COURT FILE NO.: CV-18-598800 MAIN MOTION HEARD: 20181015 REASONS RELEASEED: 20181122 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
2518358 ONTARIO INC. Plaintiff
- and-
3070 ELLESMERE DEVELOPMENTS INC. Defendant
BEFORE: MASTER D. E. SHORT
COUNSEL: William A. Chalmers, for moving plaintiff Todd Robinson, for defendant
RELEASED: November 22, 2018
Reasons for Decision
I. Background
1The moving party 2518358 Ontario Inc. (referred to by the parties as “Rise”) seeks a Certificate of Pending Litigation with respect to a development property located in Scarborough, Ontario.
2The defendant 3070 Ellesmere Developments Inc. (“Ellesmere”) is the registered owner of the land upon which the parties intended to construct a multi-unit residential development.
3This matter first came before my colleague Master Jolley in June of this year. At that time the plaintiff advised the court that it wished to adjourn its motion to permit it to cross examine the defendant on the affidavit it filed on 21 June 2018. However, it sought to preserve the status quo with respect to the property until such time as its motion for the CPL could be heard.
4On that motion the defendant argued that a Master does not have jurisdiction to make an order to preserve the status quo as those terms are akin to an injunction which needed to be determined by a judge.
5My colleague’s decision read in part:
I adopt the reasoning of the court in Scalamogna v. DiToro, [2015] O.J. No. 4120. I find that by virtue of Rule 45.01(1) and Rule 1.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a master may grant an adjournment of a motion on terms. Master Dash made such an order that the parties keep the status quo in relation to certain property until a CPL motion could be heard. Master Short ultimately heard the CPL motion and determined that he was satisfied that a master has the jurisdiction to make an interim order to preserve real property while a CPL motion is pending.
There is some basis for the plaintiff's concern that the defendant is involved in attempts to refinance the property by way of further mortgage without the knowledge or consent of the plaintiff. Whether the defendant is entitled to take these steps is an issue better determined on the return of the CPL motion. For these purposes, I find the concern to be at least sufficient to warrant terms on an adjournment.
Again, while I am not determining the CPL, there is some evidence before me that there is a triable issue as to the plaintiff's interest in the property and that that interest may be in jeopardy due to the conduct of the defendant.
While I am not prepared to detail each section of the joint venture agreement and amended JVA that the plaintiff seeks to enforce by way of these terms, I do order that the property shall be preserved in order to preserve the status quo such that the property will not be transferred or further encumbered until the return of the plaintiff's motion or further order of this court.
Costs reserved to the master hearing the motion for the certificate of pending litigation. [my emphasis throughout]
6The extent of the restriction created by this endorsement has been the subject of more than one attendance by counsel for the Plaintiff seeking to clarify or broaden the extent of the restriction imposed as a term of the earlier and subsequent adjournments.
II. Preliminary Evidentiary Issue
7On October 15, I heard a full day motion with respect to whether or not to grant Certificate of Pending Litigation sought by the plaintiff. Following the arguments I determined to reserve my decision.
8At the outset of the hearing of that motion, I heard a preliminary matter with respect to a somewhat unusual use of the right to an examination under Rule 34 of the Rules of Civil Procedure. The issue is whether or not it when a party starts an action such as the present one, can a plaintiff take advantage of the provisions of Rule 34, for the purpose of examining entities that are not parties joined in the action, without notice to the defendant or counsel who may ultimately be acting for the defendant. The strategy propounded before me asserted that the examining party is entitled to file the resultant evidence, not by way of an affidavit, but rather by way of the sworn testimony of the third party who was examined by counsel for the builder.
9Notwithstanding the close relationship of the parties, no notice was given to the Ellesmere or anyone else with respect to this examination.”
10In my view it is inappropriate for such an examination to take place, without at least notice to the other side, which is specifically given rights under cross examine the witness as part of the process contemplated by Rule 34.01(d) with respect to the examination of a witness out of court regarding a pending motion. In my view, even if the matters being brought on an ex parte basis, it would require very special circumstances to justify admitting any evidence so obtained, prior to the defendants involvement, to be used at any latter stage in the proceeding.
11The Rule further provides:
34.05 PERSON TO BE EXAMINED: (1) Where the person to be examined resides in Ontario, he or she shall be given not less than two days notice of the time and place of the examination, unless the court orders otherwise.
(2) EVERY OTHER PARTY: Every party to the proceeding other than the examining party shall be given not less than two days notice of the time and place of the examination.
12The 2019 edition of Ontario Superior Court Practice (Archibald & Sugunasiri) contains a helpful example in a Practice Note, reading in part:
Where a summons to witness is served on a passenger who was in D's car during the accident in question for an examination in aid of a motion with regard to D's refusal to respond to particular questions on discovery, notice of the examination must be given to D. This right is reinforced by r. 39.03(2) which provides that a witness examined in aid of a pending motion may be cross-examined by the examining party and any other party. Without notice to D, the summons should be quashed.
Clarke v. Madill, 2001 ONSC 28089, [2001] O.J. No. 3256, 57 O.R. (3d) 730, 14 C.P.C. (5th) 66. [my emphasis]
13As a consequence, I ordered the transcript of the cross-examination, and the exhibits marked upon it, to be expunged from the record and I did not consider them in coming to my decision in this matter.
III. Nature of Interim Restrictions
14While that decision was under reserve, the plaintiff brought a fresh motion on October 30th, before me, seeking to extend or clarify the nature of the restrictions imposed by Master Jolley’s order.
15Their factum argued:
“The Spirit and Intent of the Jolley Order
- Parties are obliged to obey court orders in letter and spirit with every diligence. A person who is subject to an order should not be permitted to "finesse" it or to hide behind a restrictive and literal interpretation to circumvent the order and make a mockery of it and of the administration of justice.
Sweda Farms Ltd. (c.o.b. Best Choice Eggs) v. Ontario Egg Producers, 2011 ONSC 3650, at 121
- One must comply with both the letter and spirit of an injunction. Where the intent of the injunction is clear, it must be applied to the circumstances as they arise. Though issued at a moment in time, an injunction is a continuing one.
Ceridian Canada Ltd. v. Azeezodeen, 2014 ONCA 656, at 18
- The Court of Appeal for Ontario has rejected formalistic interpretations of orders. The Court has confirmed that a party subject to an order must comply with both the letter and the spirit of the order and is not permitted to "hide behind a restrictive and literal interpretation to circumvent the order and make a mockery of it and the administration of justice".
Chirico v. Szalas, 2016 ONCA 586, at 154
16It was submitted that the spirit and intent of Master Jolley's order set out in her endorsement was that neither party would take any steps related to a possible transfer or further encumber the property until a decision is made on the plaintiff’s motion for a CPL.
17In particular it was argued, (relying upon DiSano v. DiFlorio, 2014 ONSC 1161 at para.6-8) that a Master has the jurisdiction, by virtue of Rule 1.05, to make an order adjourning motion for a certificate of pending litigation, including a term that the defendants not sell, deal with or encumber a property subject to further order of the court.
18It was further submitted by Rise’s counsel that:
A Master is not permitted to make an order preventing the withdrawal of any monies from certain accounts or certain monies on deposit by a Bank, as that is "injunctive in nature". However, that prohibition does not mean that a Master is not permitted, pursuant to Rule 45.01, to make an interim order for the custody or preservation of property. The jurisdiction of a Master is circumscribed by the reservation to Judges of the jurisdiction to grant interlocutory injunctions, mandatory orders and orders relating to the liberty of the subject. But, apart from this general statement, the jurisdiction of a Master under r. 45.01 should be determined on a case by case basis, taking into account the nature of the relief sought and its effect upon those who would be subject to any order.
Treaty Group Inc. (c.o.b. Leather Treaty) v. Simpson, [1999] O.J. No. 554 (S.C.J.) at para 2-3 & 6
19While I accept and agree that there needs to be a case-by-case analysis, my powers as a Master do not extend to restricting any activity with respect to debts owing on the property or the possibility of losing the property as a result of a mortgage default. I therefore turn to the substance of the original motion seeking to grant a CPL in the unique circumstances of this case.
IV. Further Request for Interim Relief
20On Tuesday, November 6. Mr. Chalmers sought to have me address an urgent ex parte motion relating to this matter. A quick perusal of the newly delivered record, made it clear to me that the motion ought to have been made on notice, and I adjourned the matter, to the following day, to permit service on counsel for the plaintiff.
21This urgent motion was described (with my emphasis added) as follows:
Rise seeks an order that Ellesmere not take any steps to sell, deal with or encumber the Property until the release by Master Short of his decision on the CPL Motion, along with an order that the costs of this Motion be determined by Master Short after hearing submissions from the parties and at the same time as Master Short adjudicates the question of the costs of the CPL Motion.
22The exhibits placed before me at that time included a colour brochure with respect to the project, bearing the annotation “An Approved Development Opportunity adjacent the University of Toronto Scarborough,”
23In particular that document included a “Confidentiality Agreement” to be entered into by any potential purchaser, prior to their receiving any information in the form of a “Due Diligence Package”. That document read in part:
“The undersigned hereby acknowledges that CBRE Limited (“CBRE”)… have been retained by the vendor on an exclusive basis to arrange the sale of 3070 Ellesmere (the “property”). All inquiries and communications with respect to the property shall be directed to any of the above listing agent of CBRE:. We have requested from the Vendor and CBRE, information, including confidential and propriety information, which has not been generally disclosed the public, for use in evaluating a potential purchase of the Property.”.
24In the circumstances, I found the arguments put forward by counsel for Ellesmere of assistance. His submission read in part:
The nature of an order for preservation for property is protection of the property itself. Such an order does not direct a party to do or refrain from doing any particular act. It orders that the property itself be preserved. It is a distinction with difference. A Rule 45.01 order directs preservation of property, while an injunction directs specific action or restraint from action of a party or person.
The subtle, but significant, difference between an order under Rule 45.01 and an injunction is reflected in the established tests for both remedies:
(a) With respect to an order under Rule 45.01, the Court of Appeal has clearly focused on the property itself and not compelling action (or inaction) by a party. Specifically, the relevant test focuses on the property itself, in that a moving party must show: (i) a claimed right to a specific property; (ii) that there is a serious issue to be tried regarding the claim to that property; and (iii) the balance of convenience favours granting the relief sought.
(see Sadie Moranis Realty Corp. v. 1667038 Ontario Inc., 2012 ONCA 475, paras 17-18)
(b) With respect to an injunction, the test for injunctive relief is well established, and much more onerous. The relevant test focuses on broader considerations, in that a moving party must show:
(a) a serious issue to be tried;
(b) irreparable harm to the moving party if an injunctive order is not made; and
(c) both the balance of convenience and public interest considerations favour granting the injunction.
Obtaining a mandatory injunction is even more onerous, requiring that the moving party show a "strong prima facie case" rather than only demonstrating a serious issue to be tried.
(see RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, para 48
Cytrynbaum v. Look Communications Inc., 2013 ONCA 455, para 54)
- An order indefinitely prohibiting a party from disposing of property has been held to be injunctive and exceeding a master's inherent jurisdiction to adjourn on terms.
(Estates Associates Inc. v. 1645112 Ontario Ltd., 2009 CarswellOnt 5063, paras 5-6)
25Following argument my endorsement on this occasion was as follows:
“I am not satisfied with the listing of the property amounts to a binding agreement for the sale of the property.
I do not interpret the appointment of an agent to market the property as contrary to the order previously made.”
26As a consequence the original interim Order of my colleague remained in place in its original form.
27I thus now come to determining whether, based on all the evidence placed before a Certificate of Pending Litigation should now be issued. That process requires a more thorough discussion of a number of elements including a review of how the parties got to where they are now.
V. The Original Concept
28As I understand the facts Ellesmere was to contribute the land upon which this project was to be built and Rise was to be the constructor of a condominium and student residence project on lands that had been acquired by the defendant company.
29The parties originally entered into a joint venture agreement that contemplated each having a 50% interest in the project. In order to deal with potential disputes that might arise during the project the parties agreed to have a management committee that would address issues between the joint venturers.
30The problem that arose was that there were delays in the project relating in part to what could be built under the existing legislation and a major redesign resulting from an apparently necessary switch to above ground parking for the unit holders.
31As a consequence it seems that notwithstanding the hoardings around the site proclaim that the project is “Sold Out”, the photographs provided to me seem to show “raw land’ at the moment.
VI. The Property
32The Parcel Register as of May 30, 2018 placed before me reflects an acquisition by Ellesmere under a Power of Sale in January of 2014 for $1.9 million.
33A first mortgage is shown for $6 million registered in April of 2015.
34Then, in September of 2016, another Charge in favour of a number of parties in the amount of $5 million is reflected.
35In reviewing the Register I was surprised to note that the plaintiff Rise had filed a construction lien for $3,950,000 on January 26, 2018 which was perfected by way of a Certificate of Action registered on March 7th, 2018.
36The 10 page Notice of Motion which commences the 312 page motion record filed 3 months later on the initial return date of the plaintiff’s motion in June of 2018 does not seem to reflect, in the written submissions, any reference whatsoever to the registration of this almost four million dollar lien already having been registered by the plaintiff on title.
37The plaintiff’s material does rely upon the following assertions:
On or about May 15, 2018, Ellesmere, directly or, alternatively, indirectly, on its own, or, alternatively, with others known to Ellesmere but unknown to Rise, by operation of law or otherwise, voluntarily, directly or, alternatively, indirectly, transferred, assigned, conveyed, gifted, exchanged, or otherwise disposed of all or any portion of its Joint Venture Interest, contrary to section 7.1 of the Joint Venture Agreement.
On or about May 15, 2018, Ellesmere, directly or, alternatively, indirectly, on its own, or, alternatively, with others known to Ellesmere but unknown to Rise, created, assumed, incurred or consented to a mortgage or charge upon all or any portion of its Joint Venture Interest or its rights and interests in or under the Joint Venture Agreement, contrary to section 7.1 of the Joint Venture Agreement.
38Rise asserts a number of breaches by Ellesmere have entitled the plaintiff to a number of consequences pursuant to the terms of their agreement. In part they identify the following elements:
(a) the failure of Ellesmere to convey the Lands to the Nominee on May 27, 2017;
(b) the failure of Ellesmere to convey an undivided fifty percent (50%) beneficial interest in the Lands to Rise, free and clear of all financial encumbrances, save and except for the Cameron Stephens Mortgage;
(c) breaches of section 7.1 of the Joint Venture Agreement;
(d) the failure of Ellesmere to discharge the TCC Mortgage on or before the date that is thirty (30) days following the date on which commencement of excavation operations occurs on the Lands.
39Rise asserts that the above items constitute Events of Default within the meaning of that phrase as set out in the Joint Venture Agreement, because Ellesmere has “defaulted, for any reason other than Unavoidable Delay, in the observance or performance of any of its other covenants and obligations under or by virtue of” the Joint Venture Agreement and the “default can with due diligence be cured within 15 days” but Ellesmere did “not cure such default within 15 days after receipt by such Joint Venturer of a written notice from the Management Committee or from any other Joint Venturer asking it to cure such default”. It further asserts that the requisite written notice was given to Ellesmere in accordance with the provisions of the Joint Venture Agreement on June 6, 2017.
40Rise’s counsel asserts that the breaches by Ellesmere create certain rights for Rise. Two of the alleged contractual rights is stated as follows:
(c) pursuant to section 5.21 of the Joint Venture Agreement, because of the default, Rise is "solely empowered to make any and all decisions and to give any and all approvals from time to time required of the Joint Venturers in connection with the Lands, to the absolute exclusion of' Ellesmere, and "any decision or approval so made or given shall be fully binding on" Ellesmere;
(d) as Ellesmere's default has continued beyond the period of 15 days after notice, pursuant to section 8.1 of the Joint Venture Agreement, Rise has the right:
(i) to bring any proceedings in the nature of specific performance, injunction or other equitable remedy
(ii) to remedy the default giving rise to the Event of Default and bring any action at law or otherwise to be reimbursed by Ellesmere for any moneys expended to remedy such default, including any expenses incurred by the Non-Defaulter in connection therewith, together with interest thereon at the Interest Rate; and such advanced funds or expended money shall be deemed to be a Default Loan;
(iii) to bring any action at law that may be necessary or advisable in order to recover damages; and,
(iv) to take such steps or bring any proceedings that may be necessary or desirable to enforce the Rise Mortgage.
41However many of these remedies flow from Rise having met the pre-conditions to it having the rights of a Joint Venturer. The issue before me is primarily the present extent of the plaintiff’s present interest in property and the characteristics of the subject land.
42Ellesmere denies that the necessary preconditions have been met. Weighing that key issue requires a deeper review of the contractual history.
VII. Original Agreement and Amendment
43Originally the parties entered a document styled “Joint Venture Agreement” made as of the 13th day of May, 2016. The opening paragraphs read in part:
WHEREAS Rise and Ellesmere have agreed to form a joint venture for the purpose of a marketing, sale and construction of proposed residential condominium and student housing project on the lands …
AND WHEREAS the Joint Venturers are uniting in their efforts not for the purpose of creating a partnership but rather with a view to carry out, together, a joint project;
44Article 2 entitled “THE JOINT VENTURE” reads in part:
2.1 Establishment of the Joint Venture. The Joint Venturers agree to market, sell and construct the Project in accordance with the terms of this Agreement and to cause the Improvements to be constructed on the Lands in accordance with the Project Documents as shall be approved in accordance with the terms of this Agreement.
45Originally the document read in part:
2.4 Term.
(1) This Agreement is effective from and after the date hereof.
(2) This Agreement shall continue in full force and effect until the later of the date (the "Termination Date") that all of the residential dwelling units forming part of the Project have been sold and the date that final settlement has been made among the Joint Venturers in accordance with Section 2.4(3).
(3) On or as soon after the Termination Date as is practical the Joint Venturers shall make a final settlement among themselves to the end that, subject to Sections 2.9 and 5.22, or any other indemnity set out herein, the Joint Venturers shall have shared all of the rights and benefits and borne all of the liabilities and obligations of the Joint Venture in accordance with their respective Shares, ….
46The document also provided:
2.10 Rights and Liabilities of Joint Venturers.
Subject to Sections 2.9 and 5.22, each Joint Venturer shall be liable only for its Share of the liabilities and obligations of the Joint Venturers under any agreements made by the Joint Venture with respect to the Property or Operations and shall not be liable for any other Joint Venturer's Share of such liabilities and obligations. Each Joint Venturer shall be entitled only to its Share of the rights and benefits of the Joint Venturers under any such agreements. Each Joint Venturer hereby agrees to indemnify and save harmless each other Joint Venturer from and against any and all amounts, claims, demands, liabilities or obligations whatsoever in excess of the Share of such Joint Venturer which have been incurred by such Joint Venturer as a result of or in relation to the Property or Operations.
2.14 Real Estate.
Forthwith following the execution of this Agreement, Ellesmere agrees to convey the Lands to a new nominee titleholder (the "Nominee") which Nominee shall hold the Lands in trust for Rise and Ellesmere. Ellesmere shall convey an undivided fifty percent (50%) beneficial interest in the Lands to Rise, free and clear of all financial encumbrances, save and except for the existing Charge/Mortgage … having an outstanding principal balance of approximately $5,000,000.00 which Charge/Mortgage shall be assumed by the Joint Venture, Rise shall be responsible for the payment of the land transfer tax in respect to such conveyance in accordance with a deemed value of such interest being $950,000.00.
47It would seem that the project encountered problems with various approvals such that the parties determined to amend the foregoing Paragraph 2.14 of the May agreement. The new Document provided that it was effective “as of November 11, 2016”.
48The new document read in part:
AND WHEREAS the parties hereto have agreed to amend the Agreement as provided for hereunder;
NOW THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
- Delete Section 2. 14 and insert the following:
2.14 Real Estate. On the date that is Thirty (30) days following the date on which commencement of excavation operations occur on the Lands, Ellesmere agrees to convey the Lands to a new nominee titleholder (the "Nominee") which Nominee shall hold the Lands in trust for Rise and Ellesmere. Ellesmere shall convey an undivided fifty percent (50%) beneficial interest in the Lands to Rise, free and clear of all financial encumbrances, save and except for the existing Charge/Mortgage … having an outstanding principle balance of approximately $5,000,000.00 which Charge/Mortgage shall be assumed by the Joint Venture …
Ellesmere agrees that no further mortgages or financial encumbrances shall be registered on title to the Lands prior to the date on which the Lands are to be conveyed to the Nominee in trust for Rise and Ellesmere as aforesaid. Rise shall be responsible for the payment of the land transfer tax in respect to such conveyance in accordance with a deemed value of such interest being $950,000.00. Ellesmere agrees to discharge the Charge/Mortgage registered in favour of Toronto Capital Corp. et al registered September 15, 2016 as Instrument No. AT4343080 on or before the date that is thirty (30) days following the date on which commencement of excavation operations occurs on the
Lands. In the event Ellesmere fails to register a discharge of such mortgage on or before such date, Ellesmere shall be deemed to be default hereunder.
Contemporaneously with the execution of this Agreement, Ellesmere hereby agrees to grant Rise a Charge/Mortgage in the amount of Two Million Dollars ($2,000,000.00), payable on demand, to secure the total amount of all costs and expenses incurred by Rise in respect of the Lands to such date.
In the event of such default by Ellesmere, Rise shall be entitled to enforce the said mortgage. Ellesmere shall also be responsible to satisfy all mortgage payments payable on account of the [first] Mortgage from and after such default. Provided Ellesmere has complied with its obligations hereunder, the said mortgage in favour of Rise shall be discharged on the date the Lands are conveyed to the Nominee in trust for Rise and Ellesmere as aforesaid. [my emphasis throughout]
VIII. Excavation Operations
49Thus the precondition of there being an equal participation was altered with a trigger date of the “commencement of excavation operations.” The next event of interest occurred just over a month following the effective date of the amending agreement.
50The President of a construction company that “was engaged by the Plaintiff to provide construction services in connection with a residential condominium and student housing project at the property” deposes that his company BCL started site work on the Project on April 27, 2017, using heavy machinery and equipment, including a bull-dozer.
51Specifically he deposes:
The site was secured with security fencing around the entire perimeter and was cleared and grubbed (trees and brush removed). BCL created a construction entrance to the site with a crushed stone entrance/exit pad and locking gates. BCL's site forces stripped the entire site of topsoil, removed the existing concrete parking lot curbs and graded the site level. This work is a necessary part of excavation operations at the site and constitutes the commencement of excavation operations.
As of June 1, 2017, all locations of utilities were confirmed, the site was stripped of topsoil, surface concrete at the site was removed, the site was graded level and the site was ready for excavation operations to resume, once the Project has the necessary City approvals and conditional permits. [my emphasis]
52He further provided photographs of the site “taken shortly before the completion of the work by BCL at the Project that show the site stripped of topsoil, surface concrete at the site removed, the site graded level, the crushed stone entrance/exit pad and the bull-dozer.”
53The responding affidavit filed on behalf of Ellesmere by its principal reads in part:
“I cannot even confirm that the work outlined … has actually occurred as described or, if done, when that work would have occurred. The photographs are undated, it is difficult to see what is being depicted, and [the deponent] does not state when specifically the "work" in the photographs actually occurred, instead using only vague time references. To my knowledge and belief, as principal of Ellesmere, the site has been dormant for well over a year, and remains dormant, with no construction activities occurring.
On December 19, 2016, we held the groundbreaking and ribbon cutting ceremony for the kick-off of the Development Project. An excavator was brought to site solely to assist with the ceremonial ground breaking (since it was winter, we needed dirt turned over to be able to use the shovels). ….
Other than the groundbreaking and ribbon cutting ceremony on December 19, 2016, I am unaware of any shovels, excavators or other equipment actually breaking ground at the Development Project site. ….”
54Given that the November 11, 2016 document clearly contemplated a future commencement of “excavating operations I would have thought the intent of the parties was for the excavation contemplated was for the subject operations to be undertaken following the issuance of the necessary City approvals and conditional permits.
55I acknowledge the submissions fund in the Supplementary Factum of the plaintiff which assert:
“33. Contrary to what Liu asserts in paragraph 35 of the First Liu Affidavit, the work described in the Ball Affidavit is work that constitutes the “commencement of excavation operations”.
Liu's assertion that Schedule D of the CPM Agreement suggests that
"commencement of excavation at the Property was always intended to be a key milestone directly linked with commencement of construction" is not true. Schedule D of the CPM Agreement does not refer to the "commencement of excavation operations", it simply refers to "excavation". "Commencement of excavation operations" is not the same thing as "excavation".
Furthermore, there were no discussion with Liu regarding the need for "a construction permit and construction financing ... as being required for excavation to commence". In any event, the "trigger" is not excavation, it is the commencement of excavation operations.”
56In endeavouring to weigh these arguments I turned to the decision of D.L. Corbett, J. in Starrcoll Inc. v. 2281927 Ontario Ltd., 2015 ONSC 3719 which sets out this helpful summary of “Principles of Contractual Interpretation”:
9 Where there is no ambiguity in a written contract it should be given its literal meaning. Words should be construed in their plain and ordinary sense unless to do so would result in a commercial absurdity. In construing particular words and provisions, they should be placed within the context of the entire contract, construed as a whole, to the extent that is possible.
10 In some circumstances it is appropriate to construe a contract strictly against one of the parties, the so-called contra proferentum principle. That is not this case. This was a negotiated commercial agreement. The parties to the contract were both sophisticated commercial parties, free to contract with each other, or not, as they saw fit. The goal in interpreting s.3.2(c) should be to determine the meaning the parties intended when they made the contract, as divined from the words they chose to reflect their intention.
11 The court may consider "objective evidence of the factual matrix underlying the negotiation of the contract" to resolve any ambiguity in the contract. However, where a party claims that a literal, plain-meaning reading of the contract leads to a commercial absurdity, the court may look at objective extrinsic evidence to assess the commercial reasonableness of the plain meaning. [citations omitted]
57My consideration of the objective evidence of the factual matrix underlying the negotiation of this contract leads me to a determination that it is probable that the triggering event originally contemplated by the parties has not yet occurred and that therefore the plaintiff has yet to meet the necessary precondition to be entitled to exercise the rights of a Joint Venturer.
58My uncertainty is magnified as a result of it being unclear whether anyone had obtained even the building permit that would allow the construction of the nature that was contemplated between the parties.
59If this were a more usual application for a CPL I would nevertheless be in a position to determine there might be an arguable case sufficient to grant the CPL sought so as to preserve the status quo.
60However my ultimate conclusion requires further analysis and consideration of the limited quantity of Ontario jurisprudence concerning the interaction of lien rights and entitlements to Certificates of Pending Litigation. Before addressing those determinations I turn to a consideration of the wisdom of granting a restriction of the degree and nature sought by the plaintiff.
IX. Qualities of the Subject Property
61My colleague Master Muir has previous set out a detailed consideration of the proper approach to development disputes such as the present case in Tribecca Development Corp. v. Danieli, 2015 ONSC 7638. There while a partial payment had been made to it, the plaintiff remained concerned that the defendants would sell the development property without consulting the plaintiff. Consequently, the plaintiff issued brought a motion seeking leave to issue a CPL over the property.
62His Analysis set out the factors the court is to consider when deciding a motion brought on notice seeking leave to issue a CPL which are found in Perruzza v. Spatone, 2010 ONSC 841, [2010] O.J. No. 493; 2010 ONSC 841; 184 A.C.W.S. (3d) 1135; 2010 CarswellOnt 646. At paragraph 20 of Perruzza, Master Glustein (as he then was) identifies those considerations as follows:
(i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL (Homebuilder Inc. v. Man-Sonic Industries Inc., 1987 CarswellOnt 499 (S.C. - Mast.) ("Homebuilder") at para. 1);
(ii) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. List) at para. 62);
(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CarswellOnt 219 (C.A.) at para. 20);
(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C. - 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 CarswellOnt 1026 (Div. Ct.) at para. 9).
63As my colleague did in Tribecca, I have considered and applied these factors and principles in determining the issues on this motion.
64I am satisfied on the evidence before me on this motion that there exists a triable issue with respect to the plaintiff's claim to an interest in the Property. The defendants argued that the arrangement between the parties was such that the plaintiff has not met the condition precedent to being in the position of a joint venture partner. The plaintiff asserts that scraping the top soil and other above grade activities amounted to a sufficient “excavation operation” to entitle it to a half interest in the entire project at this point in time.
65The agreement expressly provides for the equal distribution of profits and losses “between the joint venturers”. But only if they are joint venturers.
66At this stage, based on the information before me, I would find it difficult to conclude that sufficient “sweat equity” had been expended to entitle the proposed constructor to an equal interest with the owner of the Property.
67Nevertheless, in my view, the plaintiff has met the initial threshold of showing that there exists a triable issue with respect to its claim to an interest in the Property.
X. Lack of Uniqueness
68Despite my finding that the plaintiff has satisfied this initial threshold, I have concluded that a consideration of the other applicable factors favours the defendant's position on this motion.
69First, the advertising flyer placed before me by the moving party, with a view to seeking a broader interim standstill order, describes a piece of raw land which is suitable for development. The number of cranes on the Toronto horizon suggest numerous similar locations can be found upon which to build comparable projects. The Property is not unique. While the brochure plays up the positive characteristics of the Property, the originally contemplated use does not appear to be a particularly rare or unusual opportunity and it is unclear to me whether any governmental approval has been obtained for any specific, proposed construction.
70Second, it is clear that the Property was acquired and being developed entirely for investment purposes. The purchase of the Property and the agreement between the land owner and an experienced constructor was simply an economic investment made with a view to earning a profit.
71Third, it is my view that damages can be easily calculated. The assessment of damages would appear to involve a calculation of the ultimate cost of purchasing and redeveloping the Property with other forces as compared to the entitlement of the moving party to have its construction costs fully paid and then sharing equally in any profit surplus. I adopt Master Muir’s observation in Tribecca:
17 It should also be noted that this court regularly considers and decides the potential issues raised by the plaintiff such as inflated construction costs, improper expenditures and any potentially improvident sale.
72Fourth, I particularly adopt the reasoning concerning the appropriate action to take where alternate forms of relief are sought together with a CPL, having regard to range of relief set out in the first paragraph of the Statement of Claim including alternative claim for damages (see Section XI below). In my view, the plaintiff seeks, through the instrument of a CPL, some ability to control the potential sale of the Property and the distribution of any profit. In this sense, the plaintiff's claim still extends beyond a simple claim for damages. However, as I have indicated above, it is my view that any claim can be easily calculated and adequately remedied by an award of damages.
73Finally, it is my view that the balance of convenience is at best a neutral factor on this motion. The mortgage on the property has come due. A default and enforced realization by the Mortgagee will not benefit either side.
74As noted earlier the Moving party, unsuccessfully brought, on more than one occasion, urgent motions while my decision was under reserve. On those occasions I felt the plaintiff was seeking to tie the landowner’s hands even more tightly than Master Jolley originally directed.
75In my view, this case ultimately is simply about money and not the protection of an interest in a unique piece of real estate. The registration of a CPL would certainly inconvenience the defendants and complicate the quest for re-financing the property pending completion of the construction and sale of condominium units and other elements. Arguably the plaintiff's input and consent might well be volunteered as is it is clearly in the parties’ mutual interest to maximize the recovery from this property.
76Justice Pepall, as she then was, addressed a similar issue in Hunter's Square Developments Inc. v. 351658 Ontario Ltd., 2002 CarswellOnt 2341, [2002] O.J. No. 2800, [2002] O.T.C. 508, 115 A.C.W.S. (3d) 339, 1 R.P.R. (4th) 245, 60 O.R. (3d) 264. Her decision was subsequently upheld by the Court of Appeal at, 2002 CarswellOnt 4158, [2002] O.J. No. 4694, 118 A.C.W.S. (3d) 649, 62 O.R. (3d) 302, 8 R.P.R. (4th) 29.
77In Hunter’s Square Justice Pepall was addressing the appropriateness of a CPL in a subdivision property dispute. In part her reasons addressed a number of considerations and ultimately noted:
64 Seventhly, given that the certificate of pending litigation was placed on the property in October, 2001, it is not surprising that there is no evidence of a willing purchaser. There would seem to be little point in marketing such a large development property when from a practical perspective, one is impeded from selling as a result of the CPL.
65 I have also considered the harm to each party if the certificate is not removed with or without security. Again, as a practical matter, the defendants are required to hold the property indefinitely until such time as this litigation is resolved. On the other hand, the plaintiff is deprived of its opportunity to persuade a trial judge of the merits of its case. If the defendants are successful in the trial, they can attempt to recover their losses from a shell sole purpose company and their costs from whatever amount has been posted as security for costs. In contrast, if the plaintiff is successful with a damages claim, it can attempt to claim against defendants who are owners of property to be serviced which was being sold for approximately $46 million and which is subject to a $1.5 million mortgage given by 351658 Ontario Limited and a $20 million collateral mortgage given by 795208 Ontario Limited. In addition, as noted by Estey J. in Asamera Oil, a claim for specific performance insulates a plaintiff with respect to mitigation and places on the defendants the risk of loss arising from delay in bringing the action to trial.
66 I also note that because of the unsevered nature of the property, the certificate obtained by the plaintiff covers the whole of the parcel of development land, while the claim relates only to a part of those lands. Having considered all of these matters, I am satisfied that the harm to the vendors, if the certificate is allowed to remain is greater than the harm to the plaintiff if the certificate is removed.
67 In exercising my discretion in equity, and applying the facts in this case to the aforementioned factors, including the plaintiffs claim for damages for breach of an agreement to negotiate in good faith, and the plaintiff’s non-disclosure, it is clear that this is a case in which the CPL should be discharged. In the circumstances of this case, I would discharge the CPL pursuant to s.103(6)(c) regardless of whether there was a triable issue sufficient to found a reasonable claim to an interest in the property.
78I have come to the same conclusion with respect to the defendant in the present case.
XI. What Plaintiff Claimed
79In full, the claims in the prayer for relief in the Statement of Claim read:
The Plaintiff ("Rise") claims:
(a) an order that a certificate of pending litigation be issued by the Court and be registered against title to the property described in Schedule A to this Statement of Claim (the "Lands");
(b) an interim, interlocutory or permanent mandatory order directing the Defendant ("Ellesmere") to convey the Lands to a new nominee titleholder (the "Nominee") to hold the Lands in trust for Rise and Ellesmere in accordance with Joint Venture Agreement (as hereinafter defined);
(c) an interim, interlocutory or permanent mandatory order directing Ellesmere to comply with its obligations in section 2.14 of the Joint Venture Agreement (as hereinafter defined);
(d) an interim, interlocutory or permanent mandatory order permitting Rise to exercise its rights set out in the Joint Venture Agreement and available to it in the case of an Event of Default (as hereinafter defined) by Ellesmere;
(e) an order for specific performance by Ellesmere of its obligations in the Joint Venture Agreement;
(f) payment of the sum of $3,950,000;
(g) in the alternative to (f), damages for breach of contract in the amount of $3,950,000;
(h) in the further alternative to (f), restitution for unjust enrichment or compensation on the basis of quantum meruit or ex aqueo et bona in the amount of $3,950,000;
(i) interest as provided in the Joint Venture Agreement or, alternatively, pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43;
80Rise asserts that there is an interest in land in question in this proceeding and that there is a triable issue regarding whether Rise has "a reasonable claim to the interest in the land". That reasonable claim is based on the claims of Rise as analyzed above.
81It is clear that a claim is being asserted payment of the sum of $3,950,000 on a number of alternative bases and at least implicitly the claim is with respect to a portion of the value of the joint venture interest in the land. It does not practically claim a right to the entire project not acknowledge any responsibility to seek to preserve the land for any specific purpose.
82If I am in error and there might otherwise be grounds otherwise justifying the granting of the relief sought, I turn to an examination of the impact of the Construction Lien registered by the plaintiff.
XII. The Existing Construction Lien
83The plaintiff argued that a CPL is necessary to ensure its rights under the Joint Venture Agreement are protected. A CPL is intended to protect an interest in land in situations where other remedies would be ineffective. It is not intended to be an instrument to secure a claim for damages.
84In any event as the title search reflects, a Claim for Construction Lien had already been registered by the plaintiff and presently binds the property, for what might seem an inflated value for work performed, of $3,900,000.
85The question that now arises is the impact of the registration by the plaintiff of a claim for lien on the property on January 26, 2018, six months prior to its issuing the present Notice of Motion, dated June 18, 2018.
86There appears to be relatively little case law addressing such situations. What there is would seem to conclude “you can’t have your cake and eat it too”. Rather the remedies are generally mutually exclusive.
87For example, a contractor who failed to register a statutory lien was refused a Certificate of Pending Litigation against the same lands upon which the lien could have been registered, as he had no tenable claim to an interest in the lands. In Rafat General Contractor Inc. v. 1015734 Ontario Ltd.; [2005] O.J. No. 5526, [2005] O.T.C. 1107, 81 O.R. (3d) 798, 2005 CarswellOnt 7519, 52 C.L.R. (3d) 63 Justice J. R. Sproat dealt with the questions of priority and entitlement.
88In that case a contractor who failed to register a statutory lien under the Construction Lien Act, s. 31(1), was refused a Certificate of Pending Litigation against the same lands against which the lien could have been registered, as he had no tenable claim to an interest in the lands.
89There the Plaintiff rendered its last invoice for construction work performed on March 30, 2005 and did not subsequently register a claim for lien. The Plaintiff commenced this action on July 14, 2005 and on the motion before Sproat, J. asked for a Certificate of Pending Litigation against the lands of the owner (being the same lands against which it could have registered a claim for lien).
90Specifically Justice Sproat held:
3 In my opinion this motion must fail. The scheme of the Construction Lien Act ("the Act") is that it provides a comprehensive code as to how liens are to be preserved. It would subvert the statutory requirements as to how and when a claim for lien must be registered to allow contractors to ignore the time limits, lose their statutory lien and then assert an interest in the land and obtain a Certificate of Pending Litigation. Further, a claim based on the trust provisions of the Act does not give rise to a tenable claim to an interest in the subject land.
7 The question then is whether, having had a lien in the subject property created by the Act, that it did not preserve, the Plaintiff can then look to the trust provisions in the Act, to later assert an interest in the same land. Turning to the trust provisions of the Act, Macklem and Bristow [Construction and Mechanics' Liens in Canada] state:
Where the trust remedy is included in the Act, it provides added protection to the suppliers of work, materials, and service, beyond that afforded by the remedy of the lien. The action to enforce a claim against such a trust fund is a personal action, in the sense that it does not bind the project lands and does not depend upon registration or notice for its preservation or validity.
9 To obtain a Certificate of Pending Litigation a party must have a reasonable claim to an interest in land (Courts of Justice Act, s. 103). The scheme of the Act, and the fact that the trust provisions give rise to personal rights only, lead me to conclude that the plaintiff now has no tenable claim to an interest in the land.”
91A more recent motion in 992426 Ontario Inc. v. Koenpack Canada Inc., 2018 ONSC 5102 was brought and resolved while the current motion was extant. There T. Maddalena J. Sitting in Welland dealt with a case when a lien had been registered (perhaps late) and had subsequently been discharged by the contractor. The contractor then obtained an ex parte CPL without disclosing the previous lien registration and its discharge.
92In her reasons Justice Maddalena observed:
14 It is settled and trite law that an ex parte application requires full and complete disclosure to the court. In an ex parte application it is clear that no material fact shall be omitted when presenting such a claim to the court.
16 Furthermore, in the case of Khmelevskikh v. Zubashvili, 2018 ONSC 1739, the court stated in para. 28 as follows:
When moving ex parte to obtain a Certificate of Pending Litigation, all evidence put before the court must be accurate and complete (JDM Developments Inc. v. J. Stollar Construction Ltd. at para 24). Failure to disclose any material facts will result in the Certificate of Pending Litigation being discharged particularly where the undisclosed information was of such a nature that in its absence, the court received an incomplete and inaccurate picture and had been fully apprised of all of the material facts, the Certificates of Pending Litigation would not have been granted (JDM at para. 43).
93Here it would appear that the existence of the registered lien was not addressed before Master Jolley on the initial adjournment on terms.
94Regardless, I believe its existence is of relevance in balancing the scales in this case.
95Justice Maddalena further cites various cases referred to earlier in these reasons and ratifies the guidance from those decisions in ratifying that 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.”
96Adopting the reasoning in Rafat (supra) Justice Maddalena agreed that granting or upholding a CPL, would “subvert the statutory requirements as to how and when a claim for lien must be registered to allow contractors to ignore the time limits, lose their statutory lien and then assert an interest in the land and obtain a Certificate of Pending Litigation.”
XII. Conclusion
97In my view granting a CPL after the prior continuing registration of a Construction Lien on the property would subvert the requirements and purposes of Section 103 of the Courts of Justice Act.
98I find the claim of the plaintiffs is a dispute regarding a construction contract which is one of liquidated damages as outlined in the plaintiffs' own amended statement of claim.
99Section 103 of the Courts of Justice Act, dealing with the test for discharging a CPL provides in part:
(6) ORDER DISCHARGING CERTIFICATE - The court may make an order discharging a certificate, · ·
(a) where the party at whose instance it was issued,
(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,
(ii) does not have a reasonable claim to the interest in the land claimed, or
(iii) does not prosecute the proceeding with reasonable diligence;
(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or
(c) on any other ground that is considered just,
100I believe my colleague Master Muir has established the correct approach to disputes amongst contracting parties with respect to lands proposed for development. When we have a piece of relatively raw land that is suitable for construction, that in and of itself, does not make it in any way unique.
101Rather, in this case I am satisfied that this was simply an investment opportunity, and that given the proportionally small investment to date made by Rise, It would seem unfair and contrary to proportionality to allow it to freeze this property at the present time; having regard to its interest in the property and more particularly, the present situation concerning the financing on the property.
102In particular there is now a pressing requirement for refinancing on some basis the existing first mortgage that expired while this motion was being litigated. Granting a CPL would significantly hinder, rather than help, that process.
103I am satisfied, that as set out throughout these reasons, there are a number of valid reasons, any one of which could justify the refusal of the Plaintiff’s motion. Taken together I am convinced that it would not be appropriate to encumber this property further by issuing a Certificate of Pending Litigation at this time.
104As a result I am directing that as of the present date, the plaintiff’s motion for a certificate of pending litigation is hereby dismissed with costs of all proceedings related to these issues, to the defendant on a partial indemnity basis.
105However I am directing that Master Jolley’s restrictions will remain in place until the end of the day on November 30, 2018, at which point they shall be rescinded.
XIII. Costs
106The parties are encouraged to settle the issue of costs. If the parties cannot agree on costs, the defendant may make written submissions as to costs within 30 days of the release of this Endorsement. The plaintiffs have 20 days after receipt of the defendant's submissions to respond. The Defendants shall then have a further 15 days to reply.
107All such written submissions shall not exceed five double-spaced pages, exclusive of Offers to Settle, Bills of Costs and authorities and are to be consolidated and forwarded in a single package to my Assistant Trial Coordinator, Mr D Backes. If no submissions are received within 90 days from the release of these reasons, the parties will be deemed to have settled the issue of costs as between themselves.
108I am obliged to counsel for their detailed and helpful submissions and materials.