SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-452871
MOTION HEARD: JANUARY 16, 2014

RE: Gazarek Realty Holdings Ltd. v. St. Mary and St. John the Beloved Coptic Orthodox Church

BEFORE: MASTER R.A. MUIR

COUNSEL:
Jean-Marc Leclerc for the plaintiff
Christine Boulos for the defendant

REASONS FOR DECISION

[1] The plaintiff brings this motion pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”). The plaintiff seeks summary judgment for all amounts it is claiming in this action. The defendant is opposed to the relief sought by the plaintiff.

BACKGROUND

[2] This claim arises from an agreement for the purchase and sale of land entered into between the plaintiff as vendor and the defendant as purchaser dated September 24, 2010 (the “APS”). The APS was completed on July 12, 2011.

[3] Pursuant to the terms of the APS and an undertaking given to the plaintiff by the defendant, the defendant was responsible for payment of any applicable HST associated with the transaction. There is no dispute about this.

[4] The defendant did not initially pay the applicable HST. On November 25, 2011, the Canada Revenue Agency (“CRA”) issued a Statement of Audit Adjustment (the “Reassessment”) directed to the plaintiff. The Reassessment resulted in a HST liability to the plaintiff of $617,500.00.

[5] The plaintiff immediately contacted the defendant and requested that the defendant take care of this issue as required by the APS and the undertaking given on closing. The plaintiff repeated its demand that the defendant pay the amount of the Reassessment on several occasions. On February 3, 2012, the defendant did agree to pay the $617,500.00 but also advised the plaintiff that it needed an invoice from the plaintiff for the amount of the HST in order to make payment to CRA and to obtain a partial rebate. This requirement was based on information obtained by the plaintiff from a CRA tax auditor. The CRA tax auditor also requested that the invoice be dated December 31, 2011.

[6] A dispute then arose between the plaintiff and the defendant regarding the appropriate date for the requested invoice. The plaintiff wanted it dated as of the date of closing. The defendant needed it to be dated December 31, 2011 in accordance with the information received from CRA.

[7] The plaintiff refused to provide such an invoice despite several requests from the defendant. The plaintiff has still not provided such an invoice.

[8] On April 23, 2012, the plaintiff obtained a line of credit from the Bank of Nova Scotia (“BNS”) in order to pay the amount of the Reassessment. The amount owing was paid by the plaintiff on April 27, 2012 which included an amount for interest and penalties ($17, 268.30). On June 22, 2012, after this action was commenced, the defendant remitted $617,500.00 to CRA in payment of the HST liability.

[9] The plaintiff is now claiming payment from the defendant for interest, penalties, legal fees and financing costs paid to BNS. The current total, including the full indemnity legal costs of this action, is $70,711.72.

[10] Rule 20.04 provides that the court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. The Court of Appeal has set out the test to be applied in its decision in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764. Paragraph 50 of Combined Air sets out the question the court must ask itself as follows:

[C]an the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?

[11] In my view, the evidence on this motion leads me to the conclusion that the plaintiff is entitled to partial summary judgment for the amounts claimed in respect of interest and penalties paid to CRA. There is no question that the defendant was obligated to pay the HST and that it did not do so in a timely manner. The Reassessment would not have been generated if the defendant had attended to its obligations under the APS and its undertaking in a timely manner. The interest and penalties are amounts that have been levied by CRA and have been paid by the plaintiff. It is true that those amounts are currently the subject matter of a pending waiver application submitted to CRA by the plaintiff. However, that application has not yet been processed by CRA. Moreover, the plaintiff has agreed to assign to the defendant any rights it may have in connection with the waiver application. In my view, there is no genuine issue requiring a trial in respect of the interest and penalties levied by CRA. They arise as a direct result of the failure of the defendant to make timely payment of its obligations to CRA. They are certainly not the result of any failing on the part of the plaintiff.

[12] However, I am not prepared to grant summary judgment in connection with the balance of the amounts claimed. It would appear that almost all of those claims relate to costs incurred after the defendant agreed to pay the HST to CRA. It appears that the defendant did not make the payment due to the fact that the plaintiff refused to provide an invoice dated December 31, 2011. Had the plaintiff done so in February 2012, those costs may have been avoided. The issue I cannot decide on this motion for summary judgment is whether it was reasonable in all of the circumstances for the plaintiff to refuse to provide the requested invoice. CRA asked that the invoice be dated December 31, 2011. The plaintiff’s tax lawyers advised that it should be dated as of the date of closing. The evidence and submissions before me on this motion do not allow me to come to any conclusion in respect of this issue. As counsel for the plaintiff stated during the course of his argument, there is undoubtedly a dispute on the record as to the invoice request. In my view, a trial is required in order to determine whether the plaintiff acted reasonably in refusing to provide the requested invoice and thereafter incurring more than $50,000.00 in expenses.

[13] I am therefore granting summary judgment to the plaintiff in the amount of $17,268.30. Prejudgment and postjudgment interest shall be payable on this amount in accordance with the provisions of sections 128 and 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as requested by the plaintiff at paragraph 1(e) of the statement of claim. The balance of the relief sought on this motion is dismissed.

[14] If the parties are unable to agree on the issue of the costs of this motion, they shall provide the court with brief submissions in writing by no later than January 31, 2014.

Master R.A. Muir

DATE: January 17, 2014