Court File and Parties

COURT FILE NO.: CV-20-0068 DATE: 20200331 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: CORFINANCIAL CORP. Plaintiff – and – AMAZON LAND DEVELOPMENT CORP. and 2718379 ONTARIO INC. Defendants

AND BETWEEN: 2718379 ONTARIO INC. and 2587410 ONTARIO INC. Plaintiffs by Counterclaim – and – AMAZON LAND DEVELOPMENT CORP., CORFINANCIAL CORP., ERIC INSPEKTOR, REETA LUTHRA, ROBERT KARAM, FIRST SOURCE MORTGAGE CORPORATION, COMMUNITY TRUST COMPANY AND LIONESS DEVELOPMENTS INC. Defendants by Counterclaim

Counsel: Jonathan M. Friedman for the Plaintiff Derek Ketelaars for Amazon Land Development Corp. Greg Roberts for 2718379 Ontario Inc. Greg Roberts for 2718379 Ontario Inc. and 2587410 Ontario Inc. Derek Ketelaars for Amazon Land Development Corp., Reeta Luthra and Robert Karam Johnathan M. Friedman for Corfinancial Corp. and Eric Inspektor Christopher Staples for First Source Mortgage Corporation and Community Trust Company W. John Rick for Lioness Developments Inc.

HEARD: March 25, 2020

Reasons for Decision

BOSWELL J.

[1] On December 17, 2019 Amazon Land Development Corp. sold a fourteen acre parcel of mostly vacant land in Ottawa to Lioness Developments Inc. for $6.25 million. The sale could not be completed because of a Caution registered on title to the lands by 2718379 Ontario Inc. (“271”). 271 says it is entitled to the lands pursuant to an agreement in principle made with Amazon on August 5, 2019.

[2] On March 25, 2020 I heard a number of urgent motions by telephone conference. Amazon and its agent, Corfinancial Corp., want the sale to Lioness to be completed. 271 wants to block the sale and enforce the agreement in principle. First Source Mortgage Corporation and Community Trust Company hold the first mortgage on the lands. It is in default. They want it paid. They have judgment against Amazon and its principals and are in a position to sell the subject lands under power of sale.

[3] Amazon does not dispute that it entered into an agreement in principle with a company related to 271. The agreement contemplated the rollover of the subject lands into a joint partnership where 271 was to be the general partner. Amazon claims, however, that it justifiably terminated the agreement on October 28, 2019.

[4] The outcome of the motions, and the fate of the subject lands, rests on what, if any, determination the court makes about the validity of Amazon’s termination of the agreement in principle.

[5] For the reasons that follow, I am granting the necessary orders to facilitate the sale transaction to Lioness.

Overview

The Huntmar Lands

[6] Amazon is the registered owner of a 14.6 acre parcel of land on Huntmar Drive in Kanata, Ontario. The land is vacant, other than a derelict heritage building. The land is suitable for a combination of residential and commercial development. I will refer to it as the Huntmar Lands going forward.

Amazon

[7] Amazon is a land development company. It is owned by two holding companies, which I will refer to as H1 and H2, in an effort to keep things as simple as possible.

[8] H1 is owned by Reeta Luthra, but managed by her husband, Girish Luthra. H2 is owned and operated by Robert Karam.

The Mortgages

[9] The Huntmar Lands are heavily mortgaged. There is a first mortgage with a face amount of $4.5 million owing to First Source Mortgage Corporation and Community Trust Company and a second mortgage with a face amount of $400,000. Both are in default.

[10] The first mortgage was guaranteed by Reeta Luthra and Robert Karam.

[11] On December 2, 2019, the first mortgagees obtained judgment for possession of the Huntmar Lands as well as for payment of the outstanding balance of the first mortgage which, at that time, was over $4.92 million. The judgment is against Amazon, as well as H1, H2, Reeta Luthra and Robert Karam.

[12] The first mortgagee has also initiated power of sale proceedings against the Huntmar Lands and is now in a position to sell them in order to realize on its mortgage security.

The IPA

[13] For some time, Amazon has been seeking to deal with the lands in order to get out from under the mortgages. On August 5, 2019 it entered into what was titled an “In Principle Agreement” (the “IPA”) with an entity called Consortia Projects. The gist of the IPA was that the Huntmar Lands were going to be rolled into a limited partnership. Consortia, or an entity to be named later, was to be the general partner. Amazon was to be the limited partner. The partnership would develop the lands, ideally for profit.

[14] The IPA was poorly drafted, to say the least. In many respects it is unclear. Indeed, a lack of clarity defines much of what has happened between the principal parties to these proceedings over the past 8 months.

[15] For starters, it is not even clear who the parties to the IPA are meant to be. The IPA describes the parties in its opening paragraph, which says as follows:

…This project is brought to the attention of Consortia Projects and 2587410 Ontario Inc. for a potential development opportunity by Amazon Land Development Corporation (“Amazon”). The intention of the proposal is to create a broad framework for a potential GP/LP structure to develop this project. In this structure, Consortia shall be the General Partner and Amazon Land Development Corporation will be the Limited Partner. This is a mutually binding agreement between Amazon Development Corporation and Consortia Projects.

[16] I note that after the opening paragraph of the IPA, 2587410 Ontario Inc. (“258”), was not mentioned again in the document, until the signature line. Robert Karam executed the IPA on behalf of Amazon. Premkumar Yachmanani, the sole principal of 258, signed on its behalf. No one signed on behalf of Consortia Projects.

[17] I do not know who or what Consortia Projects is.

[18] The individual who negotiated the IPA on behalf of the proposed general partner was Mir Ali. Mr. Ali was examined as a witness to the pending motions. He testified that Consortia Projects is not one and the same as 258. They are distinct entities. He said he operates a company known as Consortia N.A. Limited. He did not say how “Consortia Projects” might be connected to Consortia N.A. Limited. Nor did he explain why Consortia Projects was named as the general partner in the IPA when it appears, from all subsequent events, that 258 was intended to be the general partner.

[19] Notwithstanding the express terms of the IPA, no one appears to take the position that Consortia Projects or Consortia N.A. Limited has any legal standing in these proceedings.

[20] Instead, Mr. Ali testified that he was, at all times, acting on behalf of 258. Mr. Yachmanani takes the position that it was 258 who entered the IPA with Amazon. Mr. Yachmanani subsequently incorporated 271 to be the general partner contemplated by the IPA. It was 271 who eventually registered the caution on title when the deal fell apart.

[21] The principals of Amazon appear to have been equally careless about the parties meant to be bound by the IPA.

[22] Robert Karam deposed in his affidavit sworn January 24, 2020 that he began to deal with 271 in or about April 2019. That can not be the case because 271 was not incorporated until September 25, 2019. He further said that Amazon executed the IPA with the “Mir Group”. The “Mir Group” is not a legal entity.

[23] Girish Luthra also referred to the “Mir Group” in his affidavit sworn February 21, 2020. He described the Mir Group as being Mr. Ali, Mr. Yachmanani, 258 and 271. Mr. Luthra said that Amazon entered the IPA with 258. He did not mention Consortia Projects.

[24] For the purposes of this motion, and in light of the positions taken by the litigants, I find that the parties bound by the IPA are Amazon and 258. I find that 271 was subsequently incorporated for the purpose of becoming the general partner contemplated by the IPA.

[25] The IPA appears to have two main purposes: the assumption of the outstanding mortgages by 258 and the subsequent development of the Huntmar Lands.

[26] The significance of the assumption by 258 of the outstanding mortgages was identified at para. A.ii, of the IPA which provided as follows:

The First priority of this agreement is to assume the first mortgage of 173 Huntmar Drive, Ottawa effective August 1, 2019 by entering into an in-principle agreement between Amazon Land Development Corporation and Consortia.

[27] Amazon had only one real obligation under the IPA. Specifically, it was to transfer title to the Huntmar Lands into the new partnership. In exchange, it was to receive the following financial compensation, as set out at para. 6:

• Upon signing this agreement, Consortia shall pay First Source and the Second Mortgagee all mortgage payments and outstanding dues.
• From the refinancing of the existing mortgages, $350,000 will be paid to Amazon Land Development Corporation from the proceeds.
• $100,000 will be paid to Amazon Land Development Corporation as a non-refundable deposit within 72 hours from signing this in principle agreement by certified check or wire transfer to Amazon Land Development Corporation’s bank account, or this agreement shall be null and void.
• A consultancy fee of $150,000 + HST is to be paid to a company whose name is to be provided against invoice from closing.
• GP shall pay LP a total compensation of $4.0M from the project as per the following schedule:
  1. $1.0M within 12 months of site plan approvals from the construction disbursements and/or other funds which may com in the project.
  2. $1.0M within 24 months of site plan approvals from the construction financing disbursements.
  3. $1.5M within 48 months of site plan approvals. [1]

Default

[28] None of the compensation referred to in para. 6 of the IPA has been paid. The outstanding mortgage arrears were not paid on the signing of the agreement, as they were intended to be. In fact, they remain outstanding to date.

[29] Although the IPA provided that it would be null and void if the $100,000 deposit was not paid in 72 hours, no one appears to have ever treated the agreement as null and void. The date for payment of the deposit and the mortgage arrears just kept getting delayed.

[30] 258 retained Dentons LLP to represent them in relation to the transactions contemplated by the IPA. Through Dentons, 258 made a number of demands that were not expressly contemplated by the IPA.

[31] Most significantly, 258 sought a number of documents by way of security from Amazon and its principals. These security documents included a performance guarantee, a share pledge agreement and a unanimous shareholders agreement. The share pledge agreement and the unanimous shareholders agreement effectively ceded control of Amazon to 258. The intent of the security documents was to ensure that Amazon would follow through on its obligations under the IPA.

[32] Notwithstanding the express terms of the IPA, 258 appears to have been unwilling to make any of the up-front payments in the absence of the security documents.

[33] On August 20, 2019, Michael Davies of Dentons wrote to Amazon’s counsel, Bob McKinley, and said, amongst other things:

Our client has now arranged interim bridge financing to facilitate all interim project costs pending the refinancing of first and second mortgages as contemplated by our agreement. Our client is prepared to release the $100,000 payment contemplated by the agreement immediately in exchange for the pledge or transfer of shares in Amazon to our client to be held pending completion of our transaction, following which they will be returned.

[34] The principals of Amazon agreed to execute and deliver the security documents requested, in an obvious effort to move the agreement forward. The signed security documents were provided to 258, through their counsel at Dentons, on or about September 12 or 13, 2019, to be held in escrow until the agreement was completed or terminated.

[35] Notwithstanding the terms of Mr. Davies’ letter of August 20, 2019, the $100,000 deposit contemplated by the IPA was not released immediately, or at all, in exchange for the delivery of the executed security documents.

[36] To date, 258 has failed to make any of the payments required of it under the IPA.

Ongoing Negotiations

[37] A flurry of email communications followed the execution of the IPA. These were largely between Girish Luthra and Mir Ali, but also between Erik Inspektor (of Corfinancial) and Mir Ali, Robert Karam and Mir Ali, and between counsel to Amazon and counsel to 258/271. The substance of the communications was generally about when the payments contemplated by the IPA would be made and when the transaction would close.

[38] Having reviewed the correspondence filed in the record, I find that Mr. Ali repeatedly put off Mr. Luthra, telling him a number of times to “relax”. Mr. Ali pressed a consistent message: payment of the deposit was always just around the corner. Completion of the transaction was always imminent. But there was always just one more issue to tidy up. The closing never came.

The Termination

[39] Eventually, after numerous threats to do so, Mr. Luthra advised Mr. Ali that the deal was terminated, on the basis of 258’s repudiation of its terms. A formal notification of this termination was provided by Mr. McKinley to Mir Ali and Michael Davies, amongst others, on October 28, 2019.

[40] More email communications followed, again largely between Mr. Ali and Mr. Luthra, but also between Mr. Karam and Mr. Ali. Both Mr. Luthra and Mr. Karam pressed Mr. Ali about when 258 would be in a position to close and to make payments as agreed.

[41] On October 28, 2019 Mr. Ali attempted to renegotiate the deposit by reducing it from $100,000 to $15,000. Mr. Luthra demurred, although he said they may be able to accept $50,000.

[42] On October 30, 2019 Mr. Ali told Mr. Luthra the “deal is dead”.

[43] On November 4, 2019 Mr. Luthra told Mr. Ali by email that the agreement would be reinstated if the following three conditions were met:

(a) A $50,000 non-refundable deposit was paid before 5:00 p.m. that day; (b) A signed financing commitment was provided; and, (c) The closing was scheduled for no later than November 15, 2019.

[44] In response to Mr. Luthra’s email, Mr. Mir suggested, “Let’s not put today for $50,000. Let’s put before closing. Closing subject to lender’s date.” In other words, the conditions for reinstatement were not met.

The Corfinancial Agreements

[45] In November and early December 2019, Amazon entered into a number of agreements with Corfinancial. First, they executed an agency agreement whereby Corfinancial was to act on Amazon’s behalf in arranging alternative mortgage financing for the Huntmar Lands. Later, they executed a joint venture agreement to develop the Huntmar Lands together. Finally, they executed an agency agreement whereby Corfinancial would seek to find a buyer for the Huntmar Lands.

[46] Amazon agreed to pay Corfinancial $248,000 for its services and signed a mortgage in their favour in that amount as security for payment. The mortgage was not registered before the caution and, to date, remains unregistered.

The Sale to Lioness

[47] Corfinancial was able to find a buyer for the Huntmar Lands, in Lioness Developments Inc. An agreement of purchase and sale was executed by Amazon and Lioness on December 17, 2019. The purchase price is $6.25 million. There are no outstanding conditions.

[48] The agreement was to have been completed on February 14, 2020. The closing date has been extended, pending the outcome of these motions.

The Caution

[49] In an effort to prevent Amazon from dealing with the Huntmar Lands, 271 registered a Caution against title on December 5, 2019. The Caution contained the following statement:

The applicant is entitled to register a caution to prevent any dealing with the land without the applicant’s consent. The nature of the interest is Cautioner and Owner entered into agreements to develop the lands and acquire shares of Amazon Land Development Corp. The Land Registrar is authorized to delete this caution 60 days from the date of registration.

The 258 Mortgage

[50] For reasons not entirely clear to me, on January 28, 2020 Mr. Yachmanani caused Amazon to register a $1 million mortgage in favour of 258/271 against title to the Huntmar Lands. To accomplish this act, he relied on the pledge of Amazon’s shares, which were to have been held in escrow. Mr. Yachmanani concedes there was no consideration provided for the mortgage.

The Motions

[51] Corfinancial initiated the series of motions now before the court. They seek the following relief:

(a) A mandatory injunction requiring Amazon to register a mortgage against the Huntmar Lands in Corfinancial’s favour, in the amount of $248,000; (b) An order that Corfinancial’s mortgage has priority over the mortgage registered in favour of 258/271; (c) An order requiring 271 to remove the caution it registered on title to the Huntmar Lands; (d) An order that the Huntmar Lands be sold to Lioness pursuant to an Agreement of Purchase and Sale dated December 17, 2019; (e) In the alternative, leave to issue a certificate of pending litigation against the Huntmar Lands.

[52] In response, 258/271 brought a cross-motion seeking the following:

(a) An interim injunction preventing the first mortgagee from continuing with its power of sale proceedings against the Huntmar Lands; (b) Leave to issue a certificate of pending litigation against the Huntmar Lands; (c) Partial summary judgment for the following claims: (i) A declaration that the IPA and the security agreements are enforceable as against Amazon; (ii) A declaration that Reeta Luthra and Robert Karam did not have authority to bind Amazon after they executed the security agreements; (iii) A declaration that any and all agreements made between Amazon and Corfinancial after the security agreements were entered into are void and unenforceable; (iv) A declaration that the plaintiff did not have any legitimate authority to represent Amazon following the execution of the security agreements; (v) A declaration that the Lioness agreement is void and unenforceable; and, (vi) Specific performance of the IPA and the security agreements, including a mandatory order that Reeta Luthra and Robert Karam execute all documents necessary to permit the transfer of the Huntmar Lands to 271.

The Parties’ Positions

[53] The parties’ positions are reasonably straightforward. I will begin with 258/271 because their position is arguably the most complex.

The Position of 258/271

[54] 258/271 want the opportunity to complete the deal contemplated by the IPA. They seek an order granting them 45 business days to do so. They claim the IPA remains alive and enforceable notwithstanding their failure to make any of the payments it calls for. Their position is based on three alternate assertions:

(a) There was an agreement reached between the parties that all of the up-front payments would actually be made on closing. In the result, 258 is not in breach and is entitled to enforce the agreement; (b) Amazon’s purported termination was equivocal, or subsequently waived entirely; or, (c) The termination was unlawful because 258 was entitled to, and did not receive, reasonable notice of Amazon’s intention to put an end to the agreement.

[55] 258/271 submit that, for any of the foregoing reasons, the IPA remains enforceable and the security documents – including the pledge of Amazon’s shares – continue to be held in escrow. While they are in escrow, the principals of Amazon have no legal right to deal with the assets of Amazon. As such, they had no right to enter into a joint venture agreement with Corfinancial, no right to grant a mortgage to Corfinancial, and no right to agree to sell the Huntmar Lands to Lioness.

[56] 258/271 have also raised issues of fraudulent, or alternatively negligent, misrepresentations purportedly made by Amazon in relation to issues that go to the cost and feasibility of the development of the Huntmar Lands. They say, for instance, that the principals of Amazon misrepresented the cost of future site servicing, the availability of municipal services, the presence of easements and rights of way over the lands, the existence of municipal work orders, zoning issues, and an amount of $1.5 million owing in dues to the Kanata West Owners Group. They seek an order that they be entitled to close the deal with Amazon, subject to a trial of the issue of what, if any, abatement of the purchase price should be imposed in light of Amazon’s misrepresentations.

[57] 258/271 are agreeable to the discharge of the caution registered by 271 against title to the Huntmar Lands. They are also agreeable to the discharge of the $1 million mortgage they registered against title, without consideration.

[58] 258/271 submit that they are not seeking to enjoin the first mortgagee from realizing on its security by way of power of sale. They acknowledge that the mortgagees have the right to enforce their security, without regard to the dispute between 258 and Amazon. Nevertheless, they do ask that no party be entitled to deal with the Huntmar Lands for 45 business days.

The Position of Amazon

[59] Amazon’s position is that the “termination” of the IPA is more properly characterized as their acceptance of 258’s repudiation of the agreement. That repudiation is evidenced by 258’s failure to make any of the payments required by it when due, or at all. In the face of that repudiation, Amazon was entitled to, and did, treat the contract as at an end. Amazon contends that it need not give reasonable notice of an intention to accept the contract as at an end due to 258s substantial failure of performance.

[60] Amazon contends that it was free to deal with the Huntmar Lands as it saw fit, following October 28, 2019. They submit that their sale to Lioness is valid and should be supported by the court.

[61] Amazon accepts that there may be triable issues in terms of the issue of repudiation. It relies on rule 45.01(2) of the Rules of Civil Procedure which provides the court with the jurisdiction to make an interim order for the sale of property which is perishable or likely to deteriorate. It urges the court to order an interim sale of the Huntmar Lands on the basis of two factors: (1) the monthly mortgage interest costs of more than $35,000 which are accumulating; and (2) the ongoing power of sale proceedings. They expect that if the lands are sold by the mortgagee in the current economic circumstances, substantially lower value will be obtained than they could realize from the sale to Lioness.

[62] In terms of its obligations to Corfinancial, Amazon agrees that Corfinancial is owed $248,000 and consents to the registration of a mortgage in that amount against the Huntmar Lands in favour of Corfinancial.

The Position of Corfinancial

[63] Corfinancial takes essentially the same position as Amazon.

The Position of First Source

[64] The first mortgagee takes the position that it is entitled to enforce its security. It has nothing to do with any dispute between 258 and Amazon. Its security ranks in priority to any claim 258 may have to the lands. It suggests 258/271 are in fact asking for an injunction against them for 45 business days. There is no legal basis, it submits, to impose such injunctive relief.

The Position of Lioness

[65] Lioness did not file any materials on the motion but participated in the hearing to the extent of advising the court that it remains willing, ready and able to complete the purchase deal with Amazon and can close within 5 business days.

Analysis

[66] In view of the circumstances of this case and the positions of the parties two issues are central to the disposition of the motions:

(a) Is this an appropriate case for partial summary judgment? And, (b) If the answer to (a) is no, should the court make any interim orders regarding the Huntmar Lands?

[67] I will address these issues in turn.

(a) Partial Summary Judgment

[68] The core issue in this litigation, and on these motions, is whether the IPS was validly terminated, whether on October 28, 2019 or otherwise. If so, then 258 has no right to the Huntmar Lands. If not, then Amazon had no right to deal with the lands free of any claims of 258.

[69] The position 258/271 is that this is an appropriate case for partial summary judgment. They say the facts are clear: there was an agreement to defer all up-front costs until closing. They say the law is clear: they were entitled to reasonable notice of any intention to terminate. They say they are entitled to enforce the terms of the IPA and that they should be granted judgment now on that issue. All other issues relating to their assertions of misrepresentation should, they concede, press on to trial.

[70] Appellate courts have not encouraged the granting of partial summary judgment. In fact, they tend to strongly discourage it. See, for instance, Butera v. Chown, Cairns LLP, 2017 ONCA 783. Counsel to Corfinancial argued that this is not an appropriate case for partial summary judgment for a number of the reasons discussed in Butera, including, in particular, the risk of duplicative or inconsistent findings of fact.

[71] In my view, I need not address whether partial summary judgment is advisable in this case in the context of the litigation as a whole. The simple fact is, this is not an appropriate case for any form of summary judgment.

[72] The Rules of Civil Procedure provide a number of mechanisms for the early resolution of civil cases. Among them is r. 20 which authorizes the granting of summary judgment, on motion of any party, where the court is satisfied that there is no genuine issue requiring a trial to resolve and that it would be just and appropriate to grant judgment in a summary fashion.

[73] The controlling appellate authority on the scope and application of rule 20 is the Supreme Court’s decision in Hryniak v. Mauldin, 2014 SCC 7. Hryniak instructs that summary judgment motions should be analyzed in two stages.

[74] First, the motions judge must determine if there is a genuine issue requiring a trial based only on the evidence filed on the motion. No genuine issue requiring a trial will exist if the evidence permits the motions judge to fairly and justly adjudicate the dispute in a timely, affordable and proportionate manner. If no genuine issue requiring a trial exists, judgment should be rendered accordingly.

[75] If the motions judge concludes at the first stage that a genuine issue for trial exists, then stage two is triggered. At stage two, the motions judge is directed to consider whether the need for a trial may be avoided by resort to the enhanced fact-finding powers set out in rule 20.04(2.1). These include weighing the evidence, assessing credibility and drawing reasonable inferences. The motions judge may utilize those powers, in his or her discretion, unless doing so would be contrary to the interests of justice.

[76] In this case, there are simply too many crucial facts in dispute to make summary judgment possible or appropriate. I will provide a relatively brief overview of those disputed facts.

[77] The controlling issue, as I said, is the validity of Amazon’s termination of the IPA. Counsel to 258/271 urged the court to conclude that this was a straightforward legal issue only and that the facts surrounding it are not disputed. I strongly disagree.

[78] I will review the factual dispute from the perspective of what I would describe as 258/271’s three-pronged position. As I noted above, they assert the ongoing enforceability of the IPA on three alternative grounds: (1) the IPA was amended to provide that all up-front payments would actually be made on closing and hence there was no breach by 258; (2) the termination was equivocal; or (3) the termination was invalid because Amazon failed to provide reasonable notice.

The Assertion that the IPA was Amended

[79] 258/271 point to a single piece of evidence that they characterize as unquestionably illustrative of the parties’ intentions to amend the payment terms of the IPA. It is an email sent by Mr. Luthra to Amazon’s counsel, Mr. Howard, on September 27, 2019. It said as follows:

Upon transfer of the deed of the property (Huntmar Lands) below funds are due.

1. Consortia will pay 1st mortgage, 2nd mortgage, and city taxes paid in full (including any penalties and outstanding interest payments)
2. Consortia will pay $100,000 (which was due 6 weeks ago)
3. Consortia will pay $350,000 (due at the time of transfer)
4. Consortia will pay $150,000 + HST for consulting fees of 1728009 Ontario Inc.
5. Consortia will pay $100,000 + HST to Amazon (for Planner, Helping Hands, commission and misc)

[80] Mr. Ali deposed that he and Mr. Luthra agreed, on a phone call, that all of the foregoing payments would be made at the time of the closing of the transaction (i.e. when the lands were rolled into the partnership), effectively amending the terms of the IPA. He says Mr. Luthra’s email to Mr. Howard confirms the content of their telephone conversation.

[81] 258/271 claim that in the face of Mr. Luthra’s instructions to Amazon’s counsel, there can be no dispute that any up-front payments were deferred until closing. In the result, Amazon could not rely on any non-payment of those fees as a breach.

[82] I reject their position for three reasons.

[83] First, Mr. Luthra deposed that he did not orally agree to any amendment of the payment terms. He said Mr. Ali told him that the closing was going to happen within 2 -3 days and so he instructed Mr. Howard to be alive to the fact that there were numerous up-front payments that were still to be paid when the closing occurred. Mr. Luthra’s evidence means that there is a factual determination to be made about whether the terms of the IPA were amended, as Mr. Ali says they were. This factual determination will turn on an assessment of the credibility of Mr. Luthra and Mr. Ali.

[84] Second, Mr. Yachmanani testified, on cross-examination, that there had been no amendments to the terms of the IPA.

[85] Third, even if 258/271 prevails in their position about the amendment to the payment terms of the IPA, Amazon may yet have an argument that 258/271 repudiated the IPA by failing to close the transaction within a reasonable time period. The IPA was dated August 5, 2019. It made it clear that the first priority of the agreement was to assume the first and second mortgages, which were in arrears. There is a legitimate outstanding issue about whether 258/271’s delay in closing constituted a substantial failure of performance.

The Assertion that the Termination was Equivocal

[86] There is a lengthy record of correspondence between the principals of Amazon and Mr. Ali between early August 2019 and November 2019. Most of it was by text messaging between Mr. Luthra and Mr. Ali who, I note, were social friends long before this transaction.

[87] The correspondence gives rise to a strong argument, in my view, that Amazon waived strict adherence to the payment dates provided for in the IPA. There is, additionally, an argument to be made that the principals of Amazon were equivocal about whether they were terminating the agreement or whether they were simply aggressively pressing 258/271 to complete it.

[88] By its very nature, the correspondence between the parties gives rise to factual issues that must be determined. Whether there was a waiver of compliance, whether there was a termination, whether that termination was also waived and whether Amazon ever really insisted on performance, are all live issues that, in my view, cannot be determined on this motion record.

The Assertion that Notice of Termination was Required

[89] Counsel to 258/271 argues that where a contract requiring ongoing performance is silent about the circumstances in which it may be terminated, the court should imply a provision that reasonable notice is required.

[90] Again, I make three observations.

[91] First, whether it would be appropriate to imply a provision that the IPA could be terminated on reasonable notice is a live issue. I do not agree that it is a purely legal issue.

[92] Second, whether 258/271 have characterized the nature of the termination accurately is a live issue. This is not a case about whether, and under what conditions, one party may terminate an ongoing contract that otherwise contains no termination clause. As I understand Amazon’s position, they say that 258/271 repudiated the agreement, releasing them from future performance. One would not expect reasonable notice to be required in such circumstances.

[93] In 968703 Ontario Ltd. (c.o.b. Headline Industries) v. Vernon (2002) 2002 ONCA 35158, 58 O.R. (3d) 215, [2002] O.J. No.580 (Ont. C.A.) Weiler J.A. listed five factors that provide guidance in determining whether or not a breach is a substantial failure of performance justifying future non-performance of an innocent party's obligations:

(a) the ratio of the party's obligation not performed to the obligation as a whole; (b) the seriousness of the breach to the innocent party; (c) the likelihood of repetition of the breach; (d) the seriousness of the consequences of the breach; and (e) the relationship of the part of the obligation performed to the whole obligation.

[94] All of the “Vernon” factors must be considered and weighed in this case. All are factual determinations. All are live issues.

[95] Moreover, there is evidence in the record of communications between Mr. Luthra and Mr. Ali that suggests that notice was given of an impending termination. Accordingly, even if the court were to imply a reasonable notice of termination provision, there will still be a live issue about whether notice was actually given and, if so, whether it was reasonable.

[96] This is not an evidentiary record upon which I would feel comfortable making the determinations necessary to grant summary judgment, even with the ability to weigh the evidence, assess credibility and draw inferences. The evidence is highly contradictory and much of the factual record is unclear. There are significant issues of credibility to be determined.

[97] In the result, I am not prepared to grant any of the relief sought by 258/271. I may have been prepared to grant them a certificate of pending litigation, but they abandoned their claim for that relief on the basis that it would serve no purpose other than to compel a sale by power of sale.

[98] Because I am not able to determine the validity of the termination on this record, I am not prepared to make a finding that Amazon had the authority to enter into agreements with Corfinancial or Lioness. The legal authority of their principals to enter such agreements is a live issue that I am unable to determine on this motion.

[99] Finally, I am not prepared, again for the same reasons, to effectively grant summary judgment to Corfinancial on the issue of its entitlement to a mortgage in the amount of $248,000. As I indicated, the authority of the principals of Amazon to enter into any contract with Corfinancial is a live issue.

(b) The Huntmar Lands in the Interim

[100] In light of my conclusion that the validity of the termination of the IPA is a genuine issue requiring a trial, I am left with a single question: whether it is advisable to order an interim sale of the Huntmar Lands to Lioness pursuant to Rule 45.01(2) of the Rules of Civil Procedure.

[101] Rule 45.01(2) provides as follows:

Where the property is of a perishable nature or likely to deteriorate or for any other reason ought to be sold, the court may order its sale in such manner and on such terms as are just.

[102] I accept that I have the jurisdiction, based on r. 45.01(2), to order a sale of the Huntmar Lands. See Kargakos v. The Estate of George Kargakos, 2019 ONSC 4546.

[103] I am satisfied that the equity in the property is deteriorating. There are two principal drivers of the deterioration. First, unpaid interest continues to accrue at a rate in excess of $35,000 per month on the first and second mortgages. Second, the first mortgagee is in a position to realize on its security by way of power of sale.

[104] I am further satisfied that a number of parties may be significantly prejudiced should the property be sold under power of sale, as opposed to the proposed sale to Lioness. Most acutely, Reeta Luthra and Robert Karam, who have personally guaranteed the first mortgage, which has an outstanding balance in the neighbourhood of $5 million at present.

[105] I am prepared to take judicial notice of the fact that a private sale generally yields a better return than does a sale under the distress of a power of sale proceeding. That said, 258/271 have adduced evidence of an appraisal which values the Huntmar Lands at $14.5 million. Counsel to Lioness made submissions about why that appraisal may be somewhat fanciful, but none of the facts in support of his assertions are in evidence.

[106] The sale to Lioness is for $6.25 million, less than half of what 258/271 suggests the lands are worth. Such a gap raises a concern about whether the sale to Lioness is commercially reasonable.

[107] I think it axiomatic that the purpose of r. 45.01(2) is to preserve value, not to countenance an improvident sale.

[108] Amazon did not adduce any expert evidence of the value of the property, thereby leaving the court somewhat handcuffed in assessing the commercial reasonableness of the proposed sale to Lioness. That said, I am, on balance, satisfied that the sale to Lioness is reasonable and the only sensible option in the prevailing circumstances. I reach that conclusion for the following reasons.

[109] The IPA was not a traditional sale agreement. It provided that Amazon would “roll” the Huntmar Lands into a partnership. Amazon was to be a limited partner and was to receive payments that, by may calculations, total $9.3 million. [2]

[110] 258/271 take the position, however, as I noted above, that there are a number of factors that they were misled about, which materially affect the value of the Huntmar Lands. They point to $1.5 million owing to a local land association for site servicing; other excessive costs of servicing; the costs of rehabilitating a heritage building on site; the presence of easements and rights-of-way; the fact that 2.5 acres of the lands are undevelopable; and zoning restrictions. They seek, by way of counterclaim, a $3.5 million abatement in the purchase price, which would lower the value of their deal with Amazon to $5.8 million.

[111] The $14.5 million appraisal is based on certain assumptions. The position of 258/271 tends to refute a number of them. In my view, the $14.5 million appraisal is not particularly reliable.

[112] One would expect, as a matter of common sense, that the principals of Amazon would be motivated to obtain the highest possible value for their lands. I appreciate that they are under some considerable pressure to sell and that pressure may make them particularly motivated sellers. But there is no benefit to them to sell for a commercially unreasonable sum.

[113] The Lioness deal, at $6.25 million, includes all the “warts” attached to the lands, as I have just described. When assessed in that light it compares favourably to the IPA transaction.

[114] The alternative to the Lioness deal is not attractive. First Source will undoubtedly carry on with its power of sale proceedings. Perhaps Lioness will offer to purchase the property from them. Perhaps 258/271 will do likewise. One can only speculate about that. Generally, however, parties buying from a lender in a distress sale look for a bargain. Moreover, the economic circumstances in this province and beyond are as tenuous as they have been in more than half a century. There are sound reasons to be concerned about the realizable value under a power of sale conducted in the current market.

[115] The Lioness deal can be closed in very short order. One can only speculate, again, about how long it might take to actually complete a transfer by way of a power of sale proceeding. It could be many months. In the meantime, the mortgagee’s costs will continue to increase, as will the outstanding interest owing on both the first and second mortgages.

Conclusion

[116] I am satisfied, in all the circumstances, that the best course of action is for the Huntmar Lands to be sold to Lioness pursuant to the agreement of purchase and sale dated December 17, 2019. The sale is to be completed within 30 days.

[117] The Caution in favour of 2718379 Ontario Inc. and registered December 5, 2019 as Instrument No. OC2173006 shall be vacated and discharged from title to PIN 04487-0343LT.

[118] The proposed mortgage in favour of Corfinancial Corp. is not to be registered on title, given that the authority of Amazon to grant that mortgage is a live issue.

[119] Likewise, the mortgage in the amount of $1 million in favour of 2587410 Ontario Inc. and registered on January 28, 2020 as Instrument No. OC2187572 shall be vacated and discharged from title to PIN 04487-0343LT.

[120] The net proceeds of the sale of the Huntmar Lands, after payment to discharge any outstanding encumbrances, the usual and ordinary adjustments on closing and the legal fees associated with the sale, shall be paid into court to the credit of this action.

[121] Any party may apply to the court for further directions relating to the sale if need be.

[122] The parties may make written submissions on costs on a 14-day turnaround. Corfinancial and Amazon shall serve and file their submissions by April 13, 2020. 258/271 shall serve and file their submissions by April 27, 2020. If First Source or Lioness wish to make cost submissions they too shall serve and file them by April 27, 2020. Submissions are not to exceed 2 pages in length, not including Costs Outlines, and are to be filed by email to Jennifer.Smart@Ontario.ca

Boswell J.

Released: March 31, 2020

[1] Many readers will recognize that $1 million plus $1 million plus $1.5 million does not equal $4 million. It is unnecessary for me to resolve this discrepancy for the purposes of these motions.

[2] The first and second mortgages were to be assumed, with an estimated value of $5,350,000. A $100,000 deposit was to be paid. An addition $3.5 million was to be paid in three tranches over a period of 48 months.