Court File and Parties

COURT FILE NO.: CV-18-594560 DATE: 2019-04-08 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

8174709 Canada Inc. Plaintiff – and – CBV Collection Services Ltd. Defendant

Counsel: Wolfgang Kaufman and Daniel Waldman, for the Plaintiff Catherine Francis and Mark Freake, for the Defendants

HEARD: December 6, 2018

REASONS FOR DECISION

NISHIKAWA J.

Overview

[1] The Plaintiff, 8174709 Canada Inc. (“817”), brings a motion for summary judgment against the Defendant, CBV Collection Services Ltd. (“CBV”), for outstanding rent on a commercial lease.

[2] CBV commenced a counterclaim against 817 for breach of an offer to lease, but has not brought a motion for summary judgment.

[3] CBV brings a cross-motion to strike certain portions of the affidavit of 817’s affiant, Mike Zenker, on the basis that the subject matter is protected by settlement privilege.

[4] For the reasons that follow, I find that this is not an appropriate case for disposition by summary judgment. The Plaintiff’s motion for summary judgment is dismissed. The Defendant’s cross-motion is also dismissed, without prejudice to raise the issue of settlement privilege at a later date.

Factual Background

The Parties

[5] 817 is the owner of a high-rise office building at 100 Consilium Place in Scarborough (the “Building”).

[6] CBV is a corporation that carries on business as a collection agency and call centre. CBV is incorporated and has its head office in British Columbia.

The Offer to Lease and Reinstatement Agreement

[7] On February 14, 2017, 817 and CBV entered into an offer to lease approximately 22,608 square feet in the Building (the “Premises”) for a term of 12 years commencing on February 1, 2018 (the “Offer to Lease”). The Offer to Lease was conditional on approval by 817 and CBV’s senior management within 10 business days. The Offer to Lease was not approved by either party’s senior management and expired.

[8] On March 8, 2017, 817 and CBV executed a Reinstatement, Waivers and Amending Agreement dated March 2, 2017 (the “Reinstatement Agreement”). The parties agreed to reinstate the Offer to Lease and to waive their respective conditions.

[9] The parties also agreed to certain amendments to 817’s standard form of net lease and the Offer to Lease. Paragraph 15 of the Offer to Lease stated:

Within seven (7) business day[s] of unconditional acceptance of this Offer to Lease, the Lease shall be delivered by the Landlord to the tenant on the Landlord’s standard form of fully net lease for the Building, attached hereto as Schedule ‘E’, incorporating the terms of this Offer to Lease with reasonable amendments requested by the Tenant and acceptable to the Landlord (the “Lease”)….

[10] The Reinstatement Agreement amended paragraph 15 of the Offer to Lease as it pertained to amending the Lease. The words “with reasonable amendments” were replaced by the words “which shall be reasonably amended as…”

[11] Also pursuant to paragraph 15, the parties agreed to execute the Lease within 30 days of the Landlord delivering it to the Tenant. The execution and delivery of the Lease by the Landlord and the Tenant was listed as a “required condition.” The Offer to Lease also contained a “time is of the essence” clause.

Negotiation of the Lease

[12] After the execution of the Reinstatement Agreement, on March 13, 2017, 817 delivered its standard form lease to CBV. The parties disagree as to whether the standard form lease forwarded by 817 differed from the draft standard form lease that was attached to the Offer to Lease, and if so, whether the draft conformed to the Offer to Lease.

[13] On March 29, 2017, CBV’s counsel, Howard Litowitz, submitted a memorandum to 817 requesting over forty revisions to the draft lease.

[14] On May 4, 2017, 817 sent a revised draft lease to CBV’s counsel. 817 sent further drafts to CBV on May 25, 2017, and June 6, 2017.

Meetings Between 817 and CBV

[15] On June 14, 2017, the parties’ representatives met to discuss available parking at the Building, which was one of the outstanding issues on the draft lease. On June 27, 2017, 817 sent CBV a final version of the draft lease for execution. CBV saw this as a “take it or leave it” proposition, and did not execute the lease.

[16] The parties’ representatives met on September 29, 2017. The parties disagree as to what was disclosed at this meeting, but it became clear to 817 that CBV’s parent company was in the midst of another transaction that would result in CBV no longer needing to lease the Premises.

[17] On October 20, 2017, the parties met again to attempt to resolve the matter. Needless to say, the matter was not resolved, and 817 commenced this proceeding in March 2018. The parties disagree as to whether the meeting on October 20, 2017 was without prejudice. CBV seeks to strike the portions of the affidavit of Mike Zenker (the “Zenker Affidavit”), referring to the meeting on the basis of settlement privilege.

The Parties’ Positions

[18] The Plaintiff’s position is that the Offer to Lease and Reinstatement Agreement (together, the “Agreements”) constitute a binding and enforceable lease and that it is entitled to specific performance of its terms. On this motion, the Plaintiff seeks rental arrears of $78,821.13 per month from February 1, 2018, to the date of the summary judgment hearing, for a total of $867,032.43. 817 alleges that CBV was negotiating in bad faith in that it did not intend to execute a formal lease because it had secured alternative premises.

[19] CBV’s position is that 817 breached the Agreements by failing to deliver an amended draft lease and respond to the requested amendments in a timely manner, and by failing to negotiate reasonably and in good faith. CBV maintains that it intended to execute the lease, but that 817 refused to make amendments that were critical to its use of the Premises.

Issues

[20] The Plaintiff’s motion and the Defendant’s cross motion raise the following issues:

(a) Is this an appropriate case for partial summary judgment? (b) Is there a genuine issue requiring a trial as to whether the Agreements constitute a binding lease? (c) Is there a genuine issue requiring a trial as to whether CBV breached the Agreements? (d) Are the paragraphs in the Zenker Affidavit protected by settlement privilege?

Analysis

Principles on a Summary Judgment Motion

[21] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[22] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.

[23] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before them, without using the fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under rr. 20.04(2.1) and (2.2): Hryniak, at para. 66.

[24] On a motion for summary judgment, the court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97. Each party must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Sweda, at para. 26.

Is Partial Summary Judgment Appropriate?

[25] At the outset of the hearing, I asked counsel to address the Court of Appeal’s cautions with respect to motions for partial summary judgment, including its most recent decision, Mason v. Perras Mongenais, 2018 ONCA 978, which was released the day before the hearing.

[26] The Plaintiff acknowledged that its motion is for partial summary judgment, since 817 seeks outstanding rent to the hearing of this motion, and further outstanding rent will have to be determined at a later date. 817 nonetheless maintains that this is an appropriate case for partial summary judgment because, in its view, the motion requires the determination of a single issue: whether CBV breached a binding lease. 817 argues that if this issue is determined in its favour, CBV’s counterclaim must be dismissed and the only remaining issue would be the outstanding rent.

[27] CBV submits that this court could find on the evidence on this motion that no binding lease exists, and that 817’s claim ought to be dismissed. CBV recognizes that this would not resolve its counterclaim for breach of the Agreements. CBV’s position is that this is not an appropriate case for partial summary judgment.

[28] The Court of Appeal has stated that motions for partial summary judgment remain a rare procedure and should be reserved for “issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner.” Butera v. Chown, Cairns LLP, 2017 ONCA 783, at para. 34. Motions for partial summary judgment are to be approached with caution because they create a risk of duplicative proceedings or inconsistent findings. In Butera, the Court of Appeal expanded upon its reasoning in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 and Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922 and articulated the following considerations in support of the need for caution in approaching motions for partial summary judgment:

• Motions for partial summary judgment may cause the resolution of the main action to be delayed. Typically, an action does not progress in the face of a motion for partial summary judgment;
• Motions for partial summary judgment may be very expensive;
• Judges are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action; and
• The record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial, therefore increasing the danger of inconsistent findings.

[29] In the Court of Appeal’s recent decision in Vandenberg v. Wilken, 2019 ONCA 262, the Court again highlighted the need to consider a motion for partial summary judgment in the context of the litigation as a whole, and noted the Supreme Court’s further instruction in Hryniak at para. 60:

The "interest of justice" inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.

[30] In this case, the issue of whether CBV breached the Agreements is not an issue that can be readily bifurcated from the main issues in the proceeding. The issue is one of the main issues in the action and is inextricably linked to CBV’s counterclaim. In order to determine whether CBV breached the Agreements, it is necessary to determine whether they constitute a binding lease. If the Agreements do not constitute a binding lease, CBV’s counterclaim would remain to be determined. At trial, CBV is likely to adduce evidence to support its claim, resulting in a more expansive record and leading to the possibility of inconsistent findings.

[31] Even if the Agreements are found to constitute a binding lease, it does not necessarily follow that CBV will be found to have breached the Agreements, or that its counterclaim must fail. CBV has raised issues about 817’s good faith and compliance with the terms of the Offer to Lease, which are relevant to both the issue of whether CBV breached the Agreements and its counterclaim against 817.

[32] Under any circumstance, including a finding that CBV breached the Agreements, a further hearing will be required. On this motion, 817 seeks outstanding rent to the date of the summary judgment hearing but has not put forward a position on the appropriate period, or its basis in law or fact. A further inquiry will be required in order to determine to what period of rent 817 would be entitled. This will raise issues of law and fact, such as whether 817 is entitled to specific performance, whether it was required to mitigate, and whether it did so. While 817 submits that its entitlement to additional amounts for rent could be determined by a hearing on damages or by way of reference, this is not necessarily an expeditious or cost-effective use of judicial resources.

[33] 817 relies upon this court’s decision in 7Marli Ltd. v. PetValu Canada Inc., 2017 ONSC 1796, in which Perrell J. granted partial summary judgment for rental arrears owing to the date of the summary judgment hearing. That case was decided before the Court of Appeal’s guidance on partial summary judgment in Butera and subsequent cases. Moreover, in 7Marli, unlike this case, there was no issue as to whether the tenant, PetValu, defaulted on the lease. The only issue was the applicable monthly rent.

[34] Based on the above considerations, I have determined that this is not an appropriate case for partial summary judgment.

Is there a Genuine Issue for Trial?

[35] Not only is this case not appropriate for partial summary judgment, the evidentiary record leads me to believe that that there would be genuine issues requiring a trial on both the issue of whether the Agreements together constitute a binding and enforceable lease and whether CBV was in breach.

[36] In order to determine whether the Agreements constitute a binding lease, the court would inquire into the intention of parties in negotiating Offer to Lease and Reinstatement Agreement and whether there was a meeting of the minds on the essential terms. 817 recognizes that this analysis is fact-specific and determined on a case by case basis: Northridge Property Management Inc. v. Champion Products Corp., 2016 ONSC 2715, at para 52. In this case, making findings of fact as to the parties’ intent would be difficult given that the Offer to Lease was negotiated between the parties’ leasing agents, and no affidavits were provided from them.

[37] The parties differ as to whether the terms that remained to be agreed upon were essential to the lease. 817 submits that the Agreements include all of the required factors identified by the case law and therefore constitute a binding lease. CBV counters that they had not agreed to certain terms, such as parking, that were essential from its standpoint. CBV also takes the position that the execution of a formal lease, as amended pursuant to the parties’ negotiations, was required. Again, this requires the court to make findings regarding the parties’ intent as evidenced by their negotiations and conduct, which cannot be done on the record before me.

[38] Additional factual issues arise in determining whether CBV breached the Agreements, including: whether either party repudiated the Offer to Lease; whether CBV had a good faith intention to negotiate the lease and take possession of the Premises; whether 817 is estopped from taking the position that the Agreements are binding; and whether 817 acted in bad faith in delaying the negotiations and refusing to accept CBV’s proposed amendments. The allegations of bad faith are relevant to the ability of each party to make a claim based on the other’s alleged breach. None of these issues can be resolved on the record before me, as they involve an assessment of the credibility and reliability of witnesses, necessitating a trial: Lesenko v. Guerette, 2017 ONCA 522, at para. 19.

[39] While 817 states that all of the necessary evidence has been adduced on the motion, this proceeding remains at an early stage. Affidavits of documents have not yet been delivered, and no examinations for discovery have been conducted.

[40] Given the foregoing, the need for a trial cannot be avoided by using the additional fact-finding powers under rr. 20.04(2.1) and (2.2). A trial is required in order to provide the Court with a full record upon which to draw appropriate inferences and make the necessary factual findings. This is not a case in which summary judgment would afford a fair process for the just adjudication of the issues in dispute.

Does Settlement Privilege Apply?

[41] Given my findings on the motion for summary judgment, I do not think it is necessary or appropriate to determine CBV’s cross-motion to strike certain portions of the Zenker Affidavit on the basis of settlement privilege. Determining the issue would require that I make findings of fact that may be relevant to the issues at trial, which should be done on a full record. I dismiss the Defendant’s cross-motion without prejudice to raise the issue of settlement privilege at a later hearing or at trial.

Conclusion

[42] The Plaintiff’s motion for summary judgment is dismissed. This is not an appropriate case to proceed with a partial summary judgment and there are genuine issues requiring a trial.

Costs

[43] Counsel for both parties submitted costs outlines at the hearing. The Defendant’s costs outline is for a total of $84,176.95. The Plaintiff’s costs outline is for a total of $40,001.56. All amounts are on a partial indemnity basis and include disbursements and HST. The parties’ disbursements, at approximately $3,000.00 each, are comparable.

[44] The Defendant’s costs outline is for the entire proceeding, including drafting pleadings and correspondence. Unfortunately, the time spent on the motion is not broken down separately from the hours spent on other items.

[45] Pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), the court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26. Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the costs issue.

[46] I have considered these factors, as well as the proportionality principle in r. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice. The amount at stake was substantial. Because of the amount and complexity, the motion involved a significant amount of work. Both parties produced substantial documentary records and conducted cross-examinations. The Defendant submits that the motion should not have been brought, particularly before the exchange of documents and discoveries, where it should have been clear that there are genuine issues of fact and credibility in dispute. While the motion required that counsel delve into the facts and applicable law, much of the work completed for the motion will not be wasted.

[47] Based on the foregoing considerations, I fix costs of the motion on a partial indemnity basis at $55,000.00 including disbursements and HST, payable to the Defendant. No costs are awarded on the Defendant’s cross-motion.

Nishikawa J. Released: April 8, 2019