Court File and Parties

COURT FILE NO.: CV-19-00625286

MOTION HEARD: 20191204

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Naftali Rabinowitz, Plaintiff

AND:

2528061 Ontario Inc., Defendant

BEFORE: Master J. E. Mills

COUNSEL: E. Karp, Counsel, for the Plaintiff

J. Macdonald, Counsel, for the Defendant

HEARD: December 4, 2019

REASONS FOR DECISION

[1] The plaintiff seeks a Certificate of Pending Litigation (“CPL”) to secure his claimed right to purchase property municipally known as 3728 Mayfield Road, Caledon, Ontario (the “Property”). The Statement of Claim seeks specific performance of an agreement of purchase and sale. There is no alternative claim for damages.

[2] It was conceded by all parties that the subject agreement could have been clearer in expressing the intentions of the parties. It was drafted by real estate brokers without the benefit of legal counsel and is capable of being interpreted in different ways. Having regard to the conduct of the parties following the execution of the agreement, I am of the view there is a triable issue as to whether the plaintiff has a reasonable claim to an interest in the Property. As such, a CPL is hereby granted and may be registered on title to the Property.

[3] The parties agreed the proper test to apply and the factors to consider when granting leave to issue a CPL were summarized in Perruzza v. Spatone[^1]. The threshold is whether there is a triable issue as to the interest in land, not whether the plaintiff will likely succeed in the litigation. It must be demonstrated the plaintiff has a “reasonable claim” to the interest in the land. The threshold to be met is admittedly low.[^2] It is not for the court at this stage to assess the credibility of the parties nor to decide disputed issues of fact.[^3] The onus is on the party opposing the CPL to show there is no triable issue.

[4] The court must exercise its discretion in equity having regard to all relevant matters between the parties when considering whether a CPL should be granted or vacated. The factors to be considered are as follows:

a. Whether the plaintiff is a shell corporation;

b. Whether the land is unique;

c. The intent of the parties in acquiring the land;

d. Whether there is an alternative claim for damages;

e. The ease or difficulty in calculating damages;

f. Whether damages would be a satisfactory remedy;

g. The presence or absence of a willing purchaser, and

h. The harm to each party if the CPL is or is not removed with or without security.

[5] The parties entered into an Agreement of Purchase and Sale (the “APS”) on August 29, 2017, using the standard Ontario Real Estate Association commercial form. The APS represented the Property was 45 acres of which 31 acres were “usable” for development purposes. The purchase price was fixed at $14,000,000. There were provisions to permit the purchaser to conduct the necessary due diligence and the vendor agreed to consent and support the purchaser’s efforts to have the land re-zoned or approved for development. It was always known and understood that the plaintiff’s purpose in buying the Property was to develop the land and then sell it again as individual lots. A two-stage deposit in the total amount of $1,000,000 was required, conditional on completion of the due diligence. The APS provided that the plaintiff had the unilateral and unrestricted right to assign the agreement to any person, partnership or corporation.

[6] The APS also had an entire agreement provision and a time is of the essence clause.

[7] The APS was then twice amended to extend the time to waive conditions as various technical reports were required to assess the viability of the project. The first amendment was executed in September 2017 and the second in December 2017. A term of the second amendment was that $600,000 of the required deposit be paid immediately in the form of an advance to the defendant which could then be credited towards the purchase price at the time of closing. The parties agreed to extend the due diligence period to February 28, 2018 with a further extension to May 1, 2018 if required. The funds were advanced to the defendant by release of the $250,000 deposit held by the broker and a $350,000 mortgage against the Property. The balance of the deposit was due upon completion of the due diligence phase with the formal waiver by the plaintiff of the APS conditions.

[8] The plaintiff continued his due diligence and May 1, 2018 passed without a formal waiver of the APS conditions. The strict terms of the APS had expired but the parties continued their negotiations through to March 2019. The critical issue of contention was the “usable land” for development. The Property contains a large tract of environmentally sensitive wetland with the balance of the land zoned for agricultural uses and as an environmental policy area. The experts for both parties disagreed on the number of acres which could be available for development purposes. This impacted the price the plaintiff was prepared to pay for the Property.

[9] A further amendment to the APS was accepted by the plaintiff on March 1, 2019, effectively reviving the long-expired APS (the “Amendment”). The Amendment set out a new purchase price based on $451,612.90 per usable acre of land, to be determined on the closing date which was fixed at sixty (60) days following the execution of the Amendment plus an optional 60 days “up to the buyer”. The Schedule “A” to the Amendment then provides that “The closing date shall be determined by the Buyer and the Seller with a separate amendment to this agreement not later than May 18, 2019”. The requisitions date was fixed at fifteen (15) days prior to the closing date.

[10] The Amendment also contained a new provision for the payment of the purchase price in respect of any additional land for which approvals are granted in the three years post closing. The plaintiff also agreed to assume responsibility for the payment of the Co-Op Buyer/Brokerage commission and a new commission agreement was to be signed prior to the requisitions date to replace the current and existing commission agreement between the Seller and the Co-Op Buyer/Brokerage. It was expressly stated that a failure to provide a new commission agreement “shall be the end and this amendment shall be null and void”. The Amendment deleted other provisions of the APS which were no long relevant as a result of the revised purchase terms, including the provision for the waiver of conditions. All other terms and conditions of the APS were to remain the same and time was to remain of the essence.

[11] Prior to the plaintiff accepting the terms of this final amendment, the defendant appears to confirm his understanding of the terms in an email also dated March 1, 2019. Specifically, it is confirmed that the closing date could be set up to 120 days but could also be earlier if the plaintiff needed an earlier closing date. Also, the useable land was set at 6.98 acres subject to further official approval being received during the next 120 days or until the closing date.

[12] On April 29, 2019, the plaintiff advised his agent that he wanted to exercise the option to extend the closing date a further 60 days, to July 2, 2019. The extension was conveyed to the defendant’s agent with a notice sent at 9:04 p.m. on April 30, 2019. A notice terminating the APS was sent by the defendant’s solicitor at 6:18 p.m. that day but no efforts were made to tender on the plaintiff.

[13] Despite the purported termination, the defendant’s agent continued efforts towards closing the deal through May and June 2019. On June 24, 2019, through their respective counsel, the defendant advised the plaintiff that he would not be closing the APS on July 2, 2019.

[14] Without making any assessment of witness credibility or determining any disputed facts, I am of the view there are several triable issues arising from the APS, the Amendment and the termination of the transaction. The plaintiff does have a reasonable claim to an interest in the Property.

[15] There are triable issues with respect to the closing date of the transaction, whether formal notice of the exercise to extend the closing date was required to be given on April 30, 2019 and if so, whether it was properly given to extend the date to July 2, 2019. Further, the Amendment allowed the parties to May 18, 2019 to fix a closing date by mutual agreement and whether the parties by their conduct accepted July 2, 2019 as the new closing date.

[16] There are triable issues respecting the obligation to pay a second deposit since this requirement was to be honoured when the conditions were waived by the plaintiff. The provision for the waiver of conditions was deleted in the Amendment thereby calling into question the timing requirement for payment of a second deposit.

[17] There is a triable issue as to whether the new commission agreement between the plaintiff and IPro Realty Ltd. Brokerage satisfies the condition in the Amendment for the purchaser to take over and pay the commission owed to the Co-Op Buyer/Brokerage. There is a triable issue as to whether this did or did not bring the Amendment to an end on June 17, 2019 being fifteen days prior to the anticipated closing date.

[18] There is a triable issue as to whether the purchase price was agreed to by the parties with respect to the number of usable acres being paid for on the date of closing.

[19] There is a triable issue as to whether the defendant was entitled to unilaterally terminate the transaction on June 24, 2019.

[20] The only evidence before me as to the unique quality of the Property is from the defendant’s real estate broker. Mr. Thomas provided the plaintiff with an affidavit for use on this motion wherein Mr. Thomas states “with confidence that there are no similar properties for sale in the area” either privately or listed on the MLS system. For the plaintiff, the property is unique because of its size, location and other criteria, including the economic benefits associated with the purchase terms of the Amendment.

[21] The defendant knew from the outset that the plaintiff intended to acquire the Property for subdivision and development purposes. As acknowledged by the defendant, it may be many years before the required planning applications may be approved to permit development of the Property. Although they have not been sought, damages would be difficult to calculate having regard to the speculative nature of the Property development and the many contingencies respecting the planning applications and approvals.

[22] The defendant submits a third-party purchaser was prepared to purchase the Property but that the agreement ended with the commencement of this motion. The defendant continues to incur carrying costs of the Property of approximately $8,500 per month.

[23] The plaintiff cannot be fairly classified as a “straw man” without tangible assets to satisfy any adverse costs or damages award. The defendant has already received $600,000 from the plaintiff. The defendant offered no evidence to support his allegation of a lack of financial resources with respect to either the plaintiff or the numbered company incorporated for the purposes of concluding this transaction.

[24] Having balanced the equities, I am of the view they favour the plaintiff and I exercise my discretion to grant the motion for a CPL.

[25] The parties agreed that an appropriate quantum for costs is $10,000, inclusive of fees, disbursements and HST. The defendant shall pay this amount to the plaintiff. The parties shall have ten days to make written submissions, not to exceed two pages in length, as to whether the costs should be payable forthwith, in the cause or in any event of the cause.

Master J. E. Mills

Date: December 9, 2019

[^1]: 2010 ONSC 841, at para. 20.

[^2]: Bains v. Khatri, 2019 ONSC 1401, at para. 36.

[^3]: HarbourEdge Mortgage Investment Corp. v. Community Trust Co., 2016 ONSC 448, at para. 45.