COURT FILE NO.: CV-20-646121
MOTION HEARD: 20201208
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Costone Holdings Inc. and Costone 1183 Inc., Plaintiffs
AND:
Concept Lofts Ltd., Defendant
BEFORE: Master Jolley
COUNSEL: Allison Speigel and Dora Konomi, Counsel for the Moving Party Defendant
D. Kim, Counsel for the Responding Party Plaintiffs
HEARD: 10 December 2020
REASONS FOR DECISION
[1] The defendant brings this motion to discharge the certificate of pending litigation granted ex parte to the plaintiffs on 18 September 2020 over property municipally known as 1183 Dufferin Street, Toronto (the “Property”).
[2] In order to succeed on this motion, the defendant must demonstrate either that: (1) the plaintiffs failed to provide full and fair disclosure on the original ex parte motion; (2) the plaintiffs have no reasonable claim to an interest in the Property or (3) the Dhunna factors (572383 Ontario Inc. v. Dhunna (1987) 24 C.P.C. (2d) 287) do not support the granting of a CPL.
A. Non-Disclosure
[3] While the threshold for issuing a certificate of pending litigation may be a low one, the test for disclosure is not. Rule 39.01(6) provides as follows:
(6) Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.
[4] For the reasons below, I am satisfied that the plaintiffs complied with their obligations under Rule 39.01(6) and have made out a triable issue as to their claim to an interest in the Property.
[5] Pursuant to a purchase agreement signed on 20 March 2018 (the “Purchase Agreement”), the plaintiffs agreed to purchase a 14 unit condominium building being constructed by the defendant as a redevelopment of a church building on the Property. The purchase price was $10,500,000.
[6] The defendant argues that the plaintiffs misled the court or, at least, did not comply with their disclosure obligations, in that they disclosed only part of the Purchase Agreement. It argues that the transaction was comprised of two agreements. It takes the position that the standard form agreement of purchase and sale that it had used to pre-sell units in the Project to individual unit purchasers (the “Standard APS”) formed an essential part of its overall agreement with the plaintiffs. The contract between the plaintiffs and the defendant comprised both the Standard APS and the Purchase Agreement, to the knowledge of that plaintiffs. The Standard APS contained not only the right of the defendant to unilaterally terminate the agreement, as it has purported to do here, but also a prohibition against the registration of a CPL. The defendant argued that the plaintiffs did not provide full and fair disclosure when it omitted the Standard APS from its materials. It also argued that the plaintiffs failed to disclose relevant email exchanges demonstrating that that the Standard APS was part of the Purchase Agreement.
(i) Failure to Include the Standard APS in addition to the Purchase Agreement
[7] The plaintiffs recognize their obligation to essentially present and argue the other side’s case when a motion is brought without notice. They argue that they did not include the Standard APS in their materials because, not only did they not agree to it as part of the Purchase Agreement, they were unaware that the defendant would argue that the parties had agreed to it.
[8] Looking at the terms of the Standard APS, there are arguments to support the plaintiffs’ position. I note five in particular. First, from a bargaining position, it is arguable that it would not make logical sense for the plaintiffs to invest $10,500,000 in the Property and then agree, as an individual unit purchaser might, that the defendant could simply give it notice and terminate the Purchase Agreement. There was not the same inequality of economic bargaining power as might be the case with an individual unit purchaser and the defendant.
[9] Second, the Standard APS is not attached to the Purchase Agreement as a schedule or otherwise, which would have been the obvious way to clearly incorporate it into the Purchase Agreement. Granted, there are handwritten and typed references in the Purchase Agreement that mention the Standard APS, but it is unclear whether the intention was to adopt the entire Standard APS or adopt parts of the Standard APS and, if so, which parts. It is evident that not all of the terms could have been applicable as some of the dates referenced in the Standard APS had long passed. For instance, the Standard APS references an occupancy date of 9 December 2013, some 4.5 years before March 2018 when these parties signed the Purchase Agreement. Even the 24 month extension of the occupancy date would have expired prior to the agreement reached by these parties.
[10] Third, the defendant argues that emails between the parties confirmed the Standards APS was part of the Purchase Agreement. The plaintiffs argue the emails confirm the opposite and demonstrate their understanding that the parties had not agreed to the terms in the Standard APS. The Purchase Agreement was signed on 20 March 2018. Almost two months later, in May 2018 the defendant emailed the plaintiffs asking for confirmation that “CoStone Holdings Inc. have accepted terms and conditions of our APS.” The plaintiffs argue that this demonstrates that the Standard APS was not part of the Purchase Agreement and something the defendant was still trying to negotiate. As it was not an agreed term, the plaintiffs did not include it as part of the Purchase Agreement that they put before the court on their ex parte motion.
[11] Fourth, on 26 June 2020 the defendant sent a short email to the plaintiffs stating “please find attached full and final mutual release for your deposit money for your review and acceptance”. This apparently is how the plaintiffs learned the defendant was terminating the March 2018 agreement. when the defendant sent its proposed release to the plaintiffs in June 2020, it went to some lengths to define the Purchase Agreement. The definition includes the 20 March 2018 agreement, a waiver and amending agreement dated 14 May 2018 and a further amendment dated 17 September 2018. There is no mention of the Standard APS.
[12] Lastly, a series of correspondence ensued between counsel once the defendant delivered its proposed release. In its letter of reply of 31 July 2020, defendant’s counsel did not suggest that the Standard APS was part of the Purchase Agreement or that the terms of the Standard APS permitted it to unilaterally terminate the agreement and return the $2,000,000 deposit. Instead, it argued that the agreement was unenforceable as being imprecise on a number of key points. Further, one of those points was that the parties did not “properly deal with what would happen if the Project could not be completed on time or at all.” This is antithetical to the defendant’s position on this motion. Here it argued that it insisted that the Standard APS be included as part of the Purchase Agreement as it required the option of unilaterally terminating the agreement, given it knew there could be delays in completion due to the historical designation of the Property.
(ii) Failure to Include all Relevant Emails
[13] As referenced above, the defendant also argues that the plaintiffs deliberately excluded emails between the parties that demonstrated they had agreed on the Standard APS. It points to an email from Deepak Ratti, who was retained by both parties to act as a liaison, to the defendant, discussing the Standard APS. In that email, Ratti suggests that the defendant’s agreement will be “used as well … You can use both documents, they are not only buying single units, they are buying the whole project, hence the agreement is needed in addition to your POS…. we can use both documents. Agree?”
[14] The plaintiffs argue that they did not agree to these terms and that Ratti could not bind them. Further, they were not given a copy of this email by either Ratti or the defendant, which was telling as the defendant insisted on dealing with the plaintiffs directly and not just with Ratti on other key issues.
[15] The defendant also relies on the May email, referenced in paragraph 10 above, in which the defendant noted that it required acknowledgement that “terms and conditions of due diligence have been fulfilled” and “due diligence period is over and CoStone Holdings Inc. have accepted terms and conditions of our APS.” In response, the plaintiffs wrote “we confirm and acknowledge your email regarding the Terms and conditions of due diligence have been fulfilled for 1183 Dufferin Street.” Their email makes no mention of accepting the conditions of the APS and the matter was never followed up.
[16] Had the entire exchanged been included, it would not have necessarily demonstrated that the plaintiffs had agreed that the Standard APS would be included in the Purchase Agreement.
[17] The defendant also argues that the plaintiffs failed to disclose the emails the defendant sent to Ratti in March 2020 advising that the occupancy date had not been achieved and the agreement had become null and void. The defendant did not send these emails to the plaintiffs and there is no evidence that Ratti sent them to the plaintiffs. What the plaintiffs did include is their email to the defendant in June 2020 asking for an update, to which the defendant did not respond.
[18] I find that the plaintiffs’ characterization of the Purchase Agreement is not a misrepresentation but is an issue for trial. A trial court will determine whether the parties intended to incorporate the Standard APS into the Purchase Agreement. For the purposes of the motion, the plaintiffs must satisfy the court that they have a triable issue as to their interest in the Property and they have done so. Had these emails been included, given the confusion around the agreement dates and their subsequent attempts to negotiate those same terms, the triable issue test would still have been met.
B. The Dhunna Factors
[19] For the purposes of this motion, I find there is sufficient evidence that the Property is unique to the plaintiffs and fairly unique as a development. They argue their reputation in the real estate community will be tarnished if they are forced out of the Project. They have spent money marketing it, they have publicly attached their name to it and they have entered into agreements of purchase and sale with buyers for the units in the Property.
C. Conclusion
[20] The defendant’s motion to discharge the certificate of pending litigation is dismissed. If the parties are unable to agree on costs by 29 January 2021, they may each file a costs outline and submissions of no more than three pages in length to my assistant trial coordinator at Christine.Meditskos@ontario.ca.
Master Jolley
Date: 22 December 2020