M & M Homes Inc. v. 2088556 Ontario Inc., 2019 ONSC 5403

NEWMARKET COURT FILE NO.: CV-14-120631-00

DATE: 20190927

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

Elliot Birnboim and Michael Crampton, for the Plaintiff

Robert Choi and Katie Sharp, for the Defendant, 2088556 Ontario Inc.

HEARD: May 23, 24, 27, 28, 29, 31, June 13, 14 and 25, 2019

JUDGMENT

HEALEY, j.:

Introduction

[1] This is an action by M & M Homes Inc. (“the plaintiff”) against 2088556 Ontario Inc. (“the defendant”) for specific performance of an Agreement of Purchase and Sale dated September 14, 2012 (the “APS”), with an abatement of the original purchase price of $2,150,000.

[2] The property to be purchased consists of vacant land in the Town of Georgina, Regional Municipality of York (the “Lands”). The parties’ contractual understanding was that the plaintiff intended to develop the Lands commercially. The plaintiff seeks an abatement because of the failure of the defendant to provide water, storm and sanitary services to the Lands’ property line prior to closing, as required by the APS.

[3] The Lands were severed by application of the defendant, approval from the Committee of Adjustment having been received in 2010. The defendant is building a residential subdivision, called the Cedar Ridge subdivision, on the remaining abutting lands situated to the north and east of the Lands. The intention of the parties is clear from the APS and their subsequent dealings; the defendant would do the necessary work and obtain the required approvals to bring municipal services through the Cedar Ridge subdivision and to the edge of the Lands, from which point it was the plaintiff’s responsibility to supply the infrastructure to service its commercial development. The installation of services within the subdivision was, I find, central to the viability of the plaintiff’s proposed commercial development on the Lands. It was for this reason that the APS provided that the defendant complete a minimum level of residential development as a condition to closing.

[4] The defendant is the only named defendant against whom the action proceeded to trial.

[5] There is a somewhat unusual history to this action which will not be repeated here, but which has been outlined in this court’s rulings made immediately prior to and during the trial (M & M Homes v. 2088556 Ontario Inc. et al., 2019 ONSC 3170; M & M Homes v. 2088556 Ontario Inc. et al., 2019 ONSC 3221; and M & M Homes v. 2088556 Ontario Inc. et al., 2019 ONSC 3361).

[6] One of the more peculiar aspects of this case, however, is the relationship between the pleadings and the position taken by the defendant in respect of them. This must be explained to understand the arguments raised by the defendant, this court’s disposition of those arguments and, ultimately, the reason why there is only one triable issue that requires this court’s determination.

The Pleadings

[7] The dates of the pleadings are significant. The action began by Notice of Action dated November 5, 2014, with the Claim being issued on December 3, 2014. The Statement of Defence and Counterclaim is dated September 7, 2016. The indulgence of accepting a late pleading was made by the plaintiff because, in the intervening period, the defendant confirmed in writing that it was still attempting to complete its servicing obligations under the APS.

[8] Like the Statement of Claim, the Statement of Defence and Counterclaim also seeks specific performance.

[9] The defendant admits that the plaintiff is entitled to specific performance in paragraph 1 of the Statement of Defence and Counterclaim. It alleges that due to 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 targeted dates, the defendant’s pleading alleges that the parties could not agree on the terms of the ninth extension for potential closing dates. The defendant also alleges that the plaintiff did not engage in further extension discussions, and thereby breached its obligation to extend the closing date. At paragraph 6, the defendant pleads that it seeks to close on the terms and conditions of the APS, with all necessary modifications to the closing dates. It further pleads that it was ready, willing and able to close on the terms of the agreement on a new projected closing date, and that the plaintiff, in breach of the APS and in bad faith, has refused and/or failed to proceed with the APS and prepare for the eventual closing.

[10] I find that it is plain and obvious that the Statement of Defence:

(a) admits that the servicing has not been completed either in accordance with the APS or the terms of the extending agreements;

(b) alleges that construction delays are the cause;

(c) alleges that the plaintiff has an obligation to extend the closing dates;

(d) asserts that the defendant is willing to provide the servicing and close the deal once the plaintiff complies with its alleged obligation to extend the closing date; and

(e) admits that the plaintiff is entitled to specific performance of the APS.

[11] By way of Counterclaim, the defendant relies solely on the allegations pled in its Defence to seek the following relief:

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

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

(c) specific performance of the APS, or in the alternative, damages in lieu of specific performance;

(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 APS.

[12] At trial the defendant attempted to resile from the Statement of Defence and Counterclaim. On the second day of trial it brought a motion to amend, which was dismissed (M & M Homes v. 2088556 Ontario Inc. et al., 2019 ONSC 3361). The proposed amended pleading would have had the defendant withdraw each of its admissions. It would withdraw the allegation that the plaintiff breached its obligations to extend the milestones for installing services and the potential closing dates. There was to be a new paragraph that read: “the APS terminated pursuant to its terms, and M&M is not entitled to specific performance”.

[13] In the years preceding the trial date, the defendant had never suggested to the plaintiff that the servicing has been completed, or is close to being completed. The defendant failed to answer the plaintiff’s Demand for Particulars, served September 27, 2016, which specifically dealt with the extent of servicing. And after the plaintiff’s abatement expert was retained, his requests for documentation that would show the status of the servicing work went unanswered. Perplexingly, on the second or third day of trial, the defendant’s counsel stated his intention to lead evidence that would prove that the servicing was either complete or substantially complete. While at odds with his client’s pleading, those comments raised a pleasing prospect for both court and the plaintiff – there would be little need to hold a trial, and the plaintiff would get what it has wanted throughout – a completed bargain and delivery of serviced land.

[14] But that was not to be. The defendant does not want to complete the deal. Mr. Choi, on behalf of the defendant, raised multiple arguments why this court should not award specific performance to the plaintiff despite the admissions in the Statement of Defence and Counterclaim. I will deal with these arguments after outlining the salient terms of the APS.

The Terms of the APS and Pre-litigation Dealings Between the Parties

[15] The APS is dated September 14, 2012. Alan Lam signed the APS in his capacity as president of the defendant and Samantha Mercado in her capacity as an officer of the plaintiff. As pled by both parties, I find that the APS is a valid and binding agreement.

[16] It is uncontroverted that the parties agreed to eight amendments of the APS to extend timelines, as follows:

(a) on January 10, 2013, extending the expiry of the economic review period and the review period, as defined in the APS to January 31, 2013;

(b) on January 28, 2013, extending the expiry of the economic review period and the review period to March 29, 2013;

(c) on March 27, 2013, whereby the defendant agreed to waive the economic review period altogether;

(d) on March 29, 2013, whereby the plaintiff agreed to waive the review period altogether;

(e) on June 10, 2014, extending the latest date of closing to July 14, 2014;

(f) on July 10, 2014 extending the latest date of closing to August 15, 2014;

(g) on August 12, 2014, extending the latest date of closing to September 15, 2014;

(h) on September 15, 2014, extending the latest day of closing to September 22, 2014;

(i) on September 22, 2014, extending the latest day of closing to October 3, 2014; and

(j) on October 4, 2014, extending the latest day of closing to October 10, 2014.

[17] The specifics of the agreement are more particularly set out in Schedule C to the APS. The parties mutually complied with its terms from the outset. As can be seen from the above timeline, after some extensions the defendant waived the condition allowing for its economic review period. Lawrence Zimmerman was the real estate solicitor who acted for the plaintiff. He explained that this economic review period was a condition inserted for the benefit of the defendant, because it would be taking on a considerable financial obligation to service the Lands. The economic review period allowed the defendant to ensure that provision of the services to the property line would be economically feasible. Ultimately, the defendant provided a waiver of the economic review condition on March 27, 2013, and the plaintiff provided its waiver of its review condition on March 29, 2013.

[18] Throughout, the plaintiff complied with the deposit structure set out in the agreement. By April 2, 2013 the real estate solicitor acting for the defendant, Gary Harris, had received trust funds from the plaintiff totaling $241,666.66. These funds remain in the trust account of Harris Sheaffer, LLP.

[19] For the purposes of this action, there are three provisions of the APS of particular significance. The first is paragraph 5 of Schedule C, as follows:

The closing of this transaction shall take place 30 days after the date upon which water, storm and sanitary services have been installed by the Vendor at the boundary of the Property and also to twenty eight percent (28%) of the building lots on the Plan but in no event later than June 12, 2014 failing which this Agreement shall thereupon become null and void and the Deposit or such portion thereof that has been paid to such date and the Extension Deposit shall be returned to the Purchaser with interest as herein provided and without deduction save and except as provided for herein and the Vendor and the Purchaser shall not be liable for any costs or damages to the other. The Vendor covenants to advise the Purchaser within 90 days after its commencement of the installation of such services and provide confirmation of same from the Consulting Engineer. If the closing date is on a day on which the Land Registry Office is not open, the closing date shall be the next day following on which the Land Registry Office is open.

[20] The second important provision of the APS is paragraph 6 of Schedule C. Paragraph 6 contains provisions which I find were inserted entirely for the benefit of the plaintiff. It provides:

In the event that the Vendor has not installed water, storm and sanitary services (the “Services”) as provided for in this Agreement to a point on a boundary of the Property by December 31, 2013 the purchaser shall have the following option:

(a) to terminate this Agreement by written notice to the Vendor on or before January 5, 2014 and in such event the Purchaser shall be entitled to a return of the Deposit or such portion thereof that has been paid to such date and the Extension Deposit with interest thereon as provided for herein and without deduction save and except as provided for herein; or

(b) to extend the December 31, 2013 date to April 30, 2014 by written notice to the Vendor on or before January 5, 2014, to allow the Vendor to complete the Services. In the event of the extension contemplated herein and the Vendor still has not completed the Services by April 30, 2014 the Purchaser shall have the option by giving written notice to the Vendor on or before May 5, 2014 to terminate this Agreement and in such event to be entitled to a return of the Deposit and Extension Deposit as set out in subsection 6 (a) hereof.

[21] Mr. Harris testified that paragraph 6 of the APS was drafted with the intent of giving the purchaser the opportunity to terminate the transaction if dissatisfied with how things were proceeding.

[22] It is also uncontroverted that the services were not completed in compliance with paragraph 5, as amended, by October 10, 2014. However, the parties continued to negotiate about the terms of the APS beyond October 10, 2014. Draft amending agreements exist, but they were never executed by the parties. The evidence of Mr. Zimmerman and Mr. Harris together leads me to find that the last proposed agreement was drafted by Mr. Harris before October 10, 2014, delivered to Mr. Zimmerman, revised by Mr. Zimmerman and delivered back to Mr. Harris on October 20, 2014, and thereafter was never responded to by Mr. Harris.

[23] The third term of the APS that has significance is paragraph 17 of Schedule C, which originally read as follows:

The parties acknowledge that there currently exists a “hold” on the zoning of the Property. The Vendor shall, prior to closing, obtain a written confirmation from the Municipality’s Director of the Engineering and Public Works Department that adequate servicing is available for the appropriate development of the Property. In the event the aforesaid confirmation is not in place, the Purchaser may extend the closing without payment of a further deposit for such extension, until such confirmation is in place but in no event for more than five (5) months, or if it appears unlikely that such confirmation would be within the said five (5) months, the Purchaser may either terminate this Agreement on written notice to the Vendor and have the Deposit and the Extension Deposit returned with interest thereon as provided for herein and without deduction save and except as provided for herein or proceed to closing with a mutually agreed between the Vendor and Purchaser abatement of the purchase price on the decreased value of the Property and its development potential.

[24] By amending agreement made on January 28, 2013, paragraph 17 of the APS was amended to read:

The parties to this Agreement acknowledge that there currently exists a “holding zone” by-law provision on the Property. It is further acknowledged by the parties to this Agreement that before the holding zone symbol is removed on the Property, a site plan approval is required, and that this site plan approval will not be forthcoming until after the closing of the subject transaction (i.e. at time of closing the holding zone provision will still be in place). The Vendor covenants and agrees, prior to closing, to obtain a written confirmation from the Municipality’s Operations and Engineering Department that adequate servicing is available to the Property for the appropriate development of the Property. Adequate servicing shall mean the provision of municipal services as required by the Municipality as a prerequisite to obtaining a building permit. In the event the aforesaid confirmation is not in place, the Purchaser may extend the closing without payment of a further deposit for such extension, until such confirmation is in place but in no event for more than five (5) months, or if it appears unlikely that such confirmation would be within the said five (5) months, the Purchaser may either terminate this Agreement on written notice to the Vendor and have the Deposit and the Extension Deposit returned with interest thereon as provided for herein and without deduction save and except as provided for herein or proceed to closing with a mutually agreed between the Vendor and Purchaser abatement of the purchase price on the decreased value of the Property and its development potential.

[25] No further amendments were ever made to paragraph 17 of the APS. Mr. Zimmerman testified that the amendment was required to paragraph 17 because of the need for site plan approval between the defendant and the Municipality. Mr. Harris confirmed that paragraph 17 of the APS relates to a zoning hold on the Lands; its purpose was to give the plaintiff a right to extend the date if conditions were not met and was inserted entirely for the benefit of the plaintiff.

[26] Mr. Zimmerman testified that there were certain irregularities that occurred as the transaction progressed. For example, Mr. Harris refused to grant authorization to Mr. Zimmerman to obtain information about the Lands from various regulatory authorities and from the Town of Georgina. Mr. Zimmerman testified that this is normally standard practice. Further, Mr. Harris never answered the requisitions requested in Mr. Zimmerman’s correspondence sent on July 30, 2013. In that requisition letter Mr. Zimmerman asked for, among other things, conclusive evidence of compliance with s. 5 of Schedule C of the APS, and written confirmation from the Municipality’s Director of Engineering and Public Works Department that adequate servicing is available for the appropriate development of the Lands in accordance with s. 17 of Schedule C.

[27] The plaintiff indicated its continued willingness to close the transaction in correspondence delivered by Mr. Zimmerman to the defendant’s former litigation counsel, Mr. Feingold, on February 5, 2015, even at the original purchase price and waiving the cost incurred due to the delays. Mr. Zimmerman again sought the confirmations required by ss. 5 and 17 of the APS. In the closing paragraph of that correspondence, he wrote:

I have no doubt that, if your client has indeed completed the work required, I will be able to obtain instructions to close and we can agree on suitable terms to this effect. We remain prepared to discuss closing with an abatement if the work remains incomplete, but, of course, the key to resolving this matter will be proper evidence of the state of the required work. We look forward to such evidence so that we can promptly discuss resolution of this matter.

[28] Mr. Feingold responded by letter dated February 25, 2015, indicating inter alia that the defendant was willing to “reinstate” the original APS, amended in accordance with the amending agreement issued by Mr. Harris in October 2014. In that correspondence Mr. Feingold stated that the defendant had advised that the construction work necessary to provide the required installation of water, storm and sanitary services has been completed and written notice that such work had been completed was being obtained from the consulting engineer.

[29] Mr. Zimmerman testified that he could not recall ever receiving any evidence as to the state of completeness of the servicing work, nor did he ever receive such written notice from the consulting engineer.

[30] Mr. Zimmerman confirmed that the plaintiff never tendered on the defendant. Instead, in October, 2014, the defendant’s solicitor sought to terminate the transaction and purported to return the deposit funds, which were rejected by Mr. Zimmerman.

[31] Finally, Mr. Zimmerman confirmed that the plaintiff contemplated that a different company would take title to the property at the time of closing. It was expected that title would be taken in the name of Even Money Holdings Limited. For that reason, some of his correspondence refers to Even Money Holdings Limited as being the purchaser of the subject property. Mr. Harris testified that it would not have been problematic for a related company to take title at the time of closing.

The Issues and Arguments Raised by the Defendant

Withdrawal of admissions

[32] The defendant does not concede that its pleading contains admissions. However, Mr. Choi argues that if the contents of the Statement of Defence and Counterclaim are deemed to admit that the plaintiff is entitled to specific performance, the defendant ought to be permitted to withdraw any such admissions.

[33] When this court heard the defendant’s motion to amend its pleading, the defendant was provided with an opportunity to make the same submissions that Mr. Choi attempts to re-argue in his written closing submissions. The motion was dismissed because the defendant did not provide enough evidence to meet the test that applies to the withdrawal of pleadings pursuant to r. 51.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The court has already made its ruling, and no direct or collateral attack on that ruling can be permitted, particularly where, at trial, the defendant provided no further evidence that could satisfy the test.

Specific performance cannot be granted because the defendant no longer owns the property

[34] The defendant’s position is that it is not able to convey title to the plaintiff even if ordered to do so because it is no longer the registered owner of the property. The property was transferred by the defendant to CRC Sutton Inc. (“CRC”) in December, 2014.

[35] This argument is perplexing given that ownership of the property did not present itself to the defendant as being an impediment to specific performance at the time that it filed its pleading, which was almost two years after the transfer to CRC.

[36] The defendant argued that the reason for the transfer to CRC was to ensure compliance with the Planning Act, R.S.O. 1990, c. P.13 and land use controls following the severance. The defendant submits that Mr. Harris testified in support of such argument. However, Mr. Harris’ actual evidence was that a transfer had to be carried out to effect the severance, but that severance could be effected by the defendant conveying the property to itself, or to another entity. The downside to the defendant of transferring the severed portion to itself was that a potential issue could arise down the road. For example, it could not mortgage the retained lands without getting the consent of the Committee of Adjustment.

[37] Similarly, Mr. Zimmerman testified that such a transfer to CRC was not necessary and was not a required part of obtaining a severance of the property. His evidence was that, in the normal course, following severance an owner will convey the separate property to itself, even as the common owner of abutting lands. This does not offend the Planning Act.

[38] The evidence bears out that subsequent encumbrance was indeed the basis for the transfer to CRC.

[39] The parcel register for the Lands shows that as of September 10, 2014 the registered mortgages totalled $1.53 million. Shortly after commencing this litigation, on November 13, 2014 the plaintiff obtained an order from Vallee, J. granting it leave to register a Certificate of Pending Litigation. The defendant never moved to set aside or appeal the order of Vallee, J.

[40] Evidence heard at this trial established that CRC was incorporated on December 17, 2014 and that Alan Lam is CRC’s director and its President, Secretary and Treasurer. Alan Lam is also the principal of the defendant. The defendant transferred the subject property to CRC on December 29, 2014 for the sum of $2.00. Shortly thereafter, CRC registered charges against the property totalling $5.51 million.

[41] In its Statement of Claim the plaintiff claims an interlocutory and permanent injunction restraining the defendant or any party acting on its behalf from dealing with the subject property in a manner inconsistent with the defendant’s obligations or the plaintiff’s rights pursuant to the APS. Despite its knowledge of this claim and the order of Vallee, J., the defendant mortgaged the Lands.

[42] On March 20, 2018 the plaintiff issued a Notice of the Application in Toronto as action CV-18-594318 (the “Toronto application”) to address these subsequent encumbrances registered against the Lands. All but one of the respondents in the Toronto application recognize the plaintiff’s priority. That mortgagee has commenced power of sale proceedings. The plaintiff obtained a temporary injunction in that proceeding on June 29, 2019 to prevent further steps from being taken. A determination of the plaintiff’s rights in this proceeding is required before the issues may proceed in the Toronto application, as directed by Copeland, J. by order dated August 2, 2018.

[43] The defendant submits that it is not equitable for this court to disentitle CRC of its property rights without first giving CRC an opportunity to be heard in this proceeding.

[44] The obvious answer to this is that, having a principal common to the defendant, CRC’s directing mind is fully aware of this litigation. If CRC was concerned about having a voice in this litigation, it has had ample time since 2014 to begin its own claim, and the defendant ample time to commence a third party claim if it thought it was warranted. However, given the defendant’s own lack of participation in this proceeding, and the fact that CRC has not filed a Notice of Appearance or participated in any of the hearings in the Toronto Application, this is a submission with no real substance.

[45] This is not a situation involving an innocent arm’s length purchaser. Given the defendant’s pleading and admissions made therein, registered ownership of the Lands is not a legitimate impediment to the granting of specific performance.

[46] In these circumstances, if specific performance is granted it is available to the court to circumvent the defendant’s participation by making an order effectively vesting ownership of the Lands in the plaintiff: Norlund Family Retreat Inc. v. Plominski, 2014 ONCA 444, 309 C.C.C. (3d) 535; Paterson Veterinary Professional Corporation v. Stilton Corp. Ltd., 2018 ONSC 4952; and McLaughlin v. Canadian Service Management Inc., 2018 ONSC 1937, 96 R.P.R. (5th) 186, rev’d on other grounds 2018 ONCA 799.

The Statement of Defence and Counterclaim contain inconsistent pleadings

[47] The defendant also argues that its pleading contains inconsistent claims for relief, one of which is a denial of the plaintiff’s entitlement to specific performance. Accordingly, the plaintiff has had sufficient notice that its entitlement to specific performance would be challenged at trial.

[48] This argument rests entirely on the pleading itself, as there is no evidence that the defendant ever notified the plaintiff of its position prior to trial. The defendant has been spectacularly inattentive to this litigation. Specifically, it failed to respond to requests for pretrial dates, failed to attend at the first Central East Trial Scheduling Court on February 22, 2018 (a step which was only necessary so that a pretrial date could be set), failed to attend the pretrial, failed to pay the costs ordered on that date until a deadline was imposed by this court during the trial, failed to respond to a Request to Admit, and failed to abide by the Order of Justice de Sa of May 7, 2018 to appoint a new counsel of record within 30 days or obtain an order granting it to be self-represented. Mr. Choi first entered the scene the day before the trial began, as the defendant’s agent, to seek an adjournment. When the defendant was unsuccessful, Mr. Choi was retained as trial counsel. It was only when the defendant sought to serve and file an amended pleading on the first day of trial, without leave, that the plaintiff’s counsel became aware that his client’s entitlement to specific performance was being contested. In this respect, the present pleadings are distinguishable from the case presented in Royal Bank v. Société Générale (Canada), [2007] O.J. No. 2262 (Ont. S.C.), cited in Guergis v. Novak, 2013 ONCA 449, 116 O.R. (3d) 280because in Royal Bank the motion judge specifically held that the defendants knew the precise allegations against them, in part, due to the long history of the proceedings.

[49] However, the fact is that the Statement of Defence and Counterclaim does not contain an inconsistent pleading that the defendant should be permitted to pursue.

[50] Part of the defendant’s argument rests on paragraph 13 of the Statement of Claim, which reads:

13. The closing of the transaction was to take place 30 days after the date upon which the Services had been installed by 208 Ontario, but in no event was the closing to take place later than June 12, 2014, failing which the Agreement would become null and void and the Deposit, as set out below, returned to MM.

[51] The defendant argues that this is an implicit admission by the plaintiff that it is not entitled to specific performance in the face of a deal that was at an end. This argument will be dealt with further on; suffice it to say that that argument is unsupportable on a reading of the pleadings as a whole.

[52] Thereafter, the defendant’s argument rests on paragraph 11(e) of its Counterclaim. Paragraph 11 provides, in part:

11. 208 claims against the plaintiff/defendant by counterclaim M&M:

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

(b) An order rectifying the APS to revise certain milestone dates (including a closing date) to reflect the current construction schedule of the Property;

(c) Specific performance of the APS or, in the alternative, damages in lieu of specific performance of the APS;

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

(e) In the further alternative, a declaration that M&M is not entitled to specific performance of the APS.

[53] At paragraph 12 of its Counterclaim, the defendant pleads that it “repeats and relies upon the allegations contained in the statement of defence above in support of its counterclaim”. As previously stated, the Statement of Defence unequivocally and unambiguously seeks specific performance.

[54] The defendant submits that it has never elected to pursue only specific performance at the expense of removing its right to claim, in the alternative, that the APS became null and void and that specific performance should not be granted. The defendant says it has always maintained its alternative pleading for a declaration that the plaintiff is not entitled to specific performance. Inconsistent pleadings are specifically permitted by r. 25.06(4) of the Rules of Civil Procedure, and thus, the defendant argues, it should be permitted to advance its alternative argument.

[55] This argument is unsustainable. The pleading contains no material facts upon which such alternate relief could be based. Subrule 25.06(1) provides that pleadings must contain a concise statement of the material facts. Second, pleading in the alternative is not possible in this situation, as it is not possible to admit certain facts in the Statement of Defence, and then in the alternative plead a different set of facts in the Counterclaim (hypothetically speaking, as no alternative facts were pled); to do so would require a withdrawal of the admission. As argued by the plaintiff’s counsel, to hold otherwise would defeat the purpose of pleadings, as the defendant’s position would be impossible to determine on the face of its pleading. In this case, when the defendant’s pleading stipulates to the plaintiff’s plea as to the right to and elements of specific performance, that becomes binding as a formal admission and the alternate plea irrelevant.

[56] I adopt the reasoning from Kim v. Trump, 2014 ONSC 2129, 26 B.L.R. (5th) 314 at paras. 126-128, which explains why the defendant cannot pursue the inconsistent rights of specific performance, and disentitlement to specific performance based on a breach, for which the defendant also appears to be seeking damages, all in one pleading:

126. In United Australia Ltd. v. Barclays Bank Ltd. (1940), [1941] A.C. 1 (U.K. H.L.), at p. 30, Lord Atkin stated the general principle as follows:

[I]f a man is entitled to one of two inconsistent rights it is fitting that when with full knowledge he has done an unequivocal act showing that he has chosen the one he cannot afterwards pursue the other, which after the first choice is by reason of the inconsistency no longer his to choose.

127. One “obvious case” of inconsistent rights mentioned by Lord Atkin, at p. 30, was “the right of a landlord where forfeiture of a lease has been committed to exact the forfeiture or to treat the former tenant as still tenant”. In the contractual context, the issue of election of inconsistent rights arises when it is open to a party to either affirm or disaffirm a contract. Despite the ability to make an inconsistent alternative pleading, from time to time a party will be found to have given up his right to specific performance by electing to disaffirm the contract, generally by “accepting” a repudiatory breach and suing for damages, although the same principle would apply where the contract was disaffirmed by means of a claim for rescission based on misrepresentations.

128. In the context of the innocent party’s election following a repudiatory breach, Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf, 4th ed. (Toronto: Canada Law Book, 2012), at para. 10.750, the rule is stated as follows:

The accepted position is that subsequent insistence upon specific performance is inconsistent with the acceptance of the promisor’s breach. The effect of acceptance, or the assertion of a damages claim, is to discharge both parties from further performance, and hence, specific performance is no longer possible.

[57] Conversely, where, as here, the defendant has specifically advanced the position that specific performance should be granted to the plaintiff, it may not later in its pleading advance the inconsistent position that an alleged breach by the plaintiff disentitles it to specific performance, and itself to damages.

The defendant cannot have made the admission that the plaintiff is entitled to specific performance, as the plaintiff did not plead the necessary material facts

[58] This argument goes like this: in contravention of r. 25.06(1), the plaintiff did not plead the necessary material facts that would entitle it to an order for specific performance, and thus the defendant could not make a factual admission that the plaintiff was entitled to specific performance of the APS. It is submitted that the material facts necessary for a claim of specific performance must include those going to the uniqueness of the property and the insufficiency of monetary damages: Semelhago v. Paramedevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415, 136 D.L.R. (4th) 1. Additionally, the defendant argues that entitlement to specific performance is a legal conclusion that can only be determined based on the facts in evidence, and therefore does not fall within the definition of an admission.

[59] While Mr. Choi cites three cases in support of his argument that the material facts necessary for a claim of specific performance must include facts relating to the uniqueness of the property and insufficiency of damages, none of the cases cited stand for that proposition: Northfield (Waterloo) Developments Inc. v North American Acquisition Corp., 2015 ONSC 7352; Lam v. Chen, 2019 ONSC 2510; and Semelhago.

[60] The factual matrix necessary to establish entitlement to the equitable remedy of specific performance is well-established in our law – it requires an allegation of breach of contract. The Statement of Claim pleads the material facts supporting breach of contract, for which specific performance is one redress. The defendant has provided no authority for its argument that one must go further to recite how the property is unique and why damages would be insufficient. To do so would, in my view, offend r. 25.06(1) by delving into a description of the evidence.

[61] The defendant also argues that a counterclaim for specific performance cannot be considered an admission of specific performance, relying on Vend-All Marketing Inc. v. Silverberg Estate, 2015 MBCA 10, 315 Man. R. (2d) 84. That case is patently different from the factual scenario before this court. The defendant in Silverberg Estate denied the plaintiff’s claim for specific performance in its statement of defence, and the court found that “one could not suggest or find anything in the statement of defence and counterclaim of [the defendant] which could be taken as a concession or acknowledgement of the truth of some matter alleged by [the plaintiff] in its statement of claim” (at para. 65). The Manitoba Court of Appeal held that the contents of the statement of defence and counterclaim were not admissions contemplated under Queen’s Bench Rule 51.06(2). Again, this is distinguishable from this case, in which this court has already made a ruling that admissions were made by the defendant in its pleading that engaged Ontario’s comparable rule, r. 51.05.

The APS is null and void

[62] This defence was not pled.

[63] Despite the clear position in the defendant’s pleading, Mr. Choi argued that the APS had terminated pursuant to s. 5 because the deadline of October 10, 2014 had arrived and the terms of a further amending agreement had not been settled by the parties. Section 5 stipulates that past that deadline, the APS became null and void and the parties are not liable for any costs or damages to the other. Again, he argues that paragraph 13 of the Statement of Claim contains this admission. He submits that by the time the Statement of Claim was issued, the APS had already become null and void and so specific performance was not available. The only remedy available to the plaintiff at that point was damages, which have not been claimed. Again, this begs the question why the defendant would plead in 2016 that it wanted specific performance of an agreement that had supposedly “died”.

[64] In support of its position, the defendant relies on St. Thomas Subdividers Ltd. v. 639373 Ontario Ltd., 1996 CanLII 575 (ON CA), 2 R.P.R. (3d) 133, 91 O.A.C. 193 (Ont. C.A.), a case which Mr. Choi suggests has similar facts. St. Thomas involved an agreement of purchase and sale of subdivided lots. The agreement contained a rescission clause that provided that if the vendor did not register the plan of subdivision by a stipulated date, which the court found had been extended to December 31, 1987, the agreement would become null and void. After the vendor failed to obtain registration of the plan by that date, the vendor informed the purchaser that the agreement was null and void because the agreement was not extended, and returned the purchaser’s deposit. The Court of Appeal found that the agreement was incapable of specific performance in the absence of plan registration, or the certain ability, through the exercise of best efforts, to obtain plan registration, by December 31, 1987. Accordingly, the purchaser’s remedy was limited to a claim for damages.

[65] This is a different case than the one before me. First, in St. Thomas there was no provision for a further extension after December 31, 1987. Such is not the case in this APS, as provided for in s. 6 of Schedule C. Second, there was no evidence in St. Thomas that the parties continued to negotiate past the December 31, 1987 deadline, contrary to the evidence that exists in this case about the drafting of a further amending agreement by Mr. Harris, and its review by Mr. Zimmerman, after October 10, 2014. Sam Mercado also testified that she and Alan Lam continued to discuss the terms of this amendment, as set out in an email that she sent to him on October 20, 2014. No contradictory evidence was provided by Mr. Lam, who chose not to testify at trial. Third, there was no waiver of conditions by the defendant in St. Thomas. Here, s. 3 of Schedule C gave the defendant the opportunity to do its own economic due diligence on the transaction, including its obligations to deliver the property “serviced”. The defendant waived that condition, such that it became obliged to service the property pursuant to the terms of the APS. Most importantly, however, there was no admission in the pleadings by the defendant in St. Thomas that specific performance was the desired remedy.

[66] Not only was the defendant in breach by failing to install the services, but the defendant denied the plaintiff the right to extend the transaction by treating the APS at an end and attempting to return the deposit, relying on its own conduct to escape the effect of the contract. A party cannot rely on its own conduct to resile from an agreement: 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, 80 C.L.R. (4th) 297, at paras. 133-134; and Mason v. Friedman, 1958 CanLII 7 (SCC), [1958] S.C.R. 483, 14 D.L.R. (2d) 529, at pp. 486-487.

Policy rationales weigh in the defendant’s favour

[67] The defendant submits that policy rationales weigh in favour of allowing it to argue that specific performance is not available in these circumstances, as the defendant would be deprived of its fundamental right to a fair trial if not permitted to advance its argument.

[68] The defendant has not pointed to any policy reasons why it should be permitted to challenge the plaintiff’s right to specific performance. This court has nonetheless allowed the defendant to make its arguments, none of which have been successful. Ultimately, each of the arguments raised by the defendant amounts to a collateral attack on the dismissal of its motion to amend its pleading.

[69] In Silverberg Estate, at para. 55, the Manitoba Court of Appeal quoted from Black’s Law Dictionary, 6th ed. (St. Paul: West Publishing Co., 1990) to define and describe the effect of an admission in a pleading:

… The acknowledgement or recognition by one party of the truth of some matter alleged by the opposite party, made in a pleading, the effect of which is to narrow the area of facts or allegations required to be proved by evidence…

[70] There is clearly a sound policy rationale in holding litigants to their pleadings. In National Trust Co. v. Furbacher, [1994] O. J. No. 2385 (Div. Ct.), at para. 9, the court stated that the function of pleadings is: (a) to define with clarity and precision the question in controversy between the litigants; (b) to give fair notice of the precise case that is required to be met and the precise remedies sought; and (c) to assist the court in its investigations of the truth and the allegations made. Once a proceeding has been conducted in the face of an admission, as this one has been, it would be manifestly unjust to disregard these principles just because the defendant no longer likes the prospect of being held to its bargain.

[71] The law is that a court is bound to act on a formal admission, and evidence inconsistent with the pleading may not be adduced: Urquhart v. Butterfield (1888), 37 Ch. D. 357, [1887] 12 WLUK 44, at 369 and 374; Sidney N. Lederman, Alan W. Bryant & Michelle K. Fuerst, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 3rd ed. (Toronto: Butterworths, 2009), at p. 1263.

[72] There is no reason in this case to depart from these principles.

Should specific performance be granted?

[73] This relief should be granted, for two reasons. First, the defendant has admitted that the plaintiff is entitled to such relief and seeks it itself. As such, the usual requirement to call evidence to prove any such entitlement is eliminated.

[74] Second, even if that was not the case, the evidence does establish that specific performance is a remedy that should be granted in this case.

[75] Sam Mercado testified that the property was intended for commercial development, as it was located next to the defendant’s planned residential development. For that reason, paragraph 5 required that servicing be completed to 20% of the building lots on the Plan prior to closing. The existence of the abutting residential development and provision of services to those lots was significant because it enabled such services to be more easily brought to the lot line of the subject property, and the plaintiff had less experience with installing services outside of the property boundaries. Ms. Mercado had already exchanged letters of intent with favourable “AAA” tenants such as LCBO, Tim Horton’s and BMO. The plaintiff expended considerable effort not only securing these potential tenants, but in undertaking preliminary engineering investigations. There is no evidence that a substitute for this land is available within the Town of Georgina or nearby. These factors have been held to give rise to a finding of uniqueness: Northfield (Waterloo) Development, at paras. 36-40. In Northfield (Waterloo) Development, at paras. 43-46, it was noted that where a purchaser invests significant time and money towards the development of a property, damages may not provide adequate compensation.

[76] There was no evidence that the plaintiff entered the APS to “flip” the property. That takes this case out of the scenario in which courts have determined that damages can be easily calculated in monetary terms. Even though the plaintiff may have been considering taking title in the name of another related corporate entity, a fact which was contemplated in the APS, the evidence of Sam Mercado was unchallenged in establishing that the property was being purchased as an income-producing investment.

[77] There was also evidence that the defendant may be unable to satisfy a damage award. I take into account the nominal consideration of the transfer to CRC and the subsequent substantial mortgaging. I also take into account the evidence of the defendant’s planner, Michael Smith, who testified that three to four months would pass in which he would not get paid for his planning work on the defendant’s development, and that the defendant has now owed him money for several months. It also took this court’s intervention for the defendant to pay costs of $5,000 that it had been ordered to pay forthwith on August 14, 2018.

[78] Again, one must keep in mind that much of this evidence was given incidentally, and undoubtedly would have been explored more robustly had the formal admission not been made from the outset. But it is sufficient to satisfy me that damages would likely be an inadequate remedy, as I infer from all of the above that any such judgment is likely unrecoverable from the defendant.

The Issue

[79] For the foregoing reasons, abatement is the only issue for this court’s determination.

Abatement

[80] Again, one of the defendant’s arguments in defence of abatement is that the installation of the services has been completed.

[81] The defendant was permitted to lead evidence regarding the state of servicing to the lands even though the defendant had never amended its Defence to assert that it had fulfilled the conditions in s. 17 of Schedule C and was ready to close. It was hoped that evidence about the present state of the services would be relevant to the issue of abatement. Unfortunately, no cogent and reliable evidence was forthcoming in this regard from the defendant’s witnesses.

[82] Remarkably, neither the engineer whose firm was retained by the defendant throughout the project, Tas Candaras, nor the responsible Candaras engineer, Massimo Soscia, was called by the defendant to testify. Mr. Candaras was originally on the witness list that this court ordered the defendant to provide at the outset of the trial, and his absence was never adequately explained. Don Roughly, the project manager, did not testify. Alan Lam did not testify. If any of these individuals had evidence that could prove that the servicing is now complete to the boundaries of the Lands and that the requirements of s. 17 have been fulfilled, the trial would have been an opportune time to produce it.

[83] The defendant sought to establish completion through the evidence of Michael Smith, the defendant’s planner, and Michael Baskerville, the former Manager of Engineering for the Town of Georgina. Neither of these witnesses testified that servicing was fully complete, and neither produced any documents that could allow this court to draw the firm conclusion that the defendant has now fulfilled the requirement to service the Lands. Neither produced the written confirmation referenced in s. 17 of Schedule C of the APS.

[84] On the final day of trial, the defendant called Lyle Jewell, from T. Candaras & Associates, who was not on the list of witnesses produced by the defendant. He learned that he was being asked to attend the trial only a few days earlier, and testified that the responsible engineers from his office were “at the office”. Mr. Jewell was a technical site supervisor for the Cedar Ridge subdivision. Although Mr. Jewell expressed his view that servicing was complete, he provided no reliable evidence to establish such fact, and did not produce the written confirmation referenced in s. 17 of Schedule C of the APS.

[85] The evidence of these witnesses established that some work has been done on the underground services in the Cedar Ridge subdivision and that such service connections might even now be installed on the Lands. Mr. Baskerville spoke about inspection records, a video inspection, a detailed report that was to be submitted to A.M. Candaras, engineering reports and progress reports. None of these documents were tendered during this trial. But Mr. Baskerville testified that he went to the site the day before he was to testify at trial and saw that an inspection crew was there videotaping the system again. Before then, he had last been on site in the summer of 2017. The fact that videotaping of the pipes was still going on during the trial suggests that the work necessary to satisfy the defendant’s obligations under the APS continues. Unless the connections are on the Lands, approved and working for the plaintiff’s use, it does not matter whether completion is at 1% or 99%. Only 100% will satisfy the terms of the APS.

[86] Throughout the trial, Mr. Birnboim raised the issue of the defendant’s failure to call the best evidence on the issue of servicing. Despite being given many opportunities to produce direct documentary proof, or the evidence of an individual who could reliably speak to such proof, the documentary evidence that the defendant asked this court to rely on was out of date. Mr. Baskerville testified that certain documentation would necessarily exist upon completion of servicing, including final engineering submissions to the Town and confirmatory letters from the Town. None of this was produced. I draw an adverse inference from this lack of production that no such documents exist.

[87] And the defendant’s closing submissions speak clearly to this issue. Despite calling evidence to attempt to hoodwink this court into entertaining the notion that the defendant has fulfilled its obligations to provide servicing, Mr. Choi wrote, at para. 56:

In APS, Schedule “C”, s. 17 (“Section 17”), the closing of the transaction is premised upon the delivery of the written confirmation (“Municipality’s Confirmation”) from the Municipality’s Director of the Engineering and Public Works Department that “adequate servicing is available for the appropriate development of the Property”. No such written confirmation has been or can be obtained [emphasis added].

[88] I find this to be a shocking statement, rendering much of this trial to be a waste of time and resources. It is unconscionable that the defendant and its counsel conducted a charade to elicit evidence that the defendant has satisfied its obligations under the APS, when both clearly knew otherwise. In doing so, they sought and received from this court indulgences for trial preparation and to bring a motion to amend, and largely contributed to extending the estimated trial time from two to nine days.

[89] Between this admission, and the failure of the defendant to provide evidence from those with direct knowledge about the state of the services, together with the inconclusive evidence provided by the defendant’s witnesses, I find that the defendant has not fulfilled the fundamental term of the APS to provide services to the Lands.

Abatement

[90] It is the plaintiff’s position that it cannot rely on the defendant to cooperate in bringing approved and working services to the lot line, even if this work has been partially completed. The Town will not permit the plaintiff to develop with “close to” completed servicing, and any work to bring municipal services to the property line was supposed to have been done in the Cedar Ridge Subdivision. I agree that there is no reason to believe that the defendant will be cooperative. As such, the plaintiff’s only choice is to attempt to service the Lands independently, as opposed to connecting to the services that were supposed to have been made available through the Cedar Ridge subdivision. The cost of that, along with any other damages proved by the plaintiff, will result in an adjusted purchase price for the Lands.

[91] Yet the plaintiff’s closing submissions accept the probability that some degree of servicing work has been carried out and that such work could potentially have commercial value to the plaintiff. The plaintiff is prepared to afford the defendant a grace period to minimize the abatement by demonstrating that the contemplated servicing is complete. The plaintiff’s willingness to do so is a function of the fact that:

(a) if the defendant exercises diligence and good faith, the completion of such servicing by the defendant is likely the most efficient solution in absolute dollars and the quickest scenario to complete servicing; and,

(b) it was a fundamental intention of the APS that the plaintiff not be burdened with the expense and risks of attempting to self-service the Lands; this remains the plaintiff’s last preference.

[92] The plaintiff proposes to afford the defendant a brief and final opportunity to demonstrate that servicing is complete in accordance with the APS, on certain terms. The approach is a practical one that this court embraces, but terms are necessary to ensure that the transaction is completed in accordance with the parties’ bargain. Those terms are:

(a) If the defendant delivers to the plaintiff, within thirty days:

(i) written confirmation from the Manager of Engineering for the Town of Georgina, to the satisfaction of the Plaintiff’s engineers, of the completion of the servicing required under the APS;

(ii) to the plaintiff and to the court, a written undertaking to fully cooperate in ensuring the plaintiff has access to the services contemplated by the APS without obstruction and without cost,

then the defendant shall be at liberty to apply, on a summary basis, to vary the adjusted purchase price and, pursuant to such undertaking, the defendant shall provide the plaintiff with access to such servicing is as required per the APS without cost and without obstruction.

(b) The plaintiff shall be at liberty to seek further adjustment to the adjusted purchase price on motion in writing to the trial judge, for any further costs or losses it may incur in seeking clear title to the Lands and servicing as contemplated by the APS.

[93] But if the defendant elects not to utilize the thirty-day grace period to prove that it has completed its obligations pursuant to the APS, an abatement to the purchase price will be warranted because the plaintiff will have no choice but to go to extraordinary, additional work to bring services to its contemplated commercial development. If the defendant is unwilling or unable to comply with its obligation to provide serviced lands per the APS, the appropriate basis for calculating an abatement is what it would cost the plaintiff to independently service the Lands.

[94] In Sokoloff v. 5 Rosehill Avenue Developments Inc. (1998), 21 R.P.R. (3d) 176, (Ont. Div. Ct.), at para. 22, the legal principles applicable to abatement were reviewed:

1. Assessing compensation is, for all intents and purposes, the same task as assessing damages for breach of contract.

2. In instances involving specific performance, a purchaser, in so far as such is possible, is to be placed in the same position as if the contract had been performed - in this respect, the purchaser can recover damages for loss of bargain.

3. Damages for loss of bargain can be established by:

(a) providing the purchaser with a rateable reduction from the purchase price without regard to the actual value of the land,

(b) reimbursing the purchaser for the cost of remediation,

(c) providing the purchaser with the difference between the value of the land without the defect and with the defect,

(d) providing the purchaser with the difference between the purchase price and the value of the land without the defect.

4. In cases of this nature, the court is not wedded to any particular methodology so long as it has regard to the material circumstances, including the intention of the parties, in determining the purchase price at first instance.

[95] To prove its damages, the plaintiff relies on the evidence of Scott Passmore, an engineer. Mr. Passmore was retained by the plaintiff to provide a cost estimate for independent servicing of the site. Mr. Passmore was granted leave to provide opinion evidence about the costs of servicing a site for commercial purposes and, in particular, the Lands as of February, 2019. Mr. Passmore estimated the cost to be $1,210,300 inclusive of engineering costs, allowing 20% for contingencies.

[96] Mr. Passmore is a civil engineer and senior manager of a land development group at EXP, a civil engineering firm. After graduating with a degree in civil engineering in 1997 he worked in land development engineering for a company called Stantech. He was hired by EXP last July to grow their land development services. For the past ten years, he worked for an engineering consulting firm called The Sernas Group, as senior project manager for their land development division. That company eventually merged into another company called GHD, and he moved into the position of regional manager, a position he held for seven years. As a senior project manager Mr. Passmore carried out preliminary and detailed engineering for subdivisions and sites for developers and builders. In that role, he procured quotes and took on the contract administration role as he oversaw the projects. He prepared the tender documents. When he moved into the role of regional manager he was in charge of internal finances and business development. He reviewed pricing and worked on bid analysis for clients.

[97] At EXP he holds the position of senior manager of land development. EXP is heavily involved in land transactions, and primarily, carrying out engineering services to satisfy due diligence work on land transfers. In his current position he does feasibility reviews for developers, including obtaining quotes and dealing with general contractors.

[98] His experience over the past ten years has involved providing feasibility studies with respect to servicing new development land, starting right from the beginning of a project. A feasibility study shows the magnitude of the engineering work and cost required to service lands. He has also undertaken preliminary engineering to service lands for rezoning. His work involves doing detailed design of services for construction purposes, carrying out project management and contract administration duties during construction, and certifying the servicing works. He has done approximately 50 site projects of the kind in which the plaintiff is involved. This is the first time he has ever worked with the plaintiff or Mr. Mercato.

[99] Mr. Passmore was cross examined extensively on his past work experience, with a view to exploring his experience with costing the type of services set out in his report. That examination revealed that he has significant experience and familiarity with budgeting for many aspects of the horizontal servicing work needed for land development and construction projects.

[100] Defence counsel objected to the witness’ proposed area of expertise on the basis that he obtains secondhand information from others within the companies that he has worked for, and does not perform his own due diligence. This court ruled that Mr. Passmore has significant expertise in an area not within the knowledge of the court, in particular with respect to the costing for site services as part of land development through all of the positions that he is held throughout his career, and rejected the submission that he does not perform his due diligence on the costing information obtained from his managers and peer engineers. His evidence showed exactly the opposite.

[101] Mr. Choi submits that diminished weight should be afforded to the evidence of Mr. Passmore because some of the mandated information required by r. 53.03 was absent from his report. In particular, he submits that Mr. Passmore did not sign the acknowledgement of expert duties, nor did he provide a list of every document relied upon in forming his opinion contrary to r. 53.03(2.1). Although Mr. Choi references the fact that courts have refused to admit reports that have failed to include the information required by rule 53.03 (2.1), the exclusion of Mr. Passmore’s evidence was already the subject of argument during the trial and a ruling to the contrary by this court.

[102] Mr. Passmore did sign the Form 53 prior to giving testimony, and upon this court’s inquiries satisfied me that he understood his duties and his role. It is true, however, that none of the source documents relied on by Mr. Passmore in arriving at costs were provided during his evidence, nor were they referenced in his expert report. However, as Mr. Passmore’s testimony unfolded, it became clear that his pricing for the various components of the work came from his own inquiries and records internal to EXP. Much the same way that one would never expect a physician to list the numerous sources of knowledge, experience and expertise that informed an opinion, Mr. Passmore should not be required to list such information in his report. It is all contained in his C.V. Further, Mr. Choi made no request to review any documentation that Mr. Passmore consulted when preparing his pricing, such as recent tenders and quotes, at any time before Mr. Passmore’s testimony began.

[103] Mr. Passmore was a straightforward witness. He has no prior connection to the plaintiff. Despite extensive cross-examination on the point, I find that there is no reason to conclude that he was exaggerating the cost of work that may be required to independently service the Lands. He was fair in conceding that the numbers in his report are a matter of opinion to some degree. He testified that another expert may give an opinion with a lower or a higher number. I find, as he testified, that Mr. Passmore attempted to find the most efficient design to service each component.

[104] In terms of his process, Mr. Passmore undertook preliminary engineering calculations to determine whether it is possible to tie into existing municipal services, which helped him to narrow the options available. Once he had developed a servicing strategy, he began to speak to other senior engineering staff in his company in the areas of their expertise – hydrology, infrastructure, wastewater, electrical - about feasibility and current costs associated with each item. He also consulted EXP’s historic records for prices and unit rates. Where necessary he also spoke to contractors about their latest unit rates, in the geographic area of the Lands if possible. He explained that he did not obtain formal bids from contractors for any of these items because contractors prefer not to provide bids in the absence of drawings.

[105] Mr. Passmore sent an email to Alan Lam on March 6, 2019 requesting that he or his consulting engineer provide details with respect to the servicing of the property, and any supporting documentation to support the level of servicing completed. He did not receive a response. On March 25, 2019 he followed up with a phone call and left another voicemail message for Mr. Lam. He did not receive a response. In the result, he had no information about the status of any of the servicing in the subdivision in order to assess the economics of any servicing that might already be in place.

[106] The thrust of Mr. Passmore’s evidence is that the Lands are not an easy site to service independently of the Cedar Ridge subdivision. There are not a lot of options for the Lands since they are not in a completely urban area. His findings are set out in the Table 1 to his report, as explained below.

[107] Several components include the cost of decommissioning. As Mr. Baskerville testified, sufficient security has been posted in favour of the Township of Georgina to complete the work in the Cedar Ridge subdivision contemplated in the subdivision agreement entered into by the defendant. Accordingly, the Town may ultimately complete the services in the subdivision if the defendant does not, at which point what had been temporary services for the plaintiff may no longer be permitted or needed.

[108] There are no municipal water mains near the site. The closest ones are so far away that a new municipal water main would be required. Mr. Passmore explained that this would be a large undertaking. He concluded that this was not the most efficient or realistic option available for water servicing. He suggests that a private well system be installed on the Lands, and fire storage for fire protection services. Again, the price estimate provided by Mr. Passmore included decommissioning the works if the municipality would not allow the well to be a permanent solution once municipal water became available. The price quoted by Mr. Passmore assumed that the pumping station would be temporary; the quote would increase if the pumping station had to be constructed above ground. Other variables such as well depth, selection of pumps and pump configuration, the emergency overflow system, and installation of a digital remote-control system could all affect the cost.

[109] A senior hydrologist at EXP informed him that the Lands are in an environmentally sensitive area, and outlined the studies that would be required, including a hydrology study. He did not make any inquiries with the Ministry of the Environment (“MOE”) to see whether a well would be permitted, but he agreed that without MOE approvals a well could not be installed. The only alternative would be to get the water from the municipal water main in the area of Burke or North Streets, an onerous and potentially financially prohibitive option.

[110] The unit price for each of the water servicing items was provided to Mr. Passmore by his hydrogeologist, with the exception of the cost of the water storage tank. For the water storage tank, he looked at recent past contracts for construction of concrete chambers.

[111] Sanitary servicing must go through a treatment facility. Mr. Passmore deemed the subject site to be too large for a septic system, or any type of tanking system that would be extracted with a vacuum truck, so he looked at a pumping system to connect to the sanitary sewer on the closest street.

[112] Storm servicing is one of more sensitive items because these lands are adjacent Highway 48, owned by the Ministry of Transportation (“MTO”). EXP’s cost estimate entails maintaining drainage rights from these MTO lands as they are currently draining, and dissipating the flows through an infiltration gallery. From the records that Mr. Passmore was able to obtain, there is an allowance for storm water management to be done downstream in the Cedar Ridge subdivision design. If that turns out not to be available, on-site facilities are required to be installed. He had no accurate information about the status of the subdivision works and how much has been installed to date. If all of the storm servicing could be constructed and left in place to the satisfaction of the Town, then it might not need to be removed. Alternatively, decommissioning could come about as a result of a cost-sharing agreement with the defendant, or municipal approval.

[113] Road access from Highway 48 was costed on the assumption that subdivision road access is not or will not be available. Mr. Passmore’s pricing includes a private driveway and a taper to facilitate traffic flows into the Lands from Highway 48. He had not had discussions with MTO about what might be approved. He estimated costs for removing the temporary driveway, reinstating the ditch and putting everything back to original conditions, including sodding and seeding, on the assumption that once the subdivision agreement is registered and ownership of Smokum Road concurrently transferred to the Township, access to the Lands will then be available from Smokum Road. Smokum Road is a main traffic artery through the Cedar Ridge subdivision, which could access the Lands.

[114] Utilities includes an allowance for a new transformer that could potentially be required.

[115] Mr. Passmore estimated 20% for engineering, an allowance that he believed would be adequate for this level of a cost estimate. Detailed design works for obtaining design approvals and inspections, and work related to certifying the construction work, can usually be about 10% of construction costs. However, with the level of cost estimate that he was asked to provide, and potentially the need for studies to be done, he felt it was necessary to increase that estimate from 10% to 20%.

[116] His costing estimate provides another 20% for contingencies. He usually includes 10% on tender documents for construction for contingencies when a detailed design exists. Here, a detailed design does not exist. For the level of review involved in reaching his opinion in this case, he used 20%. An example of a contingency could be having to realign or remove a hydro pole that was not foreseen to be in the way at the preliminary level. Another contingency would be requests from the municipality to reinstate larger areas of land than that which the plaintiff disturbed when installing services. His estimate does not include the cost of additional land use planning and legal fees that would be involved in any requests for a permanent or temporary plan amendment, or any appeals.

[117] Mr. Passmore testified that when coming up with a project design, it is fundamental to examine the feasibility of the proposal given the regulatory controls and planning framework of the municipality and province. Typically, a proposal would be made to the Township and reviewed by the Director of Engineering, feedback obtained, and potentially the engineering plans might have to be altered or completely redrawn. However, the scope of work that he was requested to do by the plaintiff for the purpose of this litigation was to consider the servicing requirements from an engineering perspective only. For that reason, he did not consult the planning division at EXP about this work. He did have a discussion with the Manager of Development and Engineering for the Town of Georgina about the proposal contained in his report, after producing the report. The manager indicated that representatives of EXP and the plaintiff would have to come in for a consultation to explain why the Lands need to be independently serviced, and move forward with that discussion as a pre-consultation process. The manager expressed concerns with deviating from the subdivision design. Mr. Passmore acknowledged that he did not contact the Director of Engineering & Planning at the Township, who would be the individual to approve any application of this kind. He did not contact the director because EXP was doing a technical review only. If the plaintiff intends to pursue the self-servicing option further, Mr. Passmore would contact the director to set up a pre-consultation meeting. Without the input from the director, Mr. Passmore fairly admitted that he does not know whether the plans would be able to be implemented.

[118] The defendant submits that this court should reject the evidence of Mr. Passmore because it is based on the assumption that the contemplated engineering systems can be installed, without first investigating the planning and regulatory framework to determine feasibility. The defendant submits that, in line with cases where expert reports based on incorrect assumptions have been found to be without value, this court should reject Mr. Passmore’s findings: Purani v. Esmail, 2014 ONCA 145, 320 O.A.C. 356, at para. 59; Roy Wise Professional Corp. v. Colaco, 2015 ONSC 3801, aff’d 2016 ONCA 889, at para 11.

[119] This principle does not apply in this case, because Mr. Passmore was not opining on whether the engineering systems referred to in his report were able to satisfy the planning and regulatory framework in the Township, but rather was opining on his best estimate of the cost to the plaintiff, on the assumption that approvals would be forthcoming.

[120] No contrary engineering or costing evidence was tendered by the defendant. The defendant’s real challenge to Mr. Passmore’s cost estimate is that there is no evidence that the necessary approvals will be given by the Town and other authorities. In fact, Mr. Choi submitted that the evidence heard at trial established that Mr. Passmore’s engineering designs could not be implemented pursuant to the land use controls governing the Lands.

[121] The defendant relies on the Town’s “Second Plan”, which requires developers to use municipal services rather than allowing independent servicing. The plaintiff concedes that this is what the Second Plan says on its face. However, Mr. Birnboim argues that both Mr. Smith and Mr. Baskerville conceded that Town plans are not inviolate, and Mr. Baskerville agreed that the Second Plan can be subject to amendment on application to the Town, with right of appeal to the Local Planning Appeal Tribunal and thereafter the Divisional Court. He also agreed that the Town has the ability to grant a temporary amendment given this unique situation. Mr. Baskerville was, however, very skeptical of the likelihood of this ever occurring.

[122] In my view, the evidence of Mr. Passmore is credible, but the implementation of the plaintiff’s proposal to service the lands remains highly speculative. The court has no crystal ball, and the individual who might have been able to shed some light, the Director of Engineering and Planning, was not among either party’s witnesses.

[123] But at the end of the day, as the plaintiff argues, if approvals are denied Mr. Passmore’s estimate may prove to be the most conservative estimate of the plaintiff’s damages. If ultimately the plaintiff is never successful on its application for a variation of the Second Plan, it may ultimately find itself the owner of vacant land unsuited for development at all, being of little to no commercial value. The plaintiff is willing to take that risk. And in the absence of any competing evidence, Mr. Passmore’s estimate of the cost to remediate these lands is the only one available to the court, and I find no reason to reduce the figures provided by Mr. Passmore.

[124] All of the numbers in Mr. Passmore’s report are exclusive of HST, in accordance with his standard practice. The defendant argues that HST should not be included in any abatement of the purchase price, as HST is ultimately recoverable for the plaintiff through tax credits. I have no evidence that this amount, totaling $165,205.95, will be recovered to the plaintiff and accordingly cannot agree with this submission.

Other Damages Giving Rise to Increased Abatement

[125] Samantha Mercado has no ownership interest in the plaintiff. She operates Orpheus Management Services Inc. (“OMS”), a company that provides management services to property development companies. She typically is compensated by being paid 5% of the entire project cost. Additionally, she sometimes receives an equity stake in the companies for which she does development work. It was anticipated that she would be receiving an equity interest in Even Money Holdings Limited, which was originally the proposed assignee of the APS rights.

[126] In its closing submissions, the plaintiff confirmed that it is content to take title solely in its own name and not assign.

[127] To undertake the work described in Mr. Passmore’s report, the plaintiff will incur the cost of OMS’s management services. The plaintiff seeks an additional 5% of the estimated project cost to be added onto the total abatement figure. This amount is $60,515 plus HST. In Newton v. Evclare Holdings Limited, 2013 ONSC 7231, 329, 26 C.L.R. (4th) 189, at para. 86, Howden, J. remarked that a 7% management fee was fair and in line with the usual range.

[128] It is clear to me that project management services will be necessary to attempt to navigate the complexities outlined by Mr. Passmore. But for the defendant’s breach, this additional work and financial burden would not have been necessary. There is no reason why the plaintiff should shoulder the extra cost.

[129] The plaintiff also seeks its costs of this action, and submits that any costs awarded should be payable, in the first instance, as an abatement of the purchase price. Mr. Choi has not responded to this submission. Costs will be determined after review of written submissions. Absent a r. 49 offer from the defendant that could trigger r. 49.10(2), the plaintiff will have its costs of this action. I agree that these costs should be deducted from the adjusted purchase price prior to payment into court.

Payment into Court

[130] To ensure that third parties with competing claims of priority on the proceeds of sale are not deprived of their interests, the adjusted purchase price required from the plaintiff should be paid into court until a determination is made with respect to priorities of such sale proceeds.

Deposits

[131] The plaintiff’s deposits continue to be held by Harris, Sheaffer LLP, with accumulated interest. These funds should be now released to the plaintiff in order that they may be utilized as part of the adjusted purchase price to be paid into court.

Warranties

[132] The APS provides that the defendant’s warranties shall survive closing. Such rights that it would have pursuant to the APS after closing shall continue after judgment.

Continued Judicial Intervention

[133] The plaintiff seeks continued judicial intervention to ensure that this order is implemented, and to provide ongoing management of any issues relevant to the amount of the abatement. Given the potential for the existence of issues such as unpaid property taxes or municipal fees and levies, the parties should have recourse to a summary procedure to resolve any significant issues that may affect the adjusted purchase price.

[134] Further, given the 30-day grace period that is to be implemented, if the defendant seeks to take advantage of it, the court must be in a position to accept its written undertaking.

[135] The defendant resists continued judicial intervention on the basis that it violates the principles of finality. Mr. Choi cites Townsend v Kroppmanns, 2004 SCC 10, [2004] 1 S.C.R. 315 in support of this submission. Townsend is a personal injury case in which, after assessing damages at trial, the trial judge issued supplementary reasons in which he reduced the award for management fees and recalculated the tax gross-up. On appeal, the Court of Appeal allowed the plaintiff’s appeal, holding that the evidence did not support the reduction of the award. The Supreme Court of Canada dismissed the defendant’s appeal, noting that the principle of finality requires there to be a clean break between the parties and that a damage award is not to be revisited every time new evidence becomes available (at para. 20).

[136] It is not clear to me how this case is of assistance, as it did not involve an order for specific performance. Similarly, the defendant relies on Rosenberg v. 206 Bloor St. West Ltd. 2016 ONSC 6, 526, 63 R.P.R. (5th) 275, at para. 127. This case has no relevance. The thrust of the paragraph cited by the defendant is that the remedy of specific performance was not available to the plaintiff. At para. 29, the court notes that through the case management process, the parties ultimately agreed to the elimination of the claim for specific performance.

[137] For the reasons stated, some ongoing judicial management is warranted, and I am prepared to remain seized of this matter to deal with any significant issues arising in the coming months that may affect the adjusted purchase price. However, the issue of priorities and the ultimate distribution of the monies paid into court may be heard by any judicial officer.

Order

[138] For the foregoing reasons, this court orders that:

1. pursuant to the Agreement of Purchase and Sale dated September 14, 2012 as amended (the “APS”) and the Order of Justice Vallee dated November 13, 2014 granting the plaintiff a Certificate of Pending Litigation on the Lands described as Part of Lot 3, Concession 7, Town of Georgina, Regional Municipality of York being more particularly described as Part 1 on Reference Plan 65R-33192 being PIN 03523-0416 (LT) (the “Lands”), the Lands shall wholly vest in the plaintiff upon the plaintiffs compliance with the following terms:

(a) The subject Lands shall vest in the plaintiff upon paying to the Accountant of the Superior Court of Justice the Adjusted Purchase Price (as hereafter defined) or, alternately, posting a Letter of Credit in such amount with the Accountant of the Superior Court of Justice.

(b) The Adjusted Purchase Price is calculated as follows:

Purchase price per APS

$2,150,000.00

Less Abatement for Self-Servicing per Passmore Report + HST

$1,367,639.00

Less 5% for additional Mercado Management Fee

$68,381.95

Total Adjusted Purchase Price

$713,979.05

(c) The Adjusted Purchase Price may be further amended, on motion to Justice Healey in writing, as follows:

(i) If the defendant delivers to the plaintiff, strictly within 30 days:

A. written confirmation from the Manager of Engineering, for the Town of Georgina, to the satisfaction of the plaintiffs engineers, of the completion of the servicing required under the APS; and,

B. to the plaintiff and to the court, a written undertaking to fully cooperate in ensuring the plaintiff has access to the services contemplated by the APS without obstruction, and without costs,

then the defendant shall be at liberty to apply, on a summary basis, to vary the Adjusted Purchase Price as defined above and, pursuant to such undertaking, the defendant shall provide the plaintiff with access to such servicing as required per the APS without cost and without obstruction.

(ii) The plaintiff shall be at liberty to seek further adjustment to the Adjusted Purchase Price on motion in writing to the Trial Judge, for any further costs or losses it may incur in seeking clear title to the Lands and servicing as contemplated by the APS.

2. Except as to the plaintiff’s entitlement to specific performance of the APS as sought in this action, this Judgment shall be without prejudice as to the priorities as between the plaintiff and any of the encumbrancers on the Lands. The plaintiff shall be at liberty to seek such orders as it deems appropriate to seek clear title to the Lands and deal with such priorities, including but not limited to such priorities as are asserted in Court File CV-18-594318 and the plaintiff shall be entitled to pursue such relief prior to payment of the Adjusted Purchase Price to the Accountant of the Superior Court of Justice.

3. The proceeds of the Adjusted Purchase Price as may be paid to the Accountant of the Superior Court of Justice shall be distributed as the Court may determine on notice to any registered or statutory encumbrancers.

4. This Judgment shall be without prejudice to any further relief or matters which may arise in the implementation of this Judgment and Justice Healey shall remain seized of any such requests for relief to give effect to this Judgment, or which would affect the Adjusted Purchase Price.

5. Any deposit funds and interest accumulated thereon held by any party in respect of the APS shall be forthwith released to the plaintiff or as the plaintiff may direct.

6. This Judgment shall be without prejudice to any claims by the plaintiff in respect of the representations and warranties of the defendant set out in the APS.

Costs

[139] If the parties are unable to agree upon the costs of this proceeding, they may make submissions in writing delivered to the offices of the judicial assistants in Barrie, to my attention. Cost submissions are due from the plaintiff seven days after the release of these

Reasons for Judgment, and from the defendant 14 days after their release, limited to four pages plus any r. 49 settlement offers.

Madam Justice S.E. Healey

Released: September 27, 2019

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

Released: September 27, 2019