Court File and Parties

COURT FILE NO.: CV-14-120631-00 DATE: 20190531 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

M & M HOMES INC. Plaintiff – AND – 2088556 ONTARIO INC., JOHN REDVERS, ROYAL LEPAGE REAL ESTATE SERVICES LTD, 697350 ONTARIO LIMITED, 1375051 ONTARIO LIMITED, DOROTHY KUSHNER, SAM GOLDMAN, FRANK GOODMAN, LILLIAN GOODMAN, DINAPET HOLDINGS LIMITED, 614921 ONTARIO LIMITED, MARIA TRAINA, HOWARD BRIAN GOLDMAN, JOSEPH BURDI, DORIS MILLER, CAROLE GREENSPAN, COMMUNITY TRUST COMPANY, 2178875 ONTARIO INC., JONG SUK IM, SUNG RAN LEE, YEON HEE HUH and IN HEE WOO Defendants

Counsel: E. Birnboim and M. Crampton, Counsel for the Plaintiff R. Choi, as agent for 2088556 Ontario Inc.

HEARD: May 27, 2019

Reasons for Decision

Healey j. :

[1] On the first day of trial, Friday May 24, 2019, Mr. Choi appeared for 2088556 Ontario Inc. (“208”), and during preliminary remarks prior to plaintiff’s counsel’s opening statement, attempted to present the court with a proposed amended statement of defence. He had not served a motion for such relief. The proposed amended pleading contained an entirely new defence, and sought to withdraw key admissions. The court recessed to consider the impact of the proposed pleading and whether any of the scheduled trial time should be afforded to the defendant to bring such a motion. Upon court resuming, I indicated to Mr. Choi that the matter was more complicated than simply attempting to file an amended pleading and stating that the counterclaim was being withdrawn. I advised him that r. 51.05 was engaged both in order to withdraw parts of the statement of defence as set out in the proposed amended pleading, and with respect to the discontinuance of the counterclaim.

[2] By way of background, Mr. Choi had been retained on a limited basis only two days before the trial commenced to seek an adjournment of the trial. The defendant 208 had not participated in any pretrial procedural steps such as scheduling or attending the pretrial or scheduling of the trial, and had been without counsel ever since its former counsel was removed from the record on May 29, 2018 despite an order that it was to appoint new counsel within 30 days or to obtain an order granting it to be represented by a person other than a lawyer. When that application for an adjournment was refused, Mr. Choi returned the next day and indicated that he had been retained for trial and was in the process of serving a Notice of Change of Lawyer.

[3] Ultimately, this court decided that when and if the defendant brought such a motion during the trial, it would hear the motion and decide the issue. Mr. Choi expressed his intention to bring such a formal motion at the earliest opportunity. However, as the first day of trial progressed, it became clear that a ruling would be needed in order to provide certainty in respect of the issues to be tried. The court made this decision because it became clear during Mr. Choi’s cross-examination of the first witness that he had difficulty constraining himself to the four corners of the existing pleadings, and that the trial may proceed more efficiently if the proposed motion was determined sooner rather than later. A schedule was set for the delivery of the motion and related material over the past weekend.

[4] The motion was heard on Monday May 27, 2019 at the beginning of the day. After hearing argument and considering the matter this court endorsed:

For more fulsome reasons to be released in writing at a future date, this motion to amend the statement of defence is dismissed as the defendant is unable to meet the test for withdrawal of admissions pursuant to R. 51.05. Additionally, the proposed amendment at this stage (on day 2 of the trial) would cause actual prejudice to the plaintiff that cannot be compensated by an adjournment or costs. Costs of this motion shall be decided at the same time as a determination is made with respect to the costs of the trial.

[5] In this action, the plaintiff claims specific performance of an agreement of purchase and sale entered into between it and 208, 208 being the vendor. The claim seeks an abatement of the purchase price as a result of the alleged failure of 208 to install water, storm and sanitary services to the property prior to closing as required by the agreement.

[6] The statement of defence of 208 is dated September 7, 2016. It only defends against the issue of the abatement. 208 alleges that as a result of construction delays outside of its power, milestone dates set out for completion of the required servicing for the property could not be met. Despite eight previous agreements to extend those targeted dates, the pleading alleges that the parties could not agree on the terms of the ninth extension for potential closing dates. 208 alleges that the plaintiff did not engage in further extension discussions and thereby breached its obligation to extend those potential closing dates. 208 pled that it was ready, willing and able to close on the terms of the agreement on a new projected closing date. By way of counterclaim, it relied solely on the allegations pled in its defence to seek the following relief:

(a) a declaration that the agreement is a valid and binding contract;

(b) an order rectifying the agreement to revise certain milestone dates, including a closing date, to reflect the current construction schedule of the property;

(c) specific performance of the agreement of purchase and sale, or in the alternative, damages in lieu of specific performance of the agreement;

(d) damages for breach of contract, in an amount to be particularized prior to trial; and

(e) in the further alternative, a declaration that the plaintiff is not entitled to specific performance of the agreement.

[7] The proposed amended pleading seeks to eliminate the counterclaim in its entirety. It seeks to withdraw the allegations that the plaintiff breached its obligations to extend the milestones for installing services and the potential closing dates. 208 seeks to add a new paragraph that reads: “the APS terminated pursuant to its terms, and M&M is not entitled to specific performance”.

[8] In support of its motion, 208 filed a brief affidavit in the name of Alan Lam, who is the director of 208. This affidavit only addresses a single issue. Mr. Lam provided evidence that it was necessary for 208 to obtain a severance to divide the subject land in order to carry out the terms of the agreement, and accordingly 208 had to transfer the title of the subject property to another company, CRC Sutton Inc. (“CRC”) in order to comply with the provisions of the Planning Act, R.S.O., 1990, c. P.13. In the result, 208 is no longer the registered owner of the subject property, and it is not able to transfer title of the subject property to the plaintiff. The affidavit does not point out the terms of the agreement that required transfer to a company other than the plaintiff, nor did Mr. Choi satisfy this court that the Planning Act mandates such transfer in these circumstances.

[9] Mr. Lam’s evidence was used to support an argument by Mr. Choi that specific performance is not a remedy that is available to be granted by this court. But this is not what is being pled in the proposed amended defence. The proposed amended defence states that the plaintiff is not entitled to specific performance because the agreement terminated. The proposed amended defence does not refer to which terms of the agreement are being relied on to support an argument that it has terminated.

[10] Mr. Lam’s affidavit goes on to say that if the plaintiff wished to seek relief against CRC, it could have added CRC to the within proceeding but chose not to do so. Instead, the plaintiff commenced a separate court application against CRC in March, 2018.

[11] The affidavit does not in any way provide evidence relevant to r. 51.05 or r. 26.01, nor did Mr. Choi address these rules in argument.

[12] The case law has established a three-part test that must be met by a party requesting leave to withdraw an admission in a pleading. The moving party must establish: (1) that the proposed amendment raises a triable issue; (2) that the admission was inadvertent or resulted from wrong instructions; and (3) that the withdrawal will not result in any prejudice that cannot be compensated for in costs: Antipas v. Corneos, 1988 CarswellOnt 358 (Ont. H.C.), at para. 14; 147619 Canada Inc. v. Chartrand, 2006 ONCA 409, 2006 CarswellOnt 2879 (Ont. C.A.), at para. 1; Waxman v. Waxman, 2004 CarswellOnt 1715 (Ont. C.A.), at para. 478.

[13] In Antipas, at para. 12, Saunders, J. noted that r. 26.01 is superseded by r. 51.05 where the effect of the proposed amendment is to withdraw an admission.

[14] The paucity of evidence presented on this motion does not satisfy the test affirmed by the Court of Appeal in Chartrand and Waxman. There is no evidence to suggest that the admission was inadvertent or resulted from wrong instructions. The defence filed in 2016 sought specific performance for 208 even though the transfer to CRC occurred in 2014. 208 was represented by counsel at the time the statement of defence was served and filed.

[15] The plaintiff has presented substantial evidence with regard to the prejudice that would be caused to it as a result of the proposed amendment. Again, such prejudice was not addressed in the defendant’s material. This lack of evidence is fatal. The case has been conducted for years on the basis that specific performance is common ground for these parties. The specific, non-compensable prejudice that would accrue to the plaintiff if the defendant were permitted to withdraw its admission is set out in the responding affidavit of Samantha Mercado, who is an officer of the plaintiff. Her evidence is that the plaintiff relied on the admissions and the defence in deciding not to seek damages for 208’s alleged breach of its obligations under the agreement, a claim that would now be statute barred. The plaintiff also relied on the admissions in the defence to withdraw the claim against the real estate agent who acted for both parties in the transaction, along with the real estate brokerage company that was the agent’s employer. Her evidence is that because 208 treated the agreement as “live” in its own pleading and alleged that it was ready, willing and able to close on the terms of the agreement, the plaintiff agreed to release those other parties from the action. She states that the plaintiff would not have taken this step if 208 had advanced the position it now seeks to assert in its proposed amended pleading.

[16] There is additional prejudice. Following the transfer of the subject property to CRC, a company of which Alan Lam is also an officer, various encumbrances were registered. The plaintiff has commenced an application in the court in Toronto to determine its priority. One of those mortgagees has commenced power of sale proceedings and is disputing the plaintiff’s priority interest. The plaintiff obtained a temporary injunction in that application on June 29, 2019 to prevent further steps being taken. While this is a separate application to determine the plaintiff’s priority over the subsequent encumbrances and its merits have yet to be determined, there appears to be a questionable transfer of property in the face of a CPL and subsequent “mortgaging out”, resulting in considerable prejudice to the plaintiff. The plaintiff’s costs recovery if successful at trial is thrown into doubt as a result of these encumbrances and therefore any adjournment, and the subsequent costs thrown away for preparing for trial, are not likely to be recoverable. Such adjournment would be inevitable if the amendment were allowed in order for there to be essentially an entire redoing of this case from the pleading stage forward. Further, until such time as specific performance is ordered, the injunction could be terminated in the event of a sale to a third party purchaser.

[17] 208 not having met the applicable test under r. 51.05, its motion was dismissed.

Justice S. E. Healey Released: May 31, 2019