COURT FILE NO.: CV-18-590767 DATE: 20190220 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
NING LI, ZHIGANG LI, DEHONG MI, LI YANG and QING FEI QIU Plaintiffs/Responding Parties – and – PARK AVENUE HOMES CORP. and 739034 ONTARIO INC. Defendants/Moving Parties
Counsel: Rebecca Huang and Hannah Biesterfeld, for the Plaintiffs/Responding Parties Joel Cormier and Gurpal Sandhu, for the Defendants/Moving Parties
HEARD: December 13, 2018
Justice S. Nakatsuru
[1] The Plaintiffs are five buyers of pre-construction homes that were to be built in Georgina, Ontario, by the Defendant, Park Avenue Homes Corp (henceforth “Park Avenue”), on land owned and developed by the second Defendant, 739034 Ontario Inc. (henceforth “739”). Mr. Paul Sud is the president and owner of 739. Mr. Ashley Sud is the president and owner of Park Avenue. They are father and son.
[2] Each Plaintiff signed an Agreement of Purchase and Sale (henceforth the “Agreements”) with Park Avenue in February or April of 2016. The land where the homes were to be built still remains a vacant field. Park Avenue terminated the Agreements relying on an Early Termination Condition. Park Avenue also refunded the deposits. Park Avenue took the position that it could not fulfill the conditions in the Agreements before their contractual deadlines. The Defendants say the lands on which the homes were to be built are “landlocked”; that is, they are surrounded by land owned by an unaffiliated neighbouring developer. The development of the lots in question depended on the cooperation and the progress of development of the neighbouring developer. The Defendants say this was not forthcoming in a timely manner. Thus, Park Avenue terminated the Agreements early. The Plaintiffs were not satisfied with this state of affairs. They have brought an action for declarations, specific performance, and damages as a result of this termination.
[3] Park Avenue responds that it made reasonable efforts, acted in good faith, and honestly performed efforts to satisfy the Early Termination Condition. The Defendants have moved for summary judgment to have the Plaintiffs’ action dismissed. The Plaintiffs agree that summary judgment should be granted on this motion. However, they submit that summary judgment should be granted in their favour. I am satisfied that summary judgment is appropriate under rule 20.04(b).
[4] Before dealing with the merits of the motion, there are some preliminary issues that must be decided.
I. THE PRELIMINARY ISSUES
A. THE FAILURE BY THE PLAINTIFFS TO BRING A CROSS-MOTION
[5] The Plaintiffs have failed to bring a cross-motion for summary judgment. The Defendants object and say I should only decide their summary judgment motion. They submit they have suffered prejudice by the lack of notice. The Defendants argue that had they known the Plaintiffs were seeking summary judgment, they would have presented evidence regarding the failure on the part of the Plaintiffs to mitigate their damages and would have called expert evidence on the issue of damages.
[6] The Plaintiffs rely on the case of Meridian Credit Union Ltd. v. Baig, 2016 ONCA 150, 394 D.L.R. (4th) 601, at para. 17 where LaForme J.A. commented that it is permissible for a motion judge to grant judgment in favour of the responding party even in the absence of a cross-motion for such relief.
[7] While I am concerned about the potential prejudice claimed by the Defendants, I am satisfied that it is fair, proportionate, and appropriate to hear all the issues on their merits. Given my ultimate conclusion that summary judgment should be granted in favour of the Defendants, the inability of the Defendants to present other evidence relating to damages is of no moment.
B. THE ADMISSIBILITY OF CERTAIN PORTIONS OF THE AFFIDAVIT OF PAUL SUD
[8] Under rule 20.02(1), an affidavit for use on a summary judgment motion may be made on the basis of information and belief as provided in rule 39.01(4). Under rule 39.01(4), evidence otherwise inadmissible as hearsay is permitted if the source of the information and the fact of the belief are specified in the affidavit. The Plaintiffs submit that three paragraphs of Mr. Paul Sud’s affidavit contravene this provision and should be struck.
[9] I reproduce the impugned paragraphs below. To give these paragraphs in the affidavit some explanatory context, “Camlane” refers to Camlane Holdings Inc. which is the holding company that owns the neighbouring lands which landlock the Defendants’ properties that they wish to develop and build on. “GDI Lands” refers to the same surrounding lands held by a sub-group company of Camlane. “CSA” refers to the Cost Sharing Agreement that was being negotiated between 739 and Camlane. The development of both the lands held by 739 and Camlane required the construction of various municipal services and common facilities including the construction of a water distribution system, sanitary sewers, storm sewers, utilities, roads, sidewalks, grading, etc. (henceforth the “works”). The completion of the works would be of benefit to both the 739 and Camlane lands. The development of the 739 lands was also dependent on the construction of certain components of the works within Camlane’s lands, given that the 739 lands were landlocked by them. In explaining the efforts made by Mr. Paul Sud to get a CSA completed, paragraphs 20, 21 and 23 are impugned by the Plaintiffs. I will set them out in full in addition to paragraph 22 as they are also significant to the merits of this motion:
During late 2016 and throughout 2017, Camlane became hesitant and non-responsive to our efforts to negotiate a CSA. It is my knowledge, information and belief that Camlane’s hesitance arose as a result of the unknown and/or unquantifiable nature of certain costs associated with the works at the time of negotiation of the CSA. In particular, an important component of the development of both the GDI Lands and 739 Lands included the construction of a Stormwater Management Pond, the total cost of which was expected to be significant but was not quantified until recently in 2018. It is my knowledge, information and belief that Camlane was unwilling to commit to a CSA until the potential costs of the works, including the Stormwater Management Pond, crystallized.
It is my further knowledge, information and belief that Camlane was simply not eager to complete a CSA as it had no reason to be, it being at a different stage in the development of the neighbouring land than 739 was with the 739 Lands.
During the course of negotiation of the CSA, I made numerous telephone calls to representatives of Camlane in an effort to move the matter forward that were not returned.
It is my knowledge, information and belief that only as recently as Spring/Summer of 2018 did Camlane obtain concrete figures as to the construction costs of the works. In or about March of 2018, I became concerned that Camlane would attempt to register its plan of subdivision without negotiating a CSA with 739. I therefore instructed Mr. Hunter to remind the Town that a CSA was a necessary condition for the release for registration of the draft plan of subdivision of the GDI Lands, which instruction Mr. Hunter carried out on or about March 29, 2018.
[10] It is true that nowhere in these paragraphs are the sources of Mr. Paul Sud’s information and belief set out as required by the rule 39.01(4). Nonetheless, in my view, these paragraphs are still admissible. The Defendants do not rely upon them for a hearsay purpose; that is, for the truth of their assertion. Rather, these statements are relevant to Mr. Paul Sud’s beliefs and provide the factual context for the actions he took or did not take at the material times. Regardless of the true reasons behind Camlane’s acts or inaction which delayed the successful completion of the CSA, it is Mr. Paul Sud’s knowledge and belief that shapes the contours of the legal analysis pertaining to the good faith and honest performance of the contract. Put another way, even if Camlane had done none of what it may have told or led Mr. Paul Sud to believe, these paragraphs are still admissible for the limited purpose argued for by the Defendants.
[11] All that said, I should note that in Mr. Paul Sud’s cross-examination, the sources of his information and belief were revealed. During these times, Mr. Paul Sud was speaking with: Mr. Warren Melbourne, Camlane’s project manager; Mr. Menor Philipupillai (henceforth “Mr. Phillips” as Mr. Sud referred to him as), the engineer retained by Camlane who was in charge of the job; and Camlane’s construction manager, the name of whom Mr. Sud could not recall. So while the Defendants do not press for the admission of the paragraphs for their truth, the fact that Mr. Sud has identified the sources of his information increases the probative value of that evidence.
II. OVERVIEW OF THE FACTS
[12] In 2015, 739 and the Town of Georgina entered into a sub-division agreement for the relevant lands which were owned by 739. 739 intended to develop these lands for the construction of residential homes. 739 worked in co-operation with Park Avenue, the builder and vendor of the homes.
[13] Between February 13, 2016 and April 4, 2016, Park Avenue entered into the five pre-construction Agreements. The Agreements were subject to Early Termination Condition #1 that made the Agreements conditional on Park Avenue obtaining, amongst other things, site plan agreements, density agreements, shared facilities agreements, or other development agreements with approving authorities or nearby landowners and/or development approvals required from an approving authority. The Agreements included deadlines for obtaining these agreements and approvals. August 15, 2016 or October 15, 2016, were the respective deadlines depending on the Agreement signed by each Plaintiff. 739 did not enter into any contracts with the Plaintiffs.
[14] Camlane is a holding company that owns a number of land development companies involved in the development of lands neighbouring the 739 lands. At about the same time that 739 began development of their lands, Camlane proposed to subdivide and develop their neighbouring lands to build homes. The development of both 739 and Camlane’s lands required the construction of the works. The works required to be completed were set out in a schedule of the subdivision agreement signed with Georgina.
[15] Given 739’s dependence on certain components of the works being completed within Camlane’s neighbouring lands, as well as the shared benefit of the works’ completion, 739 and Camlane had to come to a CSA in order to share the cost of completing the works. Pursuant to the subdivision agreement that 739 had with Georgina, a draft plan for the subdivision of 739 lands could not be released for registration until a CSA ensuring the completion of the works was in place.
[16] On or about October 6, 2015, Mr. Paul Sud had a meeting with Mr. Warren Melbourne, the project manager for the Camlane Company developing the neighbouring lands. Also at the meeting was Mr. Phillips of Schaeffers Consulting Engineers, who had been retained by Camlane. During that meeting regarding the development of their lands, the parties discussed the CSA between 739 and Camlane.
[17] On October 9, 2015, Mr. Phillips sent revised cost sharing schedules for the lands to Mr. Melbourne and Mr. Paul Sud.
[18] On October 22, 2015, Mr. Melbourne sent Mr. Paul Sud an email saying that their template CSA was a 70+ page document. Camlane did not want to go that route. He suggested 739’s lawyer draft a one or two page CSA that confirmed their engineer’s calculations.
[19] On October 23, 2015, Mr. Phillips sent further revised calculations. Mr. Paul Sud retained a lawyer, Mr. Gordon Hunter, to facilitate the negotiation and drafting of the CSA.
[20] On October 30, 2015, Mr. Paul Sud forwarded the current estimates to Mr. Hunter.
[21] In November of 2015, there were a number of emails between Mr. Paul Sud and Mr. Hunter regarding the CSA. Mr. Hunter drafted some proposed CSAs for comment and review by 739. On November 16, 2015, Mr. Hunter forwarded a draft CSA for review and discussion. He commented that it was a reasonably standard form but it did not deal with a number of timing issues nor indicate when the final costs were to be determined. The same day, Mr. Paul Sud replied and provided Mr. Hunter with further information. Mr. Sud stated, “[t]iming may be an issue because Metrus [a Camlane Company] will be working on their own schedule for their own reasons. I think the only thing we can ask is that they provide service connections as soon as reasonably possible.” Over the next few days, Mr. Paul Sud and Mr. Hunter wrote emails to each other outlining concerns 739 had and exchanged a revised CSA. One concern Mr. Paul Sud expressed was that he did not want the Camlane Company creating a block that would prevent 739 from accessing their lands. One of the changes to the CSA was an addition stating that the full payment to be made was $342,954.00.
[22] On January 27, 2016, Mr. Hunter sent an email to Mr. Paul Sud with another revised CSA that incorporated the changes that were discussed at a meeting held on December 17, 2015. Mr. Hunter noted the issues that were discussed and how the revised CSA reflected them.
[23] On February 8, 2016, Mr. Hunter asked Mr. Paul Sud if he had received the January 27, 2016 email and attachment.
[24] On February 11, 2016, Mr. Paul Sud forwarded this draft CSA to Mr. Melbourne for his review. Mr. Sud asked for information about the relevant parties and the correct legal names for the CSA. He stated that he had copied his solicitor, Mr. Hunter, and asked for Camlane’s legal contact.
[25] On May 11, 2016, Mr. Melbourne sent Mr. Paul Sud an email asking 739’s lawyer to contact their lawyer at the law firm, Bratty’s, about the draft CSA. Mr. Paul Sud testified that Mr. Hunter had prepared an agreement which was given to him and he forwarded this to Mr. Melbourne for their lawyer’s review.
[26] On May 16, 2016, Mr. Hunter forwarded to Mr. Paul Sud a draft CSA that is dated May 16, 2016.
[27] On May 19, 2016, Mr. Paul Sud sent an email to Mr. Hunter providing the draft plan for the Camlane lands which showed the parties involved in the lands. Mr. Sud said he trusted that this will help with the agreement. Mr. Hunter sent back a revised CSA with reference to the schedules showing the Community Land and Community Works. Mr. Hunter wrote that other companies needed to be added and that Mr. Sud had forgotten to attach the draft plan in his email.
[28] On May 25, 2016, Mr. Paul Sud sent the draft plan by email. On that day, Mr. Hunter then sent back the revised CSA to Mr. Sud.
[29] There is in the record, Exhibit F to Mr. Paul Sud’s affidavit, a partial email that appears dated May 28, 2016, where Mr. Sud responds to Mr. Hunter “Ok thanks I will send it to DG Group. Can we proceed with the Easement and have the survey…” DG Group is a relevant Camlane Company.
[30] On or about June 21, 2016, Mr. Melbourne emailed Mr. Paul Sud advising that the draft CSA was being reviewed by Ms. Helen Mihalidi of the law firm Bratty’s and that he was hoping to have feedback soon.
[31] On August 5, 2016, Ms. Helen Mihalidi of Bratty’s emailed Mr. Melbourne the draft CSA with handwritten comments on it made by her. She wrote:
“As you likely know, it is a very “bare bones” agreement which needs many additional clarifications/details/provisions to round it out.
Please let me know if you want me to update the attached agreement as best I can with such additional proposed provisions, or if you want me to prepare a more fulsome agreement that contains more appropriate structure and provisions (please note, given the limited parties and scope of works, I would propose to use a shorter, more straight-forward form that [sic] the usual CSA utilized for the larger cost sharing groups).”
[32] On August 8, 2016, Mr. Melbourne wrote to Mr. Paul Sud: “We finally received comments back from our solicitor (see attached). I will contact you further to discuss. Thanks.”
[33] In his affidavit, Mr. Paul Sud avers that from November, 2015, to the swearing of his affidavit, that he had various verbal communications with Camlane in an effort to negotiate the CSA.
[34] Mr. Ashley Sud testified that on his instruction, Melody Brisson, an employee of Park Avenue, sent an email on October 7, 2016, to the real estate broker of one of the Plaintiffs, namely, Mr. Ning Li. This email stated that due to the delay in development, Park Avenue had not been able to satisfy the Early Termination Condition regarding “site plan agreements, density agreements, shared facilities agreements or other development agreements with Approving Authorities or nearby landowners, and/or any development Approval required from an Approving Authority.” Ms. Brisson asked for an extension of the conditional deadline and tentative closing date. Mr. Ning Li agreed to extend the deadline from August 15, 2016 to November 24, 2017.
[35] On October 7, 2016, the same email was sent by Ms. Brisson to another Plaintiff, Ms. Qing Fei Qiu. She signed the amendments and extended the date to November 24, 2017.
[36] In October, 2016, the same condition in the other Plaintiffs’ Agreements was also extended to November 24, 2017.
[37] On November 14, 2016, Ms. Qui received an email from Ms. Brisson stating that they had recently notified her of the delay in the start of construction. The email goes on to notify her that this also meant there was a delay in the colour selection appointment date that was in the Agreement and that the new date would be approximately six months before the first tentative closing date on the new Tarion Statement of Critical Dates.
[38] On January 20, 2017, Mr. Paul Sud sent an email to Keith MacKinnon of KLM Planning Partners Inc., a planner retained by both 739 and Camlane, enclosing the draft CSA that had already been prepared. Mr. Sud states that it was only two pages other than the property description and that it was very simple.
[39] On February 17, 2017, Ms. Brisson wrote an email to Ms. Qui’s real estate agent. The email states:
Park Avenue had some very disappointing news.
We are experiencing some drastic delays in the servicing of the land known as the Queensway in Keswick. We thought the developers would have the roads in by now and that we’d be building homes.
Unfortunately, this is not the case. Because of this situation, we will not be able to meet the early termination condition set out in the agreement of purchase and sale. At this time, there is no time frame as to when we will be able to begin construction.
As a result, we have to terminate the agreements of purchase and sale for the lot mentioned above. We will immediately refund the deposit upon the signing of the attached mutual releases. Please note the irrevocable date on the release form as Friday, February 24, 2017.
If you have any questions, please contact the office or Ashley directly.
Ms. Yang, another Plaintiff, was also advised by her real estate agent in February, 2017, that her agent received an email from Park Avenue about the termination of the Agreements.
[40] On March 10, 2017, Mr. Jayson Schwartz, the lawyer for Park Avenue, wrote letters to each of the Plaintiffs. In his letters, Mr. Schwartz informed the Plaintiffs that the conditions relating to early termination were not satisfied. In the letters, Mr. Schwartz wrote that because of the failure to satisfy these conditions, the Agreement had become void on August 15, 2016 or October 15, 2016, (depending on the particular Agreement of each individual Plaintiff). Mr. Schwartz advised that despite Park Avenue’s best efforts to obtain compliance with the pre-conditions, it was unable to do so. A cheque for the deposit paid by each Plaintiff was enclosed in the letter.
[41] On March 29, 2017, Mr. Paul Sud wrote an email to Mr. Hunter. He stated that he has received a draft CSA from the planner who represents both 739 and DG Group. Mr. Sud asked Mr. Hunter to take a look at it to see if there were any problems. Mr. Sud wrote that it is certainly simplified; however, he saw a problem with the value to be determined by an appraisal. He stated that he will speak to them about the issue.
[42] Mr. Paul Sud avers in his affidavit that during the course of the negotiation of the CSA he made numerous telephone calls to Camlane’s representatives in an effort to move the matter forward and the calls were not returned.
[43] On May 10, 2017, Mr. Paul Sud forwarded to Mr. MacKinnon a copy of Mr. Phillips email and he advised Mr. McKinnon that these were the final numbers that Mr. Melbourne and he had asked Schaeffers Engineering to complete. Mr. Sud stated that the only thing that needed to be adjusted was the land value that they had agreed would be the value for park land accepted by the Town.
[44] November 24, 2017, was the deadline for the amended Early Termination Condition in the Agreements that involved the Plaintiffs. This deadline passed.
[45] On January 4, 2018, Mr. Paul Sud sent an email to Darren Dunphy, a Development Engineering Technologist for the Town of Georgina, asking Mr. Dunphy if he had heard anything about the DG registration as 739 was looking to register as soon as possible if it could be done.
[46] On January 5, 2018, it appears Mr. Dunphy forwarded to Mr. Paul Sud an email from Mr. Melbourne wishing a Happy New Year to Mr. Dunphy and advising that Camlane was currently chasing its last clearance from the Conversation Authority after which they would be in a position to register. Mr. Melbourne said that this would occur sometime in Q1 of 2018.
[47] After receiving this email, on January 5, 2018, Mr. Paul Sud sent an email to Mr. Melbourne requesting a meeting for the purpose of completing the CSA to satisfy the draft condition for registration. Mr. Sud asked if it was possible to do so before January 14.
[48] The day after, Mr. Melbourne responded and suggested they get together in the first quarter of 2018. Mr. Paul Sud testified that Mr. Melbourne wanted to register his plan and at this point in time, Mr. Melbourne became interested in the CSA again as it was now in his interest to meet. Mr. Paul Sud further testified that since Mr. Melbourne had reached out to him, Mr. Sud took advantage of this opportunity to ask for a meeting about the CSA.
[49] On May 3, 2018, Mr. MacKinnon wrote to “Gents”. He stated further to their meeting that afternoon, he had track changed the CSA. He asked the recipients to let him know if there were to be further changes or comments. He stated, “I can finalize it once we have the value that needs to be included as well. Thanks.”
[50] On May 10, 2018, Mr. Paul Sud wrote to Mr. Hunter advising that he had a meeting with Camlane. He forwarded the agreement of Mr. MacKinnon and advised that they seem to be happy with it and Mr. Sud would call Mr. Hunter to discuss.
[51] On July 10, 2018, the CSA was signed. The parties agreed that the amount owing from 739 to Camlane was $483,889. This would be paid at the time of 739 registering its draft plan of subdivision. The Town of Georgina would be advised that both parties have entered into a CSA and that there were no further cost sharing obligations to either party.
III. ANALYSIS
A. PARK AVENUE DID NOT BREACH ITS DUTY OF GOOD FAITH AND HONEST PERFORMANCE
[52] The fundamental issue on this summary judgment motion is whether Park Avenue breached its duty of good faith and honest performance in its efforts to satisfy the condition in the Agreements to obtain the necessary agreements and approvals for the performance of the contracts; specifically, the CSA. This good faith and honest performance is both a common law requirement and a specific provision of the Agreements which mandates a similar obligation on the part of Park Avenue.
[53] To briefly re-state the relevant portions of the Agreements, clause 6 deals with the Early Termination Conditions. Early Termination Condition #1 provides that Park Avenue could terminate if it could not obtain: “site plan agreements, density agreements, shared facilities agreements or other development agreements with Approving Authorities or nearby landowners, and/or any development Approvals required from an Approving Authority.” The Approving Authority is defined to be the Town of Georgina. This is the only Early Termination Condition listed in the Agreements. The CSA was one such agreement that was required by the Town of Georgina. It is uncontroversial that this condition is a true condition precedent depending on an external condition upon which the existence of the obligation depends: Zhilka v. Turney, [1959] SCR 578, at para. 11.
[54] The original date by which Early Termination Condition #1 was to be satisfied was either August 15, 2016 or October 15, 2016 depending on the Plaintiff. This was extended by an amendment to November 24, 2017.
[55] According to the Agreements, this Early Termination Condition #1 was for the benefit of both purchaser and vendor and could not be waived by either purchaser or vendor.
[56] Another relevant provision of the Agreements is clause 6(f) which requires the vendor to take all commercially reasonable steps within its power to satisfy the Early Termination Condition. In making this assessment, an objective standard must be applied.
[57] In terms of the law that must be applied, the seminal case of Bhasin v. Hrynew, [2014] 3 S.C.R. 494 provides doctrinal clarity to the organizing principle of the good faith performance of contracts. As Cromwell J. wrote, this principle is “simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily” (at para. 63). In carrying out the contract, a party should have appropriate regard to the legitimate contractual interests of the contracting partner. While the degree of that regard will depend upon context, it means no more than a party will not undermine those interests in bad faith. This is contrasted to the higher standards required of a fiduciary. From this organizing principle, more specific rules are derived and the weight given to this standard of good faith will again depend on the contextual situation. While the existing doctrines manifesting this principle were maintained, Cromwell J. concluded that the list was not closed and was open for incremental development.
[58] A specific manifestation of this organizing principle which is relevant to this case is reflected in the law surrounding contracts where the parties must cooperate in order to achieve the objects of the contract. In Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072 the parties to a real estate transaction had not specified who in the purchase-sale agreement was responsible to obtain planning permission for a subdivision of the property. By law, only the vendor could. Dickson J. (as he then was) held that the vendor was under a duty to act in good faith and to take all reasonable steps to secure the permission and complete the sale. Such is the case before me. Not only does this common law principle apply, but clause 6(f) also makes it explicit.
[59] That said, there are limits to this notion of good faith as explained by Cromwell J. in Bhasin at para. 70:
The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another — even intentionally — in the legitimate pursuit of economic self-interest: A.I. Enterprises Ltd. v. Bram Enterprises Ltd., [2014] 1 S.C.R. 177, at para. 31. Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency: Bank of America Canada v. Mutual Trust Co., [2002] 2 S.C.R. 601, at para. 31. The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or "palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.
[60] Finally, Cromwell J. created a new common law duty of honesty in contractual performance under the organizing principle of good faith. He states (at para. 73):
… I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one's contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step.
[61] Moving from this summary exposition of the law to the facts of this case, let me briefly address the Plaintiffs’ first argument on this issue. The Plaintiffs argue that Park Avenue did nothing at all and took no steps to comply with Early Termination Condition #1. Park Avenue responds that it did as it relied upon the developer, 739, the only legal entity that could negotiate the CSA and register the subdivision plan so that the homes could be built. It is submitted in response that there was little or nothing that Park Avenue itself could do.
[62] The evidence on this point is straightforward. Mr. Ashley Sud averred that Park Avenue and 739 worked in cooperation with each other, each performing their respective and distinct role as builder and developer. Mr. Ashley Sud testified that in and around the time, he was aware that his father was trying to obtain the CSA and there were multiple communications back and forth on many occasions. He and his father spoke on a weekly basis in passing about these matters. Mr. Ashley Sud was not sure of the exact details or dates but he was aware of the communications. Mr. Ashley Sud knew Mr. Paul Sud was trying to obtain a CSA but was not able to. Mr. Ashley Sud did ask his father about it from time to time. Mr. Ashley Sud testified that his father knew there were deadlines to meet and that was why they chose to extend the condition date. Mr. Ashley Sud expected Mr. Paul Sud to work on getting the CSA until it was obtained.
[63] Mr. Paul Sud testified that 739 and Park Avenue had an oral agreement. Mr. Paul Sud testified that he told Park Avenue about his negotiations in relation to the CSA.
[64] I have no reason to doubt their evidence and I accept it on this issue.
[65] In my view, I must be mindful of the realities of the situation when assessing the Plaintiffs’ submissions that Park Avenue did nothing. To evaluate the question of whether Park Avenue discharged its obligations of good faith and honest performance of the Agreements and whether it took all commercially reasonable steps, I must take into account the actions taken by 739. It would be artificial to do otherwise. On the facts of this case, Park Avenue effectively delegated to 739 the responsibility to negotiate and complete the CSA. This reliance by Park Avenue was reasonable in all the circumstances. In doing so, it took all commercially reasonable steps that it could to obtain the CSA. The companies were run by father and son. The two communicated regularly. They were separate legal entities but cooperated in their attempt to get the homes built. It was 739 that had the relationship with Camlane that would most effectively lead to the completion of the CSA. Thus, this argument of the Plaintiffs is rejected.
[66] This leads to the broader question of whether Park Avenue and 739’s actions in securing the CSA met the required legal threshold to discharge Park Avenue’s duty of good faith and honest performance. After due consideration, I find that their actions did.
[67] There is no question that 739 made significant bona fide efforts to obtain the CSA. Mr. Paul Sud retained Mr. Hunter, a lawyer, and Mr. MacKinnon, a planner. Draft CSA’s were prepared and exchanged. Meetings were conducted. Communications took place between 739 and Camlane.
[68] That said, I appreciate that there were periods of time where there seemed to have been little activity in trying to secure the CSA that is substantiated by emails or other documentation. The effect of this lack of written contemporaneous records depends upon the assessment of Mr. Paul Sud’s explanation for this. Essentially, Mr. Sud’s evidence is that he tried his best but Camlane was not interested in finalizing the CSA in a timely fashion. Camlane was working on its own timeline. It wanted to have some certainty about the costs of the works, which it did not have. In addition, Mr. Paul Sud testified that he made numerous calls but they were not returned.
[69] Before specifically evaluating Mr. Paul Sud’s testimony, I wish to re-emphasize what I said when I made my earlier ruling regarding the Plaintiffs’ objections to the impugned hearsay portions of his affidavit. In this part of my analysis, I am not finding that Camlane did in fact delay the finalization of the CSA for the reasons Mr. Sud set out. Rather, the question is whether this information and communication lead to an honest good faith belief by Mr. Sud that this was Camlane’s position at the relevant times and whether his belief was reasonable. It is in this context that 739 and Park Avenue’s actions must be viewed.
[70] Mr. Paul Sud averred that he came to the view that Camlane became hesitant and non-responsive in negotiating a CSA. In cross-examination, Mr. Sud testified that he was dealing with Mr. Phillips, an engineer with Shaeffers Engineering that was working for Camlane on the project. Mr. Paul Sud testified that at the point when Camlane became hesitant, he was dealing with Mr. Melbourne and Mr. Phillips. Mr. Phillips became aware that the costs for the construction project as it was proceeding were higher than anticipated. Mr. Sud testified he was told this. In Mr. Paul Sud’s eyes, Mr. Phillips was an authorized spokesman for Camlane for what he was instructed to do. He testified that he and Mr. Melbourne and Mr. Phillips met on a couple of occasions. In his presence, Mr. Melbourne give clear instructions to Mr. Phillips to make sure that all of the costs, including the increased and projected increased costs, were to be continuously added to the calculations so that 739 would pay their proportionate share.
[71] Mr. Paul Sud testified that he had clear conversations with Mr. Melbourne not to proceed with the CSA in the format that Mr. Hunter had provided. Mr. Melbourne said that he would deal directly with Mr. Sud in a one page agreement, more or less, with Mr. Keith MacKinnon, the planner. Camlane did not want to enter into a complicated CSA. In explaining the lack of involvement of Mr. Hunter as time went on, Mr. Sud explained that in his eyes there was no longer any reason to have the lawyers spend any more time or money on the CSA as Mr. Melbourne gave Mr. Sud clear direction he would not do that. After receiving the marked up copies from Mr. Melbourne, Mr. Sud testified that he never sent emails but had telephone conversations with Mr. Melbourne. During these conversations, they talked about the CSA.
[72] Let me point to a passage of Mr. Paul Sud’s cross-examination, where Mr. Sud testified that it was not just the communication with the engineer that led him to his belief that Camlane was disinterested in negotiating a CSA:
A….No, it wasn’t just with the communication with the engineer. It was obvious to me that they were proceeding with their development, and they didn’t have the approval from the Conservation Authority. I knew that. And I knew that their costs were going up, and they had no reason to talk to me at that point. …Well, the impression or the understanding that I have is from Camlane’s actions, and from what they said in terms of their timing. They did make me aware that the pond costs were much higher than were anticipated. They did make me aware that their construction schedule was significantly behind. And they did make me aware that they wanted a cost share but a very simple one, and when they get around to it, they would let me know.
[73] Mr. Paul Sud admitted that he had no documents from Camlane supporting his understanding. Camlane would not provide any to him. However, Mr. Sud testified that he had spoken with Mr. Melbourne, Mr. Phillips and their construction manager whose name he could not remember. The construction manager met with Mr. Sud on site and explained they were behind in their construction schedule. Mr. Sud was unable to specify the exact times these conversations took place.
[74] Mr. Sud testified that he made numerous phone calls. However, he did not log these calls or produce emails about these calls that were not returned.
[75] Looking at Mr. Paul Sud’s evidence on this issue, in the context of the evidence as a whole, I find Mr. Sud to be a credible and reliable witness. He was not impeached in cross-examination. His evidence was consistent and straightforward. While he cannot recall all the details, this is understandable given the nature of the events and the passage of time. However, the core of his recollections remain reliable. The CSA was a significant issue. This is something that would be memorable. It could delay their project and terminate the Agreements Park Avenue had made. Mr. Sud’s testimony further makes sense to me in the context of the evidence presented. Put another way, his testimony on this is plausible. The history of what happened further supports his testimony. Mr. Sud’s testimony is also supported by various email exchanges during the relevant periods of time that note the issues of costs, delay, and Camlane being on their own schedule. Another supporting piece of evidence is that the CSA that was finally signed on July 10, 2018, was for a cost significantly higher than the cost initially proposed. The reluctance Camlane had in finalizing the CSA according to Mr. Sud, was the uncertainty of the final costs. The initial CSA circulated to Camlane had the price fixed at about $350,000. The final number that was agreed to was $480,000. In Mr. Paul Sud’s view, this was significantly higher. I accept that.
[76] Stripped to its essence, I find that Mr. Paul Sud made reasonable efforts to negotiate and secure a CSA, this got delayed for reasons out of his control, and a CSA was signed once Camlane felt it was in a position to do so.
[77] Let me deal more specifically with four arguments made by the Plaintiffs. First, the Plaintiffs argue that when a comparison is made, there is not much difference in the original CSA circulated and the final one signed. This, they argue, shows that Mr. Sud’s explanation for the delay is not credible. However, in my view, while many of the provisions are identical, the cost is the one significant difference. I accept Mr. Sud’s testimony that this was an important factor in negotiating a CSA and an impediment in concluding the CSA. This makes sense to me. The determination of the shared costs is indeed the raison d’etre of such an agreement.
[78] Secondly, I appreciate that the calls Mr. Sud mentioned which he made to Camlane, were not logged or otherwise documented. I am aware that on the grand scheme of things, there were not many emails regarding the CSA. However, this does not detract from my acceptance of Mr. Sud’s testimony. Given the nature of what was going on at the time, there was no reason to log telephone calls or confirm every conversation by email or correspondence. These were two developers whose principals and employees were working literally alongside of each other and with each other in trying to get their developments built. There is no reason why they should have “papered” their exchanges with each other regarding the CSA.
[79] Thirdly, the fact that there is no confirmatory evidence from Camlane pertaining to its attitude towards the CSA negotiations does not affect this finding. As I have already stated, regardless of what the actual state of affairs was taking place in Camlane’s development, it was Mr. Paul Sud’s understanding that was important. No adverse inference should be drawn from the fact there is no evidence forthcoming from Camlane. While I appreciate that the Defendants could have summoned someone from Camlane, in the circumstances of this case, this was neither necessary nor would it have been proportionate given the issues and what is at stake.
[80] There is a final point to address in terms of dealing with Mr. Sud’s credibility. The Plaintiffs argue that 739 stopped attempting to obtain the CSA as an excuse to terminate the Agreements because if 739 could get out of these Agreements, they could have resold the homes at a higher price given the rising housing market. I reject the Plaintiffs’ arguments on this. Mr. Ashley Sud believed the market conditions at the time were up and down. Mr. Ashley Sud further testified that the market conditions at the time of the termination of the Agreements were not particularly relevant as the project was not ready to have houses constructed. He testified that the main objective was to build and sell houses based upon the Agreements. As of the dates when the affidavits were sworn, Park Avenue had not resold the five lots to other purchasers or constructed houses on them. Mr. Ashley Sud testified that Park Avenue has not profited by the termination of the Agreements. I accept this testimony. There is no reason to reject it. Thus, the Plaintiffs’ theory regarding any ill-motive to terminate, remains that; just a theory. On this point, I also refer to Cromwell J.’s caution in Bhasin v. Hrynew that the good faith principle should not be used to overly scrutinize the motives of the contracting parties (para. 70).
[81] In the final analysis, I accept Mr. Paul Sud’s testimony about what happened. I can readily see how Mr. Sud could reasonably have come to the view that Camlane was reluctant to finalize the CSA based upon the various conversations he had with these individuals and what he could observe taking place.
[82] Taking these findings of fact into account, it remains to be determined objectively whether the Defendants performed the Agreements in good faith and took all commercially reasonable steps to fulfill the Agreements.
[83] In assessing this question, I must address the issue of early termination. The decision to terminate on the basis of the Early Termination Condition #1 was made and communicated to the Plaintiffs on March 10, 2017. The deadline was not until November 24, 2017. The obvious question raised is whether this was permitted by the Agreements. The second question that needs to be answered is whether in light of this early termination, Park Avenue in good faith took all commercially reasonable steps to secure the CSA.
[84] With respect to the first question I find that the Early Termination Condition permitted such a notice being given before November 24, 2017. In my opinion, this is a reasonable interpretation of the Agreements and consistent with the intentions of the parties as evidenced by the wording of the contracts. To hold otherwise would not make commercial sense. For instance, if a necessary approval for the building of the homes was flat out rejected by the Approving Authority early on in the life of the Agreements, it would be reasonably expected that the Agreements would be terminated soon thereafter rather than there being a contractual requirement to wait until the expiry of the deadline which could be months later. In such a circumstance, the purchasers would expect that their deposits would be forthwith returned and the vendor would expect to be freed of their obligations once it became clear the homes could not be built.
[85] Further, clause 6(g)(iii) provides that if no notice is given, the Early Termination Condition is deemed not satisfied and the Agreement is terminated. Thus, given this automatic termination without notice once the deadline expired, there would be no need of clause 6(g)(ii) if the Agreement did not permit the vendor to give notice prior to the expiry of the deadline.
[86] While I have concluded that the Agreements permitted this, the fact that the Early Termination Condition was exercised months before the November deadline must be a factor in determining whether Park Avenue acted in good faith in performing its obligations and whether all commercially reasonable steps had been taken. It is self-evident that if a significant length of time was left before the expiry of the deadline, the failure to take further steps or make further efforts to obtain the CSA could work against Park Avenue’s position on this motion.
[87] First of all, I find that Mr. Paul Sud’s conclusions about Camlane’s reluctance were reasonable and based upon credible sources of information. The individuals that Mr. Sud spoke to and was dealing with were not mere workers on site. Regardless of whether these individuals were specifically authorized by the corporate entity, Camlane, to speak on its behalf on each specific issue, they were higher-up individuals who reasonably would have knowledge of the progress of the project and would reasonably be perceived to have authority to comment on and deal with matters within their area of responsibility.
[88] Moving on, I have carefully considered the context of what was happening. In this case, the development of 739’s lands was dependent upon securing Camlane’s cooperation. Being landlocked, 739 could not build the basic infrastructure such as roads for Park Avenue to even begin construction of the homes. Thus, the reasonable steps taken by Park Avenue and 739 has to be assessed in light of the fact that they were dependent upon an external event that they had no control over. Looking at the evidence, not only was the CSA not signed despite 739’s bona fide and reasonable efforts to secure one, but also the likelihood of getting one signed before the deadline would not appear strong given the history of Camlane’s reluctance and Mr. Paul Sud’s reasonable belief in the reasons why. This reasonable belief was that Camlane was acting in a self-interested manner by delaying the CSA until they were certain of the costs of building the works and on a time schedule of their own choosing. In short, the circumstances that confronted Park Avenue and 739 inspired little confidence that they could get this done by the deadline of November 24, 2017.
[89] When the whole history of 739 and Park Avenue’s conduct regarding the CSA is considered, I find that they took all reasonable commercial steps to secure the CSA. The Defendants did not stand idly by. 739 retained counsel and a planner to help. Draft CSAs were created and exchanged. They were dependent on Camlane. On the evidence, there was no realistic way 739 and Park Avenue could force or more effectively pressure Camlane to come to an agreement. Park Avenue and 739 had a close geographic relationship with Camlane. In light of how dependent they were on Camlane not only for negotiating the CSA but likely for other practical development matters, it made commercial sense that they would be loathed to antagonize Camlane by aggressively trying to force completion of the CSA, even if there was a way they could.
[90] I recognize that there always could have been more phone calls made or more letters or emails sent to Camlane. However, perfection is not required to meet the good faith standard or the contractual requirement that all commercially reasonable steps be taken: Marleau v. Savage (2000), 2000 CarswellOnt 2226 (Ont. S.C.), at paras. 45-61. When it comes to the Early Termination Condition #1, I find, proven on a balance of probabilities, that Park Avenue performed the Agreements in good faith and took all commercially reasonable steps to fulfill it.
[91] Before leaving this issue, I need to address the letter written on March 10, 2017 to the Plaintiffs by Park Avenue’s lawyer. Mr. Schwarz stated in his letter to the Plaintiffs that the Early Termination Condition date had already passed. It obviously had not since the Agreements had been amended on consent. No evidence was led from Mr. Schwarz to explain this discrepancy. However, given how all the affected parties would have known that the date had been extended and given the transparency of the process leading to the amendment, the only reasonable inference is that this was a simple error on the part of the solicitor. Regardless of this mistake, my analysis remains unchanged. Given that I have found that Park Avenue took all commercially reasonable steps and discharged its obligation of good faith performance even given its early termination of the Agreements, it is essentially immaterial that Mr. Schwarz made this error in his letter to the Plaintiffs.
B. FAILURE TO PROVIDE REASONABLE DETAILS AND BACK UP MATERIALS
[92] Clause 6(g)(ii) provides that the vendor shall provide reasonable details and backup materials along with written notice that the Early Termination Condition had not been satisfied. The Plaintiffs submit that Park Avenue breached this term of the contract by not providing reasonable details and backup materials.
[93] Mr. Ashley Sud gave evidence on this issue. Mr. Ashley Sud testified that he believed through Mr. Schwarz’s letter that he provided a reasonable explanation and this represented the back-up materials. While he agreed he did not give any supporting materials in addition to the letter, the site, which was simply a field with no roads, spoke for itself. He further testified that he and the purchasers openly discussed the responsibilities of the developer including the building of roads. In Mr. Sud’s view, the letter referred back to the Agreements and the conditions that needed to be fulfilled. Given the totality of the known circumstances, including the lack of roads, it was obvious that the conditions were not met and he could not fulfill the Agreements. Mr. Sud testified that he could not even get a building permit given that the CSA was not signed, services were not in, and the roads were not complete.
[94] In my view, taking a pragmatic approach to this, looking at the whole of the circumstances including the emails sent by Ms. Brisson, Mr. Schwartz’s letter, the Agreements, and the development in the visible state of being vacant fields, the requirements of the notice were met. Sufficient detail and materials were provided to meet the letter and spirit of this provision.
[95] Alternatively, assuming that the notice requirement was not met given the lack of reasonable detail and materials accompanying the written notice, clause 6(g)(iii) provides that where no notice is given the condition is deemed not satisfied and the purchase agreement is terminated. Given that I have found that Park Avenue acted in good faith and took all reasonable commercial steps, once the date of November 24, 2017 passed, the Agreements would have terminated regardless of whether proper notice was given or not. Thus, even if there was a breach of this condition of the contract, no damages were suffered by the Plaintiffs. The Plaintiffs’ financial position would be no different than if the contract was not breached in this way.
C. HONEST PERFORMANCE OF THE CONTRACT
[96] The Plaintiffs submit a number of alleged misleading of the Plaintiffs by Park Avenue. I do not need to address most of them as they simply duplicate some of the arguments already raised and rejected above. Other allegations do not relate to the performance of the contract but rather relate to litigation matters after the action was commenced.
[97] The one issue that needs further analysis is the notice to terminate given in the letter of Mr. Schwarz. It was clearly misleading. However, in terms of honest performance of the contractual obligation found in clause 6(g)(iii), I find that Park Avenue has not ran afoul of this.
[98] They provided the essential reason for early termination: the inability to obtain the needed approvals and agreements. There was no misleading of the Plaintiffs about matters directly linked to the performance of the contract. While more details and specifics could have been provided, there is no unilateral duty to disclose information relevant to the termination under the common law. Here I appreciate that Mr. Schwarz’s letter was wrong and misleading when it came to the date for the Early Termination Condition. However, again, I find that on a balance of probabilities that was simply an error. There was no active dishonesty on the part of Park Avenue. The reason given for the termination was correct. The error made as to the termination date did not alter this state of affairs. The Plaintiffs would have known about the error made regarding the termination date as they had consented to and signed the extension. Thus, the mere fact that more could have been said or that Mr. Schwarz erroneously advised that the termination date had passed does not amount to the high threshold required to establish a breach of the duty of honest performance: CM Callow Inc. v. Zollinger, 2018 ONCA 896, at paras. 15-16.
[99] As argued by the Defendants, from a different perspective, it was more honest of Park Avenue to terminate the agreements, advise the Plaintiffs, and return the deposits in March of 2017, rather than holding onto the Plaintiffs’ deposits and waiting until November 24, 2017, when it knew back in March it would not be able to obtain the CSA in a timely fashion. The doctrine of honest performance could well have permitted Park Avenue to have done the latter to the financial detriment of the Plaintiffs: Bhasin v. Hrynew, at para. 87.
D. DAMAGES
[100] If I am wrong in my conclusions regarding the breach of contract due to Park Avenue’s failure to obtain in good faith or take all reasonable commercial steps to obtain the CSA, I would nonetheless still grant summary judgment in favour of Park Avenue since the Plaintiffs have not proven that they have suffered any loss as a result of the breach. More specifically, if Park Avenue committed an anticipatory repudiation of the Agreements by terminating them on March 10, 2017, about 8.5 months before the November 24, 2017 termination deadline, it is my opinion, the Defendant has proven that Agreements would nevertheless have been terminated for the same reason.
[101] I do not agree with the Plaintiffs that March 10, 2017, should be the date that damages are calculated in accordance with the opinion evidence of their expert, Mr. Tilley. I agree with Park Avenue that the circumstances of this case is analogous to the case of Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), 12 O.R. (3d) 675 (C.A.). That case dealt with the measure of damages where a breach of a contract caused a loss of chance. In that case, the defendant developer had entered an agreement with the plaintiff builder to sell a number of building lots. The agreement was subject to a condition that required the developer to register a plan of subdivision prior to closing. The developer had to pursue and negotiate all necessary agreements diligently and in good faith. Failure to register the plan would lead to the agreement being terminated. The developer had difficulties in getting the plan registered and treated the agreement as null and void. The builder brought an action. The trial judge found that the developer did not use its best efforts to have the plan of subdivision registered by the date specified in the agreement and thus had breached it. The developer had thus denied the builder an opportunity to complete the transaction. The Court of Appeal upheld this finding. It further found that the trial judge was correct in separating the question of causation from the question of loss. However, the Court of Appeal held that the plaintiff builder failed to prove that had the defendant developer discharged its best efforts to secure registration of the plan, there was a reasonable probability of registration of the plan being achieved within the time frame of the contract. On the evidence before the trial judge, the developer devoting the most reasonable of efforts could not have succeeded in registering the plan within the time frame. As a result, the only damages that could be awarded were nominal damages.
[102] Conducting a similar analysis, the English Court of Appeal in Maredelanto Compania Naviera S.A. v. Bergbau-Handel G.m.b.H., [1970] 3 W.L.R. 601 concluded that no loss was suffered by an early repudiation of a shipping contract since it would not have been possible to fulfill the contract as the ship would not have been ready to load and the defendants would have terminated in any event on the date the option was contracted to be exercised.
[103] In this case, assuming that Park Avenue breached the Agreements by not diligently pursuing the CSA and terminating early, I find, based on the evidence, that it was more likely than not that the contract would have in any event been lawfully terminated on November 24, 2017. There is no reasonable probability that the CSA would have been completed in the time remaining. I have come to this conclusion based on all of the circumstances. The prior history showed that despite efforts made by 739 to obtain the CSA, it could not be achieved and the deadline had to be extended once already. I have further considered the efforts made by 739 prior to the termination on March 10, 2017. I have already outlined these above. Importantly, the main impediment in obtaining the CSA was out of the control of Park Avenue and 739. It took Camlane’s cooperation to achieve this. Finally, as in Maredelanto Compania Naviera S.A. v. Bergbau-Handel G.m.b.H., subsequent events demonstrated termination was predestined to have occurred. Camlane only began showing substantial interest again in moving forward with the CSA in 2018. The actual CSA was not signed until July 11, 2018.
[104] For a breach of contract, the plaintiff is only entitled to the true value of rights lost. In the circumstances of this case, given the inevitability of termination on the basis of the Early Termination Condition #1, the Plaintiffs have not lost anything and nothing more than nominal damages would have been awarded.
[105] Thus, even if I am mistaken that a breach of contract has not been established, summary judgment is still warranted.
E. THE NEGLIGENCE CLAIM AGAINST 739
[106] There is no contractual relationship between 739 and the Plaintiffs. Therefore, the Plaintiffs have sued 739 for negligence. In order to make out that claim, 739 must owe the Plaintiffs a duty of care. The Plaintiffs claim that 739 had a responsibility to take all commercially reasonable steps to fulfill its obligation to Park Avenue. As the owner of the land, it is submitted that 739 knew that Park Avenue was selling pre-construction homes on its land and that the conduct of 739 would have an impact on home purchasers. As a result, it is argued that 739 was in a close and direct relationship with the Plaintiffs that gave rise to a prima facie duty of care. Furthermore, with respect to the second part of the Anns/Cooper test, the Plaintiffs contend that there is no policy concern to negate the recognition of this duty of care.
Applying the Anns/Cooper test
[107] The test to determine whether a duty of care exists is set out in Cooper v. Hobart, [2001] 3 S.C.R. 537. This test – referred to as the Anns/Cooper test – need not be conducted if the alleged duty of care has been established in a previous case: Cooper, at para. 36. However, the Plaintiffs acknowledge that there is no established duty of care that applies to the relationship between a developer and a builder’s purchasers, and that the full Anns/Cooper analysis should be employed.
[108] The first stage of the Anns/Cooper test – which gives rise to a prima facie duty of care – requires the plaintiff to establish the elements of proximity and reasonable foreseeability of injury: Cooper, at para. 30. As recently stated by Karakatsanis J. in Rankin (Rankin’s Garage & Sales) v. J.J., [2018] S.C.R. 587, at para. 19, to meet this threshold, the plaintiff “must provide a sufficient factual basis to establish that the harm was a reasonably foreseeable consequence of the defendant’s conduct in the context of a proximate relationship”.
[109] In this case, the Plaintiffs allege that 739 owed a duty to the Plaintiffs to take “all commercially reasonable steps” to satisfy Early Termination Condition #1 in the Agreements between the purchasers and builders. In my view, although the harm is reasonably foreseeable, the Plaintiff has failed to establish proximity. As a result, there is no duty of care.
Stage 1(a): Was the injury to the Plaintiffs reasonably foreseeable?
[110] Broadly speaking, reasonable foreseeability concerns the likelihood of injury arising from the defendant’s negligence: Deloitte & Touche v. Livent Inc. (Receiver of), [2017] 2 S.C.R. 855, at para. 33. Mr. Paul Sud was aware of the Early Termination Condition in the Agreements between the Plaintiffs and Park Avenue. The record also suggests that 739 had an oral agreement with Park Avenue to take reasonable steps to secure development agreements with nearby landowners. In light of this knowledge, I find there is sufficient evidence to establish the foreseeability requirement. It is reasonably foreseeable that if 739 failed to make reasonable efforts to secure the requisite development agreements, the Early Termination Condition of the Agreements would be triggered, and the purchasers could lose the homes they contracted to buy and any purchase appreciation on the properties in question.
Stage 1(b): Were 739 and the purchasers in a proximate relationship?
[111] Foreseeability alone is not enough to establish a prima facie duty of care. The plaintiff must show proximity – in other words, that the plaintiff was in a “close and direct” relationship with the plaintiffs such that it is just to impose a duty of care in the circumstances: Edwards v. Law Society of Upper Canada, [2001] 3 S.C.R. 562, at para. 9. The Supreme Court of Canada has recognized that proximity is the more demanding hurdle for the plaintiff to overcome when discharging his or her burden under the Anns/Cooper framework: Livent, at para. 34.
[112] To determine whether a proximate relationship exists, the court must consider “the expectations of the parties, representations, reliance, and the nature of the property or interest involved”: Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263, at para. 50. As noted in Elliott v. Insurance Crime Prevention Bureau, 2005 NSCA 115, 256 D.L.R. (4th) 674, at para. 70, the existence of a contractual duty to one party does not necessarily exclude a tort duty of care in relation to others. However, allegations of proximity that are based on an “indirect” causal link are less likely to ground a duty of care: Elliott, at para. 76.
[113] As noted above, the Plaintiffs allege that 739 has a duty to take “all commercially reasonable steps” to satisfy Early Termination Condition #1 in each Plaintiffs’ Agreement. In my view, there is an insufficient factual basis to establish the proximity to ground such a duty. In this case, the harm complained of by the Plaintiffs is the failure to build the houses and the unrealized purchase appreciation of the houses in question. The Plaintiffs allege that this loss was caused by 739’s failure to take “all commercially reasonable steps” to secure the requisite development agreements with nearby landowners; this triggered the Early Termination Condition, which led Park Avenue to terminate each Agreement. Put another way, the harm to the Plaintiffs flows from the operation of a termination condition in contracts to which 739 is a non-party.
[114] While the jurisprudence indicates that the absence of a contractual relationship is not dispositive, this rule must be applied to the context of this case. There is no evidence that 739 had any direct dealings with the Plaintiffs. The Plaintiffs have not established that 739 made any representations or undertakings to the Plaintiffs to indicate that they would take “all commercially reasonable steps” to fulfil the condition in each Agreement, as is alleged by the Plaintiffs. Mr. Paul Sud did not tell Mr. Ashley Sud what to tell his clients about the CSA as this was Mr. Ashley Sud’s sole responsibility. He never advised Mr. Ashley Sud what to put into his Agreements. Mr. Paul Sud did not read them. He had no idea what Mr. Ashley Sud told the purchasers about what was going on with the development. Indeed, according to 739, the developer did not know the identity of the purchasers, which is a relevant consideration when assessing proximity: Fraser v. Westminer Canada Ltd, 2003 NSCA 76, 228 D.L.R. (4th) 513, at para. 80. Ultimately, in the absence of any dealings, representations, or undertakings, an insufficient factual basis exists to ground a finding that 739 was in a proximate relationship with the Plaintiffs.
Stage 2: Overriding Residual Policy Considerations
[115] If reasonable foreseeability and proximity are established, the Anns/Cooper test proceeds to the second stage. The court must determine whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care: Cooper, at para. 30. At this stage, the evidentiary burden of showing countervailing policy considerations shifts to the defendant: Childs v. Desormeaux, [2006] 1 S.C.R. 643, at para. 13.
[116] The Defendants have relied upon indeterminate liability. Given my conclusion above, it is not necessary to consider this stage. I find that no duty of care exists between 739, the developer, and the Plaintiffs, the purchasers.
F. CONCLUSION
[117] For these reasons, summary judgment is granted for the Defendants. The Plaintiffs’ action is dismissed.
[118] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages excluding any attachments (any Bill of Costs, Costs Outline, and authorities). The Defendants shall file within 20 days of the release of these reasons. The Plaintiffs shall file within 10 days thereafter. There will be no reply submissions without leave of the court.