I. Is it an investment or is it a sale?

[1] This Application is brought under Rule 14.05 of the Rules of Civil Procedure for the determination of the fee owing to the Applicant under a Sales Representation Agreement (“SRA”) with the Respondent, 2316543 Ontario Limited (“231”) dated June 24, 2015. The fee is in respect of the Applicant having introduced 231 to an investor/buyer for a property located at 2180 Lawrence Avenue East, Toronto (the “Property”).

[2] The newly introduced party has formed with 231 a vehicle called Birchmount Lawrence Limited Partnership (“BLLP”). On February 26, 2016, title to the Property was transferred from 231 to the Respondent, 2504639 Ontario Inc. (“250”), which now holds title as bare trustee on behalf of BLLP.

[3] The SRA contained a fee provision which set out two alternative routes for earning a fee. Under the SRA’s clause a), the Applicant would be entitled to 30% of the 231’s square footage (or the value thereof) in the event that it introduced 231 to an investor for the Property who allotted space back to 231 (“Fee Clause A”); alternatively, under the SRA’s clause b), the Applicant would be entitled to a fee of 3% of the sale price in the event the Applicant introduced 231 to a buyer for the Property (“Fee Clause B”). The Applicant submits that the arrangement under which 250 took title and BLLP gained its beneficial interest was an investment, whereas 231 submits that it was a sale.

[4] This characterization question is crucial to the case. In an earlier motion that the Applicant brought for a certificate of pending litigation, Master Wiebe found that Fee Clause B contravenes section 9 of the Real Estate and Business Brokers Act, SO 2002, c. 30 (“REBBA”). The Master’s reasoning was that a fee earned on the basis described in Fee Clause B – 3% of the sale price of the Property – was a commission on sale, and under Schedule C to REBBA only a registered broker can earn a commission on the sale of real estate. This illegality makes the clause unenforceable, and, accordingly, Master Wiebe severed it from the rest of the SRA.

[5] While I am not formally bound by the learned Master’s ruling, his reasoning on the application of REBBA appears to me to be correct. It accords with the logic of Rosenberg J. (as he then was) in MJK Consultants Inc. v Citibank Canada; [1993] OJ No 2175, at para 11 (Gen Div), who indicated that, “[i]f the remuneration to be paid depends on the eventual sale of the property and is calculated as a percentage of the sale price, whether it is called ‘consulting fee’ or ‘commission’ does not matter. It is clearly caught by [REBBA].”

[6] Following Justice Rosenberg’s mode of analysis, ibid., at para 11, I have “scrutinize[d] the nature of the [Applicant’s] interest in the transaction and the nature of the ‘services’ provided to determine whether it falls within REBBA.” It appears to me that any transaction that fit the description in Fee Clause B would run afoul of the brokers’ registration requirement. I therefore agree with Master Wiebe’s approach and would sever Fee Clause B from the rest of the SRA.

[7] The upshot of this is that only if the transaction is characterized as an investment rather than a sale is the Applicant entitled to a fee.

[8] There is some debate among counsel for the three parties as to whether this task can be accomplished on the basis of affidavit evidence and a paper record, or whether it requires a trial of the issue with viva voce evidence. Not surprisingly, the Applicant, who has been waiting two years for its fee, is anxious to proceed on the Application Record before me, while 231 and 250, who one way or the other will have to pay the fee if one is payable, are anxious to convert the Application to a full-blown trial.

[9] In my view, the paper record provides all of the evidence necessary to make the decision before me. While each side has gone to great effort to impugn the conduct the other, the essential facts – when the parties met, their respective roles, the nature of the Property and the development project envisioned for it – are not the subject of much disagreement among them. Most importantly, the transaction itself is extensively documented in written agreements, and it is this transaction that needs to be interpreted. Viva voce evidence is as likely to distract from the task as to add anything useful to the record.

[10] That said, the investment vs sale question is not an easy one. At least on the surface, the transaction at issue has hybrid features of an investment and a sale. That said, the key is to ascertain which aspect of the transaction is more in the nature of form and which aspect is more in the nature of substance. With sufficient scrutiny, one can tell a candy mint from a breath mint.

II. The transaction and the transfer

[11] In or about June/July 2015, Wilson Lam, a consultant who worked with Louis Al Jaar, one of the principals of the Applicant, introduced Gerard Lee, a real estate developer with projects across southern Ontario, to the Property. At that point, the Property was owned by 231, a non-profit corporation interested in finding a way to finance a development project it had planned for the Property. The ultimate goal of 231 and its members was to commercially develop the Property in a way that would allow them to build a Masonic temple on the Property (the “Project”).

[12] The evidence from Mr. Lam establishes that Mr. Lee was also interested in the development potential for the Property. According to Mr. Lam, “Louis [Al Jaar] told Mr. Lee that he is a consultant and former banker. He said his role was to provide input on the structure of the transaction and to find an investor capable of building the Project. The total budget for the Project was in excess of $120 million.” As 231 was a non-profit, it did not have the financial ability or the real estate development know-how to bring its plans for the Property to fruition. It had retained the Applicant to find a way to accomplish its plans. With this in mind, Messrs. Lam and Al Jaar introduced Mr. Lee to James McKinnon, the president of 231.

[13] As owner, 231 could, of course, have simply sold the Property. It is obvious from the way it proceeded, however, that a sale was not its desired course of action. In the first place, it did not engage the services of a real estate broker or list the Property for sale with the Toronto Real Estate Board in the way an owner seeking to sell commercial land would do. Neither the Applicant nor Mr. Al Jaar claim to be licensed real estate brokers, and, indeed, 231’s solicitor, Bryan Hackett, deposed that Mr. Al Jaar never held himself out to be a broker. Rather, 231 retained the Applicant under the SRA to work on bringing its development plans to fruition.

[14] As Mr. Al Jaar put it in his second affidavit, the Applicant “provided many services that real estate brokers are not qualified to provide.” As a consultant, Mr. Al Jaar produced a complex analysis of how to leverage the equity in the Project. In doing so, he produced spread sheets of projected expenditures and revenues, proposed alternative financial structures, etc. His services did not resemble those of a real estate broker working to consummate a sale in which 231 would relinquish the Property. For this reason, Fee Clause A in the SRA was the provision that more realistically matched the type of service that the Applicant provided. Again, as Mr. Lam deposed, “Louis [Al Jaar] said Swiss Tech was to be compensated based on the value of the investment he attracted, and not for selling the land like a broker would.”

[15] In order to accomplish its goal for the Property, 231 had a number of possible choices. As a non-profit corporation it likely could not have simply sold shares to a new investor and kept the ownership in its own corporate name. However, it could have brought in an investor directly by keeping part ownership of the Property in 231’s name and transferring part ownership to an investor, with the co-owners then entering into some form of joint venture agreement. Alternatively, it could have brought in an investor indirectly by forming a new corporate or partnership vehicle jointly with the investor and then transferring ownership of the Property from 231 to the new vehicle. For financial and other business planning reasons, 231 and Mr. Lee opted for the latter approach.

[16] Effective February 16, 2016, 231 entered into a Limited Partnership Agreement (“LPA”), pursuant to which BLLP was formed. 231 subscribed for 25,000 Class B limited partnership units, corresponding to a 25% interest in BLLP. The other limited partner, controlled by Mr. Lee, subscribed for 75,000 Class A limited partnership units, corresponding to a 75% interest in BLLP.

[17] On that same date, 231 and BLLP entered into an Agreement of Purchase and Sale (“APS”), pursuant to which title to the Property was transferred to 250 as bare trustee for BLLP. That transfer closed 10 days later, on February 26, 2016. According to the APS, the Property was transferred to BLLP for $6,500,000, composed of three components: a) BLLP’s assumption of 231’s mortgage liabilities in respect of the Property; b) BLLP delivering to 231 a promissory note in the amount of $1,500,000; and c) 231’s acquisition of its limited partnership units in BLLP.

[18] As an aside, I note that counsel for 250 takes the position that BLLP should have been named as a Respondent in this Application, and that 250 is not a proper Respondent. However, 250 is trustee for BLLP, and it seems to me that it is not only proper but necessary for a party seeking a remedy against a Property held in trust to name the trustee, not the beneficiary, as the relevant opposing party. It is common ground among all parties here that 250 is trustee for BLLP, and in that capacity it is responsible for the rights and obligations of BLLP and is in a position to deal with the Property as title holder: Di Michele v Di Michele, 2014 ONCA 261, at paras 68-69.

[19] 231’s equity contribution to BLLP was its net equity in the Property, while Mr. Lee and his investment vehicles contributed cash. The Project was also somewhat revised – as finalized, the LPA envisioned a 377,000 square foot development. Under the LPA, BLLP is the beneficial owner of the Property and the Project, and 231 could redeem its interest in BLLP in exchange for a Masonic temple of approximately 20,000 square feet of space in the Project (the “Temple Space”). In addition, the LPA grants 231 a credit of up to $6,000,000 (the “Special Distribution”) toward the construction costs of its temple as part of the development Project.

[20] In form, the transaction with respect to the Property resembles a sale from one owner (231) to another (250 on behalf of BLLP). In substance, however, the transaction resembles an investment by a developer (the 75% limited partner controlled by Mr. Lee) in a Project and Property previously solely owned by the new investor’s now partner (231). Indeed, when viewed as an investment transaction, the main features of the deal – i.e. the formation of BLLP, the terms of the LPA, and the mechanism of the AGS – all closely align with the terms of the SRA’s Fee Clause A. That clause provides:

The Corporation [i.e. 231] agrees to pay a Fee to the Representative [i.e. the Applicant], calculated and payable as follows:

a) If the Corporation, through an agreement with a prospective investor(s)/builder(s) introduced to the Corporation by the Representative agrees to exchange the Property in exchange for a percentage of the Gross Floor Area (GFA) of the Project, the Representative shall be entitled to a fee being thirty percent (30%) of the footage provided to the Corporation or its monetary equivalent;

[21] As indicated, BLLP’s acquisition of the Property was done in exchange for the new investor, BLLP (or, perhaps more accurately, the 75% owner of BLLP) allotting to 231 the Temple Space and the accompanying Special Distribution in respect of that space. This investment structure, in which 231 exchanged title to the property with BLLP, which in turn allotted back to 231 a portion of the gross square footage of the Project, appears to conform closely with the specific terms of the SRA’s Fee Clause A.

[22] Reading the transaction in this way is in keeping with 231’s obligation to protect the Applicant’s interest. The SRA contains a “Scope of Representation” clause in which 231 assumed an ongoing obligation to the Applicant to protect its fees through whatever type of transaction it might ultimately enter. This clause provides:

The Corporation [i.e. 231] hereby agrees and undertakes to safeguard the rights, royalties and fees of the Representative [i.e. the Applicant] on a non-exclusive basis for each and every investor(s) and or builder(s) (“Investor”) introduced in writing to the Corporation commencing as of the date of this Agreement and continuing in effect until this Agreement is expired and continuing throughout the period while the Corporation maintains any and all kinds of business relationship with any and all potential investor(s)/builder(s) referred to the Corporation by the Representative.

[23] In its factum, 231 submits that the Statement of Adjustments that accompanied the AGS and that sets out the price for the transfer of the Property “is a key document confirming that the property was in fact sold pursuant to an agreement of purchase and sale.” Likewise, and even more pointedly, 250 submits in its factum that, “231 sold the Property. It did not exchange the Property for a percentage of the gross floor area of any development project.”

[24] With respect, these descriptions of the transaction by which BLLP was formed and acquired beneficial ownership from 231 are expressions of form over substance. 231 “sold” the Property not for money, but rather in “exchange” for, inter alia, square footage in the Project. The Statement of Adjustments produced for closing of the AGS is one superficial aspect of an overall transaction whose true contours are outlined in the LPA.

[25] The Applicant submits in its factum that the effort to characterize the transaction as an outright sale rather than an investment in exchange for square footage in the Project “would give 231 Ontario a windfall, after it admitted Swisstech’s complete performance of the contract and its corresponding obligation to pay.” In making this point, counsel for the Applicant underscores that no one is seriously denying that the Applicant provided the service it contracted to provide to 231, and that the Applicant not only introduced Mr. Lee to the project but that Mr. Lee is the principal behind the new investor and that the financial forecasting and other work done by Mr. Al Jaar were of value.

[26] The argument put forward by 231 and 250 is a strictly technical one – that part of the mechanics of the investment and exchange involved a transfer and ‘sale’ of the Property. By portraying the sale as dominating the investment, 231 and 250 have fashioned a position that does not seek to characterize the real transaction as much as it seeks to mold the transaction into a shape that strategically works for them. The submissions by 231 and 250 are designed to take advantage of the fact that Fee Clause B, which would have governed any actual sale to a third party, is offside REBBA and therefore unenforceable.

III. The fee clauses

[27] I pause here to observe that while 231 negotiated the SRA and its two fee clauses with the benefit of a lawyer – Mr. Hackett – the Applicant was unrepresented during those negotiations. I also note that Mr. Hackett apparently never recommended to the Applicant that it obtain independent legal advice. While I find it hard to take seriously Mr. Al Jaar’s statement in his testimony that he thought that Mr. Hackett was also advising the Applicant – Mr. Al Jaar is too experienced and too intelligent to think that the other party’s lawyer is actually advising both sides in a complex transaction – the fact remains that the only lawyer involved in the deal was Mr. Hackett.

[28] I assume that Mr. Hackett was unaware of the enforceability issue when Fee Clause B was included in the SRA; I have no reason to doubt that the problem was inadvertent and that Mr. Hackett had simply not turned his mind to the broker licensing provision of REBBA. Nevertheless, it behooves 231 not to seize on even an inadvertent error overlooked by its own lawyer in order to deprive the Applicant of payment for services rendered.

[29] I observe that counsel for 231 now states that Fee Clause A of the SRA is also a form of brokerage commission and is unenforceable under REBBA. Apparently, 231’s litigation counsel is of the view that 231’s real estate solicitor missed that one as well. In argument before me, counsel for 231 emphasized the fact that an investment and exchange of the Property for square footage is, while perhaps not a classic ‘sale’ of real estate, a form of trade in land and that REBBA on its face appears to apply to all trades in land. In my view, this is a kind of artful argument that is aimed at undermining rather than furthering the policy of the statute.

[30] As a licensing and, at least partially, a consumer protection statute, REBBA is not aimed at protecting a party such as 231 structuring a large Project with a real estate solicitor by its side every step of the way: Neiman v Duffmits Holdings Inc., 2010 ONSC 4643, at para 31, citing McClure v Backstein, [1985] OJ No 1052 (HCJ), aff’d [1986] OJ No 467 (CA). The Supreme Court of Canada held in Roche v Maston, 1951 4 (SCC), [1951] SCR 494, 500, that “the artificial and greatly extended meanings given to the words ‘trade’, ‘real estate’ and ‘business’” used in REBBA do not apply to an investment in the shares of a real estate company”; in my view, the same is true of an investment in the partnership units of a real estate limited partnership.

[31] The interpretation given to REBBA by 231 here is an unnecessarily strained interpretation aimed at undermining any and all rights of the Applicant. That it does so in the context of the SRA, in which 231 specifically negotiated to grant the Applicant those rights and to protect them moving forward, only serves to emphasize 231’s misinterpretation. The Court of Appeal has in recent years taken aim at this type of contractual interpretation, indicating that courts are mandated “to ensure that parties do not act in a way that eviscerates or defeats the objectives of the agreement that they have entered into…”: Transamerica Life Canada Inc. v ING Canada Inc. (2003), 2003 9923 (ON CA), 68 OR (3d) 457, at para 53 (CA).

[32] The SRA must be read down or subjected to severance in order to eliminate Fee Clause B, but at the same time it must be interpreted and applied so as to give force to the balance of the contract, including Fee Clause A. That is the only way to give legal authority to the intention of the parties and to avoid subverting the SRA altogether. It is essential in interpreting the SRA to give a wide berth to any interpretation that would give 231 an unjustified windfall: see True North American Express Inc. v New Solutions Financial Corp., 2004 SCC 7, [2004] 1 SCR 249, at para 24.

[33] As the Supreme Court of Canada has put it recently, “Commercial parties reasonably expect a basic level of honesty and good faith in contractual dealings”: Bhasin v Hrynew, 2014 SCC 71, [2014] 3 SCR 494, at para 60. This is especially true here in light of 231’s express contractual obligation to safeguard the Applicant’s right to its fee.

[34] The Applicant deserves to be paid under Fee Clause A. The only questions are: how much? And how?

IV. Fashioning a remedy

[35] There is no doubt that BLLP took its equitable interest in the Property with notice of the Applicant’s fee claim. While Mr. Lee first deposed that he did not even know who the Applicant is or why they were making a claim for a fee, the evidence shows that he was keenly aware of the Applicant’s contribution. He received numerous emails prior to entering the LPA on February 16, 2016 and closing the AGS on February 26, 2016 setting out the Applicant’s entitlement to a fee, and he even drew a chart of the investment which depicted the Applicant’s claimed interest. The LPA itself makes reference to the Applicant’s fee claim and interest.

[36] As indicated, the LPA provides that the consideration received by 231 in respect of BLLP’s investment in the Property and the Project includes an allotment back to 231 of a portion of the overall square footage. As also indicated, the SRA provides that the Applicant’s fee is calculable as a portion of 231’s portion. It is therefore logical to conclude that the Applicant is the beneficial owner of a percentage of the Project.

[37] To reiterate, 231 had no right to concoct a transaction with Mr. Lee that, as Master Wiebe put it at para 53 of his judgment, attempted to “sideline” the Applicant’s interest. Since BLLP was not an innocent purchaser for value without notice of the Applicant’s interest, any remedy that the Applicant has against 231’s interest in the Property and Project applies against title to the Property and against the entire Project, not just against 231’s portion.

[38] Actual notice of an existing interest creates equitable rights as against a transferee even in the era of statutory land titles systems. As the Supreme Court of Canada noted in United Trust Co. v Dominion Stores Ltd., 1976 33 (SCC), [1977] 2 S.C.R. 915, at para 77, “the courts have expressed a disinclination to imply such an extinction of the doctrine of actual notice. There is no doubt that such doctrine as to all contractual relations and particularly the law of real property has been firmly based in our law since the beginning of equity.”

[39] BLLP having taken its interest in the Property and the Project with notice, the Applicant has an interest in priority to that of BLLP. The trick is to quantify the Applicant’s interest, since the Project itself is still in the planning stage and is therefore a moving target.

[40] Under the LPA, 231 is entitled to a Special Distribution of a $6,000,000 credit to be put toward its Temple Space in the Project. This places a value as at February 16, 2016 on the up to 20,000 square feet to which 231 is entitled. The LPA also makes clear that the allocation of square footage to the Temple Space was premised on a Project with an overall size of 377,000 square feet. The LPA provides that the amount of credit in the Special Distribution is to be adjusted downwards pro rata with any decrease in the size of the development.

[41] The SRA’s Fee Clause A specifies that the Applicant is entitled to 30% of the gross square footage allotted to 231. At the signing date of the LPA, this entitlement amounted to a value of $6,000,000 x .30 = $1,800,000.

[42] Counsel for 250 submits that since the signing of the LPA in February 2016, BLLP has encountered zoning and other development approval issues that have reduced the size of the Project. A revised site plan was submitted to the City which reduced the proposed development from 377,000 square feet down to 271,156 square feet. This reduction, in turn, reduced pro rata the maximum size of the Special Distribution to 231 from $6,000,000 down to $4,315,480.11.

[43] In recent months, 250, speaking as bare trustee for BLLP, has taken the position that the Project has been placed on long-term hold due to the current litigation. First, it states that it lost a financing commitment when the lender learned of Master Wiebe’s reasons for judgment, even though the Applicant agreed not to register the certificate of pending litigation that the Master had authorized in his ruling. Then it asserts that it has received a zoning consultant’s report indicating that the City will require a zoning change to accommodate a Masonic Temple, which falls into the category of a place of assembly. It claims that this is a difficult and impractical requirement that would greatly reduce the size of the Temple Space as well as the overall square footage of the Project.

[44] Now 250 states that BLLP is under such pressure from all of this that it has put the Project on hold while it submits a new development plan to the City. Apparently, this new plan does not include any space for a Masonic Temple. This, of course, would undermine 231’s entire raison d’être for entering the transaction and forming BLLP in the first place.

[45] Further, given the elimination of a temple from the most recently submitted plans, 250 takes the position that there will be no Temple Space and that the current allocation to 231 of square footage in the Project is now zero. Extrapolating from this, the Applicant has therefore been made to understand that under BLLP’s latest plans for the Project its 30% share of 231’s square footage will also amount to zero.

[46] The evidence from 231 is that it has divested itself of all of its asserts except for what it received as a result of the February 2016 transaction with BLLP. Mr. McKinnon, who submitted an affidavit in his capacity as president of 231, conceded in cross-examination that 231 knows that the Applicant is entitled to a fee for its services but that 231’s “pockets are bare.” Accordingly, even though Fee Clause A defines the Applicant’s fee as 30% of 231’s square footage allotment “or its monetary equivalent”, the Applicant is of the view that “[a] monetary award against 231 would not be exigible and could very likely be hollow”.

[47] Instead, given the inadequacy of a damages award, the Applicant seeks a form of specific performance with a slight departure from the literal terms of Fee Clause A: see UBS Securities Canada Inc. v Sands Brothers Canada Ltd., 2008 19507 (ON SC), [2008] OJ No 1676, at para 59 (SCJ), aff’d 2009 ONCA 328, [2009] OJ No 1606 (CA). The Applicant contends that although specific performance is called for under the circumstances, 231 has shown itself to be incapable of complying with the precise terms of Fee Clause A: Ibid., at para 6. That is, it does not possess its square footage allotment and, given BLLP’s approach to the Project subsequent to February 2016, is unlikely to possess it in the near future.

[48] Moreover, the Applicant takes the view that BLLP, acting at the instruction of Mr. Lee, will act to frustrate its right to its percentage of 231’s space. Given the position articulated by 250 in this litigation, that is an understandable fear. As indicated above, BLLP has now gone out of its way to frustrate 231’s plan to build a Masonic Temple by depriving 231 of any Temple Space. This, then, has effectively deprived the Applicant of any chance of a being granted its own space as provided for in Fee Clause A.

[49] Counsel for the Applicant augments this point by noting that 231 has also acted in less than good faith in its dealings under the SRA. It has refused to pay the Applicant any fee at all because it divested itself of all cash and other assets when it went into the transaction with BLLP. It then, during the course of the present litigation, attempted to argue that not only Fee Clause B but Fee Clause A is illegal and unenforceable, thereby creating the possibility of an unjustified windfall for itself. None of this conduct makes either BLLP or 231 a trustworthy co-venturer for the Applicant. 231 has structured itself so as to deprive the Applicant of any chance of payment, and 250, on behalf of BLLP, has produced plans that deprive 231 of its space and thereby deprive the Applicant of its right to a portion of 231’s space.

[50] If the Applicant’s remedy in enforcing its rights under Fee Clause A is to gain a percentage interest in the Property, it will inevitably be at the whim of parties who have proven themselves to be out to undermine it. 231 has shown that it will deal away its ability to satisfy obligations owed to the Applicant. For his part, Mr. Lee has demonstrated in his decision-making for BLLP and 250 on behalf of BLLP that he has no consciousness at all of the rights of the limited partners let alone of the Applicant, who he all but disregards. The Applicant submits that neither of these parties can be relied on to act toward it in good faith; the evidence establishes that they have given the Applicant good reason for saying so.

[51] The Applicant’s proposed remedy is that the court specifically enforce a monetized version of Fee Clause A by granting the Applicant a charge on the Property in the amount at which its fee is valued. This is a slight variation on specific performance – one that converts equity to debt but that otherwise leaves the value of the Applicant’s remedy unchanged. Since this makes a necessary change in the form of the security but not the amount of the award, it is an appropriate example of remedial flexibility under the circumstances: Sheppard v Carvalho, 2015 ONSC 3266, at para 17.

[52] As set out above, according to 250 the value of the Project in general, and the 231 Distribution and Temple Space in particular, has been on a slippery slope. In the past two years that the Applicant has been seeking its fee, BLLP has managed to submit plans that ostensibly reduce the Temple Space from a value of $6,000,000 to a value of $0. No one point on this sliding scale is more valid than another in terms of determining the proper value of 231’s interest in the Project or, by extension, the Applicant’s fee.

[53] That said, there is only a two-year-long sliding scale because no one saw fit to take the Applicant into consideration in structuring BLLP and transferring the Property. Given that the Applicant’s fee was payable in respect of the investment by Mr. Lee, it came due upon the formation of BLLP and the transfer of the Property from 231 to 250 to hold on BLLP’s behalf.

[54] 231, as the other party to the SRA, knew that a fee was payable to the Applicant, but did not consider it necessary to arrange its affairs so that it could actually pay the Applicant’s fee when it came due. Likewise, 250 and BLLP, as the trustee title holder and equitable owner, respectively, took their interests with notice of the Applicant’s fee but failed to ensure that it was paid before title to the Property was transferred from 231 to 250.

[55] The Newfoundland Supreme Court observed in Freeman v Hurley, 2004 NLSCTD 44, at para 27, that, “Absent any provision to the contrary, and assessing the contractual obligations objectively, one would expect that there would be reciprocity in the timing of the performance of the contractual obligations.” Applying this reasoning, the Applicant’s entitlement to a fee was in an embryonic stage up until the transaction between 231 and Mr. Lee was formalized and closed, at which point the reciprocity of obligations were triggered.

[56] According to the terms of the SRA, the trigger for the Applicant’s fee was completed in February 2016. That is when the Applicant’s rights under Fee Clause A crystallized. In other words, the value placed by the LPA on the Temple Space, as set out in the Special Distribution, is the value to be used in calculating the Applicant’s fee. Had the Applicant been paid in a timely fashion, it would have been paid in accordance with its entitlement under the SRA to a percentage of that value.

V. Disposition

[57] The fee owing to the Applicant under Fee Clause A, calculated in accordance with the values established by the LPA, is $1,800,000. 231 shall pay the Applicant $1,800,000. Pre-judgment and post-judgment interest on this amount will run at the Courts of Justice Act rate from February 26, 2016.

[58] Until such time as the Applicant is paid the amount owing to it, the Applicant shall have a charge on the Property in the amount of $1,800,000 plus interest to date. The charge is registerable immediately against the Property in the Land Titles office. Post-judgment interest shall be added to this charge as it accumulates. The charge on the Property in favour of the Applicant shall dispense with the need for a certificate of pending litigation as ordered by Master Wiebe.

[59] All three counsel have provided me with Cost Outlines or Bills of Costs. Counsel for the Applicant seeks just over $49,000 on a partial indemnity basis. Given the hard fought nature of this Application, with extensive affidavit material, cross-examinations, factums, and a two day hearing, that is not an unreasonable amount. The result of the Application establishes that the time and effort expended by Applicant’s counsel was a worthwhile investment.

[60] I note that counsel for 250 would seek over $13,000 more in costs than counsel for the Applicant is seeking. While counsel for 231 would seek substantially less, it is obvious that 250 and 231 were able to pool their resources in responding to this Application. The amount sought by the Applicant will not, therefore, be more than the two unsuccessful parties could reasonably expect to pay: Rule 57.01(1)(0.b).

[61] 231 and 250 shall pay the Applicant costs in the amount of $49,000, inclusive of disbursements and HST. 231 and 250 are liable for the costs jointly and severally. They are payable within 30 days of today’s date.

Morgan J.

Released: February 5, 2018

COURT FILE NO.: CV-17-574939

DATE: 20180205

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SWISS TECH INCORPORATED

Applicant

– and –

2316543 ONTARIO LIMITED and 2504639 ONTARIO INC.

Respondents

REASONS FOR JUDGMENT

E.M. Morgan, J.

Released: February 5, 2018

Swiss Tech Incorporated v. 2316543 Ontario Limited, 2018 ONSC 856

Case Summary

I. Is it an investment or is it a sale?

II. The transaction and the transfer

III. The fee clauses

IV. Fashioning a remedy

V. Disposition

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 2

Legislation 1