CITATION: 5A Investment v. Jane Street, 2017 ONSC 7474

COURT FILE NO.: CV-16-3643-00

DATE: 2017-12-13

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

5A INVESTMENT INC.

Amrita Mann, for the Plaintiff

Plaintiff

• and -

16380 JANE STREET INC.

Jonathan L. Rosenstein, for the Defendant

Defendant

HEARD: August 28, 2017,

at Brampton, Ontario

Price J.

Reasons for Order

OVERVIEW

1The defendant, 16380 Jane Street Inc. (“Jane Street”), sold a property at that address to the plaintiff, 5A Investment Inc. (“5A”), upon which 5A intends to build and operate a gas station and convenience store. Jane Street was unable, by the March 31, 2016 closing date, to provide an environmental report confirming that soil and groundwater levels were at or below the limits allowed by the Ministry of the Environment and Climate Change. It was a condition of agreement that it would deliver “a clean phase II report” by Rubicon Environmental, the environmental consultant Jane Street had hired to remove oil tanks from the ground and the contaminants from the site, and a report confirming that soil/groundwater levels were at or below those allowed by the Ministry.

25A agreed to close, following a late night meeting on March 30, 2016, at which Jane Street’s representative agreed that 5A could hold back $100,000 of the purchase price until its own consultant’s concerns about the draft Rubicon report were satisfied. Jane Street later delivered a report that it and Rubicon, say is a “clean phase II report”. The report confirms that the soil-groundwater samples taken from the property showed levels at or below the limits allowable by the Ministry. 5A gave the report to its consultant, Dr. Ali Rasoul (variously described as “Dr. Rasoul”, or “Dr. Ali”, or “Mr. Ali”) who, after reviewing it, concluded that it failed to address concerns raised in an earlier report by another consultant 5A had consulted.

3The Technical Standards Advisory Association, who must approve a licence permitting 5A to build and operate its gas station and convenience store, required further testing of the soil/groundwater before it would approve the licence. 5A incurred additional expense satisfying their concerns. 5A takes the position that the report from Rubicon was not a “clean phase II report”, as Jane Street undertook to provide and argues that it should be entitled to use the $100,000, or part of it, to pay the extra expenses it incurred.

4Jane Street moves for partial summary judgment directing 5A’s lawyer to release that $100,000 that it agreed 5A could hold back. Jane Street argues that it has satisfied the undertaking that it gave on closing to provide the report and is therefore entitled to the money. 5A says that Jane Street did not fulfill the undertaking, and that the funds should be returned to 5A in accordance with the parties’ agreement, or should be held by 5A’s lawyer pending a trial of the action.

BACKGROUND FACTS

5On February 13, 2014, during negotiations between the parties leading to the purchase of a property at 16380 Jane Street, where 5A wanted to build and operate a gas station and convenience store, 5A received an environmental report that it had commissioned from an environmental consultant, Winchurch (“Winchurch report”), which raised certain concerns about the level of contaminants in the soil and groundwater, particularly in the proximity of underground oil storage tanks.

6On November 19, 2015, 5A entered into an Agreement of Purchase and Sale in which it agreed to purchase the property for $1,800,000 (the “Agreement”). The Agreement was to close on March 31, 2016.

7Closing of the Agreement was conditional upon the following:

(a) The vendor removing all existing underground tanks, underground lines and pumps on the site;

(b) The vendor providing to the buyer, at the vendor’s expense, a clean Phase II Environmental Report from Rubicon Environmental (2008) Inc. (“Rubicon”), “confirming the site meets current MOE [Ministry of Environment] standards”;

(c) The vendor providing to the buyer, at the vendor’s expense, a site plan approved for the Business (“the Site Plan Approval”); and

(d) The vendor providing to the buyer a letter of intent or signed lease agreement from Tim Horton’s Express within two days after acceptance of the Agreement of Purchase and Sale.

8Jane Street retained Rubicon to oversee the removal of the oil storage tanks from the property, which was completed by March 7, 2016. In the course of its removal of the tanks, Rubicon took soil samples from the property that it later described in the following terms:

On February 11, 2016 [certain soil testing was conducted]. The analytical results were compared to Table 2, O. Reg. 511/09 amended, O.Reg. 153/04 criteria for commercial land use with medium to fine textured soil in a potable groundwater condition. All of the soil samples met the appropriate site condition standards.

On March 30, 2016, [certain groundwater testing was conducted]. The analytical results were compared to Table 2, O. Reg. 511/09 amended, O. Reg. 153/04 criteria for commercial land use with medium to fine textured soil in a potable groundwater condition. All groundwater samples met the appropriate site condition standards.

9Rubicon had not completed its report by March 30, 2016. Accordingly, on that date 5A refused to close the transaction, taking the position that Jane Street had failed to provide to it a clean Phase II report, a Site Plan Approval, and a Letter of Intent from Tim Horton’s Express, as required by the Agreement.

10At a meeting on the evening of March 30, 2016, the parties agreed that in order to facilitate closing of the Agreement on March 31, 2016, 5A would hold back $100,000 from the closing proceeds, to be held in trust by 5A’s solicitor. The meeting was attended by Jane Street’s representative, Mirza Chaudhary, 5A’s representative, Xia Mai, (also known as Nika Mai), and Rubicon’s representative, Andrew Topp.

11On March 31, 2016, Jane Street’s representative, Mirza Chaudhary, sent an email to 5A’s solicitor, stating:

We have discussed all the details about the clean phase II… We suggest to your client will sit with Mr. Ali (your client consultant) and if still not satisfied then we will continue to fix the problem until Dr. Ali is satisfied… Even if the site plan is approved tomorrow, your client can continue holding the funds until Mr. Ali is satisfied. Your client agrees to it. [Emphasis added]

12On the same date, 5A’s solicitor signed and gave to Jane Street the following undertaking:

To release to the Vendor… the sum of One Hundred Thousand ($100,000.00) Dollars upon receipt of a clean Phase II report and Ground Water Analysis Report from Rubicon, confirming the Soil/groundwater samples show levels at or below MECC [Ministry of the Environment and Climate Change] allowable limits. In the event that said reports are not received by the Buyer… by 6:00pm on June 30, 2016, then the sum of One hundred thousand dollars shall be released to the Buyer.

The transaction closed at 4:26 pm on March 31, 2017.

13On April 7, 2016, Rubicon issued a Phase II environmental report, which Jane Street sent to 5A on May 13, 2016. 5A forwarded the Rubicon report to its consultant, Dr. Rasoul, for feedback. It asked Dr. Rasoul to review the report and advise if it was a “clean Phase II report” and whether the report confirmed that “soil and ground water samples showed levels at or below MOECC allowable limits.”

14After reviewing the report, Dr. Rasoul replied:

The statement of the executive summary shows exceedances in the groundwater parameters, while the conclusion statement shows no exceedances in groundwater testing.

The Phase II ESA did not address the issues of the groundwater condition in cleanup area and area identified by Winchurch Environmental Inc., Phase II Environmental Site Assessment dated: February 13, 2014. [Emphasis added]

Accordingly, Dr. Rasoul concluded, “the results obtained from the Phase II ESA were not sufficient to meet the requirements to release the amount held in trust.”

155A forwarded Dr. Rasoul’s comments to Rubicon. Rubicon conducted further testing on May 27, 2017, which it described in a further environmental report dated June 2, 2016. It stated:

On May 27, 2016 - further soil testing was conducted]. The analytical results were compared to Table 2, O. Reg. 511/09 amended, O. Reg. 152/04 criteria for commercial land use with medium to fine textured soil in a potable groundwater condition. All of the soil samples met the appropriate site condition standards.

On May 27, 2016, [further groundwater testing was conducted]. The analytical results were compared to Table 2, O. Reg. 511/09 amended, O. Reg. 153/04 criteria for commercial land use with medium to fine textured soil in a potable groundwater condition. All groundwater samples met the appropriate site condition standards.

Based on the findings of this investigation, the subject property does not appear to pose an environmental risk in owning, financing, or developing. No further environmental investigations are recommended at this time.

165A forwarded the Rubicon Report dated June 2, 2016, to Dr. Rasoul for his review. Although some of Dr. Rasoul’s comments on Rubicon’s April 7, 2016 Report were addressed in the June 2 Report, Dr. Rasoul found that the June 2 Report still did not address the issues of groundwater at the clean-up site which the Winchurch Report had identified. He therefore concluded that the June 2 Report was still not a “clean Phase II report”.

17The Technical Standards and Safety Authority (TSSA), whose approval was required in order for a licence to be issued to 5A to build and operate a gas station and convenience store on the property, also reviewed Rubicon’s June 2, 2016 Report. It found that the monitoring wells previously installed at the site had not been fully removed and that the report failed to address the impacted/contaminated areas of the site that had been identified by the 2014 Winchurch Report.

185A refused to release the $100,000 holdback funds because it concluded that Jane Street had failed to provide a clean phase II report or satisfied Dr. Rasoul’s concerns about the contamination in the area from which the storage tanks had been removed. On August 17, 2016, 5A began the present proceeding as an application for a declaration that the holdback was forfeited and should be returned to it. On October 7, 2016, the parties obtained a consent order by Van Melle J. converting the application into an action.

ISSUES

19The Court must determine whether there is a genuine issue for trial.

PARTIES’ POSITIONS

Jane Street’s Position

20Jane Street asserts that it provided the Rubicon Report, which both it and Rubicon say was a “clean phase II report”, as required by the Agreement. Rubicon’s principal and environmental engineer, Paul Rew, who prepared its reports, states in his affidavit sworn September 7, 2016:

Clean Phase II report

8. I do not purport to be a lawyer or to give legal advice, and so I cannot know what the parties intended when they made an agreement to deliver a “clean Phase II report.”

9. However, I can say that the term “clean Phase II report” is commonly used in the environmental assessment industry in Ontario. It refers to a report of a phase II environmental assessment which concludes that the concentrations of contaminants in the soil and groundwater of the subject property do not exceed applicable maximum concentrations, as prescribed in environmental regulations, and that therefore environmental contamination does not appear to pose a risk in owning, financing, or developing the subject property.

10. If that is what the parties meant when they used the term “clean Phase II report”, then the Report is a clean Phase II report. The Report confirms my findings in the course of my Assessment, I determined that the concentrations in the soil and groundwater of the property do not exceed applicable maximum concentrations, as prescribed in environmental regulations, and that as a result, the concentrations of those contaminants do not appear to pose an environmental risk in owning, financing, or developing the subject property.

Ground Water Analysis Report

11. “Ground Water Analysis Report” is not a term of art in the environmental assessment industry in Ontario. However, I would assume that such a report would, as suggested, report on the analysis of the groundwater in respect of a particular property. Specifically, it would report on the analysis of the concentrations of various contaminants in the groundwater of that property.

I did not prepare a separate report with my analysis of the concentrations of various contaminants in the groundwater of the property. Instead, my analysis of the concentrations of various contaminants in the groundwater of the property are contained within the Report.

21Jane Street asserts that 5A does not challenge Rubicon’s fundamental conclusion that its report was a “clean Phase II report”. Rather, it says, 5A challenges Rubicon’s testing methodology and asserts that the TSSA insists on further testing as a condition for it issuing a licence. Neither the testing method nor the TSSA licensing approval were conditions required by the Agreement of Purchase and Sale.

5A’s Position

225A asserts that Jane Street undertook to provide a clean Phase II report. It says that Rubicon’s Report dated June 2, 2016, does not show that soil/groundwater samples at the clean-up site show levels at or below Ministry allowable limits. It therefore says that Jane Street failed to fulfill its contractual obligation to provide a clean Phase II report, which was a condition precedent to the release of the holdback amount by 5A.

235A argues that Jane Street mischaracterizes 5A’s position when it says that 5A does not dispute that the Rubicon Report was a clean phase II report. In fact, 5A asserts, at para. 26 of its factum, that it “disputes that Rubicon’s June 2, 2016 report is a clean phase II report”.

24Additionally, 5A argues that Mr. Chaudhary, on behalf of Jane Street, agreed to satisfy Dr. Rasoul’s concerns, and agreed that 5A could continue holding the $100,000 until it did so. 5A submits that satisfying Dr. Rasoul’s concerns was a condition precedent to the release of the holdback funds.

ANALYSIS AND LAW

Legislative framework

25Motions for summary judgment are governed by Rule 20 of the Rules of Civil Procedure.¹ It provides:

20.04 (2) The court shall grant summary judgment if,

(a) The court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) The parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).

Powers

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence. O. Reg. 438/08, s. 13 (3).

Oral Evidence (Mini-Trial)

(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation. O. Reg. 438/08, s. 13 (3).

26Accordingly, the court may grant summary judgment in the following circumstances:

1. Where the parties agree;

2. Where the claim is without merit;

3. Where the motions judge is able to dispose of the matter and where the trial process is not required in the “interest of justice.”² [Emphasis added]

Jurisprudence

27In 2014, the Supreme Court of Canada, in Hryniak v. Mauldin,³ and Bruno Appliances and Furniture Inc. v. Hryniak,⁴ reinterpreted Rule 20 of the Rules of Civil Procedure, taking into account the need for the court to preserve the public’s access to justice. The Supreme Court held that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely, and just adjudication of claims.

28The Supreme Court of Canada, in Hryniak v. Mauldin, gave guidance as to how Rule 20 should be applied to promote timely and affordable access to the civil justice system. Justice Karakatsanis, on behalf of the Court, noted that such motions are an opportunity to simplify pre-trial procedures and move the emphasis away from the conventional trial, in favour of proportional procedures tailored to the needs of the particular case. She stated:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (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.⁵ (Emphasis added)

29Justice Karakatsanis held that the judge hearing a motion for summary judgment must compare the procedures available in such a motion, supplemented, if necessary, by the fact-finding tools provided by Rules 20.04(2.1) and (2.2), with those available at trial. The judge must determine whether the court can make the necessary findings of fact and apply the principles of law to those facts in a proportionate, most expeditious, and least costly manner, to achieve a just result:

This inquiry into the interest of justice is, by its nature, comparative. Proportionality is assessed in relation to the full trial. It may require the motion judge to assess the relative efficiencies of proceeding by way of summary judgment, as opposed to trial. This would involve a comparison of, among other things, the cost and speed of both procedures. (Although summary judgment may be expensive and time consuming, as in this case, a trial may be even more expensive and slower.) It may also involve a comparison of the evidence that will be available at trial and on the motion as well as the opportunity to fairly evaluate it. (Even if the evidence available on the motion is limited, there may be no reason to think better evidence would be available at trial.)⁶ (Emphasis added)

30In Sweda Farms v. Egg Farmers of Ontario, in 2014, Corbett J. described the current approach to summary judgment motions following the Supreme Court of Canada’s decision in Hryniak v. Mauldin, as follows:

Summary judgment motions come in all shapes and sizes, and this is recognized in the Supreme Court of Canada’s emphasis on “proportionality” as a controlling principle for summary judgment motions. This principle does not mean that large, complicated cases must go to trial, while small, single-issue cases should not. Nor does it mean that the “best foot forward” principle has been displaced; quite the reverse. If anything, this principle is even more important after Hryniak, because on an unsuccessful motion for summary judgment, the court will now rely on the record before it to decide what further steps will be necessary to bring the matter to a conclusion. To do this properly, the court will need to have the parties’ cases before it.⁷

31Based on the guidelines set out in Hryniak v. Mauldin, I must first determine, based on the evidence before me and without using the new fact-finding powers under Rule 20.04, whether there is a genuine issue requiring trial, whether I can fairly and justly adjudicate the dispute, and whether the motion is a timely, affordable, and proportionate procedure under Rule 20.04(2)(a). If there is no genuine issue requiring a trial, I must grant summary judgment.⁸

32If there appears to be a genuine issue requiring a trial, I must exercise my discretion to determine whether the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2), provided their use will not be contrary to the interests of justice. The use of those Rules must lead to a fair and just result and serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole.⁹

33The party moving for summary judgment has the onus of establishing that there is no genuine issue of material fact requiring a trial. Once that onus is met, the burden shifts to the responding party, opposing summary judgment, to demonstrate that the claim has a “real chance of success”.¹⁰ A self-serving affidavit is not sufficient to create a triable issue in the absence of detailed facts and supporting evidence.

Applying the legal principles to the facts of this case

a) Is there a genuine issue for trial as to whether the terms of the Agreement of Purchase and Sale were satisfied?

34The Ministry of the Environment and Climate Change, or the TSSA, ultimately had the authority to determine whether, based on further testing on any other criteria, the soil or groundwater at the site contained contaminants above the level allowable by the Ministry. There was no recourse for 5A from a negative TSSA determination. Rubicon’s opinion, whether it was arrived at properly or not, and whether it was correct or not, was of no avail to 5A.

355A, in paragraph 24 of its factum, notes that no one has suggested that Rubicon’s opinion is “outside the standard of care for an environmental engineer in the Province of Ontario, acting reasonably and that, at its highest, there is a genuine difference of expert opinion”. In other words, Rubicon may be wrong in its opinion, but no one has suggested that it was negligent in expressing the opinion it did. If that is the case, 5A would have paid for the property on which to build and operate a gas station and convenience store, and would be precluded from doing so because the Ministry or TSSA had come to a different opinion than Rubicon. 5A would have no remedy against Rubicon for its loss in buying a worthless property because Rubicon, though wrong, had not been negligent.

36If there was a genuine difference of opinion as to whether the property was fit for the purpose for which 5A intended it, and as to whether its soil and groundwater samples would be approved for that purpose, that uncertainty may have had a bearing on the amount 5A was willing to pay for the property, and the amount Jane Street demanded for it.

37In entering into the Agreement of Purchase and Sale, 5A gambled on the correctness of Rubicon’s report. If, on one hand, the property, purchased for the purpose of building and operating a gas station and convenience store, was worth, hypothetically, 5 million dollars, but cost 5A only 1.8 million dollars, and Rubicon turned out to be correct in its Report, and 5A secured its licence, 5A would have profited from its gamble.

38If, on the other hand, the property, purchased for purpose of building and operating a gas station and convenience store, was worth only 1.8 million dollars and, if not fit, is worth, hypothetically, nothing, and the Rubicon report turns out to be incorrect and 5A is unable to secure its licence, 5A would have lost money in its gamble.

39If, in order to derive the value that 5A paid for the property, the Ministry and TSSA must find the level of contaminants to be within the limits allowable by the Ministry, one would expect 5A to have required, in its Agreement, that the Ministry or TSSA, or both, must approve the level of contaminants, or 5A’s licence application, before 5A was required to close the transaction.

40The purchaser took that approach in J.M.B. Cattle v Kaufman, (2015). The property in that case was of value to the purchaser only if the Planning Board allowed a severance. The purchaser tried to ensure, by the time the Agreement closed, that the property was worth what it was paying for it by including in the Agreement a term that the purchaser could apply for severance, on behalf of the vendor, before being required to close the transaction. The Agreement gave either party the right to terminate the Agreement if severance was not granted by a certain date. When the Planning Board denied the severance application, the purchaser sought to extend the deadline until its appeal from the denial was heard, but the vendor refused and terminated the Agreement. This Court held that the vendor was within its rights, even though the purchaser had expended funds on the severance application and appeal. The cost of eliminating the risk that the property would have no value, if severance were denied, was the purchaser’s, because the process for doing so was under its control.¹¹

41In the present case, 5A did not bargain for a condition of closing that permitted it to apply, on behalf of Jane Street, for approval of a licence, or for TSSA to approve such an application, but for Rubicon to give a clean Phase II report. The delivery of a report from Rubicon was a condition precedent for closing, according to the test set out in Coghlan v. Unique Real Estate Holdings Inc., (2016).¹²

42A Rubicon report, however accurate, and however exacting the sampling and analysis it employed, did not guarantee that the TSSA would approve the licence application but, if its sampling was thorough, and the analysis and report were accurate, it was more likely that the application would ultimately be successful. Had 5A wanted more certainty, and been willing to pay for it, it could have sought the right to apply for the licence on Jane Street’s behalf, and to require approval of its application as a condition of closing. That is not what 5A bargained for. It bargained for a “clean Phase II report” from Rubicon.

43As long as there could be a difference of opinion between Rubicon and the Ministry or TSSA as to whether the level of contaminants was within allowable limits, then a “clean Phase II report” from Rubicon was not conclusive. The decision as to whether to accept Rubicon’s opinion as a substitute for approval by the Ministry or the TSSA was within the control of 5A. It depended on 5A’s risk tolerance, and what degree of certainty it was prepared to pay for.

44If Rubicon erred in its opinion that the contaminants were within the Ministry’s allowable limits, then 5A may have a recourse against Rubicon if Rubicon was negligent in arriving at its opinion. If it was not, then 5A assumed the risk that it was buying a property that was worth less than what it was paying for it. Only 5A could value that risk and protect itself by negotiating a purchase price that was discounted to reflect the risk, or by negotiating terms of the Agreement that would protect it from loss, by entitling it to an abatement, or making the purchase contingent on approval of the licence application.

455A argues, in effect, that the determination of what a clean Phase II report is can only be decided by 5A, or by its consultants, or by the court. Even if 5A were to obtain an opinion from the Court that the contaminants were within the allowable level, such a finding would not be binding on the Ministry or TSSA unless they were a party to the action, which they are not.

46If what 5A required was certainty that the contaminants were below the level the Ministry allows, the only party who could give that assurance conclusively was the Ministry or TSSA. If 5A had wanted that degree of assurance, it could have specified that the Ministry’s or TSSA’s approval was a condition of the Agreement. From the plain reading of the Agreement, it did not do so.

47It must be inferred from the wording of the Agreement that an opinion from Rubicon would give 5A the assurance it required, and would reduce to an acceptable level the risk of being unable to develop the property. When construing a contract, the court determines the intentions of the parties based on the language used in the contract. It presumes the parties intended what they wrote.¹³ The Court does not rewrite a contract for the benefit of a party who later decides it is unhappy with the bargain it struck.¹⁴

485A and Jane Street specifically contracted to have Rubicon provide the clean Phase II report. They did so with the knowledge that it was Rubicon that was removing the tanks and undertaking the remediation of the property and might have an interest of its own in reporting that the property was then free of contaminants.

495A argues that the intention of the parties is in dispute. I do not agree. The issue is not what the parties intended by the words “clean Phase II report”, but who can authoritatively determine whether the report that was delivered by Rubicon is, in fact, a clean Phase II report. The Court cannot do so unless the Ministry or TSSA are parties to the action, which they are not. It cannot be 5A or Jane Street, because an interpretation from either of them would be self-serving and unreliable.

50The issue is: who is the ultimate arbiter of whether the report that Jane Street delivered was, in fact, a “clean Phase II report”? In the absence of any qualification of those words, the words of the Agreement itself answer that question. Rubicon states that the report it provided was a clean Phase II report.

51Even if the Ministry or TSSA find the level of contaminants in the soil or groundwater to be beyond the allowable limit, it will be a difference of opinion as to the level of contaminants, not a difference of opinion as to whether Rubicon’s report is a “clean phase II report.”

525A argues that there are serious issues of credibility that affect the outcome of the action. In particular, Mr. Rew denies agreeing with Dr. Rasoul’s analysis. He denies having had discussions with Dr. Rasoul. Additionally, Mr. Rew and Dr. Rasoul disagree on the reliability of the Winchurch report. None of those issues of credibility can affect the outcome of the action.

53Moreover, where a term of an agreement is unclear, the intent of the parties when the agreement was signed is a material issue in dispute, and a trial is required to determine credibility issues, weigh evidence, make factual findings etc.¹⁵ This is not such a case. The term requiring a clean Phase II report from Rubicon is very clear. 5A decided that a Rubicon report was reliable. The requirement for such a report to be delivered was fulfilled; a fact unchanged by whether or not the report ultimately proved to be reliable or accurate.

b) Is there a genuine issue for trial as to whether the satisfying of Dr. Rasoul’s concerns was an enforceable condition precedent to the release of the holdback funds, as to whether that condition has been breached, and as to the appropriate remedy?¹⁶

(i) Was Jane Street’s statement that it would satisfy Dr. Rasoul’s concerns a condition precedent to the release of the holdback funds?

54In his email on the date of closing, March 31, 2016, Mr. Chaudhary, on behalf of Jane Street, offered to satisfy Mr. Ali’s [i.e., Dr. Rasoul’s] concerns and to permit 5A to continue holding back the $100,000 until it did so. He stated, “Your client can continue holding the funds until Mr. Ali is satisfied”.

555A’s acceptance of Jane Street’s offer is reflected by its decision to proceed with the closing. As stated by Mr. Chaudhary, “Your client agrees to it. We must close today.”

56In the transcript of his cross-examination, at page 69, lines 15-20, 5A’s representative, Xai Mai, states, “Dr. Ali said this report is not clear and completed. So we won’t close…And Andrew [Topp] said, “Yes, we agreed, but just a little problems left. We promise to fix it.”

(ii) Was the condition enforceable?

Offer and Acceptance

57Jane Street, the vendor, offered to satisfy Dr. Rasoul’s concerns in exchange for 5A, the buyer, closing on March 31, 2016, which it was not obliged to do. 5A accepted the offer by agreeing to close. Its conduct signified acceptance, and according to the cross-examination of Mai, at page 69, lines 15-20, 5A closed the agreement with this promise in mind.

58With the exchange between Xai Mai and Mr. Chaudhary, later confirmed by Mr. Chaudhary in his email of March 31, 2016, the release of the holdback funds became conditional on Dr. Rasoul’s satisfaction.

Certainty of terms

59The condition may appear vague on its face; however, prior communication between the parties discloses that there was a shared understanding of what Dr. Rasoul’s concerns were. In particular:

a) In the transcript of the cross-examination of Xai Mai, at page 66, line 8, Mr. Mai is asked whether Dr. Rasoul’s comments were shared with the vendor prior to the March 30 meeting. Mr. Mai states that an email was sent to the vendor with Dr. Rasoul’s comments, and that Rubicon responded to those comments.

b) In emails dated March 9, 2016, 5A’s lawyers forwarded Dr. Rasoul’s comments to Jane Street’s lawyers. One email from Johnny Luo to Angelo R. DeMichele lists Dr. Rasoul’s concerns, including those with respect to the ground water at previously contaminated sites. The second email forwarded those comments to Mr. Chaudhary, with Mr. DeMichele’s recommendation that Dr. Rasoul’s questions be answered, and that Dr. Rasoul be put in touch with Rubicon directly.

c) There are further emails that show communication between the parties about Dr. Rasoul’s concerns. Andrew Topp responds to Dr. Rasoul’s concerns on March 24, 2016.

60Dr. Rasoul’s concerns were not addressed after closing. An email dated July 25, 2016, from Dr. Rasoul states that he has reviewed the Phase II Assessment and indicates that the report has not addressed the groundwater condition in the clean-up area, among other concerns. Dr. Rasoul states, “At the present time the results obtained from the Phase II ESA not sufficient to meet the requirements to release the amount held in trust.”

61Based on the foregoing, I find that the parties expressed themselves with respect to Dr. Rasoul’s concerns in a manner that can be “determined with a reasonable degree of certainty.”¹⁷

Condition Precedent

62Dr. Rasoul’s satisfaction meets the criteria for a condition precedent as stated by Polowin J. in 3869130 Canada Inc. v. I.C.B. Distribution Inc. (2005), 2005 28425 (ON SC), 45 C.C.E.L. (3d) 15, at para. 371. Justice Polowin stated:

371I have reviewed the case law provided by counsel with respect to true conditions precedent and have summarized the basic principles emanating from the case law as follows:

• A true condition precedent occurs where a) the rights and obligations of the contracting parties under the contract depend b) on a future uncertain event, c) the happening of which is beyond the control of the parties and depends entirely on the will of a third party. Until the event occurs, there is no right to performance on either side. (Turney v. Zhilka, 1959 12 (SCC), [1959] S.C.R. 578 at 583-584 [Turney], affirmed by S.C.C. in Barnett v. Harrison, 1975 33 (SCC), [1976] 2 S.C.R. 531. See also Goetz et al v. Whitehall Development Corp. Ltd. (1978), 1978 1466 (ON CA), 19 O.R. (2d) 33 (C.A.); McCauley v. McVey, 1979 50 (SCC), [1980] 1 S.C.R. 165 [McCauley])

Was the condition breached?

63In his affidavit dated September 16, 2016, Dr. Rasoul states, at paragraph 16, that Rubicon’s Phase II ESA Report dated June 2, 2016, is not “sub-standard”; rather, it is not a clean report as contemplated between the parties when the funds were held back. In paragraph 12, he strongly disagrees with Mr. Rew that the contaminants, which were identified in the Winchurch Report, have been remediated.

64Based on the foregoing, Dr. Rasoul’s initial concerns regarding ground water contamination, particularly in the areas of contamination previously identified in the Winchurch Report, have not been satisfied.

The appropriate remedy

65In Whitaker v. Ellerby Properties Inc. (2002), later affirmed by the Court of Appeal, (2005), Mossip J. considered an agreement by the parties to an Agreement of Purchase and Sale of property. The parties agreed that $25,000 would be held back from the purchase price and held in trust by the plaintiff/purchaser until certain deficiencies were rectified. The vendor signed an undertaking at the time of closing which stated:

• In consideration of the closing of the above noted transaction and further to any other general undertakings to complete, and without thereby limiting the effect of such general undertaking, Ellerby Properties Inc. hereby undertakes to complete all of the items on a certain list of deficiencies agreed upon by the parties on 3 August 1989 as soon as possible.

• The undersigned, Jan Poot, undertakes to hold in trust the sum of $25,000, until such time as advised by Ellerby's architect that all of the items in the said list have been completed.

66Mossip J. stated:

16 I find that any claim the Plaintiffs had to the holdback funds of $25,000 was limited to any amount needed to remedy a specific deficiency, and any calculation of damages is related to that failure to remedy that specific deficiency.

17 There was no such claim made at this trial, nor was any evidence presented at this trial to prove any damages for a failure to complete a specific deficiency.

18 I accept the submission of counsel on behalf of Poot, that this case appeared to start out as a claim for damages for non-completion of deficiencies, but as there was no evidence to support that, the Plaintiffs, erroneously in my view, shifted to a position that the $25,000 was "their" money and that because Poot technically breached the undertaking, and/or because the Plaintiffs suffered other damages as a result of the purchase of the property and the construction of the building, they could look to the $25,000 as either a form of "punishment" of Poot, or a recovery for other wrongs.

19 In my view, that is not the law of Ontario with regard to undertakings given on closing with respect to construction deficiencies. The cases relied upon by the Plaintiffs do not assist them. In several of those cases, a Plaintiff suffered damages directly traceable to the breach of the terms of the undertaking, in that, certain work was agreed to be done and funds were held back to ensure that the work was completed. In certain of those cases, the holdback funds were released in contravention of that agreement, and damages were incurred and calculable because of that breach. That is not the case here.

20 As set out in the case of 115 Place Co-Operative Housing Association v. Burke, [1994] B.C.J. No. 1488 (B.C.C.A.), the Court makes it clear that the construction of the actual undertaking must be examined to determine if a plaintiff has a claim against any particular holdback funds. In fact, several of the Plaintiffs' cases, for example, Kutilin v. Auerbach, [1988] B.C.J. No. 2552 (B.C.C.A.), also state that an inquiry must be held as to the construction of the undertaking and its applicability in a particular fact situation, to determine if there can be recourse to holdback funds. Obviously, if holdback funds are released without agreed upon work being done, then that would be a breach of the undertaking. Further, I agree with Plaintiffs' counsel that the sending of the letter by Poot to Plaintiffs' counsel advising that he was releasing the holdback funds, would not "cure" a breach of the undertaking to hold the money until the deficiencies were completed.¹⁸

67There is no evidence before the Court as to whether, or when, the concerns of Dr. Rasoul were satisfied, and as to the expense 5A incurred for further testing before that occurred. I find that the $100,000 holdback was arrived at in contemplation of 5A having to incur further expense, or suffering a loss resulting from delay in being able to operate a gas station on the property, owing to Jane Street’s delay in satisfying Dr. Rasoul’s concerns, and inferentially, the requirements of the licencing authority. That evidence is required before the Court can determine the claim that 5A can reasonably make against the holdback funds. This is an issue that must be determined at trial.

CONCLUSION AND ORDER

68Having determined that there is a genuine issue for trial as to the remedy for the breach of the condition precedent to the release of the holdback funds, I must, in accordance with the Supreme Court’s decision in Hryniak, exercise my discretion to determine whether the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). This is subject to the concerns that their use will not be contrary to the interests of justice, will lead to a fair and just result, and serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole.¹⁹

69I am unable to determine, based on the evidence before me, whether or not the remedy issue can be determined fairly by exercising the powers under Rule 20.04. I will therefore leave it to the parties to determine that issue by agreement, or submit further evidence to enable the Court to determine it.

70For the reasons stated above, it is ordered that:

1. The motion by Jane Street for the release of the holdback funds is dismissed.

2. The parties shall, by January 13, 2018, agree on a timetable for trial, or submit further evidence to me for the purpose of enabling me to determine whether the remedy issue can be fairly determined by the exercise of powers under Rule 20.04, or whether it requires a trial.

3. If the parties, having reviewed the principles I have discussed in costs endorsement in previous cases, are unable to agree on costs, they shall submit written argument, not to exceed four pages, and a Costs Outline, by January 13, 2018.

Price J.

Released: December 13, 2017

CITATION: 5A Investment v. Jane Street, 2017 ONSC 7474

COURT FILE NO.: CV-16-3643-00

DATE: 2017-12-13

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

5A INVESTMENT INC.

Plaintiff

• and –

16380 JANE STREET INC.

Defendant

Footnotes

1. 1Rules of Civil Procedure, R.R.O. 1990, Reg. 194
2. 2Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, at paras. 41-44
3. 3Hryniak v. Mauldin, 2014 SCC 7 [Hryniak]
4. 4Bruno Appliances and Furniture Inc. v. Hryniak, 2014 SCC 8
5. 5Hryniak, at para. 49
6. 6Hryniak, at para. 58
7. 7Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 32
8. 8Hryniak, at para. 66
9. 9Hryniak, at para. 66
10. 10Hamilton Kilty Hockey Club Inc. v. Ontario (Attorney General), (2003), 2003 24429 (ON CA), 64 O.R. (3d) 328 at para. 20.
11. 11J.M.B. Cattle v Kaufman, 2015 ONSC 7372, paras. 71-72
12. 12Coghlan v. Unique Real Estate Holdings Inc., 2016 ONSC 6420
13. 13Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673
14. 14Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] S.C.J. No. 55
15. 15Corkery v. Crecan International Ltée, 155 A.C.W.S. (3d) 58 at para. 17
16. 16I am grateful to judicial law clerk Humera Jabir for her assistance in the research in this section
17. 17John D. McCamus, The Law of Contracts, 2nd ed. (Toronto: Irwin Law Inc., 2012), at p. 92, citing G. Scammell and Nephew Ltd. v. Ouston et al., [1941] A.C. 251 (H.L.)
18. 18Whitaker v. Ellerby Properties Inc., [2002] O.J. No. 4051 affirmed [2005] O.J. No. 701 (Ont. C.A.)
19. 19Hryniak, at para. 66