ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-1106
DATE: 2015 11 25
B E T W E E N:
NORTHFIELD (WATERLOO) DEVELOPMENT INC.
Ray Tharpar, for the Plaintiff / Defendant by Counterclaim
Plaintiff/ Defendant by Counterclaim
- and -
NORTH AMERICAN ACQUISITION CORPORATION
Irvin Schein, for the Defendant / Plaintiff by Counterclaim
Defendant / Plaintiff by Counterclaim
HEARD: November 24, 2015
REASONS FOR DECISION
Justice D. Edwards
[1] Northfield (Waterloo) Development Inc. (“Northfield”) brings this motion to discharge the certificate of pending litigation (“CPL”) that North American Acquisition Corporation (‘North American”) obtained on an ex parte motion on June 25 2013.
[2] Northfield submits three grounds for discharging the CPL:
a) North American did not provide full and frank disclosure on the ex parte motion;
b) North American has no reasonable interest in land and no grounds for specific performance; and
c) In the further alternative, the CPL should be discharged in the exercise of my discretion under section 136(6) of the Courts of Justice Act.
Background
[3] The parties entered into an agreement of purchase and sale dated June 12, 2007. (“APS”). The purchased property is described in the APS as “approximately 7.31 acres located on the southwest corner of Northfield Drive and Bridge Street in the City of Waterloo as shown in red on Schedule A attached to this agreement”. There is no legal description of the purchased property in the APS.
[4] The critical issue between the parties is the extent of the purchased property. Northfield submits that it was Block 89. North American argues that it also includes Block 94, a one-foot reserve between Block 89 and Northfield Drive.
[5] The agreement was conditional upon the purchased property being rezoned. North American undertook the rezoning and was successful. It waived its last condition on February 22, 2013 and the transaction was scheduled to close March 11, 2013.
[6] For closing North American requisitioned a conveyance of both blocks, namely Block 89 and Block 94. Northfield replied that it never owned Block 94, it never agreed to sell it, and could not convey it. The purchase transaction did not close.
[7] On June 25, 2013 Justice Lemon granted the CPL following an ex parte motion.
Alleged Non-disclosure
[8] The first ground raised to discharge the CPL is based upon Rule 39.01(6) of the Rules of Civil Procedure:
Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient grounds for setting aside any order obtained on the motion or application.
[9] Counsel for North American does not dispute the application of this rule. However, he submits that there was full and fair disclosure of all material facts.
[10] In Hunter Square Development Inc. v. 351658 Ontario Ltd., 2002 49497, Pepall J. concluded that a material fact was a fact of which the judge hearing the motion would need to be aware in coming to the decision and that may affect the outcome. A fact is material regardless of whether disclosure would have changed the outcome of the ex parte motion. It is material if it might have an impact on granting the original order or influence the judge’s approach. 1245519 Ontario Ltd. V. Vince Rosie et al 2008 6933 (ONSC) at para 9.
[11] Northfield’s counsel also asserts that “the fair disclosure of facts relevant to the opposing party's position must be expressly set out in the body of the affidavit” and not simply contained within the exhibits to the affidavit. L’Unita Development Corporation v. 505369 Ontario Ltd. 2001 CarswellOnt. 3217, 44 R.P.R. (3d) 303.
[12] He cites a number of what he considers to be material facts that were not disclosed to the motion judge. Those include the fact that:
a) Northfield sent to North American prior to the execution of the APS a survey showing that the one-foot reserve was a separate block having a separate PIN (parcel identification number);
b) North American prepared the first draft of the APS and that this included the PIN for Block 89 alone. The PIN was deleted from the APS by Northfield;
c) a plan of subdivision was described as a permitted encumbrance in the APS. This plan of subdivision showed the one-foot reserve being retained by the subdivider. Additionally, the Statement of Claim set forth the information about the subdivision agreement. It was attached as an exhibit, but not put into the body of the affidavit material for the motion judge;
d) in 2011 American registered a caution only against Block 89;
e) in Northfield's opinion North American is a holding corporation with no assets; and
f) none of the results of North American’s due diligence during the conditional period was brought to the attention of the motion judge. In Northfield's counsel's opinion this would have been relevant as to the knowledge of North American and its intention as to what land it was purchasing.
[13] Counsel for North American submits that this case is unusual, as normally following an aborted real estate transaction the purchaser begins the court action and then seeks a CPL. In those circumstances the only pleadings that are available is that of the moving party. The concern of the court is to ensure that it has the entire story before it. He submits that the critical question must be before the court, but not the minutia.
[14] Here, the vendor, Northfield, began the action. At the time of the ex parte motion the pleadings of the vendor and purchaser were available and provided to the motion judge.
[15] Council directs my attention to L’Unita Development para. 20 in which Molloy J. states “Fair disclosure requires that the affidavit material include ‘a reasonable statement of the positions known or likely to be taken by the party or parties opposite.’” This requirement must be viewed in the context of the real estate transaction.
[16] Here the transaction had a life span in excess of 6 years. As North American elected to proceed ex parte, it assumed the obligation of full and fair disclosure. However, it was not required to produce on the ex parte motion, all of the potential evidence to support the parties’ positions. It was obligated to provide a reasonable statement of the parties’ positions.
[17] I am satisfied that the affidavit of Gilbert J. Weiss provides a full and fair disclosure of all material facts, including those facts relevant to Northfield's position.
[18] The mischief that L’Unita Development addresses is the short affidavit to which is attached voluminous exhibits, and contained within those exhibits are relevant facts. Mr. Weiss's affidavit is not such an affidavit. It accurately sets forth the issues and summarizes relevant facts contained in the exhibits.
[19] Mr. Weiss's affidavit fairly sets forth Northfield's position that it never owned Block 94 and never agreed to convey it.
[20] The first group of alleged non-disclosure relates to the due diligence of North American prior to the execution of the APS. I am satisfied that its disclosure to the motion judge would not have had an impact upon his decision. Whether the purchased property was described as one or two Blocks in various documents that North American obtained would not impact upon the motion judge’s exercise of his discretion in issuing the CPL.
[21] This is not a situation where the APS described the purchased lands as one block and North American was seeking to add a block to the purchased lands. No blocks are described in the APS. Therefore, whether due diligence documents contained one block or two blocks is not a material fact required for the motion.
[22] The second group of alleged nondisclosure relates to the APS itself and the events surrounding its drafting and execution.
[23] Both parties were aware that the lands would be rezoned and utilized for a shopping centre, rather than a residential subdivision, and that the APS was conditional on rezoning. An old plan of subdivision registered on title that would be removed upon rezoning was not a fact that needed to be brought to the attention of the motion judge.
[24] I am also satisfied that the specifics of who drafted the APS, who deleted the PIN and the reasons therefore are more properly the subject of a trial. First, I am of the view that for the purpose of the motion, this minutia was not required to be produced. Second, it would not impact upon the motion judge’s decision. For example, the fact that a representative of Northfield did not know the legal description of the lands sketched on the schedule attached to the APS and therefore deleted “Block 89” from the legal description in the APS does not assist in determining the extent of the purchased land.
[25] Both parties at trial will adduce evidence as to the events surrounding the drafting of the APS, but in the circumstances it was not required to be disclosed for the motion. It is clear from Mr. Weiss's affidavit that Northfield’s position is that it never owned the block and never agreed to sell it.
[26] The third group of alleged nondisclosure relate to North American's actions after the APS was entered into. The most critical action was the fact that North American took steps to rezone all of the lands at the corner of Northfield Drive and Bridge Street, that include block 89 and block 94. This was disclosed to the motion judge.
[27] I do not believe that the fact that North American registered a caution against Block 89 only in 2011 was a fact that should have been disclosed to the motion judge. Given that Northfield was not the registered owner of Block 94, it would not have been prudent to register a caution against those lands.
[28] The last alleged nondisclosure is Northfield’s opinion that North American is a shell corporation. For the reasons that I describe later in this decision, I reject that North American is a shell corporation.
[29] For all of the reasons stated above, I conclude that there was full and fair disclosure of all material facts; this is not a ground for discharging the CPL
[30] Counsel for Northfield argued that it was improper for North American to proceed ex parte when it knew that Northfield had legal counsel. I am satisfied that there was nothing improper in the way North American had proceeded. By proceeding ex parte it created the obligation to fairly and fully disclose material facts. However, I have found that it satisfied that obligation.
No Reasonable Claim to an Interest in Land
[31] I am satisfied that North American has established the potential entitlement to specific performance. This is sufficient for a reasonable claim to an interest in land.
Discretion to discharge CPL
[32] Both parties agree that a CPL is a discretionary remedy and that the relevant factors that I may consider are:
a) whether the plaintiff is or is not a shell corporation;
b) whether the land is, or is not, unique;
c) the intent of the parties in acquiring the lands;
d) the ease or difficulty of calculating damages;
e) whether damages would be a satisfactory remedy;
f) the presence, or absence of another willing purchaser; and
g) the harm done to the defendant if the certificate is allowed to remain or the plaintiff if the certificate is removed with or without the requirement of alternative security.
Shell Corporation
[33] Based upon the evidence before me I am satisfied that North American is not a shell corporation. Indeed, part of Northfield’s argument as to the extent of the purchased lands is that North American is a sophisticated developer with thousands of square feet of commercial shopping space under its control. The evidence of Mr. Weis is that he is a long term employee and that North American had at the time, and still has, assets in the form of agreements of purchase and sale. North American is not a shell corporation.
Intention of Parties and Uniqueness
[34] I will review whether the land is unique in conjunction with the intention of the parties in acquiring the land.
[35] The parties disagree as to the legal meaning of uniqueness.
[36] Here, the purchaser had a specific use in mind, namely the rezoning of the property in order to build and lease a commercial shopping plaza. There is evidence that the property is located in a pivotal and desirable location. The purchaser expended considerable effort to rezone the property to allow for its desired use. In addition, a substitute property was not readily available given the unique location within the City of Waterloo and its zoning.
[37] These factors have been held to give rise to a finding of uniqueness: 2039903 Ontario Inc. v. Parktrail Estates, 2008 CarswellOnt 7036 (On.S.C.J.) at para 38, 2329131 Ontario Inc. v. Carlyle Development Corp. 2014 CarswellOnt 1803 (ONCA).
[38] Counsel for Northfield submits that the intent of North American was to purchase the land for investment/profit and therefore the property is not unique. Multani Custom Homes Ltd. v. 1426435 Ontario Ltd., 2013 ONSC 4712 at para 26
[39] However, the evidence of North American was that its purpose was to rezone the lands for a shopping centre, develop the lands of the shopping centre and ultimately manage it. There was no intention to resell the land or even to develop and then sell the land. It was not purchasing as a passive investment or as inventory in the sense of building lots or existing apartment buildings, but rather as part of its business of taking land from a raw state and developing into a shopping centre that it continued to manage for years to come.
[40] I am satisfied that the property is unique in the sense that word has been interpreted for the purpose of a CPL.
Damages
[41] North American has made an alternate claim for damages. However, North American's principal claim is for specific performance. In addition, it is alternatively claiming for an order rectifying the agreement.
[42] The fact that it has made the alternative claim for damages is not in and of itself a significant factor for me to consider in exercising my discretion. What is more significant is whether damages would be a satisfactory remedy, as well as the ease or difficulty in calculating damages.
[43] Based upon the evidence I have accepted that North American intended to purchase the land to redevelop, and then subsequently manage the property on a long term basis. That is also consistent with its mode of operations. It was not purchasing in order to simply resale at a profit. In 2039903 Ontario Inc. v. Parktrail Estates, it was held that in those circumstances damages may not be an adequate remedy.
[44] In Marianai v. 778963 Ontario Ltd. 2005 CarswellOnt 5269 (OnS.C.J.) at para. 42 it was held that where a purchaser invests significant time and money towards the development of a property, damages are not an adequate remedy to compensate the purchaser.
[45] North American spent six years and over $500,000 towards developing the property. Clearly it has invested significant time and money towards the development of the property.
[46] I am satisfied that damages would not be an adequate remedy here.
[47] I am also satisfied that the calculation of damages will be difficult given the myriad of potential events that occur during the development, leasing and management of a shopping centre over many years.
Willing Purchaser
[48] Northfield has provided evidence of a potential purchaser for the land. This is a factor in favour of discharging the CPL.
Harm to Parties if the CPL remains or is lifted
[49] The evidence before me is that Northfield was created as a sole purpose corporation, to hold and develop the purchased land. Northfield indicates that there is a willing purchaser.
[50] Given the uniqueness and desirability of the property, the probabilities are high that the property would be sold. If that occurs the net proceeds could be distributed from Northfield, leaving it judgment proof.
[51] Northfield acquired the property in 1989 and did not develop it. Northfield was content to hold the property until 2007 when it entered into the APS. It held the property during those 18 years as a passive investment.
[52] North American continues its business of developing and managing shopping centres. There is no evidence that it is winding up, or that it may be judgment proof should it lose this action.
[53] I am satisfied that there is more potential harm to North American if the CPL is discharged, than there is to Northfield for the CPL to remain in place.
Ex Parte Motion
[54] Northfield submits that the fact that North American proceeded without notice to obtain the CPL is a factor inn favour of discharging the CPL. I am satisfied that this is a relevant issue in the consideration of whether there was full and fair disclosure, but it is not relevant when I weigh the equities as to whether the CPL should be discharged or not.
Conclusion
[55] After considering factors, I am satisfied that:
a) North American is not a shell corporation;
b) the land is unique;
c) North American purchased the land for the purpose of rezoning, developing and subsequently managing a shopping plaza on the long term;
d) the quantification and assessment of damages would be difficult;
e) there may be willing purchasers particularly given the uniqueness of this property; and
f) there is more potential harm to North American if the CPL is discharged than there is to Northfield for the CPL to remain in place.
[56] I find that the equities favour not discharging the CPL and dismiss Northfield's motion.
[57] If the parties cannot agree upon costs, North American shall provide its written costs submissions within 14 days; Northfield shall provide its costs submissions within seven days thereafter, and a reply, if any, within five days thereafter. Costs submissions shall be limited to three pages.
Justice D. Edwards
Released: November 25, 2015
COURT FILE NO.: CV-13-1106
DATE: 2015 11 25
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
NORTHFIELD (WATERLOO) DEVELOPMENT INC.
Plaintiff / Defendant by Counterclaim
- and –
NORTH AMERICAN ACQUISITION CORPORATION
Defendant / Plaintiff by Counterclaim
REASONS FOR DECISION
Justice D. Edwards
Released: November 25, 2015