CITATION: Crossview Developments Inc. v. 2262443 Ontario Limited, 2015 ONSC 2854
COURT FILE NO.: CV-15-521880
DATE: 20150505
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CROSSVIEW DEVELOPMENTS INC.
Plaintiff
– and –
2262443 ONTARIO LIMITED
Defendant
Allan Sternberg, for the Plaintiff
David Taub and Robert Choi, for the Defendant
HEARD: April 29, 2015
REASONS FOR DECISION
DIAMOND J.:
[1] On November 21, 2014, an Agreement to Lease (the “agreement”) the property municipally known as 10731 Yonge Street (the “property”) was executed by the plaintiff Crossview Developments Inc. (“Crossview”) as tenant, and the defendant 2262443 Ontario Limited (“226”) as landlord.
[2] As a result of events which subsequently unfolded during and after the various conditional periods defined under the agreement, the parties now take diametrically opposed views of the current state of affairs. Crossview maintains that it has a valid lease for the property while 226 contends that there is no binding agreement between the parties.
[3] Crossview brings this motion seeking (a) an interlocutory injunction restraining 226 and its principals, officers, directors and shareholders from marketing, selling, transferring, leasing or any other way dealing with or disposing of the property until the trial of this action, and (b) an order granting Crossview leave to issue a certificate of pending litigation (“CPL”) against the property pursuant to the provisions of section 103 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and Rule 42.01 of the Rules of Civil Procedure.
[4] On March 2, 2015, Crossview brought this motion on short notice returnable before Madam Justice Sanderson, who granted the injunctive relief on an interim basis, and adjourned the balance of the motion until April 29, 2015 at which time it was fully argued before this Court.
[5] From a review of the materials filed by the parties, I note the following:
a) Crossview did not file any additional affidavits other than what was submitted before Justice Sanderson;
b) 226 did not serve or file any responding material when Crossview’s motion was argued before Justice Sanderson even though a timetable permitted such responding material to be filed; and
c) 226 ultimately served and filed its responding material approximately three weeks after the issuance of Justice Sanderson’s interim Order.
The Facts
[6] Sam Agha (“Agha”) is an officer, director and shareholder of Crossview. Agha describes Crossview as an Ontario corporation which, together with affiliated companies, is a part of a “substantial commercial and residential real estate developer and automotive business”.
[7] There is evidence that Crossview does not carry on any active business itself, and was for all intents and purposes a “shelf corporation” to be used for a single purpose business venture.
[8] 226 is an Ontario corporation and the registered owner of the property which it purchased in December 2010. The principal of 226 is Hadi Bakhtiari (“Hadi”).
[9] Prior to 226 purchasing the property, a Chrysler automobile dealership carried on business at the property. Currently, the property houses a used car dealership.
[10] Agha states that he has extensive experience in operating automobile dealerships. In or around August 2014, Agha approached Chrysler Canada Inc. (“Chrysler”) to ascertain Chrysler’s interest in re-establishing a dealership at the property.
[11] After speaking with Chrysler, Agha reached out to a real estate agent named Reza Danayan (“Reza”) who was affiliated with Royal LePage Your Community Realty Inc. (“Royal LePage”). Reza and Hadi were already friends, and Hadi had previously been introduced to Agha by Reza.
[12] In any event, negotiations between Crossview and 226 took place during the fall of 2014. Reza/Royal LePage was formerly retained as 226’s listing agent.
[13] I pause to note that during those negotiations, Crossview executed a “Buyer Customer Service Agreement” (“BCSA”) in favour of Royal LePage. On its face, the BCSA states that it is “for use when the buyer is not represented by the brokerage”, and was in consideration of Royal LePage providing “customer service to Crossview in an endeavour to procure the acceptance of an agreement to lease acceptable to Crossview”. As such, Reza/Royal LePage was not a dual agent, and any information imparted to or received by Reza/Royal LePage from 226 does not bind Crossview.
[14] According to Hadi, Crossview wanted to be the sole tenant of the property, which had historically been leased to multiple tenants. There was an understandable business risk associated with 226 taking on a single tenant, as all of 226’s rental income would be dependent upon that tenant.
[15] After weeks of continued negotiations and previous offers, Crossview and 226 entered into the agreement on November 21, 2014.
[16] The agreement provided for a lease term of ten years commencing on January 15, 2015, with the property being used exclusively for used and new car sales. For the first three months of the term, Crossview would pay 226 monthly rent of $13,000.00 which increased to $26,000.00 for the next 57 months, and again increased to $28,000.00 for the remaining 60 months of the term.
[17] Within the agreement, there are three conditions relevant to the disposition of this motion. The first condition (clause 16), in favour of Crossview, provides as follows:
This Agreement to Lease shall be conditional for a period of twenty (20) days from the full acceptance of this Agreement to Lease, in favour of the Tenant only, upon the Tenant satisfying itself, in its sole and unfettered discretion as to the Tenant and Tenant’s Use of the property. In this regard, the Landlord authorizes the Tenant to enter upon the Leased Premises and at any time or times during the twenty (20) day conditional period to do inspections of the Leased Premises. The Tenant shall have the right to waive its condition within the above-noted timeframe, by delivering notice in writing to the Landlord that it is in fact waiving the said condition. In the event that the Tenant does not provide the Landlord with notice in writing that it is waiving the aforesaid condition within the twenty (20) day period then the within Agreement to Lease shall become null and void and neither party shall have any further obligation to the other whatsoever and the deposit page shall be forthwith repaid to the Tenant without interest or deduction.
[18] Of note, the number ‘20’ was crossed out and increased to ‘30’ by agreement of both parties, thereby initially extending that diligence period to thirty days.
[19] The second condition (clause 17), in favour of 226, provides as follows:
The parties agree that the within Offer to Lease is conditional in favour of the Landlord for a period of two (2) business days from the day of acceptance, upon the Landlord’s solicitor approving the Agreement to Lease. In the event that the Landlord does not provide to the Tenant written confirmation that the Landlord is waiving this condition within the above-noted timeframe, then the within Agreement to Lease shall become null and void and neither party shall have any further obligation to the other whatsoever.
[20] The third condition (clause 19), in favour of 226, provides as follows:
The Tenant shall provide within five (5) days of acceptance of the Offer, its Financial Statements for its most recent fiscal year end. If such Financial Statements shall be found by the Landlord, in its sole discretion, to be unsatisfactory, this Agreement to Lease, may, at the sole discretion of the Landlord, be terminated and declared null and void and that the deposit shall be returned to the Tenant in full without interest or deduction.
[21] Unlike clauses 16 and 17, there is no temporal component in clause 19 requiring 226 to communicate its dissatisfaction with the financial statement to Crossview by a specified date.
[22] A deposit cheque in the amount of $75,710.00, drawn on the account of Sweetbriar Estates Inc. (“Sweetbriar”) was delivered to 226 c/o Royal LePage on or about November 26, 2014. Sweetbriar is one of Crossview’s “affiliate companies”. 226 cashed the deposit cheque and is holding that deposit to this day.
[23] I note that as a term of Justice Sanderson’s interim injunctive relief granted on March 2, 2015, in addition to Crossview’s undertaking as to damages, Justice Sanderson ordered the $75,710.00 (minus any real estate commission which may be owing to Royal LePage) would remain with Royal LePage as security for Crossview’s undertaking until further order of the Court.
[24] Crossview retained Ari Reichman (“Reichman”) as its solicitor to close the transaction. 226’s solicitor was Myer Betel (“Betel”).
[25] There is no dispute that 226 did not deliver a waiver of clause 17 to Crossview within the two business day period (i.e. on or before November 26, 2014). On November 26, 2014, the deadline for the waiver clause 17, Reichman sent an e-mail to Betel stating as follows:
“We act for Crossview Developments Inc. in connection with the attached Agreement to Lease and understand you act for the Landlord. Can you please confirm that the Landlord has waived the condition in Section 17 of Schedule “A” and provide us with the draft lease for our review and comment?
Thank you.”
[26] Reichman was obviously aware of the fact that 226 had yet to waive the condition in clause 17. Having heard nothing from Betel in response to his above e-mail, on December 1, 2014, Reichman delivered a follow-up e-mail to Betel asking for him to “advise in regards to the waiver of the Landlord’s condition and provide us with an initial draft of the lease”.
[27] On that same day (December 1, 2014), in fulfilment of Crossview’s obligations under clause 19 of the agreement, Reichman also delivered Crossview’s 2014 financial statements to 226 c/o Royal LePage. Crossview’s financial statements disclose no assets and a $17,307.00 debt owing to “affiliates”. It is Hadi’s evidence that he communicated his displeasure with Crossview’s financial statements to Reza, and Reza “in turn advised Agha” of that displeasure. While there is a text message and an e-mail from Hadi to Reza which appear to communicate a lack of satisfaction with the financial statements, Agha denies ever being advised of any substantive issue with the financial condition and there is no affidavit from Reza filed on this motion. However, both Hadi and Agha gave sworn evidence that in early December 2014 they attended a meeting at a Persian restaurant in Toronto to discuss, inter alia, the financial statements.
[28] Subsequent to that meeting, and presumably at Hadi’s request, Agha sent Reza copies of the 2013 Financial Statements for Minthollow Estates Inc. (“Minthollow”), another one of the “affiliate companies”. According to Minthollow’s Financial Statements, it had a deficit of nearly $6,000,000.00 although its assets consisted of land under development and construction worth (at the time) approximately $19,000,000.00.
[29] In his affidavit, Hadi maintains that Crossview knew that 226 was not satisfied with the financial condition. As stated above, there is no evidence from Reza on this point, and there is no evidence in the record of Betel or Hadi communicating 226’s dissatisfaction with the financial statements of Crossview or Minthollow. In fact, the financial condition in clause 19 does not re-appear until much later in the events giving rise to this proceeding.
[30] Crossview relies upon evidence it uncovered through, inter alia, a Rule 39.03 examination of a representative of Korea Exchange Bank of Canada (“Korea Bank”) that in seeking to refinance the property with Korea Bank, 226 delivered a copy of its agreement with Crossview to presumably secure a substantially more favourable financing of the property. There is no dispute that 226 advised Korea Bank that its agreement with Crossview was a conditional one. For what it is worth, Korea Bank gave evidence that it would have advanced its loan to 226 even if it had not been provided with a copy of the agreement.
[31] By December 11, 2014, Reichman had not heard back from Betel in response to Reichman’s two previous e-mails. As a result, on that day Reichman delivered another e-mail to Betel advising of his understanding that the parties had agreed to some changes to the “offer to lease”, and asked Betel to revise the offer to reflect those changes. Of note, within that December 11, 2014 e-mail Reichman renewed his request that clause 17 of the agreement should be deleted or waived.
[32] Betel responded within a few hours, taking issue with the contents of the draft environmental clause proposed by Reichman. Nowhere in Betel’s response did he mention clause 17, which is consistent with his silence on that issue up to that point.
[33] On December 15, 2014, Reichman renewed his request that Betel provide the revised offer to lease and the draft, formal lease (as contemplated by the agreement) as the commencement date was only one month away, and the parties may be away for the holidays. In response, the next day Betel’s assistant Debbie Teremchuk proposed some minor revisions to the terms suggested by Reichman, and then advised Reichman “if this is satisfactory Myer can prepare the amendments” (my emphasis).
[34] With respect to clause 16 of the agreement, on December 22-23, 2014 the parties executed an Amendment to the Agreement to Lease whereby the conditional period in clause 16 was extended to 50 days from November 21, 2014. This would allow Crossview until January 13, 2015 to satisfy itself of that condition. Essentially, Crossview needed to obtain approval from Chrysler for the ownership and operation of a Chrysler dealership at the property, and Crossview required that additional time to hopefully secure that approval.
[35] According to Hadi, he only signed the Amendment at Agha’s assistance as Crossview wanted to show Chrysler that the lease negotiations were still ongoing in late December 2014. I note that within the Amendment the parties agreed that “all other terms and conditions in the agreement would remain the same”.
[36] On December 23, 2014, Reichman advised Betel that his latest proposal with respect to improvements to the property would likely be acceptable but he needed to receive Crossview’s confirming instructions. As Agha was out of town until early January 2015, Reichman suggested that the parties touch base in early January 2015 to “wrap this up as expeditiously as possible”.
[37] On December 29, 2014, Reichman sent a follow up e-mail to Betel advising that prior to Agha providing his confirming instructions, he wanted to see the “revised offer to lease”. As such, Reichman asked when Betel would be in a position to provide the revised offer to lease.
[38] Later that day, Betel responded to Reichman advising that since (a) Reichman was already in possession of all of the proposed revised terms, and (b) Betel’s assistant was out of town, he was unable to re-do the offer himself but he could “however, read and edit”.
[39] In response, Reichman asked Betel for a copy of the current, draft offer and agreed to provide a revised offer to lease for Betel’s review.
[40] On December 30, 2014, Betel sent an e-mail to Reichman, the contents of which form much of the basis for the dispute between the parties. I note that neither party tendered affidavit of evidence from Reichman or Betel on this motion. The contents of Betel’s December 30, 2014 e-mail are as follows:
“I spoke to my client this A.M.
I’m advised that;
Your clients are waiting for approval by Chrysler for use of subject property.
He has agreed that they can have until Jan. 14 to firm up a deal. There seems little point in doing documents until Jan. 14-15. We have discussed and agreed mostly re Environment as well as Fixtures.
Please confirm receipt.
Discuss with your clients and let me know where we are apart.
Regards,
Myer Betel”
[41] 226 takes the position that the words “he has agreed that they can have until Jan. 14 to firm up a deal” must be interpreted to mean that Crossview was being given until that date to finalize its new offer to lease with 226 (i.e. and not an amendment to the original agreement).
[42] Crossview takes the position that the subject words mean that 226 was allowing Crossview one extra day (i.e. from January 13 to January 14, 2015) to firm up Crossview’s deal with Chrysler and, if so obtained, waive the condition in clause 16. I will have more to say about this e-mail hereinafter.
[43] Later that same day (December 30, 2014), Reichman responded to Betel and advised that he had already drafted most of the revised offer to lease, and enclosed a copy of that document for Betel’s review as Reichman was scheduled to be out of the office until January 12, 2015. Reichman noted that the draft, revised offer to lease was still subject to Crossview’s review and approval.
[44] Over the next several days Crossview continued its efforts to secure approval from Chrysler for the dealership at the property. Interestingly, on his cross-examination Agha could not confirm whether he ever saw Betel’s e-mail of December 30, 2014 to Reichman.
[45] In any event, Agha was able to secure an unsigned letter from Chrysler stating that Chrysler was prepared to enter into a standard Sales and Service Agreement with a “new corporation for the purpose of carrying out the business”. This letter contained a series of conditions which Agha and/or the “new corporation” had to fulfill in order to commence operations as a Chrysler dealership. The letter is dated January 9, 2015, and was signed by Agha as “Dealer Principal” on January 12, 2015. While it was not counter-signed by Chrysler until April 7, 2015, Agha signed the letter indicating his agreement with Chrysler’s terms prior to the expiry of the conditional period set out in clause 16, regardless of whether that conditional period expired on January 13 or 14, 2015.
[46] In the afternoon of January 14, 2015, Reichman e-mailed Betel to advise that, according to Reichman’s understanding, the parties had now agreed not to use a new offer to lease but simply amend the existing agreement. Reichman enclosed a revised draft Letter Agreement reflecting same for Betel’s review.
[47] Later that day, Agha signed a formal waiver of clause 16 on behalf of Crossview, and at approximately 9:30 p.m. that evening Agha delivered that signed waiver to 226 c/o Reza/Royal LePage.
[48] The following morning, Reichman delivered another copy of Crossview’s signed waiver of clause 16 to Betel and requested a copy of the formal lease containing the salient terms set forth in the agreement.
[49] In response, Betel delivered a letter to Reichman later that day stating as follows:
“I have your letter of January 15, 2015. The Agreement to Lease was acknowledged by all parties to be at an end and you were preparing a new offer to lease the Premises with a closing date in March, 2015. Notwithstanding your letter of today’s date, there is no agreement.
Primarily because your client revised the agreement to Lease and has been negotiating and continuing to negotiate up until January 14, 2015 when he purported to waive the condition and then went on to make all new terms. With respect, you cannot suck and blow at the same time. You have no deal.”
[50] There is no written acknowledgement by the parties that the agreement was at an end. Betel never took any such position up to that point. Even in his January 15, 2015 letter, Betel did not specify why or how the parties purportedly acknowledged the agreement to be at an end (i.e. there was no stated reliance by 226 upon clause 17 or clause 19).
[51] Not surprisingly, Reichman delivered a lengthy letter on January 16, 2015 taking issue with Betel’s position. Betel did not respond to Reichman’s January 16, 2015 letter until February 3, 2015, nearly three weeks after Crossview delivered its executed waiver. In Betel’s February 3, 2015 correspondence, he provided Reichman with “notice” that the agreement was null and void. On that date, the stated basis for 226’s position was that Crossview’s signed waiver was delivered one day late contrary to the provisions of clause 16 (i.e. on January 14, 2015 and not January 13, 2015). According to Betel, as the waiver was “delivered out of time” the agreement became null and void and 226 “will be returning the deposit” to Crossview.
[52] No other grounds to support 226’s position are stated in Betel’s correspondence. Curiously, if the agreement was purportedly “null and void” as a result of a late waiver on January 14, 2015, the agreement was therefore capable of being firmed up by a timely delivery of the waiver and was thus valid and subsisting up to January 13, 2015.
[53] Within two days, 226 retained litigation counsel. In correspondence sent from litigation counsel to Reichman on February 5, 2015, 226 continued to rely upon the sole ground raised in Betel’s correspondence to support its position; namely, Crossview’s waiver was delivered one day too late. Once again, no further grounds were raised by 226.
[54] Correspondence was then exchanged between litigation counsel for the parties over the next few weeks, all in anticipation of this litigation. It was not until February 18, 2015 when 226 purported to give “formal notice” (again?) through its litigation counsel that 226 found Crossview’s financial statements to be unsatisfactory, thereby terminating the agreement pursuant to clause 19 if the agreement had not already become null and void due to the late delivery of the waiver. This was the first time that 226 raised clause 19 in support of its position.
[55] Of note, on February 13, 2015, 226 entered into a conditional Agreement to Lease with R.S. Investments Inc. in trust. That agreement is conditional upon the within proceedings being terminated in favour of 226, and in particular Crossview’s motion for injunctive relief and a CPL being dismissed. Of note, the rent under the R.S. Investments agreement is substantially higher than the rent provided for in Crossview’s agreement.
[56] As stated above, the parties attended on March 2, 2015 to argue Crossview’s motion seeking interim injunctive relief. 226 did not deliver its Statement of Defence until April 6, 2015, when 226 raised, for the first time, its reliance upon clause 17, and the fact that 226 did not deliver the waiver of clause 17 within the two day conditional period. This argument does not appear to have been advanced before Justice Sanderson at the return of Crossview’s original motion, and was a “late addition” to the joining of issues after litigation ensued.
[57] For its part, Crossview maintains that it has expended considerable effort and incurred substantial expenses to successfully obtain the letter of intent from Chrysler. However, on cross-examination many of 226’s questions inquiring into the merits of those contentions, and in particular production of documentation to substantiate the expenses claimed, were refused.
[58] Crossview takes the position that the property is unique in that:
(a) It is well situated in a high traffic commercial thoroughfare at the intersection of Yonge Street and Elgin Mills Road in Richmond Hill, Ontario.
(b) There are no similar sized properties with exposure to a commercial thoroughfare available for lease in the immediate vicinity.
(c) The property has been approved for use by the City of Richmond Hill as an automobile dealership.
(d) No alternative premises located in the area will be able to obtain a zoning permit entitling use as an automobile dealership.
(e) Chrysler has designated the property as a suitable location for a dealership based upon, inter alia, Chrysler’s interest in protecting the territory rights of its dealers; and
(f) Given the property’s historical use as a Chrysler dealership and its current use as a used car dealership, Crossview expects little to no marketing efforts would be necessary in order to generate immediate sales.
[59] In response, 226 retained the services of a real estate agent named John Park who advised 226 that there were multiple properties in the immediate area with automobile dealership zoning. Mr. Park did not provide an affidavit, and his “evidence” was tendered through Hadi’s affidavit under the guise of hearsay. None of the “multiple properties in the immediate area” appear to be currently available through leasing arrangements.
[60] Finally, 226 takes the position that Chrysler’s letter of intent did not grant Crossview any right to operate an automobile dealership. It granted Agha, or a company to be incorporated, that conditional right. Further, Chrysler’s letter of intent states that the rights thereunder cannot be assigned or transferred without Chrysler’s consent. In response, Crossview takes the position that as it is a “shelf corporation and/or affiliate” under Agha’s control, there would be no issue in Crossview taking over the operations of the automobile dealership.
Interlocutory Injunctions
[61] This Court must consider and apply the well-known test for motions for interlocutory injunctions as set out by the Supreme Court of Canada in R.J.R.-Macdonald v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311. A moving party must present evidence to allow the motions judge to assess the following three elements of that test:
Is there a serious question to be tried?
Would the moving party seeking the injunction suffer irreparable harm if the relief is not granted?
Which party would suffer the greater harm from the granting or refusal of the relief (i.e. the balance of convenience)?
[62] In exercising its discretion, the Court must approach the three elements of the test as a whole, and not individually. To satisfy the requirement of a “serious question to be tried”, the moving party must show that its claim is not frivolous or vexatious. Typically, the Court need not engage in a detailed review of the merits of the case as the “serious question to be tried” element requires a low threshold.
[63] Both parties agree that the RJR test governs this case. However, 226 submits that on the facts of this case, Crossview must satisfy this Court that it has a strong prima facie case rather than show a serious question to be tried. In support of its position, it relies upon the decision of Justice Gray in Patrick Chadwick Inc. v. Brimley Business Centre Inc. (1999) 36 C.P.C. (2nd) 152 (Gen. Div.).
[64] In Chadwick, a commercial lease between the plaintiff (tenant) and the defendant (landlord) expired and the plaintiff failed to exercise its right of renewal thereunder. After negotiations ensued, the defendant kicked the plaintiff out of the premises forcing the plaintiff to commence proceedings and move for an interlocutory injunction restraining the defendant from taking possession. In dismissing the plaintiff’s motion, Justice Gray found on the facts of that case that the appropriate test was a strong prima facie case due to the fact that the injunction sought by the plaintiff, if granted, would effectively bring the action to an end.
[65] Chadwick was decided prior to the Supreme Court of Canada’s seminal RJR decision. In RJR, the Supreme Court of Canada referenced the following excerpt from M.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294 with approval:
“Where, however, the grant or refusal of the interlocutory injunction will have the practical effect of putting an end to the action because the harm done will have been already caused to the losing party by its grant or its refusal is complete and of the kind for which money cannot constitute any worthwhile recompense, the degree of likelihood that the plaintiff would have succeeded in establishing his right to an injunction if the action had gone to trial is a factor to be brought into the balance by the judge in weighing the risks that an injustice may result from his deciding the application one way rather than the other.”
[66] In my view, the granting or refusal of the injunctive relief sought by Crossview would not necessarily dispose of this proceeding. The facts of Chadwick are distinguishable from this case. In Chadwick, the plaintiff conceded that it did not exercise the option to renew within the time stipulated for that purpose under its lease with the defendant. Here, the parties have executed an agreement but differ upon whether the conditions set out therein were satisfied or had expired.
[67] If Crossview was to lose this motion, such a result would not preclude Crossview from continuing with this action, especially for a damages award in the event it is proven and accepted at trial that the parties entered into a binding and enforceable agreement.
[68] I therefore find that with respect to the first branch of the RJR test, Crossview need only satisfy this Court that there is a serious question to be tried.
Certificate of Pending Litigation
[69] Both parties agree upon the test to be applied by this Court in determining whether leave to issue a Certificate of Pending Litigation (“CPL”) ought to be granted. With respect to a party’s requirement to demonstrate that an “interest in land” is an issue, the threshold in respect of that onus is whether there is a triable issue as to such a claimed interest in land. The moving party need not show that it will succeed on its claim to the interest in land.
[70] The test on a motion seeking leave to issue a CPL is the same as a test on a motion seeking an order discharging a CPL. As summarized by Master Glustein (as he then was) in Perruzza v. Patone 2010 ONSC 841, in exercising its discretion and looking at all relevant matters between the parties to determine whether a CPL should be granted or vacated, the Court may consider the following factors:
(i) Whether the plaintiff is a shell corporation;
(ii) Whether the land is unique;
(iii) The intent of the parties inquiring the land;
(iv) Whether there is an alternative claim for damages;
(v) The ease or difficulty in calculating damages;
(vi) Whether damages would be a satisfactory remedy;
(vii) The presence or absence of a willing purchaser;
(viii) The harm to each party if the CPL is or is not removed with or without security;
Decision
[71] In assessing the first part of the RJR test, Crossview must satisfy this Court that there is a serious question to be tried insofar as its claim that it has a binding agreement with 226.
[72] In addition, the injunctive relief sought by Crossview can only be granted if there is a serious question to be tried with respect to its claim for specific performance of the purported agreement. Had Crossview only sought damages arising from an alleged breach of the agreement, there would be no legal or equitable justification to support the granting of an injunction.
[73] As previously stated, there is no dispute that 226 did not waive the condition in clause 17 within the two day period. Crossview maintains that despite Reichman pressing that issue with Betel in December 2014, 226 never took the position that the agreement was at an end due to clause 17 until well after the legal proceedings were commenced. Crossview submits that Betel’s silence, coupled with Betel’s continued representations throughout December 2014 and early January 2015 that the parties were jointly working towards “amendments” of the agreement, amount to an estoppel argument which would preclude 226 at trial from relying upon clause 17 as justification for the “expiry” of the agreement.
[74] 226 relies upon the decision of the Court of Appeal for Ontario in Sales Promotion Services Inc. v. Ultramar Canada Inc. (1998), 1998 CanLII 5995 (ON CA), 2 B.L.R. (3d) 243 in support of its position that Betel’s silence cannot support a finding of estoppel. In Sales Promotion, the parties entered into an oral agreement in the absence of any note or memorandum in writing codifying the agreement which would satisfy the provisions of section 5(1) of the Sales of Goods Act, R.S.O. 1990, c. S.1. As the oral agreement was unenforceable, the plaintiff needed to prove that the defendant waived or was estopped from relying upon the provisions of section 5(1) of the Sales of Goods Act. At trial, the Court found the existence of such an estoppel based upon the silence and ignorance of urgent correspondence sent to the defendant.
[75] In overruling the trial judgment, the Court of Appeal for Ontario stated as follows:
“In order to ground an estoppel, there must be a promise or a representation in the nature of a promise; the promise must be intended by the promisor to affect the legal relationship between the parties; and, by the promise, the promisor must indicate that it will not insist on its strict legal rights arising from its relationship with the promisee. Even assuming that such a promise or a representation may be made by silence, the promise must be an unequivocal representation that the promisor does not intend to enforce his strict legal rights against the promisee. To bring the legal doctrine into operation, the promise or representation must be ‘clear’ or ‘unequivocal’ or ‘precise and unambiguous’”.
[76] The Court found that the defendant’s silence did not convey a clear, unequivocal or unambiguous promise to waive its prescribed legal rights under section 5(1) of the Sales of Goods Act or to undertake to sign a written acknowledgement which would satisfy the terms of that section. Further, the Court found that the very fact that the plaintiff felt obligated to make repeated requests for written confirmation supported the view that the plaintiff was not entitled to draw an inference of waiver or estoppel from the defendant’s silence.
[77] As emphasized above, in Sales Promotion the findings made by the judge at first instance and the Court of Appeal were after a trial during which all necessary witnesses presumably testified before the Court. In the within case, neither Reichman nor Betel gave any evidence in support of or in response to Crossview’s motion. This proceeding is essentially in its infancy.
[78] Further, while Betel was conspicuously silent in response to Reichman’s claims for a formal waiver of clause 17, I am not prepared at this stage to overlook the balance of Betel’s responses which until January 15, 2015 (a) never took the position that the agreement was at an end (by reason of clause 17 or otherwise), and (b) asked Reichman to prepare the “amendments” for Betel’s review.
[79] If 226 took the internal position that the agreement was at an end on November 26, 2014, why did it cash Crossview’s deposit cheque? Further, why did it not return the deposit funds to Crossview as there was no legal basis for holding unto those funds absent the continued validity of the agreement?
[80] I therefore find that the issue of whether 226 is estopped from relying upon clause 17 is not frivolous and vexatious, and qualifies as a serious question to be tried.
[81] Similarly, 226’s reliance upon alternative grounds supporting the expiry/termination of the agreement also raises triable issues. As summarized earlier, the first position advanced by Betel was that the parties had “mutually agreed to terminate the Agreement to Lease”. On the record before this Court, there is no such mutual agreement in existence at that time.
[82] 226 then advanced the argument that Crossview’s delivery of the waiver contemplated by clause 16 was one day late as it arrived on January 14, 2015. At this stage, the contents of Betel’s December 30, 2014 e-mail are ambiguous at best. Without deciding the proper interpretation to be given to Betel’s e-mail, it is certainly arguable that the words “firm up a deal” related to Crossview seeking approval from Chrysler as that is what was happening at that time. Unfortunately, as neither Reichman nor Betel gave sworn evidence on this motion I am not in a position to comment further other than to find that the contents of the December 30, 2014 e-mail raise a serious question to be tried.
[83] With respect to 226’s reliance upon clause 19, its dissatisfaction with the financial statements was never communicated to Crossview until February 18, 2015, approximately one month after Betel took the original position that the parties had mutually agreed to terminate the agreement. While clause 19 does not contain a deadline by which 226 was to waive that financial condition, the terms of the agreement must make commercial sense, and the trial judge will be in the best position to determine whether a reasonable period ought to be implied in clause 19.
[84] Having found that there is a serious question to be tried with respect to the validity of the agreement, I still must find that Crossview’s claim for specific performance is not frivolous or vexatious. Even though this Court need not engage in an extensive review of the merits, I must nevertheless be satisfied that there is a serious question to be tried with respect to the availability of specific performance as a remedy to Crossview in this proceeding.
[85] As stated by the Court of Appeal for Ontario in John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003) CarswellOnt 342, in order to establish that a property is unique for the purpose of the remedy of specific performance, the moving party must show that the property in question has a quality that cannot be readily duplicated elsewhere. This quality should relate to “the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended”.
[86] In the John E. Dodge Holdings trial judgment (upheld by the Court of Appeal for Ontario), the late Justice Lax stated as follows:
“It is important to keep in mind that uniqueness does not mean similarity. It means that the property has a quality (or qualities) that make it especially suitable for the proposed use that cannot be reasonably duplicated elsewhere. To put this another way, the plaintiff must show that the property has distinctive features that make an award of damages inadequate. The plaintiff need not show that the property is incomparable.”
[87] 226 submits that there is nothing unique about the property to Crossview, for Crossview did not obtain the necessary approval from Chrysler. It was Agha who personally obtained that approval. In response, Crossview takes the position that the terms of Chrysler’s approval mandate Agha to carry on business through a new corporation, something which Crossview (as a “shelf corporation”) can do in the circumstances.
[88] Crossview submits that its agreement with 226 is fundamental to establishing the Chrysler dealership, and that it has expended considerable effort and incurred substantial expenses to obtain Chrysler’s approval, although it refused to answer questions posed by 226 at Agha’s cross-examination to substantiate those contentions. Chrysler must also view the property as unique for its approval purposes.
[89] Hadi relies upon the “evidence” of John Park who advised Hadi that there are multiple properties in the immediate area with auto dealership zoning. To begin, Mr. Park’s evidence is inadmissible as being both hearsay and opinion evidence. I do not know why Mr. Park did not tender an affidavit setting out his opinion and the basis for it. Nevertheless, as the property (a) was previously used as a Chrysler dealership, (b) is zoned for the stated business purpose, and (c) approved as a suitable location by Chrysler, I find that there is a serious question to be tried with respect to the availability of specific performance, and Crossview’s request for that remedy is not frivolous or vexatious.
[90] I therefore find that Crossview has satisfied the first element of the RJR test.
[91] With respect to Crossview’s claim that it will suffer irreparable harm in the absence of the injunction being granted, I would have preferred to have been furnished with further particulars of Crossview’s “extensive efforts and considerable expense” incurred in securing Chrysler’s approval. Obviously, if this Court was to dismiss Crossview’s request for injunctive relief, a damages claim would subsist. However, due to my finding that there is a serious question to be tried with respect to the property’s uniqueness, it follows that there is potential irreparable harm to be suffered by Crossview if 226 proceeds with its conditional lease with R.S. Investments.
[92] The evidence before this Court is that there are no similar available properties for Crossview’s specific, intended use. All of Crossview’s work (although not particularized) incurred in securing Chrysler’s approval would be undone in the absence of an injunction. I am therefore prepared to find on this motion that Crossview has satisfied the second element of the RJR test.
[93] With respect to the balance of convenience, both Crossview and 226 have legitimate competing interests to be considered by this Court. On one hand, Crossview is a “shelf corporation” in its proverbial business infancy which has taken the steps set out above and posted the deposit funds as security for any damages caused to 226 as a result of the granting of an injunction. On the other hand, 226 is an existing, ongoing business (although apparently solely incorporated for the purpose of owning and operating the property) which stands to lose its potential lease with R.S. Investments and thus additional income over and above what Crossview would be paying 226 under the agreement.
[94] I do not believe that it would be an equitable result to grant Crossview the injunctive relief until the trial of this action. Presumably, the approval granted by Chrysler will not be maintained indefinitely as Chrysler would not wish to be dragged into litigation in which it cannot participate or control.
[95] I find the more just result to be a continuation of the injunction granted by Justice Sanderson on the condition that Crossview move expeditiously for summary judgment based upon its claim for specific performance. As Crossview believes it has the necessary evidence to substantiate a claim for specific performance, I order the parties schedule the first available attendance in Civil Practice Court and obtain an expedited return date for a motion for summary judgment seeking specific performance of the agreement. The injunctive relief should only last until the disposition of Crossview’s motion for summary judgment, without prejudice to the parties making further submissions at that time before the judge hearing that motion.
[96] If Crossview does not succeed in obtaining specific performance of the agreement on its motion for summary judgment, then (subject to an appeal and/or stay of that decision) the injunction shall terminate as there are no longer any grounds to support it. If Crossview succeeds on its motion for summary judgment, then the injunction would presumably be moot.
[97] I further order that since it may take a few months for Crossview’s motion for summary judgment to be disposed of by the Court, as a further term of the continuation of the injunction granted by Justice Sanderson, Crossview shall post into Court by way of certified cheque or letter of credit the sum of $150,000.00 being approximately twice the amount ordered Justice Sanderson to date. I further order that the undertaking as to damages shall apply to Crossview, Minthollow and Sweetbriar. All three corporations must provide their signed undertakings as to damages to 226 within seven days of the release of these reasons.
[98] Finally, with respect to Crossview’s motion for leave to issue a Certificate of Pending Litigation, given the relief granted above I view the registration of a CPL to be “overkill” in the circumstances. The terms of the injunctive relief are adequate to protect Crossview’s interests until its motion for summary judgment is determined. While I am not finding that there are insufficient grounds to grant a CPL, in the circumstances and balancing the factors set out in the governing test, I believe that a CPL is unnecessary. On that basis, Crossview’s motion for a CPL is dismissed.
Costs
[99] Both parties sought costs of this motion, and the attendance before Justice Sanderson, on a partial indemnity basis. Crossview has been the more successful party on this motion. However, as is often the case in successful motions for injunctive relief, the ultimate determination of whether or not the issuance of the injunction was warranted will be made by the trial judge, or in this case, the judge hearing the motion for summary judgment.
[100] I therefore reserve the costs of this motion, including the attendance before Justice Sanderson, to the judge hearing Crossview’s motion for summary judgment.
Diamond J.
Released: May 5, 2015
CITATION: Crossview Developments Inc. v. 2262443 Ontario Limited, 2015 ONSC 2854
COURT FILE NO.: CV-15-521880
DATE: 20150505
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CROSSVIEW DEVELOPMENTS INC.
Plaintiff/Moving
– and –
2262443 ONTARIO LIMITED
Defendant/Respondent
REASONS FOR DECISION
Diamond J.
Released: May 5, 2015