COURT FILE NO.: CV-17-132801 (NEWMARKET)
MOTION HEARD: 2018 01 15
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 2579394 Ontario Inc. v. Sandra Mammone
BEFORE: MASTER R.A. MUIR
COUNSEL: Mauro Marchioni for the plaintiff W. Brad Hanna and Lauren Ray for the defendant
REASONS FOR DECISION
[1] There are two motions before the court. The first is brought by the plaintiff pursuant to section 103(1) of Courts of Justice Act, RSO 1990, c C.43 (the “CJA”) and Rule 42.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) for an order granting it leave to issue a certificate of pending litigation (“CPL”). The second is brought by the defendant pursuant to Rule 2.1.01 seeking an order dismissing this action and other related declaratory relief.
BACKGROUND TO THE ACTION
[2] This action arises out of an agreement of purchase and sale entered into between the plaintiff as purchaser and the defendant as vendor dated November 13, 2016 (the “APS”). The land which is the subject of the APS is located at 8940 Jane Street in Vaughan, Ontario (the “Property”). The purchase price is $58 million.
[3] The APS was not conditional on financing. However, the APS was conditional on the defendant securing certain re-zoning of the Property. The re-zoning was to have been obtained by May 12, 2017. If the Property was not re-zoned by that date either party could elect to terminate the APS. If the defendant chose to terminate the APS, the plaintiff could then elect to waive the re-zoning condition and continue with the completion of the APS.
[4] The Property was not re-zoned by May 12, 2017 and the defendant terminated the APS. The plaintiff then waived the re-zoning condition, keeping the APS alive.
[5] The APS was scheduled to be completed on August 10, 2017. Shortly before the closing date, the plaintiff advised the defendant that she was in breach of the terms of the APS. The plaintiff alleged that due to the defendant’s failure to keep the plaintiff apprised of the re-zoning process, the plaintiff required additional time to arrange for financing to close the transaction. The plaintiff needed more information about the proceedings before the Ontario Municipal Board (“OMB”) involving the Property in order to satisfy its lenders. Everyone agrees that the Property will be far more valuable if the proposed re-zoning is approved.
[6] Ultimately, the plaintiff took the position that the defendant had breached her information obligations under the APS and refused to close on the scheduled date. Specifically, the plaintiff alleged that the defendant failed to fully advise the plaintiff of the details of the OMB mediation process, as required by the APS.
[7] The defendant’s position is that she has fully complied with the disclosure requirements of the APS. The OMB mediation is subject to the OMB’s confidentiality rules and its details cannot be disclosed to third parties. The defendant also argues that the APS allowed the plaintiff to assume control of the re-zoning process after the re-zoning condition had been waived and the plaintiff simply failed to do so. Finally, the defendant submits that the plaintiff was simply not in a position to complete the APS on August 10, 2017 because it had failed to arrange the necessary financing.
[8] The APS did not close on August 10, 2017. The defendant states that she was ready willing and able to close. She purported to tender on that date by providing the plaintiff’s lawyer with the necessary closing documents and a key to the building on the property. The plaintiff did not tender the purchase price set out in the APS.
[9] The plaintiff then commenced this action on September 28, 2017 seeking specific performance of the APS along with leave to issue a CPL and other related relief. The statement of claim also seeks damages as an alternative remedy.
ANALYSIS – PLAINTIFF’S MOTION
[10] In his decision in Perruzza v. Spatone, 2010 ONSC 841 (Master), Master Glustein concisely sets out the factors the court is to apply when deciding a motion seeking leave to issue a CPL. At paragraph 20 of Perruzza, Master Glustein identifies those considerations as follows:
(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, RSO 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 (SCJ), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] OJ 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 (CA) 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 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 (SC - Mast.) 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).
[11] For the purposes of this motion, it is important to note that it is more common for a residential property to be found to be unique as opposed to a commercial property being purchased simply for investment purposes. See Perruzza at paragraph 39(i) and Redfox Land Co. v. 770 Brookfield Properties Ltd., 2015 ONSC 4153 at paragraphs 12 and 13.
[12] I have applied these factors and considerations to the facts before me on the plaintiff’s CPL motion. In my view, the plaintiff’s request for leave to issue a CPL should be dismissed.
[13] As stated above, the threshold question for the court on this motion is whether there is a triable issue, not whether the plaintiff will likely succeed. The onus is on the party opposing the CPL to demonstrate that there is no such triable issue.
[14] In my view, the initial requirement to show a triable issue with respect to a claim to an interest in land has been met. The plaintiff is a purchaser pursuant to the APS. The defendant did not provide the plaintiff with certain disclosure with respect to the OMB mediation proceedings. The defendant takes the position that the OMB rules prohibited her from making such disclosure.
[15] However, in my view, it is at least arguable that the OMB mediation confidentiality provisions do not apply to disclosure to the plaintiff. The plaintiff had a prima facie interest in the Property by virtue of the APS. The APS contained a provision that allowed the plaintiff to assume direction over the redevelopment process. It is difficult to understand how the plaintiff could assume such control if it was prohibited from being advised of the particulars of the mediation process. Indeed, there is some evidence that the defendant’s representatives did in fact disclose some of this information to the plaintiff during a meeting in November 2016. As well, a reading of the OMB rules would also allow for a reasonable argument that the non-disclosure requirement is really directed to the use of information and documents disclosed during the mediation in evidence at future proceedings.
[16] It is also important to note that the provision of the APS that permits the plaintiff to enter into the redevelopment process is permissive in nature. The plaintiff was not required to do so.
[17] Finally, as noted above, everyone agrees that the Property is not worth anything close to $58 million if it is not re-zoned. No lender would provide financing to that extent without some comfort that the re-zoning would happen. The OMB mediation proceedings would appear to be material to any such evaluation by a potential lender. It is certainly arguable that the plaintiff’s inability to secure financing was a result of the alleged non-disclosure by the defendant.
[18] For these reasons, I have concluded, for the purposes of this motion, that the plaintiff has established a reasonable claim to an interest in the Property.
[19] I now turn to a consideration of the equities. As stated above, the overriding test, on a motion such as this, is that the court must exercise its discretion in equity and look at all relevant matters between the parties in deciding whether to grant leave to issue the CPL. Typically, this exercise involves an analysis of the so-called Dhunna factors, which are set out above.
[20] I have concluded that none of the Dhunna factors favour the plaintiff. It appears clear that the plaintiff is a shell corporation. It was incorporated for the sole purpose of purchasing the Property. Its interest in the APS and the deposit are its only assets. The absence of assets is important given the provisions of section 103(4) of the CJA which provides that a person who registers a CPL without a reasonable claim to an interest in land is liable for damages sustained as a result of the CPL’s registration.
[21] In my view, the Property is not unique. The trend in the jurisprudence is to move away from ordering specific performance, especially with respect to commercial properties. When considering a claim arising from a commercial transaction in which land is being purchased for investment purposes, damages will often be appropriate. 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 by the Supreme Court of Canada in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51 at paragraph 41. This is a purely commercial transaction. The principal of the plaintiff is familiar with investing in property and has been involved with at least one other property development project. There is simply no evidence of any intrinsic value in this particular Property specific to the plaintiff. It is nothing more than an attractive investment opportunity given its size, location and development potential. Where land is purchased as an investment, damages are generally an appropriate remedy.
[22] The plaintiff has made an alternative claim for damages. I do not view the calculation of damages as particularly difficult in the circumstances of this action. The alleged unique qualities of the Property relate solely to the potential profitability of the proposed re-development. In fact, the plaintiff has provided evidence of the value of the Property, if re-zoned, as being in the $60 million to $70 million range. Damages are an adequate remedy. See Southcott Estates Inc. at paragraph 40.
[23] There is some evidence of the existence of potential purchasers although there are no firm or conditional agreements with respect to the sale of the Property. The defendant’s evidence is that potential buyers are not prepared to enter into an agreement given this pending litigation. I therefore view this as a neutral factor, given the absence of clear evidence of a willing buyer.
[24] Finally, I view the “harm done” factor as favouring the defendant on this CPL motion. Obviously, the presence of a CPL will be an encumbrance on the defendant’s title, as it is in all cases in which a CPL is registered. The defendant will be prevented from selling the Property which is clearly her intention. Moreover, it is unclear when the plaintiff will be prepared to complete the transaction. The Property has not been re-zoned. The plaintiff appears to be asking for specific performance, but not right now. On the other hand, I have concluded that damages will be an adequate remedy for the plaintiff.
[25] For the above reasons, I have concluded that although the plaintiff has established a reasonable claim to an interest in the Property, a consideration of the equities favours the defendant. It is just in the circumstance of this action that the plaintiff be denied leave to issue a CPL.
DEFENDANT’S MOTION
[26] Given my finding that the plaintiff has established a reasonable claim to an interest in land, it is obvious that the defendant’s motion cannot succeed. The defendant has clearly failed to establish that the plaintiff’s claim is, on its face, frivolous, vexatious or otherwise an abuse of the process of the court, as required by Rule 2.1.01.
ORDER AND COSTS
[27] The plaintiff’s motion and the defendant’s motion are therefore dismissed. If the parties are unable to agree on the issue of the costs of these motions, they shall provide the court with brief written submissions by April 4, 2018. These submissions may be sent directly to me by email.
Master R.A. Muir
DATE: 2018 03 05