Court File and Parties

COURT FILE NO.: 15-64620 DATE: 2018-10-11

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Tega Homes (Attika) Inc. Plaintiff – and – Spencedale Properties Limited and Markton Properties Limited Defendants

COUNSEL: David Cutler for the Plaintiff Kenneth Radnoff, Q.C., and Jonathan Collings, for the Defendants

HEARD: April 26, 2018

JUSTICE SALLY GOMERY

[1] This litigation arises from a failed real estate deal. In 2011, the plaintiff Tega Homes (Attika) Inc. (“Tega”) entered into a joint venture with the defendants Spencedale Properties Limited (“Spencedale”) and Markton Properties Limited (“Markton”) to redevelop two properties in the Hintonburg neighbourhood in Ottawa. This agreement terminated before the necessary governmental approvals for the development were obtained. In 2013, Tega entered into a further agreement with the defendants, this time to purchase the Properties. On the eve of closing in April 2015, the defendants announced that they would not go through with the sale. Although the parties entered a further conditional agreement of purchase and sale later in 2015, it lapsed after Tega failed to get financing or waive the financing condition.

[2] In anticipation of buying or otherwise obtaining an interest in the Properties, Tega invested over a million dollars to obtain necessary government approval for its proposed redevelopment. This investment was lost when the defendants refused to close the sale in 2015. The Properties were worth $5 million in 2010 and $7.323 million immediately after Tega’s redevelopment plan for the site was approved. Tega’s investment therefore increased the value of the Properties by over $2 million.

[3] Tega claims that is entitled to recover either the increased value of the Properties, or its lost investment, on the basis of unjust enrichment. Alternatively, it claims damages for breach of the 2013 agreement of purchase and sale. The defendants have counterclaimed for over $600,000 that they allege that Tega owes to them.

[4] The parties now seek summary judgment on their respective claims. They agree that the court should adjudicate Tega’s claims for unjust enrichment and, in the alternative, breach of contract. The defendants also say they are entitled to partial summary judgment of the counterclaim.

[5] For the reasons that follow, I conclude that Tega’s claim for unjust enrichment does not raise a genuine issue for trial and this claim must accordingly be dismissed. I conclude that Tega’s claim for breach of contract raises a genuine issue for trial, but that I can justly determine, on the evidence, that the defendants breached the 2013 agreement of purchase and sale. It would not be appropriate to render summary judgment on damages payable on Tega’s claim or on any of the issues on the defendants’ counterclaim. These issues are interconnected and cannot be fairly resolved on the current record. Tega’s motion to amend its reply and defence to counterclaim is granted.

Facts

The evidence

[6] The material facts giving rise to this litigation are not in dispute. Each side submitted affidavits from a corporate representative and a solicitor acting from them in 2015. The transcripts of their cross-examinations was also filed. The evidence on the dealings between the parties is consistent and uncontroversial.

[7] There is however one evidentiary issue that I must consider at the outset. It arises from Tega’s attempt to examine Gerald Lalonde, a principal of Markton and Spencedale.

[8] Lalonde attended a Rule 39.03 examination after being served with a summons by Tega’s counsel David Cutler. Prior to this, Mr. Cutler had attempted to obtain an affidavit from Lalonde, but Lalonde refused. When Mr. Cutler attempted to examine Lalonde, the defendants’ counsel Kenneth Radnoff took the position that the examination was improper in the context of a summary judgment motion. Over the course of the next thirty minutes, Mr. Radnoff repeatedly told Lalonde that he could not answer any questions asked by Mr. Cutler:

• “Under the Rules, I am entitled to object, in my opinion, and you are then not to answer .” (p. 6)
• “So I am telling you, based on my position, you are not to answer anything … .” (p. 6)
• “Now, my friend will probably tell you that he differs with me, and he will probably tell you that you can disregard what I am telling you and answer whatever you want. I am telling you that you ought not to; that I am right; that I can object, and then you can’t answer that question. And I will object to anything you say .” (p. 7)
• “So to put myself back on the record, there is a specific Rule that says that if I object, you are not to answer , and I am telling you that I will object to any question that is put to you and to any answer that you may give .” (p. 8)
• “So I am saying that the procedure is wrong; and, in addition to that, I am entitled to object to your answering any question and to insist that you don’t answer . That is the position that I take.” (p.9).
• “Again, I am telling you I object to anything. Insofar as I am concerned, you are entitled not to answer anything .” (p. 12)
• “[I]f the Rules are to be followed, I am entitled to object, and you are not to answer .” (p. 15)
• “ And I will be objecting to every question asked and tell you not to answer .” (p. 16)
• “If I object, I am telling you right now you are not to answer . Forget about what he [Mr. Cutler] is saying. He is wrong.” (p. 21) (Emphasis added.)

[9] Mr. Radnoff also repeatedly suggested to Lalonde that he should get independent legal advice, implying that the witness might expose himself to legal risk by answering Mr. Cutler’s questions. Finally, he twice advised Lalonde that he was entitled to leave the examination, adding that “nobody will do anything to you” (p. 26).

[10] Mr. Cutler attempted to reassure Lalonde that he was not engaged in any improper procedure and would not put himself in any legal jeopardy by testifying. Despite this, Lalonde was eventually convinced by Mr. Radnoff that he should not testify, and he left the examination.

[11] On this motion, Tega urges me to draw an adverse inference against the defendants, because Mr. Radnoff dissuaded Lalonde from testifying contrary to the Rules of Professional Conduct.

[12] Let me begin by saying that Mr. Radnoff’s conduct at the examination was outrageous. The positions he took at the examination were clearly wrong in law. Lalonde was served with a valid summons to witness within the deadline set by the court for examinations in connection with the summary judgment motions. Tega had every right to examine Lalonde pursuant to Rule 39.03. Mr. Cutler had no obligation to tell Mr. Radnoff, in advance, what questions he planned to ask, nor was he obliged to proceed by way of written interrogatories. Mr. Radnoff had no basis to pre-emptively take the position that he would object to every question asked, as a way of shutting down the examination. He was wrong to tell Lalonde not to answer any questions and that he could, as a validly summonsed witness, simply leave the examination without any potential consequence. Mr. Radnoff either did not understand the Rules and applicable law, or chose to ignore them in order to gain a procedural advantage.

[13] Mr. Radnoff also clearly breached the Rules of Professional Conduct. Section 5.1-2 provides that:

When acting as an advocate, a lawyer shall not (…)

(j) improperly dissuade a witness from giving evidence or advise a witness to be absent… .

[14] By cajoling and bullying Lalonde not to comply with a lawfully issued summons, Mr. Radnoff violated section 5.1-2 as well as section 5.1-1, that imposes on counsel a duty to represent clients “honourably within the limits of the law ” (emphasis added).

[15] An adverse inference may be drawn where a party fails to call evidence from a material witness under its control, or whose evidence would be expected to assist the party’s case. Based on Mr. Radnoff’s obstruction of Lalonde’s examination, I would be prepared to infer that Lalonde’s evidence would have been unfavourable to the defendants. Unfortunately I have no idea what evidence Lalonde could have provided. As acknowledged by Mr. Cutler on the transcript, he did not know what Lalonde’s evidence would be. He has not, in argument, indicated what particular areas he intended to explore during Lalonde’s examination. There is no evidence describing Lalonde’s role in the defendants’ dealings with Tega.

[16] An adverse inference cannot be drawn in the abstract. It must relate to some particular factual inquiry. Since I do not know what Lalonde’s evidence would have related to, I cannot infer anything from the defendants’ failure to call this evidence, or rather their counsel’s successful effort to prevent disclosure of the evidence.

[17] This does not leave Tega without any potential remedies. It could seek to re-examine Lalonde to obtain his evidence on issues that will remain unresolved by this decision. It could also make submissions on cost consequences that may arise from Mr. Radnoff’s conduct.

The parties’ dealings

[18] On May 18, 2011, the parties entered into a joint venture agreement to redevelop the Properties so that condominium towers could be built. To that end, Tega undertook to take all steps required to have the Properties rezoned, to obtain site plan approval and a building permit, and to secure construction financing. Its shareholder, Tega Holdings Inc., agreed to pay all expenses in connection with the joint venture, including those arising from the re-zoning application, up to a maximum of $2 million. Once Tega obtained a building permit, it would acquire all outstanding shares in Markton and Spencedale in return for the discharge of mortgages and encumbrances on the properties totalling approximately $2.5 million. If Tega failed to obtain a building permit by August 31, 2012, the deadline to close the deal could be extended to no later than April 30, 2013.

[19] The timelines set out in the joint venture turned out to be wildly optimistic. Community consultations on the redevelopment were still ongoing in early 2013. Tega had by this time revised its redevelopment proposal numerous times. As a final decision on the proposal had not been made within the deadline set in the joint venture agreement, it expired on April 30, 2013.

[20] After the lapse of the joint venture, the parties continued to discuss a potential deal. On November 6, 2013, they entered into an Agreement of Purchase and Sale (the “2013 APS”). Further to the 2013 Agreement, the defendants agreed to sell the Properties to Tega for $7 million. [1] The closing date for the sale was originally October 31, 2014, but the parties later agreed to extend it to April 17, 2015.

[21] In the meantime, Tega finally obtained the necessary approval for its proposed redevelopment. On December 2, 2014, the Ontario Municipal Board (“OMB”) approved the demolition of buildings on the Properties, environmental remediation and construction of a new residential and commercial building up to 18 storeys high. According to Tega’s principal, Spyridon Dimitrakopoulos, Tega had also obtained all required financing by the closing date of April 17, 2015. [2]

[22] On April 16, 2015, however, the defendants’ solicitors advised Tega that Markton and Spencedale refused to close. No reason has ever been provided for the defendants’ decision. In their amended statement of defence, they allege that Tega failed to remit a $300,000 deposit required as part of the 2013 APS. In cross-examination, however, the defendants’ director Edwards admitted that the deposit or lack thereof “was no longer an obstacle or an issue as of April 16 th or 17 th ”.

[23] On June 11, 2015, Tega began this action. It sought specific enforcement of the 2013 APS or, in the alternative, damages for breach of contract. On June 12, 2015, Tega obtained certificates of pending litigation registered against the titles of the Properties.

[24] Despite the litigation, the parties continued to negotiate. On September 14, 2015, they entered into a second Agreement of Purchase and Sale (the “2015 APS”).

[25] Unlike the 2013 APS, the 2015 APS was conditional on Tega obtaining financing. If Tega did not obtain financing or waive the condition by October 9, 2015, the APS would be “null and void and at an end”. This deadline was later extended to October 30, 2015.

[26] On October 30, 2015, Tega’s solicitors sought a further extension of the deadline to obtain financing from the defendants. They refused. Since Tega had not obtained financing by that date and would not waive the condition, Tega’s solicitors sent an email to the defendants’ solicitors stating that the 2015 APS was null and void and that his client would move forward with its existing action against Spencedale and Markton. He also asked for a return of the release and consent held in escrow. Edwards sent a responding email referring to Mr. Cutler in obscene terms and telling him to “go fuck yourself”.

[27] In March 2016, the parties entered into two agreements (the “March 2016 Agreements”) that acknowledged Tega’s ongoing claims based on the defendants’ alleged breach of the 2013 APS. In the first agreement, Tega agreed to relinquish its rights to specific performance, but not to damages. The parties agreed that the certificates of pending litigation would remain in place until such time as Tega’s damages were agreed upon or determined by the court. If the sale of the Properties occurred before the damages were agreed upon, the proceeds of sale would be payable into court until the litigation was resolved. The second agreement, to which the defendants’ mortgage lender was also a party, contemplated the possibility that the Properties would be sold under power of sale before the issue of Tega’s damages was resolved by way of agreement or court order. In that case, Tega agreed to remove the certificates of pending litigation in return for the mortgage lender agreeing to pay any surplus proceeds from the sale into court.

[28] In 2017, Tega amended its statement of claim on consent. It abandoned its claim for specific performance but added a claim for unjust enrichment in the amount of $2.323 million. It maintained its alternative claim for breach of contract in the amount of $1.5 million. In response, the defendants amended their statement of defence and counterclaim. In the amended proceeding, they alleged for the first time that Tega had no basis to bring this action. They contended that the 2015 APS incorporated and amended the 2013 APS such that, when the 2015 APS became null and void, any rights under the original agreement of purchase and sale were terminated.

Questions before the court

[29] The questions before me are as follows:

1. Does Tega’s claim for unjust enrichment raise a genuine issue for trial? If so, is it appropriate for me to grant summary judgment this claim?
2. Does Tega’s claim for breach of contract raised a genuine issue for trial? If so, is it appropriate for me to grant summary judgment on this claim?
3. Should partial summary judgment be granted on the defendants’ counterclaim?
4. Should Tega be granted leave to amend its reply and defence to counterclaim?

[30] Before considering these questions, I will first review the principles governing summary judgment.

Principles governing summary judgment

[31] Rule 20.04(2) states that:

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.

[32] In Combined Air Mechanical Services Inc. v. Flesch, the Ontario Court of Appeal stated that summary judgment is available in three situations: [3]

(1) Where the parties agree to have part or all of a claim determined by way of summary judgment and the court is satisfied that it is appropriate to grant summary judgment; (2) Where a claim or defence is shown to be without merit, and there is therefore no genuine issue requiring a trial; and (3) Where the motions judge determines that he or she may rule on the merits fairly and justly using fact-finding powers at Rule 20.04(2.1) and (2.2), and that the interests of justice accordingly do not require a full trial.

[33] With respect to the first type of case, based on the plain wording of Rule 20.04(2)(b), “the court maintains its discretion to refuse summary judgment where the test for summary judgment is not met, notwithstanding the agreement of the parties”. [4] The court cannot dispose of a claim by way of summary judgment if it concludes that this would not be appropriate. A judge may decide that the interests of justice require a trial, even if the parties think otherwise.

[34] A summary judgment in the second type of case serves the interest of justice by disposing quickly of claims that should clearly not go to trial. As noted by the Supreme Court of Canada: [5]

Trying unmeritorious claims imposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the proper operation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage. Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.

[35] As a result, if a judge on a summary judgment motion is asked to determine whether a claim simply cannot succeed as a matter of law on the facts alleged, the judge must do so. If the motion is granted, that claim will be dismissed. If on the other hand the motion judge concludes that a particular claim is not clearly unmeritorious, the judge must consider whether this is the third type of case where summary judgment is possible and consistent with the interests of justice.

[36] The availability of summary judgment in the third type of case is the result of amendments to Rule 20 in 2010. New wording in Rule 20.04(2)(a), and the addition of subrule 2.1, give a judge considering a summary judgment motion the power to weigh evidence, evaluate the credibility of deponents, and draw reasonable inferences from the evidence, “unless it is in the interest of justice for such powers to be exercised only at trial”. Under subrule 2.2, a judge may also order that oral evidence be presented by one or more parties.

[37] In Hryniak v. Mauldin, the Supreme Court of Canada held that the introduction of these amendments to Rule 20 signalled a fundamental change in the way courts must view the civil litigation process. [6] The Court directed judges not to assume that every case should go to a full trial, but instead should consider what procedures must be in place to permit a fair adjudication of the issues, bearing in mind the goal of securing the just, most expeditious, and least expensive determination of every civil proceeding on its merits. The Court in Hryniak encouraged judges to use new fact-finding powers at Rule 20.04(2.1) and (2.2), where appropriate, on summary judgment motions.

[38] On the other hand, I must be alive to the potential danger of granting partial summary judgment. Deciding part of a litigation, if it is intertwined with remaining issues that will go to trial, may defeat rather than promote the policy objectives of Rule 20. In Butera v. Chown, Cairns LLP, the Court of Appeal characterized a partial summary judgment motion as “a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action.” [7] It noted that granting partial summary judgment may risk duplicative proceedings or inconsistent facts when the balance of the action eventually go to trial. [8] Partial summary judgment motions may also delay resolution of the main action and increase the cost of litigation.

(1) Tega’s claim for unjust enrichment

Is this an appropriate issue for summary judgment?

[39] Both the plaintiff and the defendants argue that Tega’s unjust enrichment claim is appropriate for summary judgment. I agree. There are no material facts in dispute on this issue. I am able to determine whether Tega’s claim raises a genuine issue for trial without using the powers available to me under subrules 20.04(2.1) and (2.2). To the extent that contractual interpretation requires me to weigh the evidence or make inferences, it is in the interests of justice that I do so, since any findings of fact can readily be made on the materials before me such that there is no reason for a full trial of the issue.

Does the claim in unjust enrichment raise a genuine issue for trial?

The test for unjust enrichment

[40] To succeed in a claim for unjust enrichment, a plaintiff must prove that:

(1) the defendant has been enriched; (2) the plaintiff has suffered a corresponding deprivation; and (3) there is no juristic reason for the enrichment. [9]

[41] Unjust enrichment is a cause of action based in equitable principles of fairness and good conscience. A plaintiff must meet the three-part test for the remedy, but the application of the criteria “should not be mechanical”. [10] Because it is based in equity, a claim for unjust enrichment gives the court “remedial flexibility to deal with different circumstances”. [11] There are however limits to this flexibility, as noted by Binnie J. in Pacific National, referring the Court’s previous decision in Garland and Peel:

This is not to say that it is a form of “‘palm tree’ justice’” … that varies with the temperament of the sitting judges. On the contrary… a court is to follow an established approach to unjust enrichment predicated on clearly defined principles. [12]

[42] In the case at bar, the focus will be on whether Tega can make out the first and third parts of the test. I will accordingly explore the principles on these elements further.

[43] On the first leg of the test requiring evidence that the defendant has been enriched, the court must conclude that “a tangible benefit … has been conferred on the defendant”. [13] Sparing the defendant an expense constitutes a benefit where (a) the services were performed at the request of the defendant, or (b) the defendant has been “incontrovertibly benefited”. [14]

[44] In Peel, the Court held that a benefit is not incontrovertible if the plaintiffs cannot show that the defendants gained a “demonstrable financial benefit” or was saved an “inevitable expense”. McLachlin J. wrote that an “uncontrovertible benefit” is:

an unquestionable benefit, a benefit which is demonstrably apparent and not subject to debate and conjecture. Where the benefit is not clear and manifest, it would be wrong to make the defendant pay, since he or she might well have preferred to decline the benefit if given the choice. [15]

[45] On the third leg of the test, the absence of a juristic reason, the court must consider whether there is some valid reason to deny recovery, even though the defendant has been enriched at the plaintiff’s expense.

[46] The court will first consider whether recovery is blocked for a reason that has already been recognized by the courts. Such a reason falls within an “established category”. Established juristic reasons to deny recovery include the existence of a contract, a statutory provision that obliged the plaintiff to incur the expense, the plaintiff’s intention to make a gift, or any “other valid common law, equitable or statutory obligation”. [16]

[47] If the plaintiff can show that there is no juristic reason within an established category that would block recovery, the onus shifts to the defendant to show that there is some other valid reason to deny recovery. [17]

Application of the test to this case

[48] The defendants argue that Tega has not met the first and third parts of the test for unjust enrichment. They contend that Tega was not obliged to incur the costs associated with re-zoning the Properties, but chose to do so. They further argue that there was a juristic reason for incurring the expenses, in the form of contracts between the parties in 2011, 2013 and 2015.

[49] Tega relies heavily on the Supreme Court of Canada’s decision in Pacific National in support of its argument that it may claim unjust enrichment. It says that this decision establishes that a party who has incurred expenses to improve property, on the expectation that it will then have a chance to redevelop it, may recover the value of its investment from the owner.

[50] In Pacific National, the City of Victoria and a developer, PNI, entered into a deal for the redevelopment of waterfront property. As part of the deal, the City undertook that it would delay any “down-zoning” of the property until the development had taken place. Based on this undertaking, PNI invested over $1 million in improvements to the properties. As the redevelopment got underway, however, City council voted to re-zone, with the result that most of the project could not be built.

[51] PNI sued the City for breach of contract or, in the alternative, unjust enrichment. The trial judge held that the City had breached its undertaking to delay re-zoning, and that this was a breach of contract. He did not consider the alternative claim for unjust enrichment. The City appealed. In its first decision on the dispute in 2000, the Supreme Court of Canada held that PNI could not claim for breach of contract because the City did not have the statutory authority to undertake to delay re-zoning. Since the City’s undertaking was ultra vires, it could not give rise to a claim in contract. The Court sent the case back for trial on PNI’s alternative claim of unjust enrichment.

[52] In 2004, the Supreme Court of Canada issued a second decision on the dispute, this time dealing with PNI’s unjust enrichment claim. It concluded that PNI was entitled to recover what it had spent on improvements, as it would be inequitable to allow the City to retain the benefit of these improvements without paying for them.

[53] Tega argues that the facts in Pacific National are similar to the facts here. It contends that, in both cases, a developer incurred substantial costs to pave the way for redevelopment. In both cases, the property owner was aware of the investment and the party’s expectation that it would benefit from the expected redevelopment. In both cases the defendant took steps that deprived the party of the expected redevelopment opportunity. Given these similarities, Tega argues that, just as the Supreme Court held that it would be unfair to allow the City of Victoria to profit from PNI’s efforts, I should conclude that it would be unfair to allow Spencedale and Markton to benefit from the increased value of the Properties resulting from the 2013 OMB decision.

Were the defendants enriched?

[54] In my view, there is a parallel between this case and Pacific National on the first leg of the unjust enrichment test. In both instances, the defendant demanded, in the course of their dealings, that the plaintiff invest in improvements to property, only to later take the position that the improvements were not really to the plaintiff’s advantage. The Supreme Court rejected this argument. So do I.

[55] Tega initially incurred costs to get redevelopment approval because its joint venture agreement with the defendants specifically required it to do so. It effectively performed services at the request of the defendants. Tega’s costs during the term of the joint venture (May 18, 2011 to April 30, 2013) therefore meet the first part of the test for unjust enrichment.

[56] There is no evidence that the defendants required or demanded Tega’s continued investment in redevelopment after the joint venture ended on April 30, 2013. The parties however clearly expected that Tega would continue to seek OMB approval, because the price negotiated for the Properties ($7 million) did not otherwise make sense. The defendants’ representative Edwards admitted that the defendants were aware that Tega was spending money to obtain approval for development in 2012, 2013, 2014 and 2015, and that the approval, if obtained, would increase the value of the Properties. He also admitted that the Properties did in fact increase in value due to the OMB decision.

[57] The increase in value of the Properties from 2010 to early 2014 is uncontested. They were originally worth $5 million, but following the OMB decision in December 2014 attained a value of $7.323 million. Through Tega’s efforts, the defendants accordingly gained “a benefit which is demonstrably apparent and not subject to debate and conjecture”. The result of Tega’s efforts indisputably enriches the owners of the Properties, Spencedale and Markton. They now have a site that is worth more than $2.3 million more than it was before. It can be developed, either by them or by a partner or purchaser, in a much more profitable way than would have been possible in the absence of the OMB ruling.

[58] As observed by Binnie J. in Pacific National at para. 17, the defendants’ portrayal of themselves as a victim of a developer’s generosity is not credible. Having first demanded that Tega incur costs as the price of its participation in the joint venture agreement, the defendants negotiated an agreement of sale with Tega that was premised on Tega’s continued investment in the redevelopment plan. It cannot now claim that Tega simply decided to seek redevelopment approval without any demand or, at the very least, encouragement by the defendants.

[59] I conclude that the defendants were enriched. Tega meets the first part of the test for unjust enrichment.

Did Tega suffer a corresponding deprivation?

[60] Tega has produced invoices from late 2010 to 2015 showing that it incurred costs of $1.1 million in its pursuit of approval for its redevelopment plan for the Properties. This included the services of lawyers, consultant, engineers, designers and other professionals, and by building and funding a sales office for the project. Tega had, as of January 18, 2018, paid $988,601 of these costs. The balance of $192,401 remains due.

[61] Based on this evidence, Tega has suffered a deprivation that corresponds to the enrichment gained by the defendants. Although the amount of the deprivation is less than the increased value of the Properties, the second leg of the test for unjust enrichment is clearly met.

Was there a juristic reason for the enrichment and corresponding deprivation?

[62] In Pacific National, Justice Binnie noted at para. 28 that:

In the usual course, the existence of a contract, such as was made by the parties to this appeal, would be a complete answer to the claim for unjust enrichment.

[63] In Pacific National, the contract between the parties could not be a valid juristic reason for the enrichment, because the Supreme Court had already held that the City’s undertaking not to re-zone was ultra vires and so could not the basis for an action in contract. Binnie J. concluded that “the City’s success in the 2000 appeal knocked out of contention the juristic reason (the contractual provisions) on which it primarily relies in this appeal.” In effect, there was no valid agreement blocking PNI’s recover for unjust enrichment.

[64] The same is not true of the agreements between the parties in this case. No part of any contract between the parties has been found to be void from the outset. The joint venture agreement furthermore required Tega to incur the costs of redevelopment.

[65] Tega nonetheless argues that neither the 2013 APS nor the joint venture agreement constitutes a juristic reason to deny it recovery for unjust enrichment. It contends that the court must consider the relationship between the parties at the moment when the benefit to the defendants and the corresponding deprivation to Tega crystallized. According to Tega, this crystallization occurred when the OMB approved the redevelopment in December 2014. At that time, the only contract between the parties was the 2013 APS. This contract should not constitute an obstacle to Tega’s claim for unjust enrichment because it did not require Tega to incur the costs of redevelopment. It would furthermore be perverse to permit the defendants to use the 2013 APS as a shield against an unjust enrichment claim, when it was the defendants’ breach of the agreement that gives rise to Tega’s right of action.

[66] Tega’s argument is novel and persuasive, but I cannot ultimately accept it. In my view, it ignores a fundamental reason why a contract constitutes a juristic reason to deny recovery. It is not because there is necessarily a perfect alignment between the terms of the contract and what brings about an enrichment and deprivation. It is because a party’s decision to enter into a contract is an expression of agency with which the court should not interfere.

[67] In Peel, the Supreme Court observed that the three-part test for unjust enrichment is necessary to protect the parties’ autonomy and legitimate expectations:

[T]he law defines what is so unjust as to require disgorgement in terms of benefit, corresponding detriment and absence of juristic reason for retention. Such definition is required to preserve a measure of certainty in the law, as well as to ensure due consideration of factors such as the legitimate expectation of the parties, the right of parties to order their affairs by contract , and the right of legislators in a federal system to act in accordance with their best judgment without fear of unforeseen future liabilities. (Emphasis added.) [18]

[68] By entering into agreements, parties choose to allocate the risks and consequences associated with future events. The court cannot interfere with their decision to include or exclude particular terms. It cannot re-write the contract to make it fairer, if and when certain risks have been realized. A claim for unjust enrichment is not a vehicle for the reallocation of contractual risk.

[69] In this case, Tega entered into a series of contracts with the defendants and incurred expenses on the expectation or hope that it could eventually acquire an interest in the Properties and redevelop them profitably. It signed the joint venture agreement knowing that it required it to bear the costs of the redevelopment effort and that, if its plan was not approved by a set deadline, the agreement would expire. Tega later signed the 2013 APS and chose to continue to invest in the redevelopment effort. It hoped that this would result in the acquisition of a site that it could develop. But there were risks associated with its decision. One risk was that the OMB would not approve the proposed redevelopment plan. Another risk was that the defendants would not honour their contractual obligations. Tega could have negotiated terms that would have specifically addressed these risks. It did not do so. That decision may have resulted in an unfair or bad bargain, but it is the bargain that Tega chose to make.

[70] Tega’s decision to sign the 2013 APS, and the terms of the agreement negotiated with the defendants, circumscribe the relief it is now entitled to. Tega may argue that, in the circumstances, it is entitled to greater damages for the defendants’ breach of contract than it otherwise could have claimed. On the particular facts of this case, Tega might argue that it is entitled not just to the difference between the value of the Properties and the price it undertook to pay for them ($323,000), but damages that reflect its investment, to the defendants’ knowledge, in the redevelopment. Tega may not however ask the court to ignore its choice to enter into a contract with the defendants.

[71] As a result, the equitable remedy of unjust enrichment cannot be extended to assist Tega. In the circumstances of this case, this would create uncertainty in the law and defeat parties’ freedom to allocate risk through contractual arrangements.

Conclusion on Tega’s claim for unjust enrichment

[72] For these reasons, I conclude that Tega’s cause of action in unjust enrichment cannot succeed, and that it should be dismissed. The defendants’ motion for summary judgment on this issue is therefore granted.

(2) Tega’s claim for breach of contract

[73] Having ruled that Tega cannot claim for unjust enrichment, I must now consider whether I can grant it summary judgment on its claim for breach of contract.

Is summary judgment appropriate?

[74] Based on the evidence submitted on this motion, I am in a position to determine whether the 2013 APS was rendered null and void when 2015 APS became null and void. It is furthermore appropriate that I do so. If I were to find in the defendants’ favour on this issue, Tega would have no claim for breach of contract. In that case, it would be preferable for all concerned to make this determination now, rather than require the parties to proceed to trial.

[75] The determination of this issue again centres on contractual interpretation which, in my view, does not require me to weigh the evidence, make findings of credibility or draw inferences from the evidence. To the extent that an inference may be necessary or helpful, I find that it would be appropriate to use my fact-finding powers under Rule 20.04(2.1). The record before me allows me to make the appropriate findings and it is in the interest of justice that this matter be determined on summary judgment rather than requiring the parties to proceed to trial.

[76] I will consider if it is appropriate to issue summary judgment on the merits of Tega’s breach of contract claim if I determine that the cause of action raises a genuine issue for trial.

Does Tega’s claim for breach of contract raise a genuine issue for trial?

[77] The defendants contend that the 2015 APS amended and incorporated the terms of the 2013 APS. As a result, when the 2015 APS became null and void on October 30, 2015, any rights that Tega had pursuant to the 2013 APS also disappeared, and Tega’s claim for breach of contract cannot succeed.

[78] In considering the effects of a contract, I must discern the intent of the parties at the time they entered into it. If the language of the contract is unambiguous, I need not consider any other evidence. In that case, determination of the parties’ intent should be based solely on their written agreement:

The contractual intent of the parties is to be determined by reference to the words they used in drafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time. Evidence of one party’s subjective intention has no independent place in this determination.

Indeed, it is unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face. [19]

[79] The first three sections of the 2015 APS read as follows:

In this agreement (the “Purchase Agreement”) dated September 14, 2018 between Tega Homes (Attika) Inc., (the “Buyer”) and Markton Properties Limited and Spencedale Properties Limited (collectively, the “Seller”) for valuable consideration …, the Buyer and the Seller agree as follows:

1. The Buyer agrees to purchase and the Seller agrees to sell the property on the terms and subject to the conditions set for in: i) an agreement of purchase and sale between Tega Homes (Attika) Inc. and Markton Properties Limited dated November 13, 2013, as amended by ii) an agreement relating to the deposit dated November 6, 2014, and as amended by iii) an e-mail amendment agreement dated January 13, 2015 (collectively, the “Original APS”), and as further amended by this Purchase Agreement.
2. The terms and conditions of the Original APS … are incorporated into this Purchase Agreement as if set out in full in this Purchase Agreement… .
3. The Original APS is amended as follows: (…)

[80] Section 4(d) of the 2015 APS further states that “the Original APS and this Purchase Agreement will be read together as one document and hereafter referred to as the Purchase Agreement”.

[81] Read in isolation, this language might suggest that, in signing the 2015 APS, the parties intended that any rights either might have had under the 2013 APS would cease to exist. Taking into account the entire agreement, however, I conclude that the parties did not intend that, by signing the 2015 APS, Tega would lose any right to sue for breach of the 2013 APS. Such an interpretation is completely at odds with the conditions set out in the 2015 APS with respect to financing and documents to be held in escrow.

[82] The agreement was first of all subject to a financing clause for the sole benefit of Tega. Subsection 3(f), (j) and (k) provided that:

(f) This Purchase Agreement shall be conditional for 30 days after acceptance upon the Buyer (the “Conditional Period”) obtaining satisfactory financing for the purchase of the Property at its sole and absolute discretion. This condition is inserted for the sole benefit of the Buyer and may be waived in writing by the Buyer at any time prior to 5:00 p.m. on the last day of the Conditional Period. If the Buyer has not waived or given notice of satisfaction with this condition to the Seller on or before 5:00 p.m. on the last day of the Conditional Period, this Purchase Agreement shall be null and void and at an end. [Emphasis added.]

[83] The 2015 APS contained further conditions whereby the parties agreed to resolve the ongoing litigation relating to the 2013 APS if certain events came to pass. Subsection 3(j) and (k) provided that:

(j) This Purchase Agreement shall be conditional upon the Seller and Buyer delivering to each other in escrow, contemporaneously with this Purchase Agreement, a mutual release with respect to the litigation related to the Original APS and the environmental condition of the Property is in a form satisfactory to both parties, each acting reasonably and each party’s court action in respect of such litigation is to be dismissed without costs. (k) The Buyer shall deliver in escrow, contemporaneously with this Purchase Agreement, a consent to remove from title to the Property Instrument Nos. OC1674418 (Caution) and OC1690053 (Certificate of Pending Litigation) which were registered by the Buyer. Such consent and mutual release referred to in Section 3(j) shall be released from escrow upon: (i) the closing of this transaction as contemplated by this Purchase Agreement; or (ii) upon the Buyer failing to close this transaction on the Closing Date in accordance with this Purchase Agreement and in such case, the Seller may proceed to clear title in respect of such instruments. [Emphasis added.]

[84] On a plain reading of subsections (j) and (k) of section 3, Tega’s consent to lift the certificate of pending litigation registered on the title of the Properties, and both parties’ release of their claims under the 2013 APS, only took effect if certain conditions were met. Either the sale had to close or Tega had to fail to close on the closing date. If, by merely signing the 2015 APS, the parties intended that Tega should have no further rights under the 2013 APS, Tega would have been obliged to release the defendants and consent to lift the certificates of pending litigation from title immediately.

[85] Under subsection 3(f), the entire 2015 APS was furthermore conditional on Tega obtaining financing or waiving the financing condition by the deadline set in the agreement. When this condition was not met by October 30, 2015, the 2015 APS ceased to have any further legal effect. This left the parties in the same situation they had been in prior to signing the agreement. The release and consent delivered in escrow had to be returned to Tega and the terms of the 2013 APS were not amended by the terms of the 2015 APS.

[86] In light of these conditions, the parties’ intent is unambiguous. It is clear that Tega’s rights to seek a remedy under the 2013 APS were unaffected unless and until it either completed the purchase of the Properties or failed to close. Neither of these events occurred because the agreement became null and void on October 30, 2015 when Tega failed to get financing or waive the financing condition.

[87] Tega argues that, in interpreting the 2015 APS, I ought to take into account the defendants’ failure to invoke the nullity of the 2013 APS until 2017, as well as the March 2016 agreements. The defendants contend that I could not consider the 2016 agreements because Tega has not alleged them in their pleadings.

[88] Since I have already determined that the 2015 APS did not, on its face, automatically nullify Tega’s rights under the 2013 APS, I do not need to consider any of this evidence. Had I concluded that the contract was ambiguous, however, I would have held that the evidence of the March 2016 agreements is admissible and that it further supports Tega’s interpretation.

[89] In their argument on this point, the defendants rely on Chloride Canada ltd. v. New Prince Tires Inc. [20] In Chloride Canada, M.J. Donohue J. denied summary judgment to the plaintiff because, among other things, its statement of claim did not allege a breach of the Bulk Sales Act, one of the statutes on which it was seeking summary judgment. The judge noted, at para. 10:

The Bulk Sales Act contravention has not been pleaded. The issue is not identified in the pleadings and the defendants have not had an opportunity to respond to it. It is, therefore, impossible to fully appreciate the issue to be decided on this part of the motion.

[90] Chloride Canada is distinguishable from this case, for two reasons. First, the March 2016 Agreements are evidence as opposed to material facts on which Tega relies for its claim. Rule 25.06(1) requires that:

Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved.

[91] Tega is not alleging that the defendants breached the March 2016 Agreements, and their existence is not an element of its claim in unjust enrichment or breach of contract. These agreements are only relevant as evidence of the parties’ understanding that Tega’s rights under the 2013 APS after the 2015 APS lapsed.

[92] Second, unlike in Chloride Canada, the defendants have not been deprived of an opportunity to respond to the issue. The issue was raised by the defendants themselves in their amended defence and counterclaim at paragraphs 11 to 13.

[93] I conclude that Tega’s claim for breach of contract, based on the defendants’ refusal to close the sale of the Properties pursuant to the 2013 APS, raises a genuine issue for trial.

Did the defendants breach the 2013 APS?

[94] On the evidence before me on the motion, I find that I can determine whether the defendants breached the 2013 APS when they refused to close. Both parties agree that this is an appropriate issue for summary judgment. The evidence on this issue is uncontroversial and there is no risk of contradictory determinations of fact arising from a decision on it. There is no reason to delay a determination of this aspect of the Tega’s claim.

[95] In their amended statement of defence and counterclaim, the defendants raise two defenses to the breach of contract claim.

[96] First, they allege that Tega failed to remit a $300,000 deposit required under the terms of the 2013 APS, rendering the agreement voidable at the defendants’ option. According to the defendants’ pleading, Tega remitted the deposit, but then borrowed it back. Tega had not repaid this loan as required by mid-February 2017, rendering the 2013 APS voidable at the defendants’ option. At paragraph 7 of the amended statement of defence and counterclaim, the defendants state that they “declared the APS null and void on March 23, 2015”.

[97] There is no support in the evidence for this defense. The defendants have not produced any correspondence or document showing that the defendants declared the 2013 APS void on March 23, 2015. On the contrary counsel for the parties exchanged e-mails on March 30, 2015 agreeing to extend the closing date to April 17, 2015. This is irreconcilable with the defendants’ allegation that they had declared the APS void. As already noted, the defendants’ representative Edwards admitted in cross-examination that the deposit or lack thereof was not an obstacle to closing on April 16 or 17, 2015.

[98] The defendants’ principal defence to Tega’s breach of contract claim is the argument that, when the 2015 APS was terminated, so too did any right or remedy by Tega under the 2013 APS. I have already determined that this is not a viable argument.

[99] As a result, I conclude that, by refusing to close the sale on April 16, 2015, the defendants breached the 2013 APS. Tega is therefore entitled to judgment on its claim for breach of contract.

What are Tega’s damages as a result of the defendants’ contractual breach?

[100] Although the defendants’ breach of the 2013 APS has been established, I am not satisfied that it would be appropriate to issue summary judgment on Tega’s damages as a result of the defendants’ contractual breach.

[101] The record on this issue is incomplete. The parties have not presented evidence, for example, on the $300,000 loan that the defendants allege they made to Tega at some point between November 6, 2013 and mid-February 2015. The evidence does not disclose whether Tega ultimately repaid this loan or whether it has paid interest on it. There is also no evidence on the other amounts that the defendants claim by way of counterclaim. As already mentioned, the peculiar circumstances of this case may allow Tega to claim a greater measure of damages than a purchaser usually could. These are all issues that would have to be adjudicated on a more complete record than is currently before me.

[102] It would furthermore not be appropriate to assess Tega’s damages without, at the same time, considering the defendants’ counterclaim. Tega’s right to contractual damages and the defendants’ right to a set-off are based on the same series of transactions. The defendants are only seeking partial summary judgment on the counterclaim, leaving other parts of the claim for trial at some future date. In these circumstances, adjudicating the issue of Tega’s damages would give rise to a risk of conflicting judgments and would not promote any saving of cost or time. These are the very dangers identified by the Court of Appeal in Butera.

Conclusions on the breach of contract claim

[103] The defendants’ motion seeking summary dismissal of the breach of contract claim is dismissed. The plaintiff’s motion for summary judgment on the same claim is granted insofar as I find that the defendants’ breached the 2013 APS. I cannot however determine Tega’s damages for this breach on the record before me.

(3) The defendants’ counterclaim

[104] It would be inappropriate to issue partial summary judgment on the defendants’ counterclaim. I cannot determine all of the issues on the counterclaim on the record before me, nor is this a case where the issues on the counterclaim can be bifurcated. Since the claims by Tega and the counterclaim by the defendants are based on the same series of transactions, determining some of the issues would moreover give rise to the risk of inconsistent conclusions of fact and not spare the parties any expense or time.

[105] The defendants’ motion for partial summary judgment of the counterclaim is therefore dismissed.

(4) Should Tega be granted leave to amend its reply and defence to the counterclaim?

[106] By way of supplementary motion to its motion for summary judgment, Tega seeks leave to amend its pleading to reflect the remedies it now seeks in its action, and to strike its admission that it owes the defendants a total of $365,000. In its proposed amended reply and defence to counterclaim, it would only admit to a debt of $65,000, which it alleges would be wholly offset by its claim for damages.

[107] In its reply and defence to the counterclaim served in 2017, Tega alleged that it had remitted the deposit to the defendants, but had subsequently borrowed it back. It denied that the $300,000 loan relieved the defendants from their obligation to close the sale of the Properties. Assuming it was entitled to specific performance of the 2013 APS, however, Tega admitted that the defendants would be entitled to repayment of the $300,000, as well as an additional $65,000 for a lease assignment and consulting fee. Tega proposed to pay these sums into court pending a determination of the main claim.

[108] In 2017, Tega amended its statement of claim. It abandoned its claim for specific performance of the 2013 APS in favour of claims for unjust enrichment and breach of contract. The defendants subsequently amended their pleading. Tega did not amend its reply and defence to the counterclaim in response to withdraw its admission that it owed the defendants the deposit under the 2013 APS. It now says that this was an oversight.

[109] Rule 51.05 of the Rules of Civil Procedure states that:

An admission … in a pleading may be withdrawn on consent or with leave of the court.

[110] In Dharsi Estate v. Manji, the Divisional Court confirmed that the party seeking to withdraw an admission must establish that:

(1) the proposed amendment raises a triable issue; (2) the admission was inadvertent or resulted from wrong instructions; and (3) the withdrawal will not result in any prejudice that cannot be compensated for in costs. [21]

[111] The proposed amendment here raises a triable issue, that is, the question of whether Tega is required to pay the amount of the $300,000 to the defendants. The defendants’ entitlement to the amount of the deposit is not clear. There is at very least a set-off argument.

[112] Tega has not filed any evidence that the admission was inadvertent. This situation, however, is unlike the typical situation where a party seeks to withdraw an admission. The inadvertence in this case arises from Tega’s failure to foresee how its claim might evolve over time. In the context of its claim for specific performance, it made sense for Tega to concede that it must pay the deposit. When Tega discontinued its claim for specific performance in favour of other relief, that context changed. Although I would have preferred to have evidence on this specific point, I am prepared to infer that Tega would not have made the admission if it had foreseen that it would eventually drop the claim for specific performance. In that sense, the admission was inadvertent.

[113] Since this litigation is ongoing, there would be no non-compensable prejudice to the defendants if leave to amend is granted.

[114] Tega’s motion for leave to amend its reply and defence to counterclaim is therefore granted.

[115] If the parties are unable to agree on costs of the motions, they may each deliver written submissions and a cost outline within the next ten days. Each set of submissions may not exceed three pages in length.

Justice Sally Gomery Released: October 10, 2018

COURT FILE NO.: 15-64620 DATE: 2018-10-11

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Tega Homes (Attika) Inc. Plaintiff – and – Spencedale Properties Limited and Markton Properties Limited Defendants

REASONS FOR JUDGMENT Madam Justice Sally Gomery

Released: 2018/10/11

[1] The 2013 APS was initially only between Tega and Markton for the property it owned. It however contained a condition also allowing Tega to purchase the property owned by Spencedale.

[2] In his May 30,2017 affidavit, the defendants’ director Doug Edwards expresses the view that Tega is insolvent. He does not however contradict Dimitrakopoulos’ sworn evidence that Tega had the financing necessary in April 2015 to purchase the Properties.

[3] 2011 ONCA 764 (“Combined Air”), at paras. 40 to 44.

[4] Combined Air, para. 41.

[5] Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372, [2008] S.C.J. No. 14, 2008 S.C.C. 14, at para. 10.

[6] Hryniak v. Mauldin, 2014 SCC 7 (“Hryniak”).

[7] Butera v. Chown, Cairns LLP, 2017 ONCA 783 (“Butera”), at para. 34.

[8] See, notably, Corchis v. KPMG Peat Marwick Thorne, [2002] O.J. No. 1437 (C.A.), at para. 3. Post-Hryniak Court of Appeal decisions citing this same concern include Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438 and in Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922, 133 O.R. (3d) 561.

[9] Garland v. Consumers’ Gas Co., 2004 SCC 25 (“Garland”), at para. 30, citing the Court’s earlier decisions in Becker v. Pettkus, [1980] 2 S.C.R. 834 at p. 848, and Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762 (“Peel”), at p. 784.

[10] Pacific National Investments v. Victoria, 2004 SCC 75, [2004] 3 S.C.R. 575 (“Pacific National”), at para. 13.

[11] Pacific National, at para. 13.

[12] Pacific National, at para. 13 (internal cites omitted).

[13] Garland, at para. 31, Peel at p. 790.

[14] Hodgins v. Grover (2011), 2011 ONCA 72, 103 O.R. (3d) 721 (Ont. C.A.) (“Hodgins”), at paras. 56-57.

[15] Peel, at p.795.

[16] Pacific National, at para. 23, citing Garland, at para. 44.

[17] Garland, at para. 46; Pacific National, at paras. 23-25.

[18] Peel, at p. 803.

[19] Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 SCR 129, at paras. 54-55.

[20] Chloride Canada ltd. v. New Prince Tires Inc., 2012 ONSC 6579 (“Chloride Canada”).

[21] 2016 ONSC 703.