2511899 Ontario Inc. v. 221465 Ontario Inc., 2017 ONSC 5363

CITATION: 2511899 Ontario Inc. v. 221465 Ontario Inc., 2017 ONSC 5363

COURT FILE NO.: CV-16-00565210

MOTION HEARD: 20170907

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2511899 Ontario Inc., Plaintiff

AND:

2221465 Ontario Inc. and 2518929 Ontario Inc., Defendants

BEFORE: Master B. McAfee

COUNSEL: Jonathan Rosenstein, Counsel for the Plaintiff, Moving Party

Shawn Tock, Counsel for the Defendant, Responding Party 2221465 Ontario Inc.

Stephen Turk, Counsel for the Defendant, Responding Party 2518929 Ontario Inc.

HEARD: September 7, 2017

REASONS FOR DECISION

[1] This is a motion brought by the plaintiff 2511899 Ontario Inc. (899) for an order granting leave to issue a certificate of pending litigation (CPL) pursuant to section 103 of the Courts of Justice Act, R.S.O. 1990, c.C.43 and Rule 42.01 of the Rules of Civil Procedure.

[2] The defendants 2221465 Ontario Inc. (465) and 2518929 Ontario Inc. (929) oppose the motion.

[3] For the reasons that follow, the motion is dismissed.

[4] In this action, 899 seeks specific performance of an agreement of purchase and sale dated August 8, 2016, (APS) of a gas station located in Mississauga, Ontario (the property). As set out in the APS, 899 is the purchaser and 465 is the vendor. 929 is the subsequent purchaser of the property.

[5] The test to be applied on a motion for leave to issue a CPL is the same as on a motion to discharge a CPL, with some slight difference in onus because the plaintiff is the moving party on a motion for leave to issue a CPL (Interrent International Properties Inc. v. 1167750 Ontario Inc., 2013 ONSC 4746 (Ont. Master) at para.14).

[6] The applicable legal principles for consideration on a motion to discharge a CPL are set out in Perruzza v. Spantone, 2010 ONSC 841 (Ont. Master). At paragraph 20, Master Glustein, as he then was, summarizes the legal principles as follows:

(i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on motion to discharge a CPL (Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (S.C. – Mast.) (“Homebuilder”) at para. 1);

(ii) The threshold in respect of the “interest in land” issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c.C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (Ont. S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. Comm. List) at para. 62);

(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has “a reasonable claim to the interest in the land claimed” (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CanLII 6832 (ON CA), 2002 CarswellOnt 219 (C.A.) at para. 20);

(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether the damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C. - Master) at paras. 10-18); and

(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct) at para. 9).

[7] In Interrent, Master MacLeod, as he then was, summarizes the law when the action is for specific performance at para. 15:

The first question is whether or not the claim for specific performance has merit. On an ex parte motion the threshold is low. The court must simply be satisfied that the claim is plausible and there is sufficient evidence to show that there is a serious issue.

On a contested motion, the court will review all of the evidence put forward by both parties and determine on the totality of evidence before it whether or not there is a triable issue.

In making this determination the court need not accept the pleadings or the affidavit evidence uncritically but will examine all of the evidence after cross examination to determine whether or not the claim has a reasonable prospect of success.

Reasonable prospect of success means not only a reasonable prospect of proving breach of contract but also succeeding in obtaining the equitable remedy of specific performance. Thus the court must be satisfied that damages would not be an appropriate remedy.

Even if the plaintiff has a potential case for specific performance the court may still refuse the CPL if it would be unjust to order it. The court must consider the equities of granting this form of interim relief. This is not a mechanical application of a test but an exercise of discretion to achieve a just result.

Factors the court may consider include the strength of the case, the uniqueness of the land, the adequacy of damages as a remedy, whether the CPL appears to be for an improper purpose, and the balance of convenience.

The court may impose terms whether it grants or withholds a CPL.

[8] On a motion for a CPL, it is not appropriate to make findings of credibility or to conclusively determine the question of liability. The court considers whether on the whole of the evidence, a reasonable claim to an interest in land has been made out (Interrent at para. 28 and Dynacorp Canada Inc. v. Curic, 2010 ONSC 2603 (Ont. Master at para. 15).

[9] 899 argues that there is a triable issue with respect to whether the APS remains in effect. I am not satisfied that there is a triable issue with respect to whether the APS remains in effect.

[10] On or August 8, 2016, 899 entered into the APS. The APS had an original closing date of September 30, 2016. 899 and 465 agreed to extend the closing date to October 30, 2016. 899 paid the initial deposit of $100,000.00 but did not pay the second deposit of a further $100,000.00. Financing had not been obtained. 899 did not hire a lawyer to close the transaction. 899 did not tender upon 465.

[11] Although there were discussions about a further extension of the closing date, the APS was not amended to provide for a further closing date.

[12] On or about November 21, 2016, an offer to sell was presented by 465 to 899 with an irrevocable date of November 23, 2016. The offer to sell was not responded to by November 25, 2016, and 465 advised 899 that the November 21, 2016, offer to sell was no longer open for acceptance.

[13] On November 26, 2016, 899 made a “counteroffer” with changes to Schedule “A” that had been attached to the November 21, 2016, offer. On November 28, 2016, 465 advised that the “counteroffer” was not accepted. No further APS was signed.

[14] There was no extension to the October 30, 2016, closing date. 899 did not hire a lawyer to close the transaction on October 30, 2016, and 899 did not tender upon 465. While further negotiations took place, no amended APS or new APS was entered into. I am not satisfied that there is a triable issue with respect to whether the APS remained in effect.

[15] Even if I am wrong and there is a triable issue with respect to whether the APS remained in effect, I am not satisfied that there is a reasonable prospect of obtaining the equitable remedy of specific performance.

[16] I am not satisfied that the property is unique. In Interrent the following is stated at para. 32:

There was a time when all land was considered unique and breach of contract for the sale of land regularly attracted the equitable remedy. This has not been so in Canada since the decision of the Supreme Court of Canada in Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415. In that case the court rejected the view that damages for breach of contract for the purchase and sale of land would be inadequate in all cases. In commercial transactions in which land is being purchased for investment purposes, damages will often be appropriate and specific performance should be granted only where the land has a peculiar and special value such that money is not a complete remedy. This principle was recently reaffirmed in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51.

[17] This is a commercial transaction. It is an attractive investment opportunity given its location. However, 899 was interested in acquiring three or four gas stations in the Greater Toronto Area and surrounding area. There is evidence before me that there are other gas stations available for sale in the GTA.

[18] I agree with the position of 465 and 929 that damages would be an appropriate remedy in the circumstances.

[19] Although there is no alternative claim for damages, if damages are an adequate remedy, specific performance will not be granted even if that is the only remedy claimed (Interrent at para. 31).

[20] 899 is a shell corporation. 899’s representative admitted that 899 was incorporated for the sole purpose of purchasing a gas station, that 899 does not have a bank account and that it has no other assets aside from the $100,000.00 deposit currently being held in trust by the agent. In light of this, it is unclear that 899 will be in a position to pay damages in accordance with section 103(4) of the Courts of Justice Act, R.S.O., 1990, c.C.43 if it is determined at trial that it does not have an interest in the property (Interrent at para. 39 and Perruzza at para. 39).

[21] When considering the equities of the matter, there is one set of circumstances that weigh in favour of granting leave to issue a CPL. 899 and 465 continued to negotiate in December of 2017. On January 17, 2017, counsel to 899 wrote to counsel to 465 with a demand that 465 consent to a CPL until settlement negotiations were completed. In the letter counsel to 899 stated that if 465 was not prepared to consent on or before January 20, 2017, a motion for leave to issue a CPL would be brought on an urgent basis.

[22] Counsel to 465 forwarded the letter of January 17, 2017, to the principal of 465 for instructions. The principal of 465 responded by email dated January 18, 2017, at 3:29 p.m. advising that he felt the parties should try one more time to arrange a meeting in the next few days to see if an agreement could be reached. At 3:25 p.m. on January 18, 2017, the principal of 465 also sent an email to the principal of 929 forwarding the January 17, 2017, letter and stated “See how urgent we have to close the property.”

[23] Unknown to 899, on January 4, 2017, 465 had entered into an APS with 929. The sale of the property to 929 closed on January 20, 2017, the deadline set forth in the January 17, 2017, letter from counsel to 899. 929 was aware of the claim of 899. A condition on closing was that 465 provide 929 with an indemnity.

[24] While these circumstances may weigh in favour of the granting of leave to issue a CPL, they are the only circumstances that I have found in favour of the granting of leave. I am not satisfied that they are sufficient in and of themselves to warrant the granting of leave. These circumstances involving 465 and 929, not their lawyers, may be a relevant consideration when addressing the issue of costs.

[25] For these reasons, I decline to exercise my discretion to grant leave to issue a CPL. The motion is dismissed.

[26] If any party seeks costs, and if after reasonable attempts to agree on costs the parties are unable to agree, the parties may arrange to attend before me to speak to the issue of costs. Sufficient time shall be scheduled by the parties. Any attendance before me shall be scheduled, not necessarily take place, within 60 days of today’s date.

Master B. McAfee

Date: September 29, 2017