Pine Hill Estates, 2015 ONSC 1702

BARRIE COURT FILE NO.: 04-B7344

DATE: 20150316

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

VESPRA COUNTRY ESTATES LIMITED

Plaintiff

– and –

1522491 ONTARIO INC., operating as PINE HILL ESTATES, BRAVAKIS AND ASSOCIATES LTD., PETER BRAVAKIS, deceased, by his Estate Trustees, Michael Hassey, John Bravakis and George Bravakis, and 981772 ONTARIO INC. operating as HASSEY REALTY CORP. and MICHAEL HASSEY

Defendants

AND BETWEEN:

1522491 ONTARIO INC. operating as PINE HILL ESTATES, and 981772 ONTARIO INC. operating as HASSEY REALTY CORP.

Plaintiffs by Counterclaim

-and-

VESPRA COUNTRY ESTATES LIMITED, STEVE SMITH and JAMES SABISTON, JASCO HOLDINGS LIMITED, JOHN DOE AND JOHN DOE LIMITED

Defendants by Counterclaim

R.P. Quance, for the Plaintiff/Defendants by Counterclaim Vespra Country Estates Limited, James Sabiston, and Jasco Holdings Limited

P.J. Daffern, for the Defendants/Plaintiffs by Counterclaim 1522491 Ontario Inc. operating as Pine Hill Estates, Bravakis and Associates Ltd., Peter Bravakis, deceased, by his Estate Trustees, Michael Hassey, John Bravakis and George Bravakis, and 981772 Ontario Inc. operating as Hassey Realty Corp. and Michael Hassey

P.J. Daffern, for the Defendants/Plaintiffs by Counterclaim 1522491 Ontario Inc. operating as Pine Hill Estates, Bravakis and Associates Ltd., Peter Bravakis, deceased by his Estate Trustees, Michael Hassey, John Bravakis and George Bravakis, and 981772 Ontario Inc. operating as Hassey Realty Corp and Michael Hassey

R.P. Quance, for the Plaintiff/Defendants by Counterclaim Vespra Country Estates Limited, James Sabiston, and Jasco Holdings Limited

Steve Smith, Defendant by Counterclaim, Self-Represented

HEARD: November 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, 29, May 20, 21, 22, 27, 28, 29, 30, June 2, 3, 4, 5, 6, and 9, 2014 and by Written Submissions

REASONS FOR DECISION

TABLE OF CONTENTS

Introduction .................................................................................................................................... 4

Background About Vespra’s Holdings .......................................................................................... 5

The Case in a Nutshell .................................................................................................................... 6

The Plaintiff’s Claim ....................................................................................................................... 6

Plaintiffs by Counterclaim .............................................................................................................. 7

The Evidence Reviewed ................................................................................................................. 7

The Consent to Severance ............................................................................................................ 12

The Closing of the Transaction ..................................................................................................... 12

Sale of the 27-Lots by Pine Hill Estates ....................................................................................... 13

Certificate of Pending Litigation .................................................................................................. 13

The Vendor Take-Back Mortgage ................................................................................................ 15

Sale of Lots ................................................................................................................................... 16

Ardel Johnston’s Letter to the County of Simcoe ........................................................................ 17

Did the Letter by Itself Cause the Delay, Enabling Pine Hill to sell the 27 Lots? ....................... 19

Michael Hassey as Buyer .............................................................................................................. 21

The December 16, 2002 Meeting .................................................................................................. 22

Fiduciary Duty of an Agent ......................................................................................................... 24

Subsequent Commissions ............................................................................................................. 25

The Limitations Act ....................................................................................................................... 26

Duty to Act in Good Faith ........................................................................................................... 26

Plaintiff’s Damages ...................................................................................................................... 27

Real Estate Commissions .............................................................................................................. 28

Money Paid into Court by Pine Hill ............................................................................................. 28

Interest on Funds in Court ............................................................................................................ 29

Punitive Damages Claimed by Vespra ......................................................................................... 29

Costs Claimed by Vespra ............................................................................................................. 30

Damages Claimed by Pine Hill, the Plaintiffs by Counterclaim ................................................... 30

The Evidence of John Bravakis .................................................................................................... 31

(i) Mortgage Costs ............................................................................................................ 33

(ii) Legal Costs re Georgian Mortgage .............................................................................. 33

(iii) Delayed Closing Costs of $46,844.62 ......................................................................... 33

Fox Farm Road Extra Costs ......................................................................................................... 34

David White’s Fee ........................................................................................................................ 34

Additional Charges re County Road 22 ....................................................................................... 34

Reduction in the Purchase Price ................................................................................................... 35

Punitive Damages Sought by Pine Hill ......................................................................................... 35

Judgment for the Plaintiff ............................................................................................................ 36

Judgment for the Defendants, Plaintiffs by Counterclaim ........................................................... 36

Costs ............................................................................................................................................. 37

Appendix A .................................................................................................................................. 38

MULLIGAN J.:

Introduction

[1] What started out as a straightforward sale of vacant development land between two sophisticated parties aided by lawyers and other advisors, has turned into protracted, extended and costly litigation. The plaintiff vendor made claims against the buyer and added its own real estate agent and broker to the claim. The buyer and the real estate agent, and broker defended the action. In addition, the defendant buyer brought a counterclaim including costs it incurred in connection with a vendor take-back mortgage it sought to discharge, and for costs incurred after closing in order to bring a draft plan of subdivision into fruition. Both the plaintiff and the defendants by counterclaim sought punitive damages against each other.

[2] The plaintiff in this action is Vespra Country Estates Limited (Vespra). At the time the transaction was entered into, it had two shareholders, James Sabiston and Steve Smith. By the time this matter came to trial, the sole shareholder and director of the plaintiff, Vespra, was Steve Smith. Mr. Smith was sued personally by the defendants in their counterclaim. In an interesting twist, Mr. Smith defended the counterclaim against himself on his own, while counsel for his corporation, Vespra, prosecuted the claim and defended the counterclaim against Vespra, as well as the other shareholder, James Sabiston and Mr. Sabiston’s company, Jasco Holdings Limited.

[3] The defendants in this action are the purchaser 1522491 Ontario Inc., operating as Pine Hill Estates (Pine Hill), Bravakis and Associates Ltd., the Estate of Peter Bravakis, Hassey Realty Corp., and Michael Hassey. Hassey Realty Corp. was the dual agent for vendor and purchaser. Michael Hassey was both the agent and shareholder/director of the purchaser Pine Hill.

[4] The original claims by the parties were in the millions. However, by the time the trial was completed, the claims were significantly reduced. Nevertheless, this matter took 24 days of trial. Twelve witnesses were called and over 200 exhibits were filed. Although there was an Agreed Statement of Facts with respect to a few issues, most issues were hotly contested. There was no joint book of exhibits filed, nor a book of individual exhibits by either side. Instead, 249 exhibits were introduced one at a time. Some exhibits were straightforward and uncontroversial; others were the subject matter of examination-in-chief or cross-examination of several witnesses.

[5] Counsel did not follow the suggested practice of the Advocates Society in its Principles of Professionalism for Advocates, which provides at para. 44:

Advocates should cooperate with other counsel in a timely preparation of a trial brief of documents to facilitate the management of documentary evidence at trial by the court, witnesses and counsel.

[6] Before the trial commenced, this matter spawned several motions and orders. The following is a brief review. After the closing, Vespra, who held a vendor take-back mortgage (VTB), was granted an ex parte order for a Certificate of Pending Litigation (CPL). Upon return of the motion and with further affidavits before the court, Keenan J. struck the CPL with costs against Vespra.

[7] The plaintiff, Vespra, was requested to provide partial discharges of mortgages and refused to do so. The defendants brought a motion to obtain such a discharge. By order of Salmers J., the mortgage was discharged upon a partial payment to Vespra, and a payment of monies, including costs, into court to the credit of this action.

[8] The matter was case managed by Justice Boswell, and interlocutory orders were made by him prior to trial with respect to limitations on examinations for discovery, and a payment into court of security for costs by Vespra.

Background About Vespra’s Holdings

[9] By way of background, Mr. Smith acquired a parcel of land in Springwater Township (formerly part of Vespra Township). To acquire title, he incorporated a company called Vespra Country Estates Limited. Mr. Sabiston, through his company, owned a large parcel of adjacent land. They decided to join their lands together. Mr. Smith had visions of a grand development plan. They became equal shareholders. The subject lands are set out in Schedule “A” attached hereto. Simcoe County Road 22 (also known as Horseshoe Valley Road) defines the north limit of the property.

[10] Years earlier, Mr. Smith pursued and obtained an official plan amendment (OPA) for an 800-unit adult lifestyle community (ALC). Mr. Smith felt that this was a unique and valuable property. The ALC project, if approved and proceeded with, would have been a massive development within the Township, requiring a vast investment with respect to internal services and improvements to surrounding roads. Substantial upgrades would have been required for County Road 22 (Horseshoe Valley Road), as well as Township roads servicing the property, including Fox Farm Road. Surplus to the needs of the proposed ALC lands was a parcel of land which ultimately became the subject of a 27-lot draft plan of subdivision. It is bounded by Horseshoe Valley to the north, Fox Farm Road to the east and Matheson Creek to the south. Mr. Smith, himself, pursued, attended meetings and instructed planners with respect to both of these proposals over a period of years. Although the proposed 27-lot subdivision was approved, there had never been an official severance applied for from the Township.

[11] It appears that Mr. Sabiston did not consult with his co-director and shareholder, Mr. Smith, when he placed this parcel with an agent and then entered into an Agreement of Purchase and Sale without consideration of the necessary severance.

[12] Although not relevant to these proceedings, it is important to say a few words about the disposition of the ALC lands. After the 27-lot draft plan was sold to the defendants, Vespra sold its remaining lands (the ALC lands) to a developer for $4 million. Mr. Smith continued to be involved for a time with the purchaser of the ALC lands. However, that involvement was terminated and litigation followed. On the closing of that transaction or sometime thereafter, the funds from that sale went from Vespra to Mr. Sabiston’s company, Jasco Holdings Limited. Therefore, at the time of trial, Vespra had no remaining property and no remaining assets other than monies it claimed was owing to it in this litigation.

The Case in a Nutshell

[13] I will provide a more detailed review of the evidence in reasons that follow, but a brief description of the case in a nutshell will provide context for the reasons that follow.

[14] Vespra obtained draft plan approval for the 27-lot subdivision from the Ministry of Municipal Affairs in January of 1995. That approval was subject to numerous conditions, including meeting the requirements of the Township of Springwater, as well as certain approvals from the County of Simcoe Engineer and other authorities having jurisdiction. No severance of this parcel was obtained. It remained as a component of the Vespra Lands.

[15] Mr. Sabiston, an experienced and sophisticated developer with many properties remaining in his inventory, decided to sell the 27-acre parcel of land which had been granted draft plan approval. Although he had a co-director and shareholder, Mr. Smith, he apparently did not consult with him. He received an offer to purchase from Bravakis and Associates in Trust. He reviewed the offer with his solicitor, signed it back for a higher figure, and an Agreement was entered into with conditions. His agent and broker was Hassey Realty Corp. Its owner was Michael Hassey.

[16] The Agreement was extended and varied by way of four amendments to the Agreement of Purchase and Sale, and ultimately closed. Three significant developments occurred before closing. First, Mr. Smith became aware of the Agreement of Purchase and Sale, and became heavily involved with respect to all remaining aspects prior to closing. Second, the agent, Mr. Hassey, transitioned from being a dual agent to becoming a part-owner of the purchaser company prior to closing. Third, after the Agreement was entered into and before closing, it became evident that this 27-acre parcel needed a severance approval from the Municipality before the transaction could be completed. The severance application opened up the opportunity for the Township to attach conditions to the terms of severance and for input by the County. There were costs associated with these terms, but the parties negotiated this issue by way of an adjustment in one of the amendments.

[17] Although the property was severed and the transaction completed, there remained issues after closing to convert this draft plan to a registered plan of subdivision to enable the purchaser to sell 27 individual residential lots. Having completed its due diligence during the conditional period prior to the closing, the purchaser assumed this risk on closing. Negotiations with the County of Simcoe after closing raised further conditions, raising costs for the buyer, including further studies. There followed unsuccessful negotiations with the County, an OMB appeal, a settlement, and eventually, construction and related costs to meet the County’s requirements before individual lots could be sold.

The Plaintiff’s Claim

[18] A summary of the claim and counterclaim as described in written submissions after trial can be briefly described as follows.

[19] The plaintiff now seeks to recover from the funds paid into court to the credit of this action, $182,806.80 plus interest. It also seeks a return of commissions earned by Hassey & Hassey Realty in the amount of $122,541.50, based on commissions earned from this transaction and the subsequent sales of the 27 lots. The basis for the claim is a breach of fiduciary duty and breach of contract. The plaintiff also seeks punitive damages against Hassey in the amount of $250,000.

Plaintiffs by Counterclaim

[20] The plaintiffs by counterclaim seek an award of general damages of $500,000 against the defendants by counterclaim. This amount is made up of various costs and losses, related to the vendor take-back mortgage, costs relating to refinancing, additional legal and consulting fees, and additional road costs required to meet the requirements of the County. The plaintiff by counterclaim also seeks punitive damages of $100,000 against each of the individual defendants by counterclaim.

The Evidence Reviewed

[21] With that background providing context, I will now review those portions of the evidence required to “cut the Gordian knot” presented by the parties in this 24-day trial. In my view, the role of the court is not to reconcile every difference in evidence presented at trial, but to achieve a fair and just result in a case involving sophisticated land developers.

[22] Having reviewed the issues in a nutshell, I now begin with a more detailed review of the uncontroverted evidence as it emerged throughout the trial. I will deal separately with evidence that is in dispute, and my conclusions later in these reasons. The uncontroverted evidence came through exhibits filed, an Agreed Statement of Facts, and the evidence from various witnesses, including the parties, planners, solicitors, and real estate agents.

[23] Mr. Sabiston, one of the shareholders of Vespra, decided to list the 27-lot draft subdivision and several other properties with an agent he knew, Derek Battaglia, in an effort to wind down his land development holdings. At the time of trial, Mr. Sabiston was 90 years of age. Mr. Battaglia was transitioning from the real estate business to focus on his mortgage business, and so he referred this matter to Michael Hassey, who was an agent and broker. He and company Hassey Realty Corp., are defendants in this action.

[24] The property in question was a parcel of land which had been approved in 1995 for a draft plan of subdivision of 27 residential lots. It was Mr. Battaglia’s evidence that Mr. Sabiston wanted $20,000 per lot, or $500,000.

[25] Mr. Hassey brought an offer to Mr. Sabiston for a proposed purchaser, Bravakis and Associates Ltd. in Trust. Peter Bravakis was a well-established developer in the area and known to Mr. Hassey. The offer as submitted was for $500,000. Mr. Sabiston directed this offer to his solicitor, Ardel Johnston. After consulting with his solicitor, the offer was signed back at $567,000 in April of 2002. The Agreement was scheduled to close in September of 2002. As part of the Agreement, the purchaser placed a $10,000 deposit and agreed to pay a further $240,000 on closing, with the balance of the purchase price secured by a first vendor take-back mortgage (VTB). The VTB was to be for a term of five years, interest-free for six months, with the interest at 7% thereafter. The mortgage contained a partial discharge provision indicating that if the mortgage was not in default, the purchaser could get a partial discharge of the mortgage with respect to each individual lot, on payment of $12,500 per lot. The mortgage required Vespra to consent and cooperate with the purchaser with respect to the plan of subdivision rezoning and related matters, and to sign all necessary documents in connection therewith. The Agreement contained a provision enabling the purchaser to assign the Agreement. In addition, the Agreement was conditional for a period of time to enable the purchaser to do its due diligence with respect to the state of the draft plan of subdivision and related matters. The due diligence period gave the purchaser an opportunity to satisfy itself regarding the draft plan of subdivision conditions and the economic viability of the proposed development.

[26] The Agreement, as signed back by Vespra, was accepted by Bravakis. It is not disputed that Mr. Smith was not aware at the time that Mr. Sabiston had listed the property for sale, or accepted this Agreement of Purchase and Sale.

[27] The Agreement was then subject to four amendments. The first amendment, dated June 28, 2002, extended the due diligence conditions for a further period of time.

[28] The second amendment was dated June 25, 2002. By that time, based on the purchaser’s due diligence, it became evident that the property required a severance from the Township. The 27-lot subdivision was a small part of Vespra’s entire holdings in this block of land. The amendment required the vendor, Vespra, to obtain the severance at its own expense. Significantly, the amendment noted:

Except that it is agreed and understood that all expenses which are required to effect the severance, which would have been required to effect the draft plan approval (eg. conditions to approval), shall remain the sole expense of the purchaser.

[29] The closing date was extended to April 15, 2003, or ninety days after the severance.

[30] The third amendment was officially dated January 9, 2003, but was a result of a meeting of the parties that took place on December 16, 2002, where all issues of concern were discussed. Mr. Smith attended the meeting and made it very clear that he had an interest in Vespra. Thereafter, almost all of the interactions were between Mr. Smith for Vespra, and the other parties. Mr. Sabiston was not further involved, other than to sign the actual closing documents with Mr. Smith in their lawyer’s office just prior to closing. Mr. Hassey states that at the meeting, it was made clear that he would be taking a position with respect to the purchaser company, not just as an agent, but as an owner. There is some support for this suggestion, but there is some evidence to the contrary as to whether it was made clear that he was transitioning to become a buyer through his corporation. I will review this issue in more detail later in these reasons. Whether or not it was announced at the meeting, it is clear that Mr. Hassey did not give any written notice to his client, Vespra, pursuant to the requirements under the Real Estate and Business Brokers Act, S.O. 2002, c.30.

[31] The primary reason for the meeting was to discuss required road improvements to County Road 22 (Horseshoe Valley Road) by the County of Simcoe. Because the severance had not been completed and the draft plan had not been finalized, the County had an opportunity to request improvements to Horseshoe Valley Road prior to their approval.

[32] Pine Hill’s engineer, Brian Stanton, P.Eng., attended this meeting. Mr. Stanton is an engineer working for C.C. Tatham and Associates. The firm was hired by the defendants to calculate costs and do drawings for the internal servicing of the 27-lot subdivision. He was also tasked with dealing with the Township about Fox Farm Road, and with the County about Horseshoe Valley Road. Mr. Stanton’s firm had previously been engaged by Vespra in connection with the ALC and the official draft plan for the 27-lot subdivision.

[33] One of the concerns that Pine Hill had as purchaser, was what several witnesses described as the creeping scope (scope creep) of the work required by the Township and the County. The Township had a say in the work to be done because of the terms of severance and had the ability to comment on the draft plan of subdivision prior to its approval. The County had a similar opportunity to weigh in as to its own requirements. As Mr. Stanton said in his evidence:

Ultimately they [the Township and the County] in this particular case, they have a common opportunity for re-zoning and they have a common opportunity to clear draft plan conditions and have this plan of subdivision registered. So, they really, in essence, can control, or have input into design right up until the subdivision agreement is registered and you’ve cleared your draft plan conditions.

[34] Initially, the County wanted certain work done on Horseshoe Valley Road, and Mr. Stanton roughly valued this construction cost at about $180,000. Mr. Stanton was one of the attendees at the meeting that occurred on December 16, 2002, which ultimately led to an agreement between the parties and formalized as Amendment No. 3 to the Agreement of Purchase and Sale. He recalled that at the meeting, the parties reached an agreement that Vespra would provide a $100,000 contribution to the road costs being imposed upon Pine Hill by way of a credit against its VTB mortgage.

[35] The parties discussed the proposed costs and reduced their understanding to Amendment No. 3 which provided in part, as follows:

Upon completion of the said work, and upon receipt of evidence of payment, the vendor shall contribute $100,000 toward the cost of the road work, which $100,000 contribution shall be paid by a $100,000 reduction in the vendor take-back mortgage registered against the purchaser’s land.

[36] Within the amending agreement, the buyer agreed to complete the road improvements required by the County within 150 days of closing.

[37] Amendment No. 4 simply extended the ultimate closing date by one month to allow the parties to finalize the necessary survey work and approval of the Township to give effect to the severance. Prior to closing, Vespra obtained a severance for the 27-lot parcel from the Township of Springwater, with conditions in accordance with its agreement to do so.

[38] The transaction closed on May 15, 2003. Ardel Johnston acted for the vendor, Vespra, and John Alousis acted as solicitor for the ultimate purchaser, 1522491 Ontario Inc., operating as Pine Hill Estates (Pine Hill). Prior to closing, the purchaser on the Agreement of Purchase and Sale (APS) assigned its interest to Pine Hill. The original Agreement of Purchase and Sale contained a right of assignment.

[39] On the closing date as part of deliverable documents, Mr. Alousis delivered a Title Direction and related documents to Ms. Johnston, indicating that Mr. Hassey was a director of Pine Hill, the purchaser company. Ms. Johnston did not do a corporate search on the purchaser company, however, she did do a corporate search subsequently, which indicated that as of June 16, 2002, Mr. Hassey was a director of Pine Hill. It is not disputed that the public record indicates directors, but does not indicate who shareholders are of private companies.

[40] Amendment No. 3 to the Agreement of Purchase and Sale had attached as a schedule, a letter dated January 8, 2003, from Pine Hill’s planners to the Simcoe County Roads Department. The letter summarized a meeting between Pine Hill planners and the County Roads Department and stated in part:

Mr. Peter Bravakis, President of 1522491 Ontario Ltd., carrying on business as Pine Hill Estates, indicated at our meeting of his commitment to undertake the construction works entailing the elimination of the vertical curve on County Road 22, the installation of a turning lane for eastbound traffic on County Road 22 at Fox Farm Road, with a three-car stacking capability, and the installation of ductwork at the intersection of Fox Farm Road and County Road 22 to facilitate the installation of a signalized intersection in future when required. We understand that while these works are required, that with the installation of the works as stated, that the requirement for traffic study is not a requirement that will be imposed by the County of Simcoe.

[41] After this meeting, the County attempted to increase its requirements for improvements to Horseshoe Valley Road. Mr. Stanton’s goal in working for the buyer after closing was to attempt to have the County reduce or eliminate these additional requirements by demonstrating that these improvements were not warranted for a 27-lot subdivision.

[42] The scope creep involving the County and Horseshoe Valley Road became a much bigger problem for Pine Hill after closing. Pine Hill took objection to the increased work required by the County and filed an appeal with the OMB. The appeal was resolved by a settlement, and Mr. Stanton agreed with a question put to him at trial that “The scope of work is essentially back to where it was by the time of the December 16, 2002 meeting.”

[43] After closing, the Township increased the improvement requirements imposed on Pine Hill for Fox Farm Road, which abutted the 27-lot subdivision to the east. Mr. Stanton told the court that Peter Bravakis, a director of Pine Hill, and his planner, Bob Spooner, ultimately attended a meeting at Township Council, a proposal was made, and a resolution passed, settling the costs for Fox Farm Road improvements.

[44] In cross-examination, Mr. Stanton agreed with the question from counsel that, “Before the draft plan approval could move on to a registered plan of subdivision, you would be aware in the normal course that you’d have to deal with Simcoe County and the Township of Springwater.” As he said further:

We work with them in a collaborative manner to understand what their requirements are and our designs are completed to fulfill those requirements, so that ultimately, we can, we can achieve accepted for construction drawings, receive their clearances and proceed to construction.

He then agreed with counsel’s statement that, “Any experienced developer would be aware that that’s the process that is generally undertaken.”

[45] As to whether the required improvements were related to the 27-lot subdivision or Vespra’s remaining lands (the potential ALC), Mr. Stanton said, “The works that were finally agreed to were established to service the 27-lot subdivision.”

[46] Mr. Stanton was questioned about three possibilities a developer could confront in the face of increasing conditions sought to be imposed by the County. One is that they would be required to do the work imposed by the County. Two is that through negotiations and engineering studies, they may be required to do less work; and finally three, the County might require even more work. In speaking to the risks that Pine Hill undertook, Mr. Stanton said:

The developer, a developer in developing any property, has a certain risk involved with the approval process. There’s no guarantees on what the municipalities or approval authorities will require. There’s always that risk and they hire consultants to manage that risk and come up with designs that have a solid basis that the county will, or approval authority will accept. So it’s our job to demonstrate that we’re following sound engineering practice, and to manage that risk for them by providing solid design. There is a risk that any of the approval authorities can increase their requirements as a process evolves.

[47] Mr. Stanton agreed with the proposition that, “This is an experienced developer who would understand those risks.” As to the risks that any developer faces, Mr. Stanton said, “I think that’s a normal risk of development, that there is unknowns that come up, have to be dealt with and there, if there’s an effort involved in resolving those issues, that there’s a cost associated with that effort.” He was then asked the question, “And the developer has to decide whether to take on that risk, or not take on that risk, correct?” He answered, “That’s part of the developer’s decision in the project.”

The Consent to Severance

[48] As part of the Agreement of Purchase and Sale amendments, it was agreed that the vendor would obtain a severance of the subject lands. In due course, Ardel Johnston acting as solicitor for Vespra, prepared the necessary application and attended at the Township’s Committee of Adjustment meeting. Mr. Spooner, the planner for Pine Hill, was also in attendance. Mr. Smith was not there. The County made submissions by letter requesting that the severance be deferred because they were pursuing road issues of concern to them with respect to Horseshoe Valley Road. The Committee of Adjustment declined that request and granted the severance together with an easement over property to the west of the subject lands because of a creek on the boundary. The size and extent of the easement was not defined.

[49] When Mr. Smith became aware of this easement condition, he took exception to the potential size and scope of this easement. He felt it would have a negative effect on the ALC for Vespra’s remaining lands. The Official Plan had approved 800 units based on the acreage within the parcel, and Mr. Smith felt that the easement, if too large, had the potential to reduce the total number of units for the ALC and therefore reduce the value of the property. His solicitor, Ms. Johnston was not aware of this issue when she was at the Committee of Adjustment meeting.

[50] The size and scope of the easement had no effect on the purchaser Pine Hill, and they did not oppose a substantial reduction in the size of the easement. Ms. Johnston ultimately obtained the Township’s approval for a much smaller easement as a term of the severance approval.

[51] In addition to the easement requirement, the Committee of Adjustment decision contained numerous standard requirements, including, “That the applicant meet all the requirements, financial or otherwise of the Municipality.”

The Closing of the Transaction

[52] The transaction originally scheduled to close on September 10, 2002, closed on May 15, 2003, in accordance with amendments to the Agreement of Purchase and Sale. By the time of closing, the consent to severance had been obtained; the easement issue had been resolved; and the parties had agreed to a $100,000 reduction in the purchase price, provided that the purchaser completed certain road improvements. These provisions were contained in the VTB mortgage, which also contained a clause requiring the vendor, Vespra, to cooperate with Pine Hill’s rezoning on the lands after closing.

[53] But there were still issues percolating before closing. The purchaser was faced with the scope of work creep being imposed by the Township and the County. Mr. Alousis, counsel for the purchaser, Pine Hill, tried to address this in his letter sent just before closing on May 2, 2003, to Ms. Johnston, counsel for Vespra. He suggested that the additional work required by the County would be approximately $235,000. Consequently, Mr. Alousis attempted to renegotiate the agreement. In his letter, he set out three possible options: (i) a reduction of the purchase price of $50,000, (ii) a reduction of the mortgage by $100,000, or (iii) a cost-sharing agreement to be later enforced by the County and the Township. Ms. Johnston did not respond to this letter and the transaction closed in accordance with the agreement as amended. None of Mr. Alousis’ proposals were accepted. In Ms. Johnston’s view on closing, “One side blinked.” It is therefore clear that the buyer was well aware on closing that it was facing over $400,000 of work to meet the County’s requirements. $200,000 had been agreed to and apportioned in Amendment No. 3, and an additional sum of $235,000 was disclosed by its lawyer, Mr. Alousis, in the unsuccessful negotiation prior to closing.

[54] From the closing proceeds, Ms. Johnston paid the balance of real estate commissions to Vespra’s agent, Hassey Realty Corp., so that the total commission paid was $30,334.50.

[55] Once the transaction closed, Pine Hill was the registered owner of a block of land which had been approved for a draft plan of subdivision. However, before individual residential lots could be sold, Pine Hill was required to complete negotiations with the County and the Township.

Sale of the 27-Lots by Pine Hill Estates

[56] Early on, Pine Hill Estates began efforts to market the sale of these 27-estate lots. Although they were in a position to receive offers, they were unable to close individual lot sales until they received final approval from the Township and the County, enabling it to register a plan of subdivision in final form. As Pine Hill’s engineer, Brian Stanton explained in his evidence, much negotiation took place with the Township and the County to address the issues and the scope creep with respect to the Township and County’s requirements. Ultimately, Pine Hill resolved these issues, but not before waging battles on two fronts.

[57] With respect to the Township, matters were resolved when the principals of Pine Hill made a delegation to Township Council and the necessary improvements to Fox Farm Road were agreed to. Negotiations with the County were far more difficult. The County increased their requirements and refused to budge. Pine Hill then brought an OMB appeal. Further studies were done as to traffic and related issues by its engineers. Ultimately, the OMB appeal was settled without a hearing. In essence, the settlement rolled back the scope creep and it was agreed that Pine Hill do the work to Horseshoe Valley Road as originally contemplated in the agreement known as Amendment No. 3 to the APS between Pine Hill and Vespra. However, the rough estimate of $200,000 discussed at that meeting proved to be much lower than the actual costs incurred by Pine Hill to do the work to the satisfaction of the County. Based on the evidence of Pine Hill at trial, the costs soared above $400,000. All of these negotiations took some time, but by August 30, 2004, the County of Simcoe issued a letter granting permission to construct improvements to Horseshoe Valley Road. The plan of subdivision was registered and Pine Hill was in a position to sell individual lots.

Certificate of Pending Litigation

[58] Unbeknownst to the buyer, Vespra obtained a Certificate of Pending Litigation (CPL) against the Pine Hill lands about one year after closing. The details surrounding the ex parte order and the subsequent discharge of the CPL when the matter returned to court bears scrutiny with respect to Mr. Smith’s involvement in the proceedings.

[59] Darren Vella gave evidence at trial. In 2004, he was a planner with the Township of Springwater, but acknowledged that he was new in that position and inexperienced. On April 19, 2004, he signed an affidavit which was sworn before counsel for Vespra (not Mr. Quance). Mr. Vella was presented with the affidavit, and driven to counsel’s office by Mr. Smith, where it was signed and commissioned. The affidavit incorrectly stated:

Prior to the sale of the 27-lot subdivision by the plaintiff to the defendant, Bravakis and his company (1522491 Ontario Inc.), the Township had entered into a draft plan of approval of the said subdivision, and one condition of same was that it, the plaintiff, be responsible for all of the costs for the necessary improvements to Fox Farm Road, running the full length of the estate-lot subdivision south to just beyond the second entrance into the estate lots.

[60] In fact, there was no specific condition in the draft plan approval as to the nature or extent of improvements on Fox Farm Road to be done by Vespra.

[61] In support of the application to withdraw the CPL, Mr. Vella signed a more detailed affidavit with legal assistance from the solicitor for the Township of Springwater. As he stated in para. 5 of that affidavit:

In paragraph 4 of my original affidavit, I deposed that,

the obligation for the full cost of the road improvement was then transferred from the plaintiff to the defendant, Bravakis and his company with its purchase of said property which closed on May 15, 2003.

In making that statement, I was relying exclusively on a letter provided to me by Mr. Smith from his solicitors to the County of Simcoe, dated May 6, 2003.

[62] The matter returned to court and by order dated July 15, 2004, Keenan J. ordered the CPL be vacated. In his written endorsement, he indicated as to the second affidavit of Mr. Vella:

It is quite different, not only in content, but in fact, from the original affidavit used to obtain the CPL. Rule 39.01 makes it clear that the failure to disclose material facts on an application without notice provides sufficient grounds for setting aside the ex parte order.

[63] Vespra was ordered to pay costs of $10,000 to Pine Hill by Keenan J.

[64] The CPL issue was no doubt troubling for the purchaser, Pine Hill, but they were successful in having it vacated and received an award of costs. The CPL was vacated well before Pine Hill was in a position to close any of the lot sales. It had not, at that point, achieved registration of the plan of the subdivision, nor had it obtained a discharge of the VTB mortgage that was obtained in September of 2004. I am not satisfied that the CPL, for the limited time it was registered, caused Pine Hill any delay the sale of the 27 lots. I will consider the issue of punitive damages as claimed against Mr. Smith for his actions regarding the CPL later in these reasons.

The Vendor Take-Back Mortgage

[65] The vendor take-back mortgage (VTB) had two substantial conditions: one was that Vespra was to cooperate with respect to the rezoning required for the property; and the second was that Pine Hill was required to complete the work on Horseshoe Valley Road within 150 days of closing in order to receive the $100,000 reduction credit reflected in the VTB.

[66] By August of 2004, counsel for Pine Hill began requesting that counsel for Vespra provide partial discharges of certain blocks of land to be conveyed to the Municipality as part of the registration of the plan of subdivision. Draft documents were provided to Vespra’s counsel for that purpose. Mr. Alousis, as counsel for Pine Hill, wrote a further letter on August 25, 2004, indicating that the road work improvements were frustrated and delayed by the County of Simcoe. Mr. Alousis further stated in his letter:

In consideration and for completion of the work, my client was to receive a reduction in the mortgage in the sum of $100,000. My client is not claiming such reduction at this time and is prepared to pay the entire principal amount on a partial discharge basis in accordance with the terms of the mortgage, subject to any claims they may have in the future with respect to compensation for road improvement work.

[67] No signed documents were forthcoming from Vespra. Instead, its litigation counsel, Mr. Leslie replied, pointing that the road work issue in Amendment No. 3 to the Agreement of Purchase and Sale had not been completed. He further stated:

If your client can provide a letter from the County and the Township that Vespra (now referred to as Spring Lakes Development by the Township) is not responsible for infrastructure improvements to County Road No. 22 and Fox Farm Road, my client will execute a partial discharge as requested. Your suggestion that your client now is not to receive a $100,000 reduction when he has completed the road improvements is an attempt to re-negotiate a contract.

[68] Pine Hill then brought the matter to court for a discharge of the VTB. On September 8, 2004, Justice Salmers ordered that Pine Hill pay $500,000 to obtain a discharge of mortgage calculated as follows:

(a) to Vespra - $217,193.20 plus interest;

(b) the remaining balance of the $500,000 to be paid into court.

I pause to note that the mortgage as registered was for $317,193.20, but contained the $100,000 credit provision as one of its terms. Justice Salmers noted that there was still a live issue about whether or not there was default, and he noted that the plaintiff could still pursue enforcement of those obligations. As to the amount of $500,000, he broke it down as further follows in para. 7:

(a) the maximum principal amount owing under the mortgage is $317,193.20;

(b) all interest thereon from August 15, 2004 to May 15, 2008 rounded off to $80,000, for a subtotal rounded off to $400,000; and

(c) an additional amount as security for costs. In this case, I am using the same percentage as is used in construction lien matters, namely, twenty-five percent of $400,000, for an amount of $100,000 to be paid as security for costs. The total of (a), (b), and (c) above is $500,000.

[69] As a result of the Order, counsel for Pine Hill tendered a cheque to counsel for Vespra in the amount of $218,484.66, including the principal noted by Justice Salmers plus interest, and paid into court $281,515.34. As no discharge was provided, counsel for Pine Hill re-attended before Justice Salmers and obtained an order, discharging the Vespra VTB from title. Therefore, as at September 14, 2004, Vespra had all of the money it was entitled to under the VTB mortgage plus interest, save and except for the $100,000 plus interest left as a live issue in the endorsement of Justice Salmers.

[70] Justice Salmers’ Order required $80,000 to be paid into court as part of the $500,000. This was an estimate of future interest on the mortgage from August 15, 2004 to May 15, 2008, as rounded. As noted, Pine Hill paid $217,193.20 for principal plus interest as a result of that Order. In my view, only the $100,000 paid into court continues to earn interest for Vespra, if it is successful. The mortgage indicated that interest ran at seven percent. I pause to note that the money paid into court has attracted interest and administrative costs by the Accountant of the Superior Court of Ontario.

[71] Pine Hill was required to obtain mortgage financing to secure the $500,000 required to comply with the Order. As such, it incurred legal fees, financing costs and interest costs. Those costs can be listed as follows:

Mortgage refinancing costs for the $500,000 mortgage: $33,612.31

Legal costs for Mr. Alousis with respect to same: $11,860.43

Sale of Lots

[72] Once the VTB was discharged by the Order of Justice Salmers in September of 2004, Pine Hill proceeded to sell the lots. By 2005, all the lots had been sold for Pine Hill. As agent, Hassey Realty Corp. earned commissions on these sales of $20,447. Michael Hassey as agent, earned commissions of $22,367. These are amounts claimed by Vespra against Hassey Realty Corp. and Michael Hassey.

Ardel Johnston’s Letter to the County of Simcoe

[73] On May 6, 2003, Ardel Johnston, as solicitor for Vespra, sent a letter to the County of Simcoe on instructions from Mr. Smith, a shareholder of Vespra. This letter was made an exhibit and was the subject of much discussion in evidence, including the examinations of Ardel Johnston, Steve Smith, and Darren Vella, the Township’s planner at the time.

[74] The letter stated in part:

It is my understanding that you have been dealing with Bob Spooner of Peter Archer and Associates, on behalf of Pine Hill Estates, with respect to required road work and installation of lights at Fox Farm Road and County Road 22.

We wish to make you aware that our clients met with representatives from Pine Hill Estates on January 9, 2003, the result of which meeting was that Vespra Country Estates gave a reduction of the purchase price to Pine Hill Estates in exchange for their agreement to complete the necessary roads and intersections as required by the County and the Township of Springwater at the intersection of Fox Farm Road and County Road 22. We take the position that any changes since January 9, 2003 agreed to between the purchaser and the County or Township, are the obligation of the purchaser only.

We have now been advised that they may be seeking a cost-sharing agreement to be put in place by the County with respect to the road.

[75] Pine Hill Estates was not provided with a copy of this letter at the time it was sent. Mr. Smith took this letter to the Township of Springwater and had it initialled by the planner, Darren Vella. He also took it to the County of Simcoe and had it initialled by their planner.

[76] The letter did not make reference to the actual cost-sharing agreement that was set out in Amending Agreement No. 3, dated January 9, 2003, nor did it reference the scope of work the parties thought the County required, as was set out in Schedule “A” to the amendment, a letter from Mr. Spooner, Pine Hill’s planner to the County. It should be recalled that that letter addressed work to be done on Horseshoe Valley Road by the buyer, including:

The elimination of the vertical curve on County Road 22, the installation of the turning lane for eastbound traffic on County Road 22 at Fox Farm Road, with a three-car stacking capability, and the installation of ductwork at the intersection of Fox Farm Road and County Road 22.

This letter was solely confined to the requirements of the County, and did not speak to the issue of work on Fox Farm Road, a township road, except where it intersected County Road 22. Nor did Spooner’s letter discuss signalization of the intersection of County Road 22 and Fox Farm Road.

[77] Clearly, the Johnston letter was wrong when it spoke about the installation of lights at Fox Farm Road and County Road 22.

[78] Pine Hill argues that the letter is misleading because it speaks about requirements of the County and the Township of Springwater for Fox Farm Road and County Road 22. Pine Hill further argues that this letter, provided to the County and the Township, mislead them as to what the parties had agreed to and caused both the County and the Township to increase the scope of the work required of Pine Hill before it could complete the registration of its plan of subdivision.

[79] It must be remembered that at the time of closing, Vespra had remaining a large acreage which had been approved for an ALC by way of Official Plan Amendment No. 8. This plan, if approved and proceeded with, would have been an extensive development within the Township, requiring a large capital investment with respect to internal services and improvements to surrounding roads. Substantial upgrades would have been required for County Road 22, and roads servicing the property, including Fox Farm Road. But it must be recalled that this was just a concept. There was no requirement for the owner to complete these works unless they proceeded with the contemplated plan. Therefore, any works done on County Road 22 and Fox Farm Road by Pine Hill in connection with its current development, had the potential to lessen the costs for the ALC project, but only if taken to fruition by Vespra or its successors.

[80] Pine Hill argues that Mr. Smith, in sending this letter and in meetings and discussions with Township and County officials, was seeking to shift the cost burden for improvements on County Road 22 and Fox Farm Road to Pine Hill, therefore potentially improving the value of the ALC property. As previously noted, the ALC property was sold after the sale to Pine Hill for $4 million. The property was raw land, but had the benefit of the Official Plan amendment approving in principle, the 800-unit proposal.

[81] John Laschinger gave evidence for the defence about the issue of the sale of the ALC property. He is an economist who was at the time employed as a vice president of a large commercial real estate firm. He was contacted by Steve Smith in 2003, about the sale of the ALC property. It was sold to an experienced developer for $4 million, and Mr. Laschinger acknowledged that the developer satisfied himself as to the viability of the ALC lands. He told the court that the property would require about $20 million of capital improvements, and if it was taken to fruition, there was a potential for a $60 million profit. But he told the court that he was unaware of dealings between Vespra and Pine Hill, and the OMB situation as to the roads. He acknowledged that the letter from Ardel Johnston to the County would have had no impact on the ALC purchase price. Further, the cost of the road work to be done by Pine Hill would have no effect because even if Pine Hill spent $500,000 on road work, it would still represent less than ten percent of the overall development costs for the ALC buyer.

[82] There is simply no evidence that the road work done by Pine Hill as required by the Township and County had any effect on the sale price of the remaining Vespra lands.

Did the Letter by Itself Cause the Delay, Enabling Pine Hill to sell the 27 Lots?

[83] Although the letter may have been misleading with respect to the reference of lights, it must be read in its entirety. As noted, it said:

… in exchange for their agreement to complete the necessary roads and intersections as required by the County and the Township of Springwater, at the intersection of Fox Farm Road and County Road 22. [Emphasis added.]

[84] In my view, the letter cannot be taken to state categorically that Pine Hill had agreed to do all required work on Fox Farm Road as part of the agreement with Vespra. Pine Hill had an independent obligation to obtain approval from the Township of Springwater as to what, if any, work was needed on Fox Farm Road, an external road which led directly to the internal roads of this proposed subdivision. The township planner, Mr. Vella, may have been overreaching in attempting to extract more work from Pine Hill than was reasonably necessary for this relatively small subdivision. But those costs were capped off by a subsequent agreement between Pine Hill and the Township.

[85] The County did try to increase the scope of work on County Road 22, but at no time did it require lights at Fox Farm Road.

[86] By July 7, 2003, the County in negotiating with a solicitor for Pine Hill, noted that the conditions of draft plan approval were no longer current, and acknowledged an understanding that Pine Hill had received a credit as to the cost of road improvements, and issued a decision amending the draft approval conditions requiring the road improvements. As June Little, planner for the County stated in her letter of July 7, 2003:

The road improvements are essential and required prior to development because it is a matter of public safety. It would be inappropriate to allow further development in the absence of improvements of the site distances.

[87] In August of 2003, Pine Hill’s lawyer Mr. White, notified the County that the County’s decision was being appealed to the OMB.

[88] In his letter to Vespra’s lawyer, Mr. White stated:

The change in position by the County resulted in substantially additional road works that more than doubled the cost of construction. The fact that the County changed its requirements after the fact frustrated the performance and completion of the agreement dated January 9, 2003 [the third amending agreement]. As a result, my client closed the purchase of these lands and did not receive the $100,000 credit towards the cost of the road improvements.

Under the terms of the Agreement of Purchase and Sale, your client agreed to cooperate and assist the purchaser in obtaining the necessary approvals and file registration. We consider your letter to the County dated May 6, 2003 to be active interference, contrary to your client’s contractual obligations.

[89] On February 19, 2004, counsel for Pine Hill wrote to Vespra’s solicitors indicating that Pine Hill had resolved issues with respect to the Township of Springwater and the County of Simcoe. In his letter, Mr. White noted:

Any agreement for County Road 22 is subject to your client’s agreement and subject to confirmation by your client that we still have an agreement for the $100,000 reduction to the mortgage. My client estimates that the work in question will cost approximately $240,000 and will be a direct benefit to your client, reducing your client’s obligations under the Official Plan Amendment No. 8.

[90] The Minutes of Settlement arrived at between the County and Pine Hill indicate that ultimately, they were able to proceed with the works as originally contemplated in APS Amendment No. 3. However, as the defendants’ evidence would indicate, the costs were far higher than they contemplated, either in the original estimates from Mr. Stanton, P.Eng, in the range of $185,000, or in Mr. Alousis’ letter of February 19, 2004, indicating approximately $235,000 in further costs.

[91] In summary, I am not satisfied that the letter of May 6, 2003, was the sole cause of the delays and extra costs incurred by Pine Hill. The letter, on its face, did not indicate that Pine Hill had agreed to any cost-sharing with the Township. The Township had an independent obligation to determine its reasonable and appropriate conditions before signing off on the plan of subdivision. Although Mr. Vella and subsequent planners may have been overreaching in what they attempted to obtain from Pine Hill, the matter was settled when Pine Hill made a deputation to counsel, capping off the work and the costs at about $50,000.

[92] In addition, the County had an independent obligation to determine its requirements before signing off on the draft plan of subdivision. Traffic to the subdivision would be coming off County Road 22 at the intersection of Fox Farm Road. The County indicated that public safety was a concern. After a detailed traffic study, an OMB appeal and negotiations, the matter was settled and Pine Hill was required to do the work that was originally contemplated in APS Amendment No. 3. The fact that this work took longer to receive approval and with increased costs is, in my view, a risk that a developer takes when acquiring a property subject to draft plan approval. The evidence of its own witness, Brian Stanton, P.Eng, on this issue, bears repeating:

… I think that’s a normal risk of development that there is unknowns that come up, have to be dealt with, and there, if there’s an effort involved in resolving those issues, that there’s costs associated with that effort.

As to whether or not a developer takes on that risk, Mr. Stanton said, “That’s part of the developer’s decision in the project.”

Michael Hassey as Buyer

[93] From the outset, Michael Hassey and his company, Hassey Realty Corp., acted as agents for buyer and seller, and thus took upon the role as dual agents. The original Agreement of Purchase and Sale was executed May 6, 2002, and the buyer was Bravakis Associates Ltd. in Trust. That company had a right to assign the Agreement of Purchase and Sale prior to closing. As noted, there were four amendments to the Agreement of Purchase and Sale. The actual closing took place on May 14, 2003. By way of an assignment from Bravakis and Associates Ltd., the purchaser became 1522491 Ontario Inc. (Pine Hill).

[94] That company was incorporated by Articles of Incorporation on July 16, 2002, by Mr. Alousis. Mr. Alousis also prepared necessary by-laws, resolutions and share certificates, and filed a form with the Ontario Ministry of Consumer and Business Services indicating an incorporation date of July 16, 2002, and reflecting directors as Peter Bravakis and Michael Hassey. According to the internal Minute Books of the company, Mr. Hassey and Peter Bravakis became shareholders. The name “Pine Hill Estates” was registered as the trading name for this company.

[95] Although Mr. Hassey indicated that these documents may have been signed in August of 2002, and back-dated to July 16, 2002, I am satisfied that the effective date of his interest in the company was July 16, 2002, in accordance with the records filed with the Ministry. It should be noted that such records filed indicate directors, but not shareholders for privately incorporated companies.

[96] It is clear that neither Mr. Hassey nor his company Hassey Realty Corp. gave the statutory notice required by the Real Estate and Business Brokers Act (the Act) to Vespra. Section 32 of the Act requires notice to be given in writing and with full disclosure.

[97] The regulations under the Act provide a Code of Ethics, and further disclosure requirements under sections 18 and 21.

[98] Amendment No. 3 to the Agreement of Purchase and Sale was fundamental to the agreement. Although it was dated January 9, 2003, it was negotiated at a meeting at the offices of Hassey Realty Corp. on December 16, 2002. A number of parties were there, including the shareholders of Vespra, Mr. Sabiston and Mr. Smith. Mr. Hassey and Mr. Bravakis were there, as well as planners, Mr. Spooner and Mr. Jones, and Mr. Stanton, P.Eng. The witnesses at trial had different recollections about whether or not Mr. Hassey was introduced as an owner of the purchaser, or had some interest in the purchaser other than as agent. The parties and the witnesses gave varying accounts about what happened at the meeting with respect to how Mr. Hassey was introduced. By this point, Mr. Hassey had been a director and shareholder of the numbered company known as Pine Hill, for several months. However, the amending agreement was executed by Bravakis and Associates Ltd. as purchaser, and the numbered company was not indicated in this amendment.

[99] Months later, Ms. Johnston, as solicitor for Vespra, received a Title Direction indicating that title would be in the name of 1522491 Ontario Inc. On closing, Ms. Johnston received a signed Title Direction, signed by Mr. Hassey and Mr. Bravakis as directors. Ms. Johnston did not do a corporate search to determine who the officers and directors of the company were. She did do a corporate search some months after closing at the request of Mr. Smith. As noted previously, that corporate search indicated Mr. Hassey as director, but did not indicate who the shareholders were.

The December 16, 2002 Meeting

[100] The December 16, 2002 meeting led to Amendment No. 3 of the Agreement of Purchase and Sale, which negotiated a credit to Pine Hill of $100,000 to be deducted from the VTB mortgage, provided that Pine Hill completed certain road work to County Road 22. This agreement was formalized into APS Amendment No. 3. By this point, it was clear to Mr. Hassey that he was not just an agent trying to keep the parties together. He had an interest in the property as shareholder of Pine Hill, which he incorporated six months earlier.

[101] This was the first meeting that Mr. Smith attended, having only recently become aware that Mr. Sabiston had entered into an Agreement of Purchase and Sale to sell Vespra’s 27-lot subdivision. At the beginning of the meeting, the parties introduced themselves. No minutes were kept. There were no independent witnesses there. The witnesses were either the parties or their hired consultants.

[102] Mr. Stanton, who was Pine Hill’s engineer, stated:

It was clear in my mind that we had two parties at the table, the vendor and the purchaser, and that there were two people representing Vespra Country Estates, and two people representing Pine Hill Estates, plus their consultants.

A further question was asked:

Q. Was there any possibility in your mind for confusion about what Mr. Hassey’s role was, that whether or not he was just there as a real estate agent?

A. No. In my, my recollection of the meeting is that he was representing Pine Hill Estates.

[103] In cross-examination, Mr. Stanton was taken to earlier answers he provided on an earlier cross-examination. Mr. Stanton thought that his current answers were more accurate. He had thoroughly reviewed his file before trial. But he acknowledged that he kept no minutes of the meeting, and he acknowledged that he knew before the meeting that his client, Mr. Hassey, was involved as a partner. As to his assumptions, he was asked the following question in cross-examination:

Q. And I suggest to you, you have made certain assumptions as to how people introduce themselves based on knowledge you either had, or later had, and you don’t have any specific recollection of what was actually said, is that fair sir?

A. I don’t have any notes or minutes from the meeting that would support that.

[104] Mr. Spooner also gave evidence for the defendants on this issue. He was the planner working for Pine Hill Estates to assist with its due diligence to enable it to determine whether it could waive the conditions in the Agreement of Purchase and sale. He attended the December 16, 2002 meeting at Mr. Hassey’s office. He was there as an observer, but his impression was that Mr. Hassey said he would be a partner in the project. He also recalled that there were times when Mr. Smith and Mr. Sabiston were not in the room.

[105] Vespra called as a witness, Richard Jones, as to what took place at the meeting. He was there as a planning consultant for Vespra. He was well aware of the property issues, having worked on the ALC project. He knew Mr. Bravakis as a successful developer and Mr. Hassey as a successful real estate broker. In cross-examination, he was asked about a memo that he sent to Mr. Smith after the meeting. He was asked the following questions and gave the following answers:

Q. In your memo, you describe Mr. Spooner not as Peter Bravakis’ planner, you describe him as their planner after referring to both Mr. Bravakis and Mr. Hassey?

A. Yes, I did.

Q. Alright. And that’s because you knew that Mr. Hassey was part of the purchaser corporation, did you not?

A. No, I wasn’t at all aware of that. I had understood Mr. Bravakis to be the proponent.

[106] Mr. Smith’s evidence was to the effect that Mr. Hassey did not indicate his new role as a part-owner. Mr. Hassey gave evidence to the contrary. He made it clear in the introduction, that he was now taking a position as owner.

[107] I am not satisfied that Mr. Hassey has proved on a balance of probabilities, that he verbally announced his interest as an owner of this property at the December meeting. The amendment to the Agreement of Purchase and Sale, reducing the purchase price by $100,000 on certain conditions, provided a potential benefit to the purchaser, Pine Hill, to the detriment of the vendor, Vespra. Had the vendor become aware that their agent was now becoming a purchaser, they may have taken a different tact with respect to the amendment discussed that day. I am further aided in this determination because Mr. Hassey gave no written notice to his client, Vespra, as he was required to do under the terms of the Real Estate Business Brokers Act. The only written acknowledgement showing his involvement was a title direction sent months later by his lawyer to Vespra’s lawyer, indicating that he was a director of the purchaser. No written notice was given indicating he was also a shareholder.

Fiduciary Duty of an Agent

[108] In their closing submissions, both counsel made reference to the facts of this case and the law on the issue of fiduciary duty of agents. Mr. Quance in submissions, made reference to an agent’s obligations under the Real Estate and Business Brokers Act and its Code of Ethics.

[109] The common law rules as to disclosure have been referred to and developed in a number of decisions. In Raso v. Dionigi (1993), 1993 (ON CA), 12 O.R. (3d) 580, at para. 20, the Ontario Court of Appeal referred with authority to the reasons of Wallace J.A. in Ocean City Realty v. A&M Holdings Ltd. (1987), 1987 (BC CA), 36 D.L.R. (4th) 94 BCCA:

In my opinion, the trial judge’s interpretation of the obligation owed to a principal by its agent is too restrictive. The duty of disclosure is not confined to those instances where the agent has gained an advantage in the transaction or where the information might affect the value of the property, or where a conflict of interest exists. The agent certainly has a duty of full disclosure in such circumstances; they are commonly occurring circumstances which require full disclosure by the agent, however, they are not exhaustive.

The obligation of the agent to make full disclosure extends beyond these three categories and includes everything known to him respecting the subject matter of the contract, which would be likely to influence the conduct of its principal. …In such cases, the agent’s failure to inform the principal would be material non-disclosure. [Citation omitted.]

[110] In Knoch Estate v. Jon Picken Ltd. (1991), 1991 (ON CA), 4 O.R. (3d) 385, the Ontario Court of Appeal stated at para. 30:

Generally speaking, it has been held that listing agents and brokers in the position of Roloff and Royal Trust, are fiduciaries owing the highest obligation of full disclosure and fair dealing to the vendor who pays the commission. …In other words, the vendor is legally entitled to expect that his or her real estate agent will faithfully serve to promote the vendor’s interests.

[111] In D-Atri v. Chilcott (1975), 1975 (ON SC), 7 O.R. (2d) 249, Ontario Supreme Court Justice Galligan distilled the following principles from cases reviewed and provided at para. 32:

I think therefore that it is clear from the authorities that the following principles are applicable to this case:

(i) that the relationship between a real estate agent and the person who has retained him to sell his property is a fiduciary and confidential one;

(ii) that there is a duty upon such an agent to make full disclosure of all facts within the knowledge of the agent which might affect the value of the property;

(iii) that not only must the price paid be adequate, but the transaction must be a righteous one and the price obtained must be as advantageous to the principal as any other price that the agent could, by exercise of diligence on its principal’s behalf, have obtained from a third person; and

(iv) that the onus is upon the agent to prove that those duties have been fully complied with.

[112] In 489212 Ontario Ltd. v. Participactive Dynamics Inc. (1994), 38 R.P.R. (2d) 32, Justice Wilson stated bluntly at paras. 108 and 119:

A purchaser is not required to prove injury or damage in order to be entitled to compensation, since remedies for a fiduciary breach are calculated on the improper gain, rather than the loss suffered.

…An agent in breach of his duty is not permitted to receive his commission. [Citations omitted.]

[113] I am satisfied on the evidence before me that Mr. Hassey and Hassey Realty Corp., stood in a fiduciary capacity to its client, Vespra. They earned a commission on closing from a transaction that may well have faltered if the vendor became aware of Mr. Hassey’s involvement as purchaser. Amendment No. 3 effectively reduced the purchase price by $100,000. I am therefore satisfied that the plaintiff is entitled to judgment against the defendants, Mr. Hassey and Hassey Realty Corp. jointly and severally, for the full amount of commissions Vespra paid on closing, $30,334.50.

Subsequent Commissions

[114] I turn next to the issue of commissions earned by Hassey Realty Corp. and Mr. Hassey for the subsequent sale of the lots by Pine Hill on the plan of subdivision. This is not a case where Pine Hill flipped the property for an immediate profit. Pine Hill took raw land, a draft plan of subdivision, and conducted the necessary planning and infrastructure work to create 27 residential real estate lots, which could be sold with all necessary approvals in place. In my view, to order Mr. Hassey to pay this money to Vespra would amount to a windfall for Vespra.

The Limitations Act

[115] In written submissions, counsel for Mr. Hassey submits that he was not added to the action until 2010, and the limitation period for making a claim against him ought to have started when Vespra’s counsel did a corporate search on August 28, 2003. The two-year limitation period, it is submitted, would have expired two years after that date. The evidence at trial indicated that a corporate search would not reveal who the shareholder of a private Ontario company was. The search simply indicated who the directors of the company.

[116] The issue of the Limitations Act, 2002, S.O. 2002 c.24, or discoverability was not the subject of examination or cross-examination at trial.

[117] In his written submissions, Mr. Smith states:

We moved immediately forward to add Michael Hassey after we received his affidavit [revealing he was a shareholder] on December 14, 2006. The first motion to add Michael Hassey happened on January 4, 2007.

[118] I pause to note that Mr. Hassey’s company, Hassey Realty Corp., was a defendant in this action from the outset.

[119] I am satisfied on a balance of probabilities, that a Limitations Act defence is not available to Mr. Hassey under these circumstances.

Duty to Act in Good Faith

[120] In a recent decision, Bhasin v. Hrynew, [2014] S.C.C. 71, the Supreme Court of Canada took steps to provide a framework to assess good faith performance of contracts. Cromwell J., speaking for the Court, found this area of law to be unsettled and in need of clarification. He noted that the issue of good faith could be reviewed by the Court even if it was not pleaded in a claim. As he stated at para. 19:

The question of whether this conduct [improper purpose and dishonesty] amounted to a breach of the duty of good faith is a legal conclusion that did not need to be pleaded separately.

In coming to a conclusion, Justice Cromwell stated at para. 60:

Commercial parties reasonably expect a basic level of honesty and good faith in contractual dealings. While they remain at arms-length and are not subject to the duties of a fiduciary, a basic level of honest conduct is necessary to the proper functioning of commerce.

[121] At para. 93, Justice Cromwell provided the following summary of principles:

(i) There is a general organizing principle of good faith that underlies many facets of contract law;

(ii) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives factual aspects of that principle in particular types of situations and relationships;

(iii) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

[122] Clearly, in this case, the defendants, Hassey Realty Corp. and Mr. Hassey, had a higher duty, a fiduciary duty. However, a duty of good faith can be considered with respect to the defendant, Pine Hill Estates, the purchaser. It knew that one of its shareholders was a real estate agent for Vespra and therefore knew, or ought to have known, that its shareholder had a fiduciary duty to Vespra.

[123] At the same time, there was a good faith duty on Vespra, as well. Vespra was contractually bound to cooperate with the purchaser with respect to the development as it moved forward after closing. Clearly, there was no cooperation and in fact, some of the actions of Vespra or its shareholder, Mr. Smith, had the opposite effect. The first incident was the ill-conceived motion for a Certificate of Pending Litigation. The second incident was the refusal to provide a discharge of mortgage or to enter into any form of negotiation which could be considered cooperative in accordance with contractual obligations.

Plaintiff’s Damages

[124] Having canvassed the relevant facts with respect to the plaintiff’s claim and the applicable legal principles, I now turn to the issue of damages as claimed by the plaintiff. The plaintiff claims damages under four headings:

(i) $182,806.80 plus interest, being the monies paid into court pursuant to the Order of Justice Salmers with respect to the vendor take-back mortgage;

(ii) Disgorgement of commissions earned by Mr. Hassey and Hassey Realty Corp., in the amount of $122,541.50 with respect to the sale by Vespra and the subsequent sales by Pine Hill;

(iii) Punitive damages against Mr. Hassey, in the amount of $250,000; and

(iv) Costs against Mr, Hassey on a substantial indemnity basis.

Real Estate Commissions

[125] Real estate commissions paid by Vespra in connection with this sale to Pine Hill were $30,334.50. I am satisfied that Mr. Hassey and his company, Hassey Realty Corp., did not disclose Mr. Hassey’s involvement as a shareholder of the purchaser. Although he was not initially a shareholder of the purchaser company, he became one upon the incorporation of Pine Hill Estates and his interest as a director was recorded in the public records upon incorporation. The only written notice given by him was a copy of the Resolution given to Vespra’s counsel on the very day of closing, which disclosed his interest as a director, but did not show his interest as a shareholder. I do not accept that he gave oral notice of his interest in the purchaser at the December meeting, based on the evidence at trial. However, even if there was oral notice, in my view it falls far short of the written notice that agents and brokers are required to give under the Real Estate and Business Brokers Act. Mr. Hassey and his company were in a fiduciary relationship with Vespra. The third amendment of the Agreement of Purchase and Sale was negotiated with all of the parties at the table. That amendment kept the deal alive, but provided Pine Hill with a credit of $100,000 if road work was completed. It is impossible to speculate what the outcome would have been had Vespra known of Mr. Hassey’s shifting role from agent to purchaser. Under all the circumstances, I am satisfied that Mr. Hassey and Hassey Realty Corp. repay the commissions paid by Vespra, based on this breach of fiduciary duty.

[126] I am not satisfied that Mr. Hassey or Hassey Realty Corp. repay commissions earned on the subsequent sale of the subdivision lots. First of all, this was not a flip of property; second, Pine Hill invested substantial sums of money in order to bring raw land within a draft plan of subdivision into 27 serviced residential lots available for sale as individual lots with roads and services as required by the Township of Springwater.

Money Paid into Court by Pine Hill

[127] The money paid into court by Pine Hill, pursuant to the Order of Salmers J., has three components. The first component is the $100,000 at issue on the VTB mortgage. The second component is the $80,000 estimated interest that the Order provided for. The third component is $100,000 as security for costs.

[128] At the point of the Order, the VTB mortgage was fully paid off with interest, save and except for the $100,000 which was paid into court. The issue then is whether the $100,000 ought to be paid back to Pine Hill who completed the work contemplated in the Amendment to the Agreement of Purchase and Sale however late, or whether the money should be paid to Vespra as part of the original purchase price. Vespra agreed to a $100,000 reduction by way of amendment without knowing that Mr. Hassey was in breach of his fiduciary duty. In my view, the $100,000 paid into court as a result of the Order of Justice Salmers ought to be paid to Vespra. The reduction in purchase price was only negotiated in the face of Mr. Hassey’s breach of fiduciary duty and failure to provide notice to Vespra. The road work as originally contemplated was required to be done 150 days after closing. The work was done much later. Pine Hill was frustrated in its efforts to get the work done because of the scope of work creep imposed by the Township and the County. Steve Smith may have taken some steps to alert the Township and the County about issues between Vespra and Pine Hill. The letter from Vespra’s lawyer of June 6, 2003, may have been somewhat misleading. But the Township and the County had an independent duty to make appropriate decisions about the necessary road work before they could sign off on the draft plan of subdivision. The County noted that there were safety issues. Ultimately, the County settled the issues, but not before substantial time had gone by, causing Pine Hill delays. Vespra was required pursuant to the Agreement of Purchase and Sale to cooperate with Pine Hill’s efforts. However, when I balance Mr. Hassey’s breach of fiduciary duty against any interference or lack of cooperation by Vespra, I am satisfied that these funds should go to Vespra.

[129] I am further satisfied that Vespra is entitled to interest on this sum in accordance with the mortgage agreement at the rate of 7% per year calculated on a simple interest basis from the date of payment into court until judgment.

[130] Justice Salmers also ordered that $80,000 be paid into court as estimated interest. As a result of the Order, Pine Hill paid the mortgage in full plus interest, save and except for the $100,000. Therefore, the $80,000 estimate of interest should be used to fund the interest on the $100,000 at 7% as previously noted. Excess of funds, if any, ought to be paid back to Pine Hill.

Interest on Funds in Court

[131] The funds in court have earned interest at variable rates over the years in accordance with records kept by the Accountant of the Superior Court of Ontario (the Accountant). There are essentially three funds paid in by Pine Hill that are earning interest. The first is the $100,000 mortgage amount; the second is the $80,000 estimated interest; and the third is the $100,000 security for costs paid in by Pine Hill. Interest earned on these sums ought to be credited to Pine Hill less expenses of the Accountant. Finally, the interest on the $100,000 paid in as costs and the disposition of costs ought to be reserved for submissions on costs after judgment.

Punitive Damages Claimed by Vespra

[132] In this case, both the plaintiff and the plaintiffs by counterclaim claim punitive damages against various defendants and defendants by counterclaim. The applicable principles to be applied when a court considers punitive damages are well established.

[133] In Fernandes v. Penncorp Life Insurance Company, 2014 ONCA 615, Pepall J.A. summarized the applicable punitive damages principles as set out by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, and Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3 as follows:

• Punitive damages are designed to address the objective of retribution, deterrence and denunciation, not to compensate the plaintiff.

• They are awarded only where compensatory damages are insufficient to accomplish these objectives.

• They are the exception rather than the rule.

• The impugned conduct must depart markedly from ordinary standards of decency; it is conduct that is malicious, oppressive or high-handed and that offends the court’s sense of decency.

• In addition to the breach of contract, there must be an independent actionable wrong.

• In a case of breach of an insurance contract for failure to pay insurance benefits, a breach by the insurer of the contractual duty to act in good faith will constitute an independent actionable wrong. [Citations omitted.]

[134] In Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, Laskin J.A. speaking for the Court, reduced a jury’s award of $150,000 in punitive damages against one of the individual defendants to $10,000. After reviewing in detail the individual defendant’s deliberate misconduct, Laskin J.A. stated at paras. 60-61:

He forced her to leave a job that meant a great deal to her. His conduct did indeed, amount to a marked departure from the ordinary standards of decent human behaviour.

That it did, however, does not alone mean that the $150,000 award of punitive damages should be upheld.

As Laskin J.A. continued at para. 63:

Thus, once the tort damages are upheld, we must ask whether an additional award of $150,000 is required for the purposes of retribution, denunciation, and deterrence. In short, we must ask whether the jury’s award is proportionate to these purposes.

[135] In my view, the damages award against the defendants adequately compensates Vespra, and further punitive damages are not warranted. Although Mr. Hassey breached his fiduciary duty in becoming a purchaser, I note that there was no evidence that the sale price was undervalued. The price was set by Mr. Sabiston, and Vespra has had the benefit, by reason of this judgment, of recovering the $100,000 credit negotiated in the Amendment to the Agreement of Purchase and Sale and that award provides adequate compensatory damages.

Costs Claimed by Vespra

[136] I make no decision with respect to costs claimed until I have received submissions from the parties in accordance with the timetable set in this judgment, if the parties are unable to reach agreement on costs.

Damages Claimed by Pine Hill, the Plaintiffs by Counterclaim

[137] In written submissions, the defendant by counterclaim, claims special damages of $580,890.24 broken down as follows:

(a) $139,422.41 – VTB Mortgage

(b) $33,612.31 – 500K 2nd mortgage costs

(c) $11,860.43 – Mr. Alousis extras

(d) $11,801.71 – Extras to Cansult Tatham

(e) $29,841.37 – LaFarge road repair in May 2005

(f) $112,715.00 – owed by PHE to JB Enterprises (extra work direct costs)

(g) $73,452.48 – Extra costs to LaFarge

(h) $17,980.49 – Extras to David White

(i) $28,430.00 – Extra to Peter Archer

(j) $23,106.27 – Fox Farm Road extra costs

(k) $51,877.26 – C.C. Tatham extras (exhibit 154)

(l) $46,844.62 – Delays

$580,890.24 – Total

[138] In addition, Pine Hill claims punitive damages in the amount of $100,000 against each individual defendant personally.

[139] As set out in my decision regarding damages for the plaintiff, Vespra, I have already made a determination with respect to the $100,000 paid into court with respect to the vendor take-back mortgage and the related interest thereon. As noted, excess funds, if any, ought to be returned to Pine Hill after the payment to Vespra of $100,000 together with interest.

The Evidence of John Bravakis

[140] John Bravakis is the president of Pine Hill Estates and is a civil contractor. He carries out municipal and county road building contracts in Simcoe County and elsewhere. The original purchaser, Peter Bravakis, his father, passed away in June of 2006.

[141] John Bravakis did the internal road works necessary to service the 27-lot draft plan of subdivision. He also did work on County Road 22 and Fox Farm Road with the assistance of a subcontractor to meet the requirements of the County and the Township.

[142] His evidence was that the actual work was done on a much delayed basis in the fall of 2004. As a result of washouts in the fall and spring, remedial work had to be done to the satisfaction of the County on County Road 22. He gave evidence about additional costs which can be summarized as follows:

(i) $29,841 to LaFarge (its subcontractor);

(ii) $73,452 extra costs incurred, including soil removal;

(iii) $11,801 to C.C. Tatham (consultants);

(iv) $17,890 to David White, Q.C. (lawyer re OMB issue);

(v) $30,699 extra cost to Spooner (its planner)

Total: $163,773

Mr. Bravakis also indicated that $460,000 was spent by Pine Hill preparing and servicing the internal roads for the estate lot subdivision. Although Mr. Bravakis was a co-shareholder of Pine Hill Estates, he did not give evidence about whether or not the project ultimately achieved a profit or loss. Mr. Hassey’s evidence was that the project resulted in a loss of about $13,000.

[143] I will now turn my focus to the remaining heads of damages as claimed by Pine Hill.

[144] Before doing that, I should note that counsel for Pine Hill indicated at trial the counterclaim for damages would be in the order of $200,000. It is important to note the timing of this submission at trial. It was not made at the opening of trial. The submission was made after Mr. Hassey, the plaintiff by counterclaim, had given his evidence and before he was cross-examined by Mr. Smith, who was self-represented with respect to the claim against himself, personally. To be more specific, Mr. Hassey spoke about the following figures:

(i) $46,854.62 as money that may have been earned as the lots closed in accordance with the original dates; and

(ii) $33,620.31 being the cost of arranging, borrowing, and refinancing to pay out the VTB.

Prior to cross-examination, counsel for Mr. Hassey posed the following question to his client:

Q. Alright, so by my calculations, we’re talking an amount that’s approximately $200,000.

A. (Mr. Hassey) That is correct.

Prior to Mr. Smith beginning his cross-examination, counsel for Mr. Hassey stated with respect to the counterclaim:

And yes, many of the claims are already disposed of. The ones that I would say remain in effect, is my client is claiming approximately $200,000 in damages plus interest on that sum, and of course, costs. …$200,000 approximately, and subject to $10,000 either way, which we will get more precise as we get to the end.

[145] In summarizing this for the benefit of Mr. Smith, before he began his cross-examination, the court said, “So, do you understand that, Mr. Smith, we’re down to the claim against you and the other defendants by counterclaim is $200,000 plus interest and costs?”

[146] It is plain and obvious that the claim of Pine Hill has expanded from $200,000 at trial to over $500,000 in its written submissions. It is apparent that a substantial amount of the additional costs are for road work on County Road 22 and Fox Farm Road, either as a direct expense or through its subcontractor, LaFarge. It is less clear that this claim for the additional road work was articulated in the counterclaim in the Trial Record.

[147] Much of the evidence about the additional road work costs came through the evidence of John Bravakis, and Mr. Smith did have an opportunity to cross-examine him. However, counsel for Pine Hill did not correct the impression left with Mr. Smith that the counterclaim was for $200,000, more or less, with respect to the costs as introduced through the evidence of Mr. Hassey.

[148] I will now deal with the other heads of damage as claimed by Pine Hill.

(i) Mortgage Costs

[149] In order to comply with the Order of Justice Salmers, Pine Hill was required to enter into a mortgage for $500,000 with Georgian Mortgages. It incurred costs for brokerage fees ($15,000), lenders fees ($10,000), lawyers’ costs ($11,860), and interest ($8,620) until the mortgage was discharged. In my view, it is entitled to be reimbursed for these expenses. I make that determination on several bases. First of all, the mortgage contained a clause that required the vendor, Vespra, to cooperate during the currency of the mortgage. I find that there is no evidence of cooperation and in fact, evidence to the contrary. The aborted Certificate of Pending Litigation is an example. The refusal to provide partial discharges of mortgages to further the subdivision lot sales is another example of a failure to cooperate. Pine Hill needed these partial discharges in order to complete the registration of the plan of subdivision in order to proceed with the anticipated sale of the 27 lots. Pine Hill had no alternative but to take the matter to court and was successful in obtaining an order discharging the mortgage on terms. Those terms required it to borrow substantial funds to make the payment obligations required of it in the Order of Justice Salmers. At the same time, Vespra received an immediate benefit. Its mortgage was paid in full with interest, save and except for the $100,000 still in dispute. Once the mortgage was obtained and the plan of subdivision was registered, Pine Hill moved to mitigate its damages by paying this mortgage off within about six weeks from lot sales, thus reducing the interest portion of the claim. I am satisfied that Pine Hill is entitled to damages against Vespra for $33,612.31 related to the mortgage costs for brokers’ fees, lending fees and interest.

(ii) Legal Costs re Georgian Mortgage

[150] On the same basis, I am satisfied that Pine Hill is entitled to be reimbursed for legal costs incurred for the services of Mr. Alousis with respect to this mortgage and related costs, in the amount of $11,860.43.

(iii) Delayed Closing Costs of $46,844.62

[151] Mr. Hassey gave evidence indicating this figure was arrived at as a calculation of interest that Pine Hill would have earned on the money received from the lot sales, had the lots closed in accordance with the original closing date, using an interest figure of five percent. In my view, to charge these costs to the vendor would be pure speculation. First of all, there was no guarantee in the Agreement of Purchase and Sale that the purchasers would be able to sell the lots. Although the vendor agreed to cooperate, the sale was after all, a draft plan of subdivision which required further planning, consulting and external and internal road work to the satisfaction of the Municipality and the County. Although the vendor did not cooperate in accordance with its contractual obligations, I am not satisfied that that lack of cooperation was the cause of the delay when the inherent risk of this type of development is factored in.

[152] I have now dealt with the heads of damages as expressed by Mr. Hassey in his evidence, including the issue of the VTB mortgage, the related mortgage costs, the related legal costs, and the claim for delays on the loss of use of anticipated funds.

[153] I now turn to the balance of Pine Hill’s counterclaims, which generally can be categorized as additional costs related to bringing the draft plan of subdivision into fruition, including consulting legal costs and additional road work.

Fox Farm Road Extra Costs

[154] Pine Hill claims $23,106.27 for extra costs regarding Fox Farm Road. I dismiss this aspect of the counterclaim for the following reasons. First of all, there was never an agreement between the parties as to any anticipated costs that the purchaser may have for Fox Farm Road. Fox Farm Road, a rural road in need of upgrading, would provide direct access from the internal roads of this subdivision to County Road 22. It was within the Township’s right to be concerned about this road in accordance with its independent duty to the ratepayers and the ultimate users of this road. Though the Township planner may have attempted to extract further work from Pine Hill, the matter was ultimately resolved by a consensus agreement between Pine Hill and the Township Council. In my view, this was part of the inherent risk of purchasing a draft plan of subdivision. The evidence of Pine Hill’s own engineer, Mr. Stanton, bears repeating:

The developer, a developer in developing any property has a certain risk involved with the approval process. There’s no guarantees on what the municipalities or approval authorities will require. There’s always that risk and they have consultants to manage that risk. …

David White’s Fee

[155] Pine Hill claims $17,980.49 to be reimbursed for legal fees paid to David White in connection with the OMB appeal. These costs were incurred after closing, and after the County increased the potential scope of work for County Road 22. Without the County’s approval, Pine Hill could not move forward, unless it did the expanded work or challenged the County’s position. It challenged the County’s position by filing an appeal to the OMB. Ultimately, the matter was resolved by way of settlement and the scope of work was reduced as a result. The work ultimately required was much more in conformity with what the parties contemplated in the original Agreement of Purchase and Sale, Amendment No. 3. I am not satisfied that Vespra should be responsible for Pine Hill’s legal fees for a successful challenge to the County’s position. As noted in correspondence from the County’s planning officer, the County had an independent duty as to public safety on County Road 22.

Additional Charges re County Road 22

[156] It was always contemplated that Pine Hill would have to do work on County Road 22. In the December 16th meeting leading to Amendment No. 3, there was some evidence that Pine Hill’s engineer, Mr. Stanton, thought the cost would be in the range of $200,000, but there were no drawings or construction estimates for these costs. It should be noted that Peter Bravakis was one of the shareholders of Pine Hill, but his son, John Bravakis, was a road builder and it was contemplated that John Bravakis would do the internal and external road work required by the Municipality and the County. Peter Bravakis was a sophisticated developer with access to engineers, planning consultants, and road builders. In my view, Pine Hill assumed the risk of additional costs with respect to these issues and cannot now look to Vespra for reimbursement. Clearly, with Mr. Hassey’s expertise Pine Hill had a good understanding of what the lots could be sold for. In addition, it was well aware of the rising costs before closing. As previously noted, John Alousis, counsel for Pine Hill, wrote to Vespra’s counsel the day before closing. That letter acknowledged that they were prepared to abide by the terms of the agreement (apportioning the $200,000 estimate). Mr. Alousis then addressed the additional works required by the County, and stated, “My client estimates the cost for such additional works will be approximately $235,000, including engineering work.”

Reduction in the Purchase Price

[157] It is clear that Pine Hill was aware it was facing costs of approximately $435,000 to satisfy the requirements of the County. I therefore dismiss the counterclaim with respect to the following items:

• $11,801.71 extras to C.C. Tatham;

• $29,841.37 LaFarge road repair bill;

• $112,715 owed by Pine Hill to J.B. Enterprises;

• $73,542.48 extra cost to LaFarge;

• $28,430 extra to Peter Archer (planner);

• $51,877.26 C.C. Tatham.

Punitive Damages Sought by Pine Hill

[158] Pine Hill claims punitive damages in the amount of $100,000 against each of the defendants by counterclaim.

[159] Punitive damages are rarely awarded and are the exception to the rule. They are awarded when compensatory damages are insufficient to accomplish the objectives of retribution, deterrence, and denunciation.

[160] I am satisfied that there were no actions by Mr. Sabiston or his company, Jasco Holdings Limited, which would warrant a consideration of punitive damages. In considering the actions of Vespra Country Estates Limited and Steve Smith, several issues need to be reviewed. First of all, there was a contractual obligation by Vespra to cooperate with Pine Hill’s development. In this case, there was a lack of cooperation and in fact, certain activities could be seen as a polar opposite. The aborted Certificate of Pending Litigation is one example. The failure to negotiate partial discharge of mortgage is another example. Ardel Johnston’s letter of June 6, 2003, as delivered by Mr. Smith to the County and the Township is another example of a failure to cooperate, and to a certain extent, an attempt to interfere with the economic relations of Pine Hill.

[161] In my view, the failure to cooperate on the part of Vespra, viewed in isolation, would not rise to the level of warranting punitive damages. General damages can provide adequate compensation. However, I consider Mr. Smith’s actions with respect to the Certificate of Pending Litigation do require a consideration of punitive damages for which Mr. Smith and his company, Vespra, should be considered equally responsible. The actions of Mr. Smith have been reviewed earlier in this decision. He caused his then lawyer, to prepare an affidavit for signature by the Township’s planner, Mr. Vella. No opportunity was given to Mr. Vella to review this affidavit with the Township’s own solicitors before it was signed. Mr. Smith took Mr. Vella to his lawyer’s office where it was signed. A Certificate of Pending Litigation was then issued ex parte. When the matter returned to court with a further affidavit from Mr. Vella, with the advice of Township’s counsel, the Certificate of Pending Litigation was discharged and Pine Hill was awarded costs of $10,000 against Vespra.

[162] In my view, the actions of Mr. Smith and Vespra with respect to this issue amounted to conduct that was malicious, high-handed, and oppressive. Pine Hill could not move forward with its development until the CPL was removed. The award of costs of $10,000 does not address the necessary principles of retribution, deterrence and denunciation. An award of punitive damages of $10,000 jointly and severally against Steve Smith and Vespra is warranted in this case and proportionate to the actions of Mr. Smith and Vespra with respect to the CPL.

[163] I decline to award punitive damages against any of the other defendants by counterclaim. Mr. Sabiston and his company Jasco had no involvement in the CPL motion.

Judgment to the Plaintiff

[164] In summary, I award judgment for the plaintiff, Vespra, as follows:

(i) $30,334.50 against Michael Hassey and Hassey Realty Corp. for real estate commissions paid upon the closing of the sale transaction from Vespra to Pine Hill;

(ii) the payment of $100,000 by Pine Hill to Vespra, being the balance of the vendor take-back mortgage paid into court pursuant to the Order of Justice Salmers;

(iii) interest on the said $100,000 paid into court at the rate of 7% per annum, calculated on a simple interest basis from the date of payment in until the date of judgment. This amount can be satisfied in part or in whole with respect to the $80,000 estimated interest ordered by Justice Salmers to be paid into court. Any surplus of funds ought to be returned to Pine Hill.

(iv) I make no order as to punitive damages as claimed by the plaintiff, Vespra.

Judgment for the Defendants, Plaintiffs by Counterclaim

[165] The plaintiffs by counterclaim are entitled to judgment as follows:

(i) judgment against Vespra for $33,612.31 for brokerage, lender’s fees and interest regarding the Georgian mortgage;

(ii) $11,860.43 for legal costs incurred by Pine Hill regarding the Georgian mortgage;

(iii) punitive damages against Steve Smith and Vespra Country Estates Limited, jointly and severally, in the amount of $10,000.

Costs

[166] In my view, success has been divided with respect to this lengthy trial. There have been costs paid into court by both sides to be dealt with, either by agreement or submissions on costs. Pine Hill paid $100,000 into court for costs as a result of the Order of Salmers J. That amount has earned interest in the hands of the Accountant of the Superior Court of Ontario at variable rates over the years. It has also attracted some administrative costs by the accountant. In addition, Vespra was also required to pay $100,000 into court as a result of a security for costs Order by Boswell J. That too, has accrued interest and costs while in the hands of the Accountant.

[167] If the parties are unable to reach an agreement with respect to costs, I will receive written submissions not exceeding five pages plus costs outlines from the plaintiff within thirty days of the release of this judgment. The defendants will then have a further fifteen days to reply and to submit its own claims, if any, for costs with respect to the counterclaim.

[168] Mr. Smith, as a self-represented individual, will have a further ten days to submit brief reply not exceeding three pages to the counterclaim against him.

MULLIGAN J.

Released: March 16, 2015