Court File and Parties

COURT FILE NO.: CV-13-5678-00 DATE: 20161003 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Correct Building Corporation and Correct Group Inc., Plaintiffs AND: Jeffrey Lehman, Jon Babulic, Richard Forward, Janet Foster, Charles Magwood, Edward Archer, Ingrid Peters, Deborah McKinnon, Jennifer Robinson, Metrolinx, Robert Steward, Indicom Appraisal Associates Ltd., Alex Nuttal, Jerry Moore, Michael Prowse and the Corporation of the City of Barrie, Defendants

BEFORE: Ricchetti, J.

COUNSEL: C. Bryson for the Plaintiffs A. Formosa and B. Faren for Jeffrey Lehman, Jon Babulic, Richard Forward, Janet Foster, Edward Archer, Deborah McKinnon, Jennifer Robinson, Alex Nuttal, Jerry Moore, Michael Prowse and Charles Magwood (the “Moving Defendants”)

HEARD: September 29, 2013

ENDORSEMENT

THE MOTION

[1] This is a motion by the Moving Defendants for summary judgment dismissing the action of Correct Building Corporation (CBC") against them.

THE UNDISPUTED FACTS

[2] This claim arises from an aborted development of certain lands in the City of Barrie known as the Allandale Train Station Lands ("Lands").

[3] In February 2008, the City of Barrie issued a Request for Expressions of Interest for the sale and redevelopment of the Lands.

[4] YMCA and the Correct Group Inc. ("CGI") jointly submitted an expression of interest.

[5] On April 21, 2009, the City of Barrie and CGI entered into a Confidentiality Agreement.

[6] On May 12, 2009 the City of Barrie and YMCA/ CGI (as joint proponents) entered into a preliminary agreement ("Preliminary Agreement") for the sale and redevelopment of the Lands (the Project"). Whether or not the Preliminary Agreement is an enforceable agreement is not a finding which needs to be or is made by this court. That is an issue in another proceeding - the Orangeville Action described below and an issue in this proceeding between the City of Barrie and CGI. For the purpose of this motion, this court is proceeding on the basis that the Preliminary Agreement is a valid agreement.

[7] In 2010, the YMCA decided not to go ahead with the Project. CGI remained interested in proceeding with the Project. The City of Barrie and CGI continued their communications regarding the Project. Changes to the proposed development were discussed.

[8] Eventually, the City of Barrie and CGI could not agree on an agreement of purchase and sale. At least one of the main issues was the value of the Lands to be acquired by CGI from the City of Barrie in light of environmental contamination and aboriginal artifacts (i.e. a Native burial site) alleged to be on the Lands.

[9] In 2011, given the continued impasse, the City of Barrie decided not to proceed with the Project with CGI.

[10] The Project came to an end.

The Orangeville Action (384/11)

[11] On December 15, 2011, CGI commenced an action in Orangeville against the Corporation of the City of Barrie claiming specific performance of the Preliminary Agreement or, in the alternative, damages and other ancillary relief.

[12] The Orangeville Action remains outstanding.

The Brampton Action (CV-13-5678-00)

[13] On December 16, 2013, CGI and CBC commenced this action.

[14] The claim by the Plaintiffs against the Moving Defendants (although not identical claims for each of the individual Moving Defendants) are for various claims in tort including civil conspiracy, unlawful/intentional interference with economic relations/interests, negligent and/or fraudulent misrepresentation, inducing breach of the Preliminary Agreement and causing a breach of a Confidentiality Agreement.

[15] All of these claims arise from alleged actions of the Moving Defendants regarding the aborted Project while the Moving Defendants were persons at the City of Barrie involved in the pursuit of, negotiations regarding and decision to abort the Project.

[16] The Moving Defendants were: a) Lehman - the City of Barrie councillor; b) Babulic - the Chief Administrative Officer of the City of Barrie; c) Forward - the Director of Culture, Development and Infrastructure of the City of Barrie; d) Foster - City of Barrie's Revitalization Coordinator and Senior Development Planner; e) Archer - City of Barrie's General Manager of Corporate Services; f) McKinnon - City of Barrie's Director of Finance; g) Robinson - City of Barrie councillor; h) Nuttal - City of Barrie councillor; i) Moore - City of Barrie councillor; j) Prowse - City of Barrie councillor; and k) Magwood - City of Barrie Centre Facilitator.

[17] None of the Moving Defendants were a party to the Preliminary Agreement between the City of Barrie and CGI.

[18] None of the Moving Defendants were a party to the Confidentiality Agreement.

[19] There is no written agreement between either of the Plaintiffs or any of the Moving Defendants. In particular, there is no written agreement between CBC and any of the Moving Defendants.

[20] A review of the 382 paragraph Statement of Claim discloses the main claims against the Moving Defendants as including: a) withholding information regarding YMCA's financial inability to proceed with the Project; b) withholding information regarding the environmental contamination of the Lands; c) withholding information regarding the aboriginal artifacts and possible burial site on the Lands; d) failing to disclose the lack of a building permit for the Go Station to be built on the Lands; e) failing to comply with the Preliminary Agreement; f) acting in a manner which resulted in no Agreement of Purchase and Sale being finalized; and g) making untrue statements to the public as to why the Project didn't proceed.

[21] In other words, the Plaintiffs allege that it was the actions or inactions of the individual Moving Defendants that created liability in tort to CBC.

[22] In the case of CGI, it claims the liability is in contract and tort - an issue which is not the subject of this motion. Those claims can proceed regardless of the outcome of this motion.

[23] In the case of CBC, it claims liability of the Moving Defendants (paragraphs 281to 331) in tort.

CBC

[24] The Correct Group of Companies is a collection of companies "generally owned and/or controlled by members of the Furbacher Family ("Correct Group"). It is not a corporation. It is not a legal entity at law.

[25] CGI is one of the companies which is part of the Correct Group.

[26] CBC is one of the companies which is part of the Correct Group.

[27] There are other related companies in the Correct Group.

[28] CBC was not a party to the Preliminary Agreement. CBC was not a party to the Confidentiality Agreement.

[29] All executed documents were between CGI and the City of Barrie. CGI was defined in the Preliminary Agreement as "CGC" which the Plaintiff's suggest is evidence that the City of Barrie knew they were dealing with the "Correct Group of Companies". This court is not persuaded that this is significant.

[30] There is reference in the "presentations" made to the City of Barrie of "CBC".

[31] For the purposes of this motion, I accept that the City of Barrie and the Moving Defendants knew of the Correct Group, that CBC was a company in the Correct Group and that it was “anticipated” other Correct Group company might be involved in the construction of the development. However, it is undisputed that the Preliminary Agreement, the subsequent dealings regarding the Project(see paragraph 130 of the Statement of Claim) and the various proposed draft Agreements of Purchase and Sale for the Project (see paragraphs 151- 168 of the Statement of Claim) were between CGI and the City of Barrie. CBC was not a party to these dealings.

[32] Clearly, Correct Group decided to proceed with the Project through CGI, a separate corporate entity, for its own reasons, presumably to ensure any liabilities, benefits and responsibilities would be between CGI and the City of Barrie. No doubt, if liabilities had accrued under the Preliminary Agreement and the City of Barrie attempted to advance a claim against the remaining companies in the Correct Group, the companies in the Correct Group would correctly raise the fact CGI was a separate corporate entity.

THE CENTRAL ISSUE BEFORE THIS COURT

[33] The Moving Defendants submit that: There were no dealings between CBC and the Barrie Defendants. CBC and the Barrie Defendants are not parties to the Preliminary Agreement. There is no contractual or other relationship between CBC and Barrie or CBC and any of the Barrie Defendants.

[34] Mr. Furbacher states in his affidavit that: It was always anticipated that CBC would be used for the construction portion of the Allandale Project. Reference to CBC in the Allandale Project planning process are listed in Paragraph 12 of the Affidavit of Richard Forward sworn August 19, 2016 in support of the herein motion. (emphasis added)

[35] Paragraph 12 of Mr. Forward's affidavit refers to only 7 documents of 812 documents produced by the Plaintiffs that mention CBC - six are presentations five of which predate the Preliminary Agreement and the sixth was a presentation by CGC. The last document consists of undated drawings.

[36] As for evidence that any of the Moving Defendants were told prior to the termination of the Project that CBC would be the builder – there is none!

[37] Even a detailed review of the Statement of Claim, the allegations against the Moving Defendants relate to: a) their dealings with CGI, not CBC; b) alleged omissions by Moving Defendants to say or do something; c) in one case the pleading (para 298) states “Forward also made verbal representations to Furbacher, CBC, CGC and CGI that they reasonably relied upon, that the Lands were clean and free from any environmental contamination or concerns…”. However, there are no details with respect to this allegation and there is no evidence on this motion regarding this allegation.

POSITION OF THE MOVING DEFENDANTS

[38] There is simply no evidence to support any claim by CBC against the Moving Defendants and there is no genuine issue requiring a trial.

POSITION OF CBC

[39] Essentially, and rather surprisingly, CBC submits that it should be allowed to proceed to the examinations for discovery to obtain evidence to support its causes of action against the Moving Defendants. This raises the spectre that CBC’s claims are nothing more than a “fishing expedition” which is not appropriate or helpful to the responding party resisting a summary judgment motion. See Business Development Bank of Canada v. Van Wyk, 2002 14109 (ON SC).

THE ANALYSIS

The Law

[40] The test for summary judgment motions is not in dispute. Hyrniak v. Mauldin, 2014 SCC 87 sets out the applicable law. The court shall only grant summary judgment if it is satisfied that there is no genuine issue requiring a trial.

[41] In Hryniak 87, the Supreme Court clarified the test to apply on a summary judgment motion. There will be no genuine issue requiring a trial if the evidence permits the court to make a fair and just determination on the merits. This will be the case when a motion for summary judgment (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. What is a "fair and just determination on the merits" depends on the nature of the issues and the evidence on the summary judgment motion.

[42] On a motion for summary judgment, a party’s evidence must set out coherent evidence of specific facts, showing that there is a genuine issue requiring a trial. A responding party to a motion for summary judgment is obliged to put his or her best position forward and, in that context, must do more than simply assert uncorroborated facts: Canadian Imperial Bank of Commerce v. Mitchell, 2010 ONSC 2227 at para. 18.

The Defence has had ample time to put its "best foot forward"

[43] The dispute over the Project arose in 2011. The Orangeville Action has been outstanding for almost five years. The merits of CGI’s claim with respect to the Preliminary Agreement have been the subject of several extensive motions in the Orangeville Action.

[44] In the Brampton Action, productions have been exchanged. Examinations for discovery have been completed of a number of the Moving Defendants - but not all.

[45] This motion was served on September 6, 2016 although prior notice had been given to CBC's counsel in July 2016.

[46] There was no cross-examination of Mr. Forward on his affidavit.

[47] There was no examination of any of the Moving Defendants as witnesses on a pending motion.

[48] CBC's responding affidavit was only prepared on September 27, 2016 just two days before the return of this summary judgment motion.

[49] There is not a single word in CBC's materials that includes ANY evidence of representations made by any of the individual Moving Defendants to CBC directly.

[50] At its highest, CBC simply points to the fact it was known or should have been known to the Moving Defendants that it was "anticipated" CBC would build the Project and that the tortious conduct of the individual Moving Defendants would cause CBC damages.

[51] Counsel for the Plaintiffs submitted that the damages suffered by CBC and CGI arising from the aborted Project were different. This submission misses the point - what is the evidentiary basis for CBC's claim in tort against the Moving Defendants?

[52] Counsel for the Plaintiffs acknowledges that CGI's claim against the Moving Defendants is primarily in contract and that CBC's claim against the Moving Defendants is in tort.

[53] In order for CBC to establish a claim in tort against any of the individual Moving Defendants, CBC must establish that a Moving Defendants owed a duty to CBC. That issue can be determined in a fair and just manner on the record before this court.

Is there any evidence that any Moving Defendants owed a duty of care to CBC?

The Law

[54] In Cooper v. Hobart, [2001] 3 SCR 537, 2001 SCC 79 the Supreme Court described the proper approach to ascertain whether there existed a duty of care:

30 In brief compass, we suggest that at this stage in the evolution of the law, both in Canada and abroad, the Anns analysis is best understood as follows. At the first stage of the Anns test, two questions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant’s act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here? The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant. These factors include questions of policy, in the broad sense of that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care. It may be, as the Privy Council suggests in Yuen Kun Yeu, that such considerations will not often prevail. However, we think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed.

31 On the first branch of the Anns test, reasonable foreseeability of the harm must be supplemented by proximity. The question is what is meant by proximity. Two things may be said. The first is that “proximity” is generally used in the authorities to characterize the type of relationship in which a duty of care may arise. The second is that sufficiently proximate relationships are identified through the use of categories. The categories are not closed and new categories of negligence may be introduced. But generally, proximity is established by reference to these categories. This provides certainty to the law of negligence, while still permitting it to evolve to meet the needs of new circumstances.

32 On the first point, it seems clear that the word “proximity” in connection with negligence has from the outset and throughout its history been used to describe the type of relationship in which a duty of care to guard against foreseeable negligence may be imposed. “Proximity” is the term used to describe the “close and direct” relationship that Lord Atkin described as necessary to grounding a duty of care in Donoghue v. Stevenson, supra, at pp. 580-81:

Who then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

I think that this sufficiently states the truth if proximity be not confined to mere physical proximity, but be used, as I think it was intended, to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act. [Emphasis added.]

33 As this Court stated in Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, at para. 24, per La Forest J.:

The label “proximity”, as it was used by Lord Wilberforce in Anns, supra, was clearly intended to connote that the circumstances of the relationship inhering between the plaintiff and the defendant are of such a nature that the defendant may be said to be under an obligation to be mindful of the plaintiff’s legitimate interests in conducting his or her affairs. [Emphasis added.]

34 Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved. Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and to determine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant.

35 The factors which may satisfy the requirement of proximity are diverse and depend on the circumstances of the case. One searches in vain for a single unifying characteristic. As stated by McLachlin J. (as she then was) in Canadian National Railway Co. v. Norsk Pacific Steamship Co., 1992 105 (SCC), [1992] 1 S.C.R. 1021, at p. 1151: “[p]roximity may be usefully viewed, not so much as a test in itself, but as a broad concept which is capable of subsuming different categories of cases involving different factors” (cited with approval in Hercules Managements, supra, at para. 23). Lord Goff made the same point in Davis v. Radcliffe, [1990] 2 All E.R. 536 (P.C.), at p. 540:

. . . it is not desirable, at least in the present stage of development of the law, to attempt to state in broad general propositions the circumstances in which such proximity may or may not be held to exist. On the contrary, following the expression of opinion by Brennan J in Sutherland Shire Council v Heyman (1985) 1988 ABCA 234, 60 ALR 1 at 43-44, it is considered preferable that ‘the law should develop categories of negligence incrementally and by analogy with established categories’.

36 What then are the categories in which proximity has been recognized? First, of course, is the situation where the defendant’s act foreseeably causes physical harm to the plaintiff or the plaintiff’s property. This has been extended to nervous shock (see, for example, Alcock v. Chief Constable of the South Yorkshire Police, [1991] 4 All E.R. 907 (H.L.)). Yet other categories are liability for negligent misstatement: Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.), and misfeasance in public office. A duty to warn of the risk of danger has been recognized: Rivtow Marine Ltd. v. Washington Iron Works, 1973 6 (SCC), [1974] S.C.R. 1189. Again, a municipality has been held to owe a duty to prospective purchasers of real estate to inspect housing developments without negligence: Anns, supra; Kamloops, supra. Similarly, governmental authorities who have undertaken a policy of road maintenance have been held to owe a duty of care to execute the maintenance in a non-negligent manner: Just v. British Columbia, 1989 16 (SCC), [1989] 2 S.C.R. 1228, Swinamer v. Nova Scotia (Attorney General), 1994 122 (SCC), [1994] 1 S.C.R. 445, etc. Relational economic loss (related to a contract’s performance) may give rise to a tort duty of care in certain situations, as where the claimant has a possessory or proprietary interest in the property, the general average cases, and cases where the relationship between the claimant and the property owner constitutes a joint venture: Norsk, supra; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., 1997 307 (SCC), [1997] 3 S.C.R. 1210. When a case falls within one of these situations or an analogous one and reasonable foreseeability is established, a prima facie duty of care may be posited.

[55] This test was succinctly described by the Court of Appeal in the recent case of Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458:

[31] The appellants allege that OLGC owed them a duty of care to prevent Ms. Spinks from losing their money by stopping her from gambling. The motion judge applied the “Anns/Kamloops” test for recognizing a duty of care, as expressed in Edwards v. Law Society of Upper Canada, 2001 SCC 80, [2001] 3 S.C.R. 562, at paras. 9-10. In that case, the Supreme Court confirmed that at the first stage of the Anns/Kamloops test, the court must examine whether the circumstances disclose reasonably foreseeable harm and sufficient proximity between the plaintiff and defendant to establish a prima facie duty of care. At the second stage, the question is whether there are residual policy reasons for not imposing a duty of care. See also Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537, at para. 30; and Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38, [2007] 3 S.C.R. 83, at paras. 23-26, 30-32.

The Analysis

[56] For the following reasons, in my view, even if the Preliminary Agreement is a valid and binding agreement between the City of Barrie and CGI, CBC is not be able to sue the Moving Defendants in tort for its lost profits because CBC "anticipated" that it would be awarded the building contract from CGI if the Project went ahead. "Anticipation" by CBC did not create a duty of care owed to CBC by the Moving Defendants.

[57] In my view, there was neither reasonable foreseeability of harm to CBC nor a sufficient proximity of the relationship between CBC and any of the Moving Defendants to create a duty of care as the basis for the alleged tortious conduct by the Moving Defendants.

Reasonably foreseeable harm and sufficient proximity

[58] On the issue of reasonable foreseeability of harm, there are two main problems: a) It is difficult to conclude that there was reasonable foreseeability of harm when it is uncertain whether CBC would actually receive the building contract if the Project went ahead (and what the scope, terms or price of the contract) since it was only anticipated. b) The second difficulty is that it is unknown whether any builder who might contract with CGI would or would not make a profit for the anticipated building contract and, if so, how much or would they lose money.

[59] The foreseeability of harm, in these circumstances, is not reasonable nor capable of creating a duty of care by any of the Moving Defendants to CBC.

[60] Turning to the sufficiency of the proximity of the relationship between CBC and any of the Moving Defendants, both parties are removed from the parties to the Project.

[61] CBC is, at best, a party with a potential interest in CGI’s dealings on the Project. The Moving Defendants are dealing with, on behalf of the City of Barrie, with CGI.

[62] There is no evidence there was any expectation prior to the Preliminary Agreement being executed or the termination of the Project that a duty of care was owed by the Moving Defendants to CBC.

[63] There is no evidence of any specific representation between CBC and any of the Moving Defendants that a duty was understood or agreed to exist or be owed by any of the Moving Parties to CBC.

[64] On the issue of reliance, Mr. Furbacher's affidavit, aside from stating that it was anticipated CBC would be the builder, does not provide any evidence that CBC relied on any specific statement by any of the Moving Defendants to ground a duty to CBC.

[65] Considering all of the circumstances, I am not persuaded that there is sufficient proximity between the relationship of CBC and any of the Moving Defendants for a duty of care to arise.

[66] I am satisfied that a fair and just determination can be made at this time, which does not require a trial, on the issue of whether any of the Moving Defendants owed a duty of care to CBC. No such duty of care existed.

Policy

[67] If necessary, I would have concluded that there are good policy reasons not to extend a duty of care to a potential subcontractor of a party to a development agreement (if one exists). Many tenders for development or construction include the names and prices of the potential subcontractors if the contract is awarded to the tendering party. If a Contract A is formed between the contracting parties, does the recipient of the tender then owe a duty to each and every one of the potential subcontractors for any losses if Contract A is breached. The consequences of imposing such a duty is neither necessary nor desirable in the circumstances of this case. The consequences to the construction industry would be overwhelming.

[68] The position of CBC would go even further. It would result in such a duty of care being imposed on those beyond the parties to the tender, negotiations or agreement by creating a duty and the foreseeability of harm to any actions or inactions of the officers, directors and anyone else involved in the dealings to third parties. Again, the consequences would be overwhelming.

[69] I also find that there is no reason to extend a duty owed to sub-contractors who “anticipate” receiving contracts if the parties are successful in concluding a development or construction contract.

Conclusion

[70] There is no evidence that any of the Moving Defendants owed a duty to CBC.

[71] If after the exchange of productions, the examination of a number of the Moving Defendants, CBC has adduced no evidence that it was owed a duty by any of the Moving Defendants. CBC cannot maintain its tort claims against the Moving Defendants.

[72] CBC's claim against the Moving Defendant's is herby dismissed.

COSTS

[73] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 5 pages, with attached Costs Outline and any authorities.

[74] Any responding party shall have two weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 5 pages with any authorities relied on attached.

[75] There shall be no reply submissions without leave.

Ricchetti, J. Date: October 3, 2016