Court File and Parties

COURT FILE NO.: CV-17-568865 Date Heard: April 6, 2017

SUPERIOR COURT OF JUSTICE – ONTARIO

Re: TWELVE GATES CAPITAL GROUP INC., Plaintiff

v.

EMINENCE LIVING INC., 2399862 ONTARIO INC., HIGHER LIVING DEVELOPMENT INC. and AZZ BUILDERS LTD., Defendants

BEFORE: Master Lou Ann M. Pope

APPEARANCES: Elliot Birnboim, Chitiz Pathak LLP, lawyers for plaintiff Fax: 416-368-0300

Sarit E. Batner, McCarthy Tetrault LLP, lawyers for defendants Fax: 416-868-0673

Reasons for Endorsement

[1] There are two motions before the court. The defendants, Eminence Living Inc., 2399862 Ontario Inc. and Higher Living Development Inc. (“defendants”), seek an order discharging the certificate of pending litigation obtained by the plaintiff, ex parte, on February 2, 2017, pursuant to s 103(6) of the Courts of Justice Act, R.S.O. c. C.43 (“CJA”), and rule 42.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 192 (“Rules”).

[2] The plaintiff seeks an order compelling John Matas (“Matas”), representative of the defendants, to answer a question he refused to answer on his cross-examination held on March 6, 2017, pursuant to rule 34.15 of the Rules.

Background

[3] This action involves three properties in Mississauga owned by the defendants located at 45 Agnes Street, 71 Agnes Street and 86-90 Dundas Street East. The properties are essentially vacant except for a small one-storey home and a parking lot. The defendants purchased the properties in 2012 to 2014 with the intention to attempt to rezone the land for high density development. The properties were purchased with a financial partner, Voreon Inc., which provided the initial capital in exchange for debt secured by the properties. The defendants sought to partner with a financial backer who could finance the equity portion of a construction loan so that the apartment buildings could be built.

[4] The properties were not zoned for high density residential buildings. Part of the process of developing the properties involved rezoning.

[5] The parties entered into negotiations concerning the structure of a deal whereby the plaintiff would become an equity partner. The parties signed a letter of intent (“LOI”) on August 3, 2016.

[6] The LOI set out a process whereby the plaintiff would have an initial 30-day due diligence period during which the defendant would provide it with information and, if the plaintiff was satisfied, it would waive the due diligence condition and “go firm.” Specifically, if the plaintiff waived the due diligence condition, the LOI provided that the plaintiff fund the “Initial Advance” $1,150,000, subject to the “Conditions Precedent” being fulfilled, and move ahead with the project. There were “Conditions Precedent” that had to be completed along with waiver of the due diligence condition before the plaintiff would “go firm.” On the other hand, if the plaintiff did not waive the due diligence condition, the plaintiff could walk away from the project and take its deposits back.

[7] In addition, the LOI contemplated that the parties would enter into a co-ownership agreement for the properties, the terms of which would have to be agreed to, if the plaintiff waived the due diligence condition and paid the initial advance. The co-ownership agreement would give the plaintiff a 60 per cent interest in the 45 Agnes and 71 Agnes properties. Then after providing an additional $7,000,000, the plaintiff would acquire a 60 per cent interest in the 86-90 Dundas Street East property.

[8] The LOI provided for a one-time unilateral extension of the 30-day due diligence period for another 30 days in exchange for paying the defendants’ legal fees up to $15,000.

[9] Upon signing the LOI on August 3, 2016, the plaintiff made a refundable deposit of $100,000.

First Due Diligence Period: August 12 to September 15, 2016

[10] The due diligence period commenced on August 12, 2016 when the plaintiff provided the defendants with a list of five items it required to complete its due diligence. These items were: (1) the plaintiff confirm its satisfaction with the construction manager, YYZ; (2) a meeting with the City of Mississauga to discuss planning that was outstanding; (3) a due diligence checklist was to be prepared; (4) confirmation of the construction budget for 45 Agnes; and (5) plaintiff’s lawyer would draft the co-ownership agreement and provide to defendants’ lawyer.

[11] The parties exchanged some due diligence materials throughout August 2016 and attended a meeting with the Mississauga City Planner. In early September 2016, the plaintiff changed its financial partner to HCI Mercantile (“HCI”). It was contemplated that HCI would fund some or all of the transactions on behalf of the plaintiff. As a result of this change, HCI made new due diligence requests.

First Extension of Due Diligence Period: September 15 to October 15, 2016

[12] The plaintiff exercised its option under the LOI and extended the due diligence period for 30 days to October 15, 2016. (The first due diligence period went from August 12 to September 12, 2016; however, the defendants gave the plaintiff an additional three days to decide whether to extend the unilateral 30-day due diligence period.)

[13] The due diligence continued throughout this period with the plaintiff making further requests of the defendants.

Second Extension of Due Diligence Period: October 15 to November 4, 2016

[14] With October 15, 2016 being the new deadline to waive the due diligence condition, the plaintiff did not waive the condition; rather, it sought an extension.

[15] On October 14, the day before the deadline to waive, the plaintiff sought additional time due to Jewish holidays. In its letter dated October 14, 2016, the plaintiff advised the defendants that its lender, HCI, was in a position to fund the initial deposit of $1,500,000 in early November. In addition, it stated that HCI was very positive about the project, it was “100% confident” it would close, and that the defendant’s lender, Mr. Stamos from Vorion Inc. “should no longer be pessimistic about 12 Gates and their funding partner.” The plaintiff stated also that the timelines were perfect as the zoning would not be done until early 2017 for 45 Agnes which triggered the closing.

[16] With its letter of October 14, the plaintiff enclosed a letter from HCI addressed to the plaintiff as evidence of HCI’s positive position with respect to this project. In its letter, HCI stated it needed two items; namely, a final report from Peter Campbell, plaintiff’s development manager, regarding questions about the project, and “timing until the end of the month to get through the holidays and confirm the mortgage piece.”

[17] On October 15, 2016, the plaintiff provided a “Due Diligence Status Report” in which it was stated that the plaintiff hoped the report would demonstrate to the defendants the merit of extending the due diligence period to October 31 “in order to make the transaction irrevocable.” In other words, this statement was an acknowledgment that, in keeping with the LOI, the deal was not irrevocable unless and until the due diligence condition was waived.

[18] Also on October 15, 2016, Mr. Matas, one of the defendants’ principals, confirmed in an email that the due diligence process still required (1) the co-ownership agreement which the plaintiff’s Due Diligence Report stated was expected that the plaintiff’s lawyer would provide a draft agreement shortly; and (2) 45 Agnes construction financing term sheet from First National which was to be provided by Eminence Living Inc. by October 20.

[19] The same day, Mr. Cogan, one of the plaintiff’s principals, stated in an email that he saw no reason why HCI and the plaintiff would not be funding the $1,500,000 by October 31, 2016 and that October 31st was more than enough time to put the deal into irrevocable status.

[20] Thus, the defendants granted the plaintiff an extension for waiving the due diligence condition to the end of October.

[21] By late October 2016, plaintiff’s lawyer had not provided a draft co-ownership agreement. In addition, by late October or early November 2016, it was determined that the original construction manager proposed by the defendants was unqualified to carry out the project; therefore, Skygrid, a new construction manager prepared construction estimates which turned out to be significantly higher than the original estimates. As a result, revisions were required to the pro forma financials. Ultimately, the parties agreed to a further extension of the due diligence period and entered into an amending agreement.

First Amending Agreement: November 4, 2016 to November 25, 2016

[22] This agreement dated November 4, 2016 provided for an extension of the due diligence period along with concessions from the plaintiff, the main terms of which are as follows:

(a) the LOI had been extended from time to time but remained in good standing; (b) $30,000 of the $100,000 refundable deposit made by the plaintiff initially became non-refundable; (c) the date for waiving the due diligence conditions was extended to November 25, 2016; (d) the total deposit would be increased to $150,000 from $100,000 requiring the plaintiff to pay an additional $50,000.

[23] By mid-November 2016, plaintiff’s counsel had provided a first draft of the co-ownership agreement. In addition, there were discussions between the parties regarding the defendants’ concerns about HCI, the plaintiff’s lender, and its ability or willingness to fund the project. There are also discussions regarding what party was responsible to pay the defendants’ debt to Vorion from the purchase of the property; namely, either the debt owing to Vorion was going to be a charge against the defendants’ share or against the project, with the plaintiff taking the former position.

[24] Ultimately, the parties agreed to a further extension of the deadline to waive the due diligence condition.

Second Amending Agreement: November 25, 2016 to January 24, 2017

[25] The plaintiff requested a further extension to the deadline to waive the due diligence condition. Therefore, the parties negotiated the terms of a further extension which provided that:

(a) the entire $150,000 deposit paid by the plaintiff became non-refundable; (b) the plaintiff would provide a further non-refundable deposit of $200,000 upon acceptance of this agreement, bringing the total deposit to $350,000; (c) the due diligence condition was extended to January 21, 2017 at which time the plaintiff was required to provide written confirmation that it would go firm, fund the Initial Advance of $1,500,000, subject to the Conditions Precedent being fulfilled; (d) certain Conditions Precedent were varied; and (e) upon providing the further deposit of $1,150,000, the owners of each property would give the plaintiff a “mortgage” securing the total deposit amounts, and the mortgages would rank behind “all mortgages” against the properties existing as of July 28, 2016.

[26] A few days before this agreement was signed, Mr. Matas sent an email to the plaintiff which set out the “current financing” existing on the properties as of July 28, 2016, which specifically stated that the plaintiff’s “security is behind the current financing” of some $22.8 million owing to Vector Financial, Voreon and Private (Merchant) which are “ahead of” the plaintiff’s deposits. Subsequently, as can be seen from paragraph 25(e) above, the wording of the agreement was that the plaintiff would receive a “mortgage” and the mortgage would “rank behind all mortgages existing as of July 28, 2016.” The issue of the ranking of the plaintiff’s mortgage in relation to the debt and/or mortgages on the properties became problematic as the relationship continued.

[27] This agreement was signed by all parties on November 25, 2016; however, despite the further deposit being due that day, the plaintiff did not provide the further deposit until December 12, 2016.

[28] The due diligence process continued throughout December 2016 and January 2017. It is obvious from the correspondence among the parties and their lawyers starting in late December and into early January of concerns regarding the ability to meet the deadline of January 24, 2017 given the outstanding steps. For example, there is a statement made by Mr. Cogan in an email dated December 29, 2016 to there being only ten business days from January 9, 2017 to January 21, 2017 to finish a co-ownership agreement that took him a month and a half to do on another development. Also on December 29, 2016, Mr. Cogan stated in his email that he had “never spent This Much Time on such a great opportunity and don’t have an irrevocable plan B in place.”

[29] In addition, on December 29, 2016, Mr. Matas’ email set out a list of five outstanding steps “to move forward” being:

(a) acceptance of First National LOI and what First National required; (b) zoning update; (c) budget review by Finnigan Marshall; (d) Skygrid construction contract – the proposal was expected that week and if the proposal fit the defendants’ budget, they would retain Skygrid “asap”; (e) co-ownership agreement – acknowledgment that all parties had to execute the agreement by January 20, 2016.

[30] Communications starting on January 10, 2017 demonstrate a concerted effort by the parties to complete the due diligence process by the deadline of January 21, 2017; however, breakdown in the relationship becomes evident.

[31] The parties and their lawyers had a meeting on January 9, 2017. The next day, Mr. Zimmerman, counsel for the plaintiff, confirmed in an email to Mr. Matas and Mr. Zaman on behalf of the defendants, a list of outstanding deliveries “required of the defendants” prior to the plaintiff waiving the due diligence condition, which was scheduled for January 21, 2017 at that time. The “deliveries” listed were: zoning letter from City of Mississauga, Lobo confirmation of 45 Agnes land value, report of the cost consultants, Finnegan Marshall, as to its preliminary approval of construction budget submitted by Skygrid, and form and content of the co-ownership agreement for 45 Agnes which Mr. Zimmerman acknowledged having received on January 9, 2017. In addition, Mr. Zimmerman stated certain concessions made by the parties at that meeting, as follows:

As further discussed, the full amount of the deposit (except $30,000 in legal fees) will be refundable in the event all of the deliverables contemplated for the First Advance as contemplated in the LOI are not met. Finally, we agreed that in the event we cannot fund the full $1,150,000 by January 21, you will accept $650,000 representing $500,000 for each of the Agnes Street projects minus the existing $350,000 already provided.

[32] However, Mr. Zaman quickly responded to Mr. Zimmerman’s email stating that it contained a “slight misunderstanding or one sided interpretation.” He stated: “Every concession made yesterday was with the intent to make the LOI closing a success!” He went on to state:

But here you are taking the 650K solution to make it easier for you and saying you will get the 300k back if we fail. The idea was you will close on Jan 21 and if the zoning side didn’t come thru via the remaining city process then we did not deliver on our side and you could get your money back.

However, as we have said before, you had already signed off with city staff letter by receiving a letter from city staff last September. So the main thing outstanding is the co-ownership agreement.

However, for the spirit of the deal, we will get another updated letter from city staff, and a Lobo land value report.

FM (Finnegan Marshall) is reviewing now. We are still waiting on the timing of his report may not be ready for the 21st.

[33] On January 11, 2017, the parties were in the process of reviewing the draft co-ownership agreement.

[34] On January 18 2017, Mr. Zimmerman emailed Mr. Matas regarding the outstanding deliverables that the plaintiff required in order to fund the next deposit of $1,150,000. The deliverables included:

(a) updated appraisals; (b) Finnegan Marshall report - the contractor had been changed to Skygrid which, in turn, caused the construction budget to exceed the amount stated and guaranteed in the LOI. Therefore, the plaintiff required preliminary approval from Finnegan Marshall before it approved the new budget, as well as a copy of the Skygrid contract; (c) mortgage statements confirming the actual amounts owed and copies of agreements with Voreon, defendant’s lender on the purchase of the land, as to the amounts owing by the defendants.

[35] On January 19, 2017, two days before the scheduled closing and deadline to waive the due diligence condition, the parties exchanged emails concerning the deadline and whether the non-refundable deposits would be returned. The defendants advised that as January 21, 2017 was a Saturday, the defendants would accept the deposit until Tuesday, January 24, 2017. However, the emails demonstrate conflicting positions. The defendants took the position if the plaintiff did not waive the due diligence condition, the defendants would consider the transaction to be at an end and all deposits forfeited. However, the plaintiff believed there had been agreement that day that the deposits would be returned and not forfeited in the event the plaintiff did not proceed. In response, the defendants advised that although their position was “technically correct,” they would be flexible even if the plaintiff was late acknowledging that the focus was on “getting the deal done” not keeping the deposits.

[36] On January 20, 2017, the parties had discussions regarding the identity of the plaintiff’s lender which culminated in Mr. Cogan denying that the plaintiff was looking for a new lender, merely that if HCI was a day or two late, the plaintiff would use a lender on an interim basis.

[37] It appears that the plaintiff did just that as evidenced from Mr. Zimmerman’s email dated January 16, 2016 to Michael Hyman at Hampshire Associates (“Hampshire”). Mr. Zimmerman sent Mr. Hyman the LOI, the two amending agreements and the valuation of 45 Agnes “for the purpose of the $1,150,000 loan.” The email explains:

The purpose of the $1,150,000 is as a further deposit (we have funded $350,000.00 already) of which $1,050,000 is to remain in the owner’s lawyer’s trust account and secured by a mortgage on all 3 properties. Once we get the mortgage, we will assign it to your lender.

If the owner does not deliver on zoning by June, 2-17, the full amount is refundable. (emphasis)

[38] In January 2016, the parties had a number of discussions regarding the terms and ranking of the mortgages. The defendants’ evidence is that the plaintiff, for the first time, required the mortgages to rank ahead of some of the debts listed in Schedule “A” to the LOI, that there be one blanket mortgage for $1,150,000 over all the properties instead of a $500,000 mortgage on each property, and that the mortgage be assignable. Notably, the term regarding assignability is consistent with Mr. Zimmerman’s email to Mr. Hyman referred to above.

[39] The defendants did not agree to give an assignable mortgage or the ranking proposed by the plaintiff.

[40] On January 23, 2017, one day before the deadline, Mr. Zimmerman advised Mr. Polisuk, counsel for the defendants for the transaction, that he had been told by Mr. Zaman that the defendants would not give the plaintiff mortgages as security for the deposits and Mr. Zimmerman advised in response that the mortgages were required. Later that day, the plaintiffs provided a draft mortgage that contained terms allowing for assignment which was unacceptable to the defendants.

[41] Later that afternoon, the plaintiff forwarded to the defendants a letter from Max Warner of HCI, the plaintiff’s lender. Dr. Warner was concerned about the increased construction costs due to the change in general contractor, the fact that Skygrid’s numbers were significantly higher than YYX’s numbers and higher than the maximum number in the LOI, and the addition of approximately $25,000,000 to the project. As such, he stated that the plaintiff and HCI required a report from Finnegan Marshall, the costs consultants, prior to waiving conditions, which he stated had been agreed between the parties. Stating further that although HCI remained keenly interested in proceeding with the transaction, the information provided to date was less than that which was to be provided and insufficient to waive due diligence. Lastly, Dr. Warner suggested that the defendants were not acting in good faith at that point but the plaintiff and HCI preferred to “continue to move forward in good faith and get this deal done once it is ready to proceed.”

[42] In his email to Mr. Zaman, Mr. Cogan confirmed that the plaintiff had the $1,150,000 “in hand” but the plaintiffs needed to clarify the outstanding issue of the increased construction costs. Later that evening on January 23, 2017, Mr. Cogan emailed the defendants and explained in detail that the increase in construction costs was actually $21.5 milllion not $25 million as expressed by Dr. Warner. He stated further that once the plaintiff showed proof of funds the next day, the parties would extend the irrevocable waiver until the parties could meet with Skygrid to get the numbers reduced and then get Finnegan Marshall to “rubber-stamp the numbers as any quantity surveyor does.”

[43] In the meantime, the defendants had been working with Finnegan Marshall to obtain a report regarding construction estimates. The evidentiary record contains an email chain from January 22, 2017 to January 24, 2017 to that effect.

[44] On January 24, 2017 at 2:00 p.m., the defendants provided the plaintiff with Finnegan Marshall’s preliminary report of same date which states that their “full review of the financial feasibility of the project remains subject to receipt of outstanding items as listed”.

[45] At 3:45 p.m. on January 24, 2017, the plaintiff advised that it was not in a position at that time to waive the due diligence conditions “as the deliveries by your client are incomplete.” Mr. Zimmerman stated further that:

Notwithstanding assurances on many occasions by your client that in the event of not proceeding all deposits to date will be returned, I take this opportunity to provide you with a copy of a certified cheque in the amount of $1,150,000 as proof of funds and our ability to proceed. . . . If you need to see the actual cheque, please advise and I will attend at your office with same. . . . I confirm that it is our desire to move forward with this project and hope that we can use our energies to do so.”

[46] Further emails were exchanged on January 25, 2017. It was the plaintiff’s position that it was not in default by failing to waive the due diligence condition because the defendants failed to provide all the disclosure information in a timely manner. On the other hand, the defendants advised that the plaintiff was in default having failed to provide “real” evidence that the plaintiff was in funds for the initial advance of $1,150,000 and the whole $30,000,000, being the maximum investment on the three properties by the plaintiff.

[47] Among the numerous emails on January 25, 2017, an email from Mr. Zimmerman on behalf of the plaintiff reveals information not previously contained in the evidentiary record. Essentially, Mr. Zimmerman was accusing the defendants for the plaintiff’s inability to waiver the due diligence condition. Mr. Zimmerman stated that the defendants’ investor, Stamos Katotakis (principal of Voreon) (“Stamos”), had put significant pressure on John Matos and Sharief Zaman, defendants’ principals, to the extent that it was Stamos who refused to provide the plaintiff with a mortgage as security for its deposits, which was a cornerstone of the November 25, 2016 extension and which he understood had been approved by Stamos. This allegation, he stated, was evidenced by the fact that the defendants failed to provide the mortgage the day prior. This, Mr. Zimmerman stated, put the defendants in breach of its obligations under the agreement. He stated further that Stomos’ refusal to provide the mortgage, explained why so many of the deliverables had been delayed including the rezoning, the co-ownership agreement, the appraisals and the construction contract review. He further stated that despite Mr. Zaman repeatedly assuring the plaintiff that the deposits would be fully refundable, it was Stamos who again exerted his influence upon Sharief to change their position.

[48] The next day, by letter dated January 26, 2017, the defendants advised the plaintiff that the LOI was at an end and the deposits were forfeited as agreed by the parties. The primary reason stated was the defendants’ loss of confidence in the plaintiff’s ability to provide the financing for the projects. They state further that the plaintiff failed to provide satisfactory or proper evidence of financing which was required months ago.

Plaintiff’s Motion

[49] Matas was cross-examined on his affidavits, (sworn on February 18, 2017 and March 5, 2017), filed in support of the defendants’ motion to discharge the certificate of pending litigation (“CPL”).

[50] At his cross-examination held on March 6, 2017, Matas refused to produce documents that are set out on the Refusals and Under Advisement Chart and can be found at question 38, page 12 of the transcript. All of the documents requested are for a four-month period from November 2016 to March, 2017.

[51] The requests are very broad. For example, the plaintiff seeks “any and all communications and agreements with any other potential purchasers or financiers, including negotiations or draft agreements,” “all internal communications between Defendants and their principals,” “all communications between the Defendants and Voreon or Mr. Katotakis . . .” and “all documentation respecting any financial terms between Voreon and/or Mr. Katotakis and the Defendants, including loans, partnerships, joint ventures or other business arrangements” for a four-month period.

[52] The four-month period includes the time when the First Amending Agreement was executed to approximately six weeks after the plaintiff advised in late January 2017 that it was not in a position to waive the due diligence condition and when the defendants terminated the LOI.

[53] The plaintiff submits that these documents are relevant to the merits of the action and to the credibility of the defendants. It is submitted that as the defendants have not delivered a defence yet, the plaintiff is unaware of their position in terms of what they admit and not admit. The plaintiff further submits that the requested documents are relevant to the issue of whether the defendants demonstrated bad faith in the negotiations between the parties. In particular, the plaintiff wants to know what went on “behind the scenes” regarding whether the defendants had other debts.

[54] The defendants refused to produce the documents on the grounds that the request is overly broad, disproportionate and not an appropriate request on a cross-examination on an affidavit in advance of a motion.

[55] The following principles apply regarding the scope of cross-examination of a deponent on an application or motion:

(a) the scope of cross-examination of a deponent for an application or motion is narrower than an examination for discovery; (b) a cross-examination is not a substitute for examinations for discovery or for the production of documents available under the Rules; (c) the examining party may not ask questions on issues that go beyond the scope of the cross-examination for the application or motion; (d) the questions must be relevant to: (i) the issues on the particular application or motion; (ii) the matters raised in the affidavit by the deponent, even if those issues are irrelevant to the application or motion; or (iii) the credibility and reliability of the deponent’s evidence; (e) the deponent may be asked relevant questions that involve an undertaking to obtain information, and the court will compel the question to be answered if the information is readily available or it is not unduly onerous to obtain the information. (*Ontario v. Rothmans Inc.*, 2011 ONSC 2504, at para. 142, leave ref’d 9 *2011 ONSC 3685*, 2011] O.J. No. 2811 (Div. Ct.))

[56] In my view, the questions are too broad and will involve the defendants having to search through all their records which will be an onerous task. This action is at a very early stage procedurally with only the notice of action having been delivered and an ex parte motion being heard. Generally, the determination of whether there is a triable issue as to a reasonable claim to an interest in land, will involve a consideration of agreements or other written documents between the parties. Here, that document is primarily the LOI and the amending arguments.

[57] In my view, by requesting these broad categories of documents, the plaintiff is attempting to obtain all the evidence it intends to rely on for the trial of this action. In other words, the plaintiff is treating the cross-examination as an examination for discovery in which the scope is much broader. For example, where a plaintiff alleged bad faith in the statement of claim, the court can take this into consideration on a motion to discharge a certificate; however, it is not an issue to be decided on this motion. The same can be said for the plaintiff’s allegation that the defendants have changed their position regarding their debts. It is important to remember that the plaintiff obtained the CPL shortly after the notice of action was issued and prior to the defendants having delivered a defence and examinations for discovery being held. Therefore, on a motion to discharge a CPL obtained at this early stage, the discretion of the judge or master hearing the motion is to “consider” all relevant matters between the parties in determining whether or not the certificate should be vacated. The discretion of the court is not to “determine” all the issues raised by the plaintiff.

[58] For the above reasons, the plaintiff’s motion is dismissed with costs. The issue of costs will be dealt with at the end of these reasons.

Defendants’ Motion to Discharge the CPLs

[59] On February 2, 2017, Master Muir granted the plaintiff an ex parte order issuing CPLs on the three properties owned by the defendants.

[60] The defendants bring this motion seeking an order discharging the CPLs pursuant to section 103(6) of the CJA and rule 42.02 of the Rules.

[61] The defendants submit that the CPLs should be discharged for three reasons:

(a) the plaintiff does not have a reasonable interest in land because the plaintiff has no interest now and will be unable to obtain any interest through obtaining specific performance of the LOI; (b) the equities favour a discharge of the CPLs; and (c) the plaintiff failed to make full and frank disclosure on its ex parte motion.

[62] The plaintiff submits that it has a reasonable claim to an interest in the properties, the equities favour maintaining the CPLs, and full and frank disclosure was made by the plaintiff on the ex parte motion.

Issues

[63] The issues to be determined are:

(i) have the defendants demonstrated that there is no triable issue on the plaintiff’s claim to an interest in the property; (ii) if there is a triable issue, then should the court exercise its discretion to discharge the CPL? (iii) should the CPL be discharged due to material non-disclosure at the ex parte motion.

Law and Applicable Test to Discharge a CPL

[64] Sections 103(1) of the CJA is the statutory authority for granting a CPL.

103(1) The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).

[65] Subsection (6) grants the court discretion to discharge a CPL in certain circumstances:

103(6) The court may make an order discharging a certificate,

(a) where the party at whose instance it was issued, (i) claims a sum of money in place of or as an alternative to the interest in the land claimed, (ii) does not have a reasonable claim to the interest in the land claimed, or (iii) does not prosecute the proceeding with reasonable diligence; (b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or (c) on any other ground that is considered just, and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.

[66] Although not set out in the Notice of Motion, the relevant section is subsection 103(6)(a)(ii) which states that a court may discharge a CPL where the party who claims it does not have a reasonable claim to an interest in the land claimed.

[67] It is well-accepted law that a CPL can only be granted when the party seeking it has a reasonable claim to an interest in the land in issue. (*Casino Bus Service Inc. v. Krawec Estate*)

[68] The Ontario Court of Appeal has held that section 103(6) confers a broad discretion upon the court to discharge a CPL upon a demonstration by the defendant and invites an examination of the equities between the parties. The court must exercise its discretion in equity and look at all of the relevant matters between the parties in determining whether or not the CPL should be vacated. (*G.P.I. Greenfield Pioneer Inc. v. Moore*, at para. 17)

[69] In a recent decision in *Lakeshore Landmark Development Corp. v. Mondelez Canada Inc.*, 2016 ONSC 2313, at para. 31, Master Wiebe referred to Master Muir’s decision in *Dynacorp Canada Inc. v. Curic*, 2010 ONSC 2603, at paras. 14-15, for the established principles to be applied on a motion to discharge a CPL where the moving party relied on s. 103(6)(a)(ii) of the CJA; namely, the onus of establishing whether there is such a triable issue rests on the party moving to have the CPL discharged; the court must examine the whole of the evidence and must not accept the pleadings and affidavits uncritically; and the threshold for the motion is whether there is a triable issue, not whether the plaintiff will likely succeed.

Is there a triable issue for the plaintiff’s claim to an interest in the properties?

[70] The plaintiff’s claim to an interest in the properties is through its claim for specific performance of the LOI as amended by the first and second amending agreements. Notably, the plaintiff did not file a factum on its ex parte motion for the CPLs. According to the endorsement of Master Muir, the plaintiff’s position was that it has an interest in the properties because it is entitled to a mortgage over the properties and it will eventually be entitled to 60 per cent ownership of the properties.

Position of the Defendants

[71] The defendant submits that where the basis for the plaintiff’s claim to an interest in land is a claim for specific performance, the issue is whether there is a triable issue as to whether the plaintiff will be entitled to specific performance.

[72] The defendant makes four arguments; namely,

(i) the plaintiff cannot obtain specific performance of the LOI because it refused to waive the due diligence condition; (ii) the plaintiff cannot obtain specific performance because essential terms of the mortgage and co-ownership agreements still had to be negotiated; (iii) the plaintiff cannot obtain specific performance of a mortgage; and (iv) the plaintiff cannot obtain specific performance of the LOI because the plaintiff’s interest was to be an investment.

(i) No specific performance due to refusal to waive due diligence condition

[73] The defendant relies on well-established law which states that to obtain specific performance, the plaintiff must prove that it was and still is ready, willing and able to exercise its rights under the contract. (*Stephens v. Gulf Oil Canada Ltd., et al*, (1974), 3 O.R. (2d) 241 (H.C.J.))

[74] The defendant submits that the plaintiff was not ready and willing to exercise its rights under the contract as the plaintiff expressly confirmed that it was unwilling to waive the due diligence condition.

[75] The defendants cite section 3 of the second amending agreement which requires the due diligence condition to be waived contemporaneously with the plaintiff making a further deposit of $1,150,000 and then upon making that deposit, the plaintiff is entitled to receive a mortgage as security for those funds. Section 3 states:

The due diligence condition is hereby extended to January 21, 2017, at which time the Investor will issue written confirmation (“Confirmation”) that the Investor is prepared to complete the Initial Advance . . . The Investor will provide a further deposit of $1,150,000.00 at the time of providing Confirmation.

Upon providing the further deposit of $1,150,000.00 the owner of each of the properties herein shall provide the investor with a mortgage.

[76] The defendant submits further that the mortgage was to be provided “upon” receipt of the waiver of the due diligence condition and payment of the $1,150,000. While the plaintiff stated that it had the funds and provided a photocopy of its lawyer’s trust cheque, it did not advance the funds.

(ii) No specific performance as essential terms of the mortgage and co-ownership agreement were not negotiated

[77] The defendants rely on the principle of law that there can be no legally enforceable contract unless the essential terms of the agreement have been settled.

[78] The defendants say that the second amending agreement states that the defendants will grant the plaintiff a mortgage after the due diligence condition was waived and the further deposit of $1,150,000 was paid; however, they argue that the second amending agreement does not attach a form of mortgage or set out the essential terms of the mortgage. That was left to the parties to negotiate.

[79] It is further submitted that although the parties attempted to negotiate the terms of the mortgage, they were unable to come to an agreement on the terms. For example, the defendants point to the evidence where the plaintiff wished the right to assign the mortgage to a third party but the defendants did not agree to an assignable mortgage.

[80] Similarly, the defendants state that the LOI requires negotiation of terms of a co-ownership agreement. The parties attempted to negotiate the terms throughout the due diligence period and exchanged draft agreements; however, they never came to an agreement on its terms. Notably, the co-ownership agreement would involve terms that defined the relationship between the parties to undertake three large construction projects in Mississauga which would go on for years.

[81] The defendants submit that courts have noted the danger in applying decisions concerning agreements of purchase and sale to development proposals such as in the herein action. In *Correct Group Inc. v. City of Barrie*, 2013 ONSC 4477, at para. 53, the court dealt with the issue of formation of an enforceable agreement and the essential terms of different types of agreements. The court noted that as opposed to a simple land transfer, development proposals can involve a complex transaction and what is “material” and “essential” to the contract goes beyond price, property and parties. It held that what is material and essential must be determined not as an objective matter, but on a subjective basis as to what the parties considered material.

[82] Thus, the defendants contend that the court will not impose a long-term agreement now that negotiations have failed and the relationship of the parties is ruptured and litigious.

[83] The defendants submit that in essence, the plaintiff’s request for specific performance of the LOI amounts to a request that the court settle the essential terms of the mortgage including whether it will be assignable and the co-ownership agreement.

(iii) No specific performance of a mortgage

[84] The defendants contend that a mortgage interest can never be the subject of an order for specific performance because a mortgage is simply security for money advanced. In any event, as the deposit was not advanced by the plaintiff, they state that the issue is moot. However, it is the defendants’ position that even if the deposit had been advanced, the plaintiff would still not be entitled to specific performance.

[85] The defendants rely on two cases from the British Columbia Supreme Court and the Alberta Court of Appeal in which CPLs were vacated for several reasons; firstly, because a claim to a property as a security for a mortgage is not of special and unique value, and secondly, because mortgages are financial interests and never capable of specific performance. (*Abby Downs Const. Ltd. v. Millenium Ventures Inc.*, at p. 1-2; *1244034 Alberta Ltd. v. Walton International Group Inc.*, 2007 ABCA 372, at para. 37)

(iv) No specific performance as the plaintiff’s interest was to be an investment

[86] The defendants contend that the sole purpose that the plaintiff was acquiring an interest in the properties was as an investment. They rely on the LOI which refers to the plaintiff as the “investor.” Also, the defendants rely on Mr. Matas’ uncontroverted evidence at paragraph 48 of his affidavit that the plaintiff was attempting to arrange a forward sale of the properties, in other words, to sell the properties before they were built.

[87] The defendants submit further that the plaintiff’s assertions in its ex parte motion record that the properties were unique relate only to the properties being a good investment.

[88] The plaintiff’s evidence on the ex parte motion regarding uniqueness of the properties was:

17. The Properties are all located in the vicinity of the intersection of Hurontario Street and Dundas Street – just south of the “city centre” area of Mississauga, a rapidly densifying area. 71 Agnes Street is a residential lot with one-story [sic] residential home situated on it. 86-90 Dunas Street East is a property consisting of two adjacent lots, comprised of parking lots and one abandoned two-story [sic] building.

18. The Properties are unique given their location and readiness for rezoning and redevelopment. The Properties are in close proximity, providing for a unique opportunity for development of three consistent rental buildings in one small area, in such close proximity to hospitals, public transportation, schools and highways. There is a significant existing residential base of tenants at this location and therefore a demonstrated and unique demand for the proposed redevelopment.

[89] The defendants rely on the decision in *Hunter’s Square Developments Inc. v. 351658 Ontario Ltd.*, (2002), 60 O.R. (3d) 264, at para. 45, where the court heard the defendant’s motion for summary judgment or, in the alternative, for an order discharging the CPL. The court held that where the purchaser’s interest is investment or resale, the proposition that a substitute could not be found and that therefore damages are inadequate is dubious and specific performance will be refused. The court’s reasons were:

The remedy of specific performance is one that is peculiar to real estate transactions and is based on the fact that real estate is regarded as unique and of particular importance to the purchaser. Obviously, the purchase of a new house is much different than the buying of a new car, which can be replaced by an almost identical new car. That reasoning does not apply when land is purchased merely as an investment. In the case at bar, the land was purchased as an investment. Ture, it may be a uniquely good investment, but it was not being purchased by the plaintiffs for their own use but only to develop and resell at a profit. Obviously any loss of profits can be compensated for in damages.

[90] The defendants also rely on the more recent decision in *2144688 Ontario Ltd. v. 1482241 Ontario Ltd.*, 2016 ONSC 1475, at para. 32, where the evidence concerning uniqueness was similar to the evidence of uniqueness advanced in this case. The court rejected the buyer’s evidence of uniqueness and its claim for specific performance stating:

In my view, the Buyer is not entitled to specific performance of the Buyer’s Condition found in the APS. Mr. Bitton did not provide subjective evidence that the Property is unique to him in the sense that it has a “peculiar or special value” to him for which money could not be a complete remedy. There is no evidence that the Property had a non-economic value to the Buyer. The Buyer agreed to purchase this Property to generate income. Mr. Bitton viewed the Property as potentially an excellent investment opportunity. Further, the Buyer has presented no objective evidence that the Property is unique in the sense described above. Finally, the Buyer’s failure to claim for damages in this action does not change my view that specific performance should not be granted and does not bolster evidence of the Property’s “uniqueness”.

Should the court exercise its discretion to discharge the CPL even if there is a triable issue?

[91] It is the defendants’ position that the equities favour discharging the CPLs. In *572383 Ontario Inc. v. Dhunna*, 1987 CarswellOnt 551, the court listed a number of factors that could be considered including:

(a) whether the plaintiff is a shell corporation; (b) whether the land is, or is not unique bearing in mind that in a sense any parcel of land has some special value to the owner; (c) the intent of the parties in acquiring the land; (d) whether there is an alternative claim for damages; (e) the ease or difficulty of calculating damages; (f) whether damages would be a satisfactory remedy; (g) the presence, or absence of another willing purchaser; and (h) the harm done to each party if the certificate is or is not removed with or without security.

[92] The defendants state that there is no evidence before the court that the plaintiff has any assets. Further, they argue that the evidence shows that the plaintiff was intending on borrowing the money for the $1,150,000 deposit and to secure it by an assignment of the mortgage.

[93] Secondly, they argue that the properties are not unique. The properties are essentially vacant plots of land in Mississauga and the plaintiff’s intent was to potentially acquire an interest in them as an investment assuming various agreements were successfully negotiated between the parties and assuming the Conditions Precedent were met and assuming the plaintiff made the initial advance of $13,000,000.

[94] Thirdly, they submit that damages are quantifiable and are an adequate remedy even if the plaintiff ultimately proves that the defendants breached the LOI as amended. The plaintiff has lost the non-refundable deposit of $350,000 and the time spent reviewing the due diligence from the defendants, in return for locking up the properties while it considered whether to go firm. Further, the pro forma revenue projections that the plaintiff states it relied on when determining whether to invest, can be used to calculate damages if the plaintiff is successful at trial.

[95] Lastly, it is the defendants’ position that the harm done to them by refusing to remove the CPLs exceeds the harm done to the plaintiff if the CPLs are removed. As for the plaintiff, it has only paid $350,000 in non-refundable deposits whereas allowing the CPLs to remain on title would give the plaintiff unfair leverage by allowing it to tie up the properties and prevent the defendants from pursuing development.

Plaintiff’s Position

[96] The plaintiff’s claim is based on the defendants’ breach of the LOI and the amending agreements as a result of the defendants’ failure to provide information to the plaintiff in order for the plaintiff to complete its due diligence. It is also pled that the defendants’ termination of the agreements is not valid due to its breach of the agreements.

[97] The plaintiff submits that this motion should be dismissed on the basis that the defendants misled the court having brought this motion on an urgent basis and that their credibility has been eroded. It submits further that the defendants have actively attempted to mislead the plaintiff in the course of this transaction. The plaintiff cites several examples of the defendants’ misstatements of the facts and it is submitted that their position is untenable at law.

[98] The plaintiff submits further that the defendants brought this motion claiming they were prejudiced and would continue to be prejudiced if the CPLs are not discharged; however, on examination, the defendants admitted that there were no pending transactions and they only had discussions with a broker who brought them no proposed transactions and none were under discussion.

[99] The plaintiff submits that there is a triable issue on the issue of uniqueness of the property.

[100] The plaintiff made numerous other submissions that, in my view, relate to the issues in the action; for example, what party terminated the agreements and whether the termination was valid. Another example is the plaintiff’s argument that the defendants purported to terminate the transaction on the basis of a loss of confidence in the plaintiff’s ability to finance the project; however, plaintiff’s counsel tendered his trust cheque on closing. Its further submission is that there is no provision in the agreements that permit the defendants to terminate for a loss of confidence. This, it is submitted, demonstrates that the defendants’ credibility is at issue and they do not come to court with clean hands. In my view, these submissions do not address the test to discharge a CPL. They are arguments on the merits for trial.

[101] The plaintiff submits further that development property can be considered unique but that the issue of uniqueness when a claim is for specific performance only is a triable issue.

[102] The plaintiff’s evidence is that the properties are unique because of their location close to the intersection of Hurontario Street and Dundas Street, just sought of the city centre of Mississauga, being a rapidly densifying area. The three properties in issue are essentially vacant lots except for a one-storey home on one of the lots and parking lots. The plaintiff states that the properties are unique given their location and readiness for rezoning and redevelopment. They state that they are in close proximity providing a unique opportunity for development of rental buildings in one small area in close proximity to hospitals, public transportation, schools and highways.

[103] Whereas, the defendants say that the properties are not unique and not different than any of many other development properties in the Greater Toronto Area as they are merely vacant development properties in Mississauga. The defendants state further that the fact that the properties are near services impacts the rent they can charge and the resulting rate of return, but do not make them unique.

[104] The plaintiff submits that it has a reasonable claim to an interest in the properties. It relies on case law for the proposition that where the circumstances, location or features of the land are especially significant, as here, the test for uniqueness may be met and specific performance will be granted. Notably, neither of the two cases involved motions to discharge a CPL; rather they are trial and appeal decisions.

[105] The decision in *John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd.*, 2003 CarswellOnt 342 (C.A.), at paras. 43-44, was an appeal of a trial decision where evidence had been tendered at trial on the uniqueness of the property. The Court of Appeal upheld the trial finding that the commercial property in issue was in fact unique.

[106] Similarly, in *Trinden Enterprises Ltd. v. Ramsay*, 2008 BCSC 177, at para. 12, the decision of the British Columbia Supreme Court involved an assessment of damages in lieu of specific performance, which is not the case herein. In reviewing the law of specific performance, the court cited numerous decisions where it was found that the test for uniqueness was met and specific performance was granted based on the location or the features of the land being especially significant. However, it is notable that the court cited the Supreme Court of Canada’s decision in *Semelhago v. Paramadevan*, [1996] 2 S.C.R. 415, at paras. 21-22, where the court held that specific performance should not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available. Further, the court held that property purchased for development generally will not be unique and where land is purchased as an investment, the fact that it is a uniquely good investment does not satisfy the uniqueness requirement for granting specific performance. Further, the court upheld the following statement by Robert Stack, “A Revised Remedy: Trends and Tendencies in the Law of Specific Performance since Semelhago v. Paramadevan” (2000) 6 Appeal 60, at para. 29: “a businessperson can always mitigate a lost profit opportunity, because she can always invest elsewhere.”

[107] The plaintiff recognizes that the although courts have found no reasonable claim for an interest in commercial property, it contends that the remedy of specific performance in commercial transactions remains available but that it is simply no longer presumed that all real estate is unique. (*Youyi Troup Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd.*, 2014 BCCA 388, para. 52; *Southcott Estates Inc. v. Toronto Catholic District School Board*, 2012 SCC 51, 2012 CarswellOnt 12505 (S.C.C.), at para. 94)

[108] The plaintiff states further that in the circumstances herein, it is entitled to an equitable mortgage, in other words, an agreement in writing to execute a legal mortgage. It says that an equitable mortgage is an interest in land and, in part, is a basis for the CPLs being registered on title to the properties. It is further submitted that an agreement to give security for a past debt or for a present advance may be enforced by specific performance. (Falconbridge on Mortgages, 4th ed. (Agincourt: Canada Law book Limited, 1977), p. 5-4 and 5-6)

[109] The plaintiff relies on the decision in *Hirji v. Khimani*, 1978 CarswellOnt 391, at para. 7, where the court held that a mortgagee owns an interest in the land upon which the mortgage is registered even if such rights are enforceable only upon default.

[110] The plaintiff further submits that the equities favour maintaining the CPLs as the defendants have been responsible for the breakdown of the transaction.

[111] In response to the defendants’ submission that the plaintiff has no assets, the plaintiff states that there is no evidence to support this assertion as the plaintiff has already paid deposits totalling $350,000 and it gave proof that it had $1,150,000 available to pay the final deposit.

[112] It is the plaintiff’s position that there is no prejudice to the CPLs remaining on title as the defendants have not demonstrated urgency. Further, the defendants retain $350,000 in the plaintiff’s deposits.

Did the plaintiff fail to make full and frank disclosure?

[113] The defendants submit that on ex parte motions, the court relies on full and proper disclosure of all relevant facts in the supporting affidavit material such that there is a heavy onus on counsel to ensure all relevant facts are before the court. (*830356 Ontario Inc. v. 156170 Canada Ltd.*, [1995] O.J. No. 687 (H.C.J.), at para. 23)

[114] Further, the defendants cite rule 39.01(6) which requires that on an ex parte motion “the moving party shall make full and fair disclosure of all material facts and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application. This obligation extends to facts which may explain the defendant’s position if known to the plaintiff. (*Chitel et al. v. Rothbart et al.*, at p. 11) The test is an objective one.

[115] The defendants contend that the plaintiff failed to make full and frank disclosure by failing to do the following:

(a) disclose relevant documents, including numerous email exchanges between the parties concerning issues in dispute; for example, emails concerning the co-ownership agreement, fundamental agreements about the terms of the mortgage and all emails concerning the due diligence process; (b) disclose information about its financial backers; (c) disclose that it intended to assign the mortgage after it was received from the defendants; (d) to draw the court’s attention to highly probative evidence buried in the record in which the defendants cite numerous examples; (e) put the defendants’ position concerning the LOI before the court; (f) put relevant case law before the court.

[116] The plaintiff submits that Master Muir had a full appreciation of the issues from the materials and his endorsement. It is further submitted that the alleged omissions from the evidence on the ex parte motion are either immaterial or incorrect.

Conclusion

[117] Having completed a thorough and detailed review of the voluminous evidence filed on this motion and on the ex parte motion, it is my view that in order to determine whether the plaintiff satisfied the test to obtain a CPL, the court on the ex parte motion required more than the mere 18 exhibits contained in the plaintiff’s ex parte motion record.

[118] Recognizing that a determination of the issue of whether a party made full and fair disclosure does not involve a comparison of the number of documents filed, having taken the time to read to attempt to fully understand the facts of this case, my conclusion is that the plaintiff failed to make full and fair disclosure of all the material facts on the ex parte motion.

[119] I reach that conclusion for several reasons. In particular, numerous email exchanges were omitted from the ex parte motion material as follows:

(a) emails that demonstrated productions made by the defendants to the plaintiff at the time the LOI was executed. In my view, this evidence is material to the issue of what efforts the defendants made to ensure the plaintiff would be in a position to waive the due diligence condition; (b) emails regarding the defendants’ actions to effect the zoning changes, deal with the construction budget and reach an agreement on a co-ownership agreement. Again, this evidence is material to the issue of the defendants’ conduct in ensuring that the due diligence condition was met; (c) emails regarding the status of the due diligence process and efforts made by the defendants to assist the plaintiff in waiving the due diligence condition; (d) emails involving the circumstances that gave rise to extending the due diligence periods that demonstrated the defendants’ position on the extensions; (e) a significant and highly relevant email from the plaintiff to its interim lender, Hampshire Associates, which clearly states the plaintiff’s intention to assign the mortgage from the defendants to Hampshire. I find that the plaintiff failed to inform the court of the parties’ disagreement over the assignability of the mortgage. The defendants’ position at the relevant time was that they would not agree to an assignable mortgage. Mr. Cogan’s evidence on the ex parte motion discloses the obligation of the defendants to deliver mortgages back; however, it fails to disclose that the parties had not reached an agreement on the terms. Paragraph 46 of his affidavit merely states that the defendants advised on January 23, 2017 that they would not provide mortgages as security for the deposit and paragraph 47 alludes to “mortgage issues”; however, it falls short of disclosing the full picture that not only had the parties not reached an agreement on the terms of a co-ownership agreement, they had not agreed on the basis terms of the mortgages. (f) emails at exhibits 42 through 47 of Mattas’ affidavit from December 29, 2016 to January 11, 2017 that chronicle the disagreements as to what steps were required to be completed before the plaintiff could waive the due diligence condition and go firm. In Cogan’s affidavit filed for the ex parte motion, there is no evidence of communications between the parties from October 15, 2016 to January 17, 2017. This is essentially three months of communications that, in my view, chronicle the steps taken by the parties not only regarding the reasons for the extensions to the due diligence period, but also regarding the efforts by the defendants to ensure the plaintiff was in a position to waive the due diligence condition.

[120] I find that the plaintiff put its position before Master Muir to the exclusion of the defendants’ position. In particular, Exhibit “S” to Cogan’s affidavit on the ex parte motion is an email from the plaintiff dated January 25, 2017 to defendants’ counsel which sets out in lengthy detail the plaintiff’s view for the reasons the defendants terminated the agreements. More importantly, certain passages are underscored for emphasis. Essentially, the gist of that email was to blame the defendants’ lender/investor, Stamos Katotakis, for refusing to grant the mortgages to the plaintiff, delays in producing documents to the plaintiff including the rezoning, the co-ownership agreement, the appraisals and the construction contract review. Furthermore, not only was this email included as an exhibit, the entire body of the email was included in Cogan’s affidavit as an excerpt. This, in my view, emphasized the plaintiff’s position strongly and the balance of Cogan’s affidavit failed to disclose the defendants’ position.

[121] Furthermore, it is important to remember that at the time of the ex parte motion, only the notice of action had been issued. It was issued on February 2, 2017 the same day the CPL motion was granted and, naturally, it contains merely a brief outline of the plaintiff’s claim. Therefore, Master Muir had to rely almost exclusively on Cogan’s evidence in reaching his decision.

[122] Additionally, I find the plaintiff failed to disclose to the court on the ex parte motion the case law relating to specific performance of letters of intent. I will deal with this point in more detail later in this decision.

[123] For the above reasons, I find that the plaintiff failed to fully and fairly disclose all the material facts in this action. In particular, the plaintiff failed to fully and fairly present the defendants’ position regarding the terms of the mortgage, that the plaintiff failed to provide satisfactory proof of its ability to pay the subsequent deposit of $13,000,000 and the lack of agreement on the terms of the co-ownership agreement.

[124] In my view, the facts relating to this transaction and the relationship between the parties are complicated. Although the relationship between the parties was not lengthy, the facts from the time the parties entered into the LOI in August 2016 to January 2017 are lengthy and detailed. As such, it is my view that the plaintiff ought to have brought its motion for a CPL on notice to the defendants. Although it was the plaintiff’s evidence on the ex parte motion that the motion was urgent as there was concern that the defendants would mortgage the property, in my view, that concern was not realistic given the length of time it took the defendants to find an investor and the length of the plaintiff’s due diligence period and the fact that it ultimately was not waived.

[125] Having concluded that the plaintiff failed to make full and fair disclosure of all material facts, I hereby set aside the order of Master Muir granted February 2, 2017 pursuant to rule 39.01(6).

[126] However, I would also set aside the CPL order for the reason that the plaintiff has not satisfied its onus of establishing that it has a reasonable claim to an interest in the defendants’ land for the following reasons.

[127] In this action, essentially the plaintiff is asking the court to enforce the LOI. In one of the defendants’ submissions, it relied on the principle of law that there can be no legally enforceable contract unless the essential terms of the agreement have been settled.

[128] Our courts have opined on the general principles regarding the interpretation of a contract and, in particular, agreements to agree or negotiate. One case that dealt with that issue was the decision of L. A. Pattillo J. in *Georgian Windpower Corp. v. Stelco. Inc.*, 2012 ONSC 3759. In that action, the parties had entered into two agreements concerning the development of a wind power project. The plaintiff’s claims were brought as a result of the defendant’s termination of the agreements. The defendant argued that the agreements were not enforceable and that there was no basis for the plaintiff’s other claims. The first agreement was a Memorandum of Understanding (“MOU”) which confirmed the general principles pertaining to the ongoing discussions between the parties with respect to the development of what is referred to in the MOU as the “Industrial Biotricity Strategy”. The second agreement entitled “Agreement to Establish a Land Lease Easement Agreement for 80 MW Wind Energy Generation and Grid Interconnect Stelco Lake Erie Site (“AELLEA”) dealt with the proposed development of an 80 megawatt wind power generation facility on lands owned by Stelco.

[129] Pattillo J. opined on the interpretation of a contract and agreements to agree or negotiate stating that it has long been held that agreements to agree or negotiate are not enforceable as they lack necessary certainty. He went on to cite the general principles that in order for there to be a binding contract, the parties must agree on all of the essential terms of the agreement. He stated further that the rationale is similar to that in respect of agreements to agree or negotiate in that an agreement which lacks the essential terms is too uncertain to be enforceable.

[130] Pattillo J. held at paragraph 123:

Where the essential terms have not been settled or agreed upon or where the contract is too general or uncertain to be valid, the agreement is not valid. Similarly, where the understanding or intention of the parties, even where there is no uncertainty as to the terms of the agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the initial agreement is not binding.

[131] Pattillo J. went on to opine on the issue of what constitutes the “essential terms” of a contract stating that it depends on the subject matter of the contract and what transpired at the time of the alleged agreement. Citing *United Gulf Developments Ltd. v. Iskandar*, 2008 NSCA 71, 69 RPR (4th) 176, Cromwell J.A. (as he then was) held:

To have an enforceable contract, there must be agreement between the parties as to all essential terms. To use the language of a leading case, a contract ‘. . . settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties’: May & Butcher Ltd. v. R. (1920), [1934] 2 K.B. No. 17 (U.K.H.L.) at p. 21. Determining what terms are ‘essential’ in a particular case is, however, more difficult than stating the principle. The sort of terms that are considered essential varies with the nature of the transaction and the context in which the agreement is made: *Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co.*, 2000 NSCA 95, 189 N.S.R. (2d) 1 (N.S.C.A.), at para. 64.

[132] Pattillo J. held that agreements providing for future agreement can be binding stating at paragraph 125:

If the concept is sufficiently certain to enable agreement, the fact that the agreement provides for future mutual agreement does not result in it being too uncertain if there is a mechanism or formula set out. The issue is whether the provision for the future agreement is directory or mechanical as opposed to the substance of the provision: see *EdperBrascan Corp. v. 1177373 Canada Ltd.* (200), 50 O.R. (3d) 425 (S.C.J) at para. 31.

[133] It is my view that the LOI and the subsequent amending agreements do not settle all the essential terms of the agreements. For example, the agreements do not provide for the terms of the mortgages or the co-ownership agreement. In other words, the agreements leave the terms of the mortgages and the co-ownership agreement to be negotiated between the parties. It is obvious from the evidentiary record that the parties were unable to reach agreement on the terms of the mortgages and the co-ownership agreement. It is my view that even if the plaintiff had waived the due diligence condition and paid the further deposit, the parties were not in agreement on the terms of the mortgages and the subject transaction would not have proceeded any further. Put another away, the LOI and subsequent amending agreements are agreements to agree or negotiate. As such, I find that the agreements in issue herein lack the essential terms such that they will likely not be enforceable.

[134] On that point, in my view, the plaintiff failed to make full and fair disclosure to the Master at the ex parte motion of the law in this area of agreements to agree or negotiate and the law relating to specific performance of agreements such as letters of intent.

[135] For the above reasons, I find that there is not a triable issue here on whether the plaintiff can obtain specific performance of the agreements. Therefore, in my view the plaintiff has failed to establish that it has a reasonable claim to an interest in the defendants’ lands.

[136] In conclusion, the plaintiff obtained its ex parte CPL order on the basis of omissions and failure to establish that there is a triable issue. This is sufficient to dispose of this motion.

[137] An order shall issue discharging the CPL granted by Master Muir on February 2, 2017.

Costs

[138] The defendants have been successful on both motions. If the parties are unable to agree on costs, they may file costs outlines and written costs submissions of no more than three pages double spaced within 14 days of the date of this order with my ATC, Christine Meditskos, 393 University Avenue, Toronto, 6th Floor.

Released: June 6, 2017 Master Lou Ann M. Pope