Court File and Parties

Citation: China Panda Limited v. 1 Yorkville Inc., 2017 ONSC 7482

Court File No.: CV-17-00576401

Motion Heard: 20171205

Superior Court of Justice - Ontario

Re: China Panda Limited and 2252493 Ontario Limited, Plaintiffs

And:

1 Yorkville Inc., 840 Yonge Street Holdings Inc. and Mayling Holdings Inc., Defendants

Before: Master B. McAfee

Counsel: Stephen Taylor, Counsel for the Moving Parties, the Defendants James Renihan, Counsel for the Responding Parties, the Plaintiffs

Heard: December 5, 2017

Reasons for Decision

[1] This is a motion brought by the defendants 1 Yorkville Inc., 840 Yonge Street Holdings Inc. and Mayling Holdings Inc. for an order for costs of the within discontinued action. The defendants seek costs payable by the plaintiffs China Panda Limited and 2252493 Ontario Limited on a substantial indemnity basis in the amount of $11,026.30. In the alternative, costs are sought on a partial indemnity basis in the amount of $7,444.20.

[2] The plaintiffs’ position is that no costs of the within discontinued action are payable.

[3] Rule 23.05(1) of the Rules of Civil Procedure provides as follows:

23.05(1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.

[4] The parties agree that the test to be applied by the court in the exercise of discretion under rule 23.05 requires the plaintiffs to satisfy the court that they had a bona fide cause of action, that it was not frivolous or vexatious and that there was some justification for the commencement of the claim (Dvoskine v. 2155710 Ontario Ltd., 2015 ONSC 2782 (Master) at para. 26 citing Carriere Industrial Supply Ltd. v. 2026227 Ontario Inc., 2013 ONSC 1016, 2013 CarswellOnt 1539 at para. 9; Metropolitan Toronto Condominium Corp. No. 943 v. Channel Property Management Ltd., 2013 ONSC 3278, 2013 CarswellOnt 7383 at para. 4).

[5] The plaintiffs owned two adjacent properties on Yonge Street in Toronto (the properties). The defendants are building a large condominium project known as 1 Yorkville. The condominium will be incorporating existing retail units into its structure. The plaintiffs sold the properties to the defendants on the condition that the defendants assign the properties back to the plaintiffs once the condominium project was complete as set out in the purchaser’s covenants dated August 28, 2012.

[6] As set out in the affidavit of Chiong-Heng Tan, director of the plaintiffs, sworn June 12, 2017, earlier in 2017 the defendants’ broker Hamid Armaki advised Tan that the defendants have agreed to sell the properties to a third party. According to Tan’s affidavit, Armaki also advised Tan that the defendants believed that they could be released from their obligation to return the properties to the plaintiffs by paying money to the plaintiffs.

[7] On May 10, 2017, May 15, 2017 and May 26, 2017, plaintiffs’ counsel wrote to Plazacorp Investments Ltd. and Bazis Inc. and requested confirmation that the purchasers’ covenants would be honoured. In the May 26, 2017, letter plaintiffs’ counsel stated that legal proceedings would be commenced. The letters do not state a reason for the requested confirmation.

[8] Plazacorp and Bazis are listed as the developers on the website and in the brochure for the condominium project. Based on the experience of plaintiffs’ counsel, and in light of the nature of the correspondence, plaintiffs’ counsel felt that the letters were best directed to Plazacorp and Bazis directly rather than a subsidiary entity.

[9] By way of letter dated May 29, 2017, associate counsel for Plazacorp responded to the letters from plaintiffs’ counsel. No issue was raised about the letters from plaintiffs’ counsel having been addressed to Plazacorp and Bazis. There was no expression of surprise over the plaintiffs’ concerns. There was no request for a reason for the confirmation. The confirmation sought was not provided. Instead a “without prejudice” meeting was proposed during the week of June 12, 2017, which would include Plazacorp’s president.

[10] The same day, plaintiffs’ counsel responded by email and indicated that he was prepared to meet on June 12 or 14, 2017, but wanted to make it clear that a claim will have already been issued and served before the meeting. Plaintiffs’ counsel asked associate counsel for Plazacorp to contact him if associate counsel still wanted to discuss the matter.

[11] There was no response to the email.

[12] The statement of claim was issued on June 2, 2017.

[13] After serving the statement of claim, plaintiffs’ counsel wrote to defendants’ counsel on June 12, 2017, regarding the scheduling of a motion for injunctive relief. Plaintiffs’ counsel stated that if the defendants would agree not to take any steps in furtherance of a transfer of the properties pending the return of a motion for an injunction, a reasonable timetable could be set.

[14] On June 13, 2017, counsel for the defendants responded that such an agreement must include language that it “did not create a status quo” and could only be for a stipulated timeframe.

[15] On June 13, 2017, counsel for the plaintiffs responded and asked if the defendants were indeed seeking to sell the properties to a third party and if there was an agreement to that effect already in existence.

[16] There defendants did not respond to this inquiry. Instead on June 14, 2017, defendants’ counsel requested particulars of the claim and stated that the claim and any injunction were speculative and without merit and advised that no Planning Act application had been made with respect to the properties.

[17] On June 15, 2017, plaintiffs’ counsel responded and reminded the defendants that they have been requesting information about the defendants’ intentions concerning the properties for over one month.

[18] An attendance in Civil Practice Court to schedule a motion for injunctive relief was scheduled for June 26, 2017, and it was agreed that the plaintiffs would serve their motion materials on June 21, 2017.

[19] The plaintiffs prepared and were ready to serve the motion material on June 21, 2017, as agreed. Shortly before service, defendants’ counsel left a voice mail message for plaintiffs’ counsel and stated that plaintiffs’ counsel may wish to hold off serving the motion material. Plaintiffs’ counsel stated that a response was on its way which may dispose of any need to attend Civil Practice Court.

[20] On June 21, 2017, defendants’ counsel wrote and advised that it was the defendants’ position that they have not violated their contractual obligations to the plaintiffs. Defendants’ counsel confirmed that the defendants would agree to an expedited trial schedule and, without prejudice to the defendants’ position, would not take any steps in furtherance of a transfer of the properties pending the outcome of this trial.

[21] On June 22, 2017, plaintiffs’ counsel confirmed that based on the defendants’ commitment not to take any steps in furtherance of a transfer of the properties, the plaintiffs would not pursue interim/injunctive relief at this time. An expedited schedule was proposed.

[22] On June 29, 2017, plaintiffs’ counsel followed up with defendants’ counsel concerning the schedule and confirmed that a statement of defence was due on July 4, 2017.

[23] On June 29, 2017, defendants’ counsel responded to the schedule proposed by plaintiffs’ counsel on June 22, 2017, and suggested a post-production motion for summary judgment.

[24] On June 30, 2017, plaintiffs’ counsel wrote and advised that he would respond to the defendants’ proposal concerning summary judgment following receipt of the statement of defence.

[25] A response to the demand for particulars was provided.

[26] A statement of defence was served on July 4, 2017. In the statement of defence, for the first time, the defendants denied having sold the properties to a third party and denied that they would not be able to comply with their contractual obligations.

[27] On July 11, 2017, after reading the statement of defence, plaintiffs’ counsel wrote and proposed a without costs dismissal of the action in exchange for a signed, written confirmation from the defendants that they would agree to comply with their obligations to transfer the properties back to the plaintiffs.

[28] On July 18, 2017, defendants’ counsel responded and advised that instructions were being sought but a short delay was expected because the lawyer responsible for the file was on vacation.

[29] On August 3, 2017, defendants’ counsel responded and refused to provide the requested confirmation. It was the defendants’ position that there was already a contract in place and the defendants did not intend to provide further guarantees or promises beyond those set out in the contract, particularly when the plaintiffs’ rights were subject to a condition precedent of the completion of the development. The defendants made an offer that the action be discontinued with costs payable to the defendants in the amount of $5,000.00, open for acceptance until August 10, 2017.

[30] On August 15, 2017, the plaintiffs reiterated their demand for confirmation that the defendants would comply with their contractual obligations to transfer the properties to the plaintiffs.

[31] On August 29, 2017, defendants’ counsel wrote and stated that the defendants have already confirmed that there is a contract in place with the plaintiffs and that the properties have not been sold to a third party and that the properties are not subject to an agreement of purchase and sale with a third party. Defendants’ counsel stated that it was unclear what the plaintiffs were requesting and requested clarification.

[32] On September 6, 2017, plaintiffs’ counsel again requested written confirmation that the defendants would comply with their obligations to transfer the units back at the required time.

[33] On September 7, 2017, defendants’ counsel advised that the defendants would provide the requested confirmation upon payment of $5,000.00 for partial indemnity costs.

[34] On September 8, 2017, plaintiffs’ counsel advised that the plaintiffs refused to pay costs and the action would continue.

[35] On September 18, 2017, defendants’ counsel advised that despite the fact that the assurances sought are unnecessary in light of the existence of the contracts themselves, the defendants “…nevertheless confirm their intention to comply with their contractual obligations to [the plaintiffs]”. The defendants requested that the action be discontinued and reserved their rights to pursue costs.

[36] On September 19, 2017, plaintiffs’ counsel confirmed that the action would be discontinued and indicated that any request for costs would be opposed.

[37] On September 29, 2017, the plaintiffs served a notice of discontinuance.

[38] I am satisfied that the plaintiffs had a bona fide cause of action and that the action was not frivolous or vexatious.

[39] Although the time for performance under the contract was not yet due, the defendants’ own agent told the plaintiffs that the defendants intended to breach the agreement.

[40] The record before me does not disclose whether the defendants ever intended to sell the properties to a third party, as their agent stated. At paragraph 23 of the affidavit of Matthew Gordon sworn October 27, 2017, Gordon states that he is unaware of the content or nature of any conversations between the plaintiffs and Armaki. Gordon denies that the defendants sold the properties to a third party but is silent as to whether such a sale was considered or pursued.

[41] I am also satisfied that the plaintiffs were justified in commencing the action. The plaintiffs had information, as noted above, from the defendants’ agent that the defendants intended to breach the agreement. Prior to commencing the action, the plaintiffs asked the defendants to confirm that they would comply with their obligations three times.

[42] In all of these circumstances, there shall be no costs of the discontinued action.

[43] With respect to costs of the motion, I am satisfied that the plaintiffs are entitled to costs, having been successful on the motion. In my view the all-inclusive sum of $2,500.00 is a fair and reasonable amount that the defendants could expect to pay for costs of this motion in all of the circumstances of the matter. Costs of this motion are fixed in the all-inclusive sum of $2,500.00 payable by the defendants to the plaintiffs within 30 days.

Master B. McAfee

Date: December 18, 2017