Court File and Parties

COURT FILE NO.: CV-18-601086 DECISION RELEASED: 2019-05-06 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Triple Eight Asset Management Inc., Plaintiff AND: Mario Greco, Defendant

BEFORE: Master P.T. Sugunasiri

COUNSEL: Statham, C., Counsel for the Plaintiff/Moving Party Dingle, G. and Shelley, A., Counsel for the Defendant/Responding Party

HEARD: February 5, 2019

REASONS FOR DECISION

Overview:

[1] The Defendant and his family own four properties found at the corner of Highway 48 and Main Street in Stouffville as their nest egg. The Plaintiff is a land developer. After unsuccessfully listing the undeveloped properties for sale, the Defendant engaged the Plaintiff to assist with their development for mixed commercial and residential use. The idea was that such development would increase both salability and profit. It was suggested that the lands could accommodate one commercial development and one medium density residential subdivision. The agreement granted the Plaintiff a right of first refusal (“ROFR”) over the medium density residential subdivision.

[2] The relationship broke down and the Plaintiff has sued for damages for breach of contract, breach of the duty to perform contracts honestly, and a declaration that it has a ROFR on one of the four properties, 5318 Stouffville Road (“subject property”). The Plaintiff also relies on the ROFR to seek leave to issue a certificate of pending litigation (“CPL”) over the subject property. In the circumstances of this case, I decline to grant the Plaintiff leave. I provide a summary of my reasons below.

Facts:

The Lands

[3] Mr. Greco and his family are the owners of four properties at the corner of Highway 48 and Main Street in Stouffville as follows:

a. 5318 Stouffville Road owned by Mr. Greco; b. 5262 Stouffville Road owned by Mr. Greco and his wife; c. 5270 Stouffville Road owned by Mr. Greco’s wife; d. 5286 Stouffville Road owned by Mr. Greco and his daughter.

[4] Mr. Greco and his family purchased these properties (collectively, the “Lands”) as retirement investments and for the family. Mr. Greco’s main business was as an owner of various fruit and vegetables stores in Toronto. Of the four properties, 5318 Stouffville Road consists of two PINS and is the largest.

[5] Triple Eight Asset Management Inc. (“TEAM”) is a corporation created in 1986 and subsisting pursuant to the laws of Ontario. It carries on business as a land developer and consultant. Harry Chan is its principal.

[6] By January 2013, Mr. Greco had been attempting to sell the Land at a price of $595,000.00 per acre but was unsuccessful. He was advised by a local real estate agent, Mr. Galetta, that the Lands might be more attractive if developed for commercial or residential use. Mr. Greco retained the Plaintiff to assist with the development of the Lands so that he could sell them as he had originally intended. According to Mr. Greco, it was always his intention to sell the Lands as a package and he did not understand or contemplate the impact this intention would have on the Plaintiff’s ROFR. His understanding was that the Plaintiff would have a first right of refusal to buy the Lands at a fair price.

[7] Over the following months, Mr. Chan conducted a preliminary assessment of the salability of the Lands for development purposes and what type of development the Lands might be able to accommodate. It was Mr. Chan’s view, based on a preliminary assessment, that the Lands would be able to accommodate one commercial or mixed-use development (such as a full service senior residence or a hotel or office building) and several blocks of medium-high density residential development.

[8] There appeared to be a number of hurdles that would need to be overcome in order to bring about an economically viable development of the Lands. It was Mr. Chan’s view that Mr. Greco would stand to gain a significant advantage in selling the Lands at a substantially higher price if these hurdles could, in fact, be overcome and Draft Plan Approval for the aforementioned land use could be obtained from the municipal authorities.

The Management Agreement

[9] On November 19, 2013, TEAM and Mr. Greco entered into an agreement whereby Mr. Greco retained TEAM as the development manager to act on Mr. Greco’s behalf for preparing and submitting a Draft Plan Application with respect to the Lands (“Agreement”).

[10] The Agreement contained, among other things, the following terms:

(a) Mr. Greco appointed TEAM as his agent to act on his behalf in negotiations with various municipal authorities for the development of the Lands; (b) The agreement and the powers conferred therein upon TEAM would expire on the earlier of (a) June 30, 2016; and (b) 30 days after Draft Plan Approval was granted by the Town of Stouffville (the “Town”); (c) The development work would proceed in the following three stages: (i) Fulfilling development prerequisites; (ii) Draft Plan Application for the Lands; (iii) Site servicing; (d) At the first stage of the project, TEAM would waive its management fees and contribute 25% of Mr. Greco’s share of engineering fees paid in connection with fulfilling development prerequisites; (e) In exchange for TEAM’s contribution to Mr. Greco’s share of the engineering fees during the first stage, Mr. Greco would grant TEAM a first right of refusal for the residential site for two years after Draft Plan Approval was obtained and engage TEAM as Greco’s representative for the sale of the commercial site; (f) At the second stage of the project, TEAM would be engaged as the development manager for a fee of $80,000, payable only if and when Draft Plan Approval was granted by municipal authorities; and (g) At the third stage of the project, TEAM would submit an offer for the purchase of part or all of the residential site.

[11] In comparison with other activities in a typical land development project, this process was unpredictable in terms of the time of completion and the compliance with ever-evolving requirements of municipal authorities.

[12] TEAM offered support to alleviate Mr. Greco’s risk and anxiety by:

(a) Allowing Mr. Greco to terminate the Agreement on June 30, 2016 if he decided not to pursue the Draft Plan Approval any further – see paragraph 13(b); (b) Deferring the payment of management fee until after the Draft Plan Approval had been granted – see paragraph 13(f); and (c) Offering a loan of $100,000 to finance disbursements of the Draft Plan Application.

[13] According to Mr. Chan, the primary benefit to TEAM under the terms of the agreement was the right of first refusal which, if exercised, would permit TEAM an opportunity to earn a substantial profit upon the eventual resale of serviced blocks within the residential site. Mr. Chan attests that he negotiated the agreement with this fact in mind.

Performance

[14] During the first stage of the project, TEAM waived management fees and contributed 25% to Mr. Greco’s share of engineering fees paid in connection with fulfilling development prerequisites. (In fact, TEAM paid the engineering fees in full and was subsequently reimbursed by Mr. Greco for his share.)

[15] By July 2014, the first stage of the project had been substantially completed and the second stage of obtaining Draft Plan Approval had been commenced. The second stage of the project involved a great amount of time and effort on Mr. Chan’s part, including assembling a consulting team, meeting with other land owners in the NE Quadrant with the objective to reach a costs-sharing agreement, commissioning necessary reports and taking various other steps necessary in order to prepare to submit the Draft Plan Application to the Town of Stouffville.

[16] Under the direction of TEAM, the draft plan would yield 370 condominium apartment units in three high-rise buildings and 81 stacked townhome units in four 4-storey buildings, all located within the boundaries of the Lands. Furthermore, the plan also included 140 senior residence units in one 6-story building in other part of the Lands, for a total of 591 residential units.

[17] In October 2015, the Town commissioned a land use planning study for the four quadrants at the intersection of Highway 48 and Main Street, which are designated as a “Gateway Mixed Use Area” in the Town’s Secondary Plan (the “Gateway Study”). The purpose of the Gateway Study was to examine the full range of policy, land use, servicing, transportation, and environmental issues necessary to prepare a detailed development concept for the study area and related amendments to the Secondary Plan. Consequently, any significant Draft Plan Applications in the study area would not be formally processed until the conclusion of the Gateway Study. This initiative by the Town caused more than two-years of delay in obtaining the Draft Plan Approval.

Termination of the Agreement

[18] As of June 2016, the compilation of documentation in accordance with the Town’s submission requirements was still in progress and the termination date for the Agreement was approaching. Prior to June 30, 2016, Mr. Chan proposed an amendment to the Agreement that would extend its duration to a date after Draft Plan Approval had been granted and provided a draft to Mr. Greco for signature.

[19] Subsequent to June 30, 2016, the parties continued to work on the Draft Plan Application. On August 25, 2016, Mr. Chan and Mr. Greco, hand delivered the first submission of the Draft Plan Application to the Town.

[20] On September 15, 2016, the Town Planning Department acknowledged receipt of the application and associated document and requested additional reports, including a cultural heritage impact assessment and an archaeological resource assessment.

[21] Over the following months and during 2017, York Region, Toronto Region Conservation Authority and the Town provided various comments on the Draft Plan Application. On December 12, 2017, the result of the Gateway Study was presented to the Town Council by the Town’s planning staff with a recommendation that it be implemented. On May 15, 2018, the Town Council has approved the passing of By-law 2018-080-OP, in which Official Plan Amendment No. 145 is to be implemented when the Regional approval is granted.

[22] Team claims that all of the foregoing was brought about as a result of the Plaintiff’s continued involvement in the project. At this point there was no formal extension of the Agreement.

Formal Termination of the Relationship

[23] On January 5, 2018, Mr. Greco terminated the relationship. TEAM issued its claim on July 6, 2018. Subsequently, Mr. Greco retained a different project manager and has received an offer from a foreign investor to buy the Lands for $38 million. As far as Mr. Greco is concerned, the ROFR expired with the Agreement. However, he has offered the Lands to the Plaintiff for the same price as the foreign purchaser. TEAM has declined to purchase at that price.

[24] Draft Approval is anticipated shortly. According to the Plaintiff, once approval is obtained, the value of the entire site is $65.4 million, or $3,750,000 per buildable acre. This is 5.3 times the list price in 2012. In other words, TEAM’s position is that they have added value to the property through their efforts.

Law and Analysis:

[25] Section 103 of the Courts of Justice Act gives the court discretion to grant leave to a plaintiff to issue a CPL when it has raised a triable issue in an interest in land. The law is well settled and is set out in TEAM’s factum.

[26] The factors a court is to consider when deciding a motion brought on notice seeking leave to issue a certificate of pending litigation have been identified as follows:

(a) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed; (b) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed"; (c) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security; and (d) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated. [1]

[27] A CPL may be issued in connection with a party claiming a right of first refusal for the purchase of the land. [2]

[28] In determining whether to moving party has raised a triable issue with respect to an interest in land, the court should examine the whole of the evidence without regard to any disputed issues of fact. [3]

The Plaintiff has raised a triable issue with respect to an interest in land

[29] In its Statement of Claim (“Claim”) TEAM seeks a declaration that it holds a ROFR with respect to 5318 Stouffville Road (“subject property”), an injunction restraining Mr. Greco from making or accepting any offer to purchase this property other than in accordance with the ROFR, damages in the amount of $3,000,000 for breach of contract, breach of the duty of honesty in contractual performance and negligent misrepresentation, a CPL and judgment in restitution and unjust enrichment. Central to the Claim is the validity of the ROFR.

[30] Mr. Greco argues that TEAM has failed to raise a triable issue with respect to an interest in the subject property because:

a. Any potential entitlement to a ROFR terminated on June 30, 2016; b. Even if the ROFR is found not to have terminated, it is void for vagueness; and c. Even if the land over which the ROFR applies could be determined, it is only on piece of the Lands. It is well settled law that a ROFR is not triggered where it is in respect of one piece of property that forms part of a package.

[31] The parties strongly disagree on whether or not the ROFR is valid, whether it expired or whether Mr. Greco waived the termination clause by his conduct. There is a dispute about what admissions Mr. Chan may or may not have made in a secretly recorded meeting, and whether there were verbal agreements modifying or extending the original Agreement.

[32] I agree with TEAM that it has raised a triable issue with respect to an interest in land. The test is not whether or not TEAM’s arguments will succeed. I am not persuaded, at this juncture, that TEAM has no possibility of success in obtaining a declaration that it holds a ROFR over the subject property. [4] Further, accepting Mr. Greco’s arguments above entails making findings on disputed facts. This is properly left to the trier of fact and not a motions judge or master.

The land is not unique

[33] Mr. Chan attests in his affidavit that the intersection where the subject land is located is known as “The Gateway of Stouffville”. Aside from this bald statement, TEAM has failed to tender any evidence to suggest that the subject land is unique other than perhaps that the Town of Stouffville conducted a “Gateway Study”. It appears that TEAM invites the court to draw the inference that a gateway is important and that there can only be one. In my view, in the absence of an explanation as to why there is no direct evidence on point, it is improper to draw an inference on such a central issue. The burden falls on TEAM’s shoulders to tender the appropriate evidence. [5] One would have expected a more robust description of the area.

[34] Even if I were to draw this inference, uniqueness nevertheless has both a subjective and objective component. The fact that the property lies at the Gateway of Stouffville may make it subjectively unique to TEAM. However, TEAM also has to demonstrate with evidence that the subject property has characteristics that make damages inadequate. [6] I am not satisfied that TEAM has adequately done so. It is not enough to say that it is an area that is desirable for a development.

[35] This is in contrast to Mariani v 7783963 Ontario Limited, [7] a case relied on by TEAM to support its argument that investment properties can be unique if a developer has invested significant time and money. In that case, the court found that developing land to be a driving range was sufficiently unique to favour a CPL. Importantly, the moving parties tendered evidence showing that this was the last piece of land in that part of Brampton to be zoned for use as a driving range.

[36] I also respectfully distinguish the present case from Northfield (Waterloo) Development Inc. v. North American Acquisition Corporation [8]. In that case, there was evidence that the property in question was located in a pivotal and desirable location. Significantly, the purchaser expended considerable effort to rezone the property to allow it to develop and manage a shopping centre. Its location was important to the viability and success of the shopping mall. It was not, in other words, a generic investment developed purely for sale and profit.

[37] In the case at bar, the only evidence before me is that TEAM is a developer and negotiated a ROFR with the intention of purchasing the residential portion of the subject property to resell the units for a greater profit. Other than it being a worthy investment, there is no evidence to suggest that the subject land is particularly unique. The mere fact that TEAM invested time and resources in developing this property does not in itself make it unique. Presumably time and money is spent on all development projects. As reflected in Mariani and Northfield and John E Dodge, supra, uniqueness requires something more.

TEAM has not demonstrated that damages are not a viable alternative

[38] In some cases, time and money spent towards developing a property makes damages an inadequate remedy. This is not one such case. TEAM relies on Mariani for that proposition and as already discussed, the facts of that case are readily distinguishable. In the normal course, damages are presumed to be an adequate remedy for the loss of investment properties. [9]

[39] TEAM further argues that it would be impossible to evaluate damages because there are too many unknown variables. The calculation would involve speculation as to how and when TEAM would have eventually dispose of the development lands.

[40] This is simply a legal argument made by TEAM in its factum. Courts are routinely determining damages for breach of contract with respect to property. While there are variables, there is nothing in the record to suggest that damages could not be determined, perhaps with the assistance of an expert. Neither party provided any evidence or compelling argument or jurisprudence with respect to the calculation of damages. At best, this is a neutral factor.

Harm to Mr. Greco is greater than harm to TEAM

[41] Mr. Greco is now 80 years old and want to retire. I accept that the Lands represent his nest egg. The parties dispute whether or not the Lands were to be sold as a package or whether that was the common intent when they entered into the Agreement. This is a matter that for the trier of fact to resolve. For the purposes of this motion, I can conclude at the very least that a CPL against the subject property would hinder Mr. Greco from realizing on his retirement plan and may also impact on the non-parties’ ability to sell their parcels.

[42] I also consider the fact that a CPL would delay Mr. Greco’s retirement plan for an entirely contingent right that may never be exercised. Even if TEAM were successful in upholding a ROFR, no one knows if TEAM would exercise its rights given that its interest lies only in the residential portion. In contrast, TEAM is in the business of development and has done so for 20 years. There is no indication that TEAM’s business is coming to an end or that this is its “pièce de resistance”.

[43] On the other hand, if I do not allow the CPL, the Lands may be sold and TEAM will lose its opportunity to purchase the residential units and resell them for a profit. Greco has advised that there is a willing foreign purchaser. TEAM also would have received no compensation for the work Mr. Chan did to enhance the value of the Lands. This loss, however, can be compensated by damages, as discussed above, and TEAM did not raise any issues about collectability.

Conclusion:

[44] Based on the record before me and after considering all of the circumstances of this case, I dismiss the Plaintiff’s motion for leave to issue a CPL against 5318 Stouffville Road.

Costs:

[45] I strongly urge the parties to agree on costs. If they are unable to do so, Mr. Greco may serve and file written costs submissions of no more than three pages double-spaced plus costs outlines at the Masters’ Administration within 30 days of today’s date. TEAM may serve and file its response with the same parameters within 14 days from the date they are served with Mr. Greco’s cost submissions.

Original signed Master P. Tamara Sugunasiri Date: May 6, 2019

[1] Peruzza v Spatone, 2010 ONSC 841 at para. 20. [2] Mariani v 778963 Ontario Ltd., 2005 ONSC 39677; see also G.P.I. Greenfield Pioneer Inc. v Moore, 2002 ONCA 6832. [3] York University v Michael Markicevic, 2013 ONSC 378 at para. 98. [4] Davidson v Hyundai, 59 OR (2d) 789 at para. 26. [5] Asamero Oil Corp v Sea Oil & General Corp., [1979] 1 SCR 633 at para. 68. [6] John E Dodge Holdings Limited v 805062 Ontario Limited, 2001 ONSC 28012, 56 OR (3d) 341 at paras. 59-60 [hereinafter “John E Dodge”]. [7] Mariani v 778963 Ontario Ltd., 2005 ONSC 39677. [8] Northfield (Waterloo) Development Inc. v. North American Acquisition Corporation, 2015 ONSC 1739. [9] John E Dodge, supra note 6.