NEWMARKET COURT FILE NO.: CV-15-124861-SR

DATE: 20190809

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Amelia Miragliotta and Francesco Di Nardo Plaintiffs

– and –

Mark Zanette, Stephen Zanette, and Randy Zanette Defendants

COUNSEL: Patrick Di Monte, for the Plaintiffs Wendy Greenspoon-Soer, for the Defendants

Heard: May 16, 17 and 22, 2019

REASONS FOR DECISION

DE SA J.:

Overview

[1] The parties have a long and litigious history. They own neighbouring lands, and have been having ongoing disputes related to the development of those lands.

[2] In 2014, the Di Nardos obtained an interim injunction to restrict the Zanettes from constructing lots of less than 60 feet on a portion of the lands within the development. The injunction restrained the Defendants from proceeding with the development of the 2 building lots of 50 feet within the subdivision. The effect of this restriction delayed the development and subjected the Zanettes to higher borrowing costs.

[3] Ultimately, the injunction was overturned.

[4] The Zanettes are now seeking damages related to the injunction.

[5] In the context of the main action, the Di Nardos have themselves brought a motion for summary judgment. The Di Nardos are claiming reimbursement for expenditures they made in relation to the roads, curbs and landscaping which was supposed to be done by the Zanettes. The Di Nardos are also seeking the interest they have paid as a result of the delays.

[6] After hearing evidence and argument, I reserved my decision. These are my reasons.

Summary of Facts

The Mulligan Order

[7] On August 3, 2010, the Honourable Justice Mulligan made an Order on Consent (the “Mulligan Order”) which provided, inter alia, for the Plaintiffs (the Zanettes) to enter into an Agreement of Purchase and Sale with the Defendants (the Di Nardos) to sell a small piece of land known as Block 7 (the “Block 7 Transaction”).

[8] The Mulligan Order had been negotiated by the parties and sought to advance the interests of both the Zanettes and the Di Nardos.

[9] The Block 7 Transaction was to enable the Zanettes to put forward their own Plan of Subdivision for the development of a number of building lots (the “Zanette Project”).

[10] At the same time, the Block 7 Transaction assisted the Di Nardos with the completion of the Apian Way which included a roadway through the Zanette Project. This assisted the Di Nardos with the completion of their own subdivision.

[11] Paragraph 2(I) of the Mulligan Order provided that the Zanettes would be responsible to landscape the boulevards along Block 7, where required by the City of Vaughan. The Zanettes were also responsible for completing the final coat of asphalt on the Apian Way by August 31, 2013 and to complete the final curbs for Block 7 and storm flushing (hereinafter referred to as the “Final Asphalt Work”).

[12] The deadline for the Final Asphalt Work being August 31, 2013 was largely incorporated on the basis that the parties expected that the Zanette Project would be at a stage of substantial completion prior to completing the final coat of asphalt on the Apian Way and final curbs for Block 7.

Delays in Development

[13] As part of the development, the Di Nardos were required to post letters of credit at the City of Vaughan (the City) in the amount of $146,000 on September 13, 2012, $25,000 on September 13, 2012 and $10,000 on December 18, 2012. These deposits were required by the City pending assumption of the road.

[14] The Block 7 Transaction did not close until September 26, 2012, more than a year after the anticipated closing date. Even after closing the Block 7 Transaction, the development progressed slowly. The Zanettes did not commence construction of the Apian Way extension nor apply for a plan of subdivision nor did they apply for severances.

[15] The Zanettes refused to complete the road maintaining that it was premature to do so since they had not commenced the development of their lands and eventually construction would ruin the road thereby causing the Zanettes to pay again for rectification of the road.

[16] By 2013, the Zanettes had not even applied for rezoning of their lands from agricultural to residential.

[17] The Di Nardos gave notice that if the Zanettes would not comply with the Mulligan Order, the Di Nardos would have to complete the road and bill the Zanettes and call upon the undertaking securing $25,000 on account.

[18] Ultimately, the Di Nardos did the work to complete the curbs and added the final coat of asphalt to the Apian roadway. Because the Zanettes had not completed the extension of the Apian Way, the City also required the reparation of a hammerhead for turning circle purposes increasing the original estimate of completing the road.

[19] After the commencement of the litigation, the $25,000 in the trust account of the solicitor for the Zanettes was released on account reducing the amount being sought by the Di Nardos.

The Injunction

[20] Once the Zanette Development started progressing, the Zanettes applied to sever their lands to create six (6) building lots, almost 3 years after the registration of the Di Nardo plan of subdivision. At this point, the Zanettes were already 3 years behind schedule. The proposed lots did not comply with the 60 foot frontage by-law requirement for the area, and did not comply with the frontage set back requirements of by-law 1-88. The City did not support such a proposal and the Di Nardos voiced their objection to it.

[21] On August 5, 2014, the Zanettes proposed a new severance application to create five (5) lots, three of which would comply with by-law 1-88 in terms of frontage, but not front yard setback.

[22] The City supported two (2) 50 foot lots on the Clarence side of the Zanette lands. The rate payers opposed the two (2) 50 foot lots and wished 60’ lots. The Zanettes proceeded to the Committee of the Whole for subdivision of two (2) 50 foot lots fronting Clarence Street (the “Disputed Zanette Lots”).

[23] The Di Nardos sought an injunction to restrict the Zanettes from constructing lots of less than 60 feet on a portion of the lands within the Zanette Project. The Di Nardos took the position that the wording of the Mulligan Order (paragraph 2(o) of the Order) obliged the Zanettes to develop their lands in accordance with by-law 1-88 (60 foot frontages).

[24] On September 5, 2014, the Di Nardos advised the Committee of the Whole of their objection to the Zanettes’ development proposal and advising of the injunction proceedings.

[25] On October 14, 2014, the Di Nardos brought a motion for injunction and undertook to compensate for any costs.

[26] The injunction motion was not argued until January 12, 2015 before the Honourable Justice Bird. At that time, an interim injunction was granted restraining the Defendants from proceeding with the development of the 2 building lots of 50 feet within the Zanette Project.

[27] Justice Bird referred the matter to a further hearing which was heard before the Honourable Justice McIsaac on June 2, 2015, at which time the injunction was overturned.

[28] The Plaintiffs appealed the decision of Justice McIsaac to the Court of Appeal.

[29] The Court of Appeal ultimately upheld the decision of Justice McIsaac on October 26, 2015.

[30] At the time the interim injunction was granted by Justice Bird, the Plaintiffs gave an Undertaking to abide by any Order as to damages. When Justice McIsaac overturned the injunction he directed that a Reference be held to determine the damages which flowed as a result of the injunction and the trial of the issue of those damages was to be heard.

[31] The Di Nardos did not seek a stay of Justice McIsaac’s ruling. As of June 2, 2015, the injunction was no longer in place.

Analysis

1) Damages Related to the Injunction

[32] The damages to be awarded must be reasonably foreseeable at the time of the granting of the interlocutory injunction and they must be caused by ("naturally flow from") the injunction and not by something else: Delrina Corp. v. Triolet Systems Inc., 2002 11389 (ON CA), at para. 87.

[33] The Zanettes had obtained a Commitment for new financing in September 2014, based on a 5 lot development (50 foot lots). The refinancing would have allowed them to pay out their existing mortgages of $1,650,000 which were accruing interest at 9% and 13.7% in October 2014 with a new rate of 6.85% for an 18 month term.

[34] While they waited for the injunction to be argued, the Zanettes had to delay the refinancing. Given the injunction, the refinancing was not finalized until May 2015. At that point, the rate that could be obtained on the basis of the 4 lots was 7.35%. They assumed the rate of 7.35% for a period of 18 months.

[35] The Zanettes take the position that they have incurred damages from the injunction based on:

(a) Interest rate differentials as a result of their inability to refinance the property between October 2014 and May 2015 - ($30,289.58).

(b) Higher interest rates paid on eventual refinancing based on reduced lot numbers between May 2015 and November 2016 - ($22,252.50);

(c) Interest for carrying costs on the project due to one year of delays ($121,275);

(d) Lender’s amendment fees ($10,000).

[36] The Di Nardos do not seriously contest the damages associated with the interest rate differential or the Lender’s amendment fees. However, the Di Nardos argue that they should not be required to pay the costs associated with the delay in the development.

[37] The Di Nardos take the position that the delays in the development (the one year of delay) have nothing to do with the injunction. Many of the delays are clearly associated with the development/Council approval that have nothing to do with the injunction.

[38] According to the Di Nardos, the Zanettes have been voluntarily delaying the development for years. If anything, the Di Nardos argue that the Zanettes have been enriched by their delay because the price of the lots have increased approximately 8% per annum.

[39] I agree with the Di Nardos. Any “delay” in the development cannot be clearly associated with the injunction. In fact, it cannot be separated out from the Zanette’s development choices, and the natural delays caused by the circumstances surrounding the development.

[40] Accordingly, I will order damages in favour of the Zanettes for the interest rate differential and the amendment fees. I would also order the Di Nardos to pay the Zanettes any costs associated with having to revise their subdivision plans that can be directly associated with the injunction. I expect these fees to be nominal in nature.

[41] In summary, I award the Zanette’s the following:

(a) Interest rate differentials as a result of their inability to refinance the property between October 2014 and May 2015 - ($30,289.58);

(b) Higher interest rates paid on eventual refinancing based on reduced lot numbers between May 2015 and November 2016 - ($22,252.50);

(c) Lender’s amendment fees ($10,000).

(d) Any costs associated with having to revise their subdivision plans from 5 lots to 4 lots.

2) Damages Sought by Di Nardos on Summary Judgment Motion

[42] The total amount claimed by the Di Nardos is $70,352.48 for the invoices, $11,732 for interest on the invoices and $33,200 for interest on the letters of credit.

[43] This amount is less the $25,000 released to the Di Nardos on account.

[44] The Zanettes dispute the amounts claimed by the Di Nardos for a number of reasons.

Inclusion of Work Not Contemplated

[45] According to the Zanettes, the amounts claimed by the Plaintiffs far exceed the amounts which was agreed to by all parties, and the invoices filed include charges for work that goes well beyond the responsibilities contemplated in the Mulligan Order.

[46] On the basis of the Mulligan Order, the Zanettes agree that they are responsible for 40% of curbs and landscaping as well as the top coat of asphalt. In total, the Zanettes take the position that the amount owed is $28,172.61.

[47] According to the Zanettes, a number of the charges in the invoices claimed by the Plaintiffs relate to bringing the roads up to municipal standards, including storm and sanitary sewers, catch basins, weeping tiles, base granular, base curbs and base asphalt. According to the Zanettes, the Di Nardos were required to bring the roads up to municipal standards prior to the application of the final coat of asphalt. There is no basis for the Di Nardos to claim these amounts from the Zanettes.

[48] The Zanettes also take the position that if the Zanettes are required to pay for the final coat and curbs, the Di Nardos should be required to be responsible for any costs associated with refinishing the roads once the subdivision is completed. The Zanettes take the position that it was premature to complete the work. Given that the subdivision is still in process, damage to curbs and asphalt is inevitable.

[49] Finally, the Zanettes dispute the interest amounts claimed. The Di Nardos only did the road work in May 2014. The $25,000 which was set aside for such work was released by the Zanettes in June 2016. The Zanettes take the position that they only owe the interest on the $28,172.61 between May 2014 and June 2016 at the Courts of Justice Act rate (1%). After June 2016, they only owe interest at the rate of 1% on the difference of $3,172.61.

Letters of Credit

[50] The Zanettes also take the position that it is unclear what the actual interest rate is on the letters of credit between 2013 and 2014. Before providing any interest on the letters of credit, the Di Nardos should be required to demonstrate the actual costs associated with the financing.

[51] Moreover, the work on the roadway/curbs was finished in May 2014 and the letters of credit were released in September 2016. This demonstrates that the release of the letters of credit was not delayed only because of the road work. There were internal delays that would have been inevitable. According to the Zanettes, at best, the Di Nardos would be entitled to the interest costs between August 2013 (the anticipated date for the work to be completed) and May 2014 (the actual date of completion).

Amounts Owing

[52] I agree with much of the Zanettes position. The Di Nardos have calculated the interest on the amounts owing at a rate of 10%. They have also included amounts in the invoices that are not attributable to the top coat of asphalt or the curbs as contemplated in the Mulligan Order. I will not order these amounts be paid.

[53] The Zanettes will be required to pay the difference of $3,172.61 plus interest from June 2016 at the Courts of Justice Act rate. This amount reflects the costs related to the asphalt and curbs less the $25,000 already paid.

[54] The Zanettes are also ordered to pay interest on the $28,172.61 between May 2014 and June 2016 at the Courts of Justice Act rate (1%).

[55] The Di Nardos are entitled to the cost of holding the letters of credit between August 2013 (the anticipated date for the work) and May 2014 (the actual date of completion). I will allow them to produce the mortgage documentation to satisfy the exact amount owed. Interest on this amount at 1% will also be ordered from May 2014.

[56] Finally, each party will be responsible for repairing any damage to the top coat of asphalt and/or the curbs caused by their own work.

Costs

[57] I will receive cost submissions from the parties on both the trial and the summary judgment motion within 4 weeks of this order. The Plaintiffs to serve and file their costs within two weeks and the Defendants to serve and file their costs submissions within two weeks thereafter. Submissions to be no more than 3 pages double-spaced excluding any cost outline, case law and offers to settle.

Justice C.F. de Sa

Released: August 9, 2019