close on June 19, 2009.
In its June 3, 2009 letter, Talisman advised the Defendants that it was ready, willing and able to complete the transaction on the closing date. All of the documentation necessary to close had been drafted and was ready for signature. Arrangements for discharges of the mortgages and construction liens on title from the proceeds of the sale had been agreed to with the mortgage holders/lien claimants, but could not be implemented without the closing monies.
In a letter dated June 12, 2009, and received by Talisman’s solicitors on June 16, 2009, the Purchasers unequivocally indicated that the Purchasers would not complete the transaction and repudiated the Agreement. In the letter, Kyser told Talisman that the transaction was over because the Purchasers had not paid the deposits.
In its reply, dated June 18, 2009, Talisman informed the Defendants that it was ready, willing and able to close and that it expected the Purchasers to do the same.
Section 2.03 of the Agreement does not permit the Purchasers to unilaterally terminate the Agreement by failing or refusing to adhere to the payment schedule.
The Purchasers failed to complete the purchase on June 19, 2009, in breach of the Agreement.
Ambiance has not defended this action and has been noted in default.
Unknown to Talisman, but known to the Defendants, the Certificate of Incorporation of KHB had been cancelled by the Corporations Branch on November 17, 2008. Accordingly, KHB did not exist at the time that the Agreement was executed by the parties, contrary to its representations in section 9.01 of the Agreement. Accordingly, the Defendants falsely misrepresented the existence of KHB.
Moreover, the defendants falsely misrepresented the relationship between Euromart, Ambiance and KHB, as these corporate defendants were interconnected and not at arm’s length.
While Usling signed the Agreement and identified himself as the president of KHB, Usling had not been an officer of the company when it existed.
Euromart also falsely held itself out as an independent real estate broker, contrary to section 4 of the Real Estate and Business Brokers Act, 2002.
Accordingly, as a result of the individual’s false representations as to the existence of KHB, the existence of the Middle Eastern Purchaser, the status of Euromart, and the fact that the individuals executed documents for corporations that did not exist, the individual defendants stand in place of KHB and are joint and severally liable.
Ambiance and KHB were, at all material times, puppets of their controlling directors/shareholders and the directors/shareholders used the companies as shams and/or cloaks to obtain the Property without liability if they failed to raise the funds for the purchase and to disguise the fact that there was not a Middle Eastern Purchaser.
The individual defendants are personally liable as their personal conduct was, in and of itself, tortuous (misrepresentation).
Since the Purchasers’ breach of the Agreement on June 19, 2009, Talisman has extensively marketed the Property both in Canada and abroad. However, in a falling market, Talisman has been unable to re-sell this unique property. The value of the Property has diminished in the range of Six Million and Forty Thousand Dollars ($6,040,000).
The Defendants’ failure to close the transaction on June 19, 2009, and their misrepresentations are evident on the face of the documentary record, do not raise genuine issues for trial or dispute and, as such, constitute grounds for summary judgment.
[...continues verbatim through paragraphs 4–76 exactly as in the source...]
Fragomeni J.
DATE: October 25, 2013