Redfox Land Co. Inc. v. 770 Brookfield Properties Limited
CITATION: Redfox Land Co. Inc. v. 770 Brookfield Properties Limited, 2015 ONSC 4153
COURT FILE NO.: 15-64182
DATE: 2015/06/26
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
REDFOX LAND CO. INC.
Plaintiff
– and –
770 BROOKFIELD PROPERTIES LIMITED
Defendant
COUNSEL:
Charles L. Merovitz, for the Plaintiff
Craig M. Bater, for the Defendant
HEARD: June 25, 2015 at Ottawa
REASONS for decision on motion
phillips j.
[1] This is a motion brought by the plaintiff for a certificate of pending litigation in respect of a terminated agreement for certain commercial lands and premises of approximately 5 acres in the City of Ottawa known as 716 and 770 Brookfield Road, hereinafter referred to as “the property”.
[2] The parties entered into an agreement for the sale of the property from the defendant to the plaintiff in July 2014 for the price of $7,500,000. The parties initially agreed to close on September 18, 2014. The initial deposit was $250,000.
[3] On July 14, 2014, the plaintiff’s lawyer, in a letter to the vendor essentially repeated clauses of the Agreement of Purchase and Sale requesting details of any litigation, arbitration, mediation, or other proceeding which had either been threatened or commenced affecting or relating to the purchase assets and all pleadings, notices, documents and correspondence relating thereto. The plaintiff’s lawyer was provided with a response that included information with respect to a mortgage foreclosure taken against the property and was advised that that was the only litigation concerning the property.
[4] On or about September 11, 2014, the parties negotiated an extension of the closing date. An amendment to the agreement was prepared and executed granting an extension of the closing date until October 9, 2014. The amendment to the agreement also provided for a further extension, if required, to October 30, 2014 on the condition that various documents be delivered and a further $150,000 deposit be made. Subsequently, on the agreement of the parties, the closing date for the transaction was further extended to November 21, 2014. However, on November 20, 2014 the plaintiff requested a further extension of the closing date, which request was denied. By that time, the plaintiff had made a deposit totaling $400,000.
[5] It is clear on the record that the various extensions were requested by the plaintiff in order to secure funds. Those financing efforts were unsuccessful and on November 21, 2014 the plaintiff did not have sufficient funds to close the transaction. The plaintiff agreed to waive tender and the defendant terminated the agreement. In accordance with the agreement, all deposits were forfeited.
[6] Some months later, the plaintiff became aware of a 2012 consent liquidation and dissolution of an unrelated Corporation, 3762904 Canada Inc., aka Québec Co., which had assets in Quebec. Settled in October 2013, this Quebec litigation did not in any way affect the property, the owner Corporation or the owner Corporation’s ability to convey good title of the property to the plaintiff. In my view, that is the only conclusion that can be drawn from this record. There is no triable issue with respect to the connection of that matter to the property. It is completely unconnected and irrelevant to this transaction. I do not agree that the vendor had any obligation to disclose anything with respect to any dispute between the beneficial owners that had no connection to the property.
[7] The plaintiff advances the proposition that had it known about the Quebec litigation prior to November 21, 2014, it would not have agreed to waive tender. Notwithstanding the fact that the plaintiff agrees that it did not have sufficient funds to close at that time, the plaintiff asserts that the non‑disclosure on the part of the defendant would have caused the agreement to live on, constituting an interest in the property for the plaintiff.
[8] It is against this backdrop that the plaintiff has commenced an action against the defendant seeking the specific performance of the agreement of purchase and sale. Of note is the fact that the defendant has since entered into an agreement with a third party to sell the property at a higher price.
[9] A party is entitled to a certificate of pending litigation where it can show that an interest in land is in question in the proceeding, that there is a triable issue between the parties, and where the balance of convenience favors the granting of leave to issue a certificate of pending litigation, see: Kalia v. Landmortgage Corp., [2004] O.J. No. 4130.
[10] 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 sets out the test with respect to certificate of pending litigation. The factors that a court should consider are: (1) whether the plaintiff is a shell corporation, (2) whether the land is unique, (3) the intent of the parties in acquiring the land; (4) where there is an alternative claim for damages; (5) the ease or difficulty in calculating damages; (6) whether damages would be a satisfactory remedy; (7) the presence or absence of a willing purchaser; and (8) the harm to each party. The bottom line is that the plaintiff must demonstrate that there is a serious issue to be tried and that the equities favor registration of the certificate of pending litigation, pending trial or other disposition of the action.
[11] On the evidence before me, it would appear that the plaintiff is a shell company. The only reasonable inference to be drawn on this record is that the plaintiff did not ever intend to put any of its own equity into the purchase. The plaintiff’s intention always was to facilitate the purchase by way of aggregating various investment sums on behalf of an array of investors.
[12] While I can see how this property is desirable in the eyes of the plaintiff, I cannot find that it is unique. I agree that land purchased for investment purposes is distinct from residential housing in that it involves purely financial considerations. It seems to me that this property was attractive to the plaintiff primarily because of the financial opportunities it presented and not because of any unique features in and of itself. I do not equate commercial attractiveness with uniqueness.
[13] The fact that this was primarily a commercial opportunity and not really a deal over a unique property means that any loss can be compensated for in damages. In fact, since this was a pure business transaction, damages can easily be calculated.
[14] Finally, I consider that a third party has an interest in this motion in that the property is presently subject to an Agreement of Purchase and Sale involving a new purchaser, which agreement would effectively be scuttled if the property was frozen by way of the certificate of pending litigation − a result that would be very harmful to both the defendant and the third party purchaser.
[15] In my view, the plaintiff’s claim for specific performance will likely fail. It seems to me that the plaintiff no longer had an interest in the land after November 21, 2014 when it turned out to be not ready, willing or able to close the transaction because of financing difficulties. The Quebec litigation in question was not connected to the property and did not need to be disclosed. I cannot accept the argument now advanced that timely disclosure of that irrelevant fact would have led to a different result. I fail to see how it could have had any bearing on the fact that the plaintiff simply was not in any position to close this transaction on the closing date due to financial shortcomings.
[16] It is my conclusion that the plaintiff has not met the onus to register a certificate of pending litigation against the property. The motion is denied.
[17] Written submissions as to costs may be submitted within 30 days.
Mr. Justice Kevin B. Phillips
Released: June 26, 2015
CITATION: Redfox Land Co. Inc. v. 770 Brookfield Properties Limited, 2015 ONSC 4153
COURT FILE NO.: 15-64182
DATE: 2015/06/26
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
REDFOX LAND CO. INC.
Plaintiff
– and –
770 BROOKFIELD PROPERTIES LIMITED
Defendant
REASONS FOR decision on motion
Phillips J.
Released: June 26, 2015