2021 ONSC 1938

Court File and Parties

COURT FILE NO.: CV-20-651197-0000 DATE: 20210315

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ghods Builders Inc. and 2405257 Ontario Limited AND: Sedona Place Co-Ownership Inc. et al.

BEFORE: J.T. Akbarali J.

COUNSEL: Melvyn L. Solmon and Nancy Tourgis, for the Plaintiffs Marek Z. Tufman, C.S., and G. Tufman, for the Defendant Sedona Place Co-Ownership Inc. A. Birnbaum, in person

HEARD: March 8, 2021

Endorsement

Overview

[1] The parties hereto are parties to an option agreement under which the plaintiffs acquired the option to purchase a portion of land owned by the individual defendants. The plaintiffs are planning a significant development in the area, of which the property in issue is a part. On its face, the option agreement expired on December 31, 2020. There are disputes relating to the option agreement. The plaintiffs allege that the defendants have acted in bad faith and breached the option agreement in order to extricate more money from the plaintiffs, and it is due to the defendants’ misconduct that the option agreement expired without the plaintiffs being able to exercise the option. In their claim, the plaintiffs seek, among other things, an extension of the option agreement, and specific performance.

[2] On this motion, the plaintiffs seek interim relief in the form of an order for leave to issue a certificate of pending litigation, and they seek interim injunctive relief, requiring the defendants to sign a consent application for a severance of the optioned lands, and enjoining the defendants from interfering with a Local Planning Appeal Tribunal (“LPAT”) proceeding scheduled for May 11, 2021, relating to the plaintiffs’ development plans.

[3] The defendant, Sedona Place Co-Ownership Inc. (“Sedona”), seeks an order directing this proceeding to arbitration. At the hearing, the plaintiffs and Sedona agreed on terms by which the dispute would go to arbitration, subject to the court retaining some residual jurisdiction, and subject to the court adjudicating the plaintiffs’ motion for relief that I have described above.

Brief Background

[4] The individual defendants hold an undivided interest in a property municipally known as 5949 Yonge St., Toronto. The property is a 116-unit residential building operating as a co-ownership. The corporate defendant, Sedona, was created by way of a co-ownership agreement entered into in September 2004, when a rental building was converted into a cooperative. Under the co-ownership agreement, the co-owners appoint a board comprised of representatives of the co-owners to facilitate the management of the co-ownership. In this proceeding, counsel for Sedona is clear that it does not speak for the individual owners. No individual owner attended court to take a position in opposition to the relief sought by either the plaintiffs or Sedona. [^1]

[5] The option agreement between the parties, dated March 31, 2014, granted the plaintiffs the option to purchase the surface parking area of the individual defendants’ property. Under the key elements of the deal that was reached, the surface parking area of the property would be severed. After severance, the plaintiffs could exercise the option to purchase. The purchased parcel would be transferred to the plaintiffs. The plaintiffs would temporarily transfer other land to the defendants on which they could park. The plaintiffs would then construct an underground parking lot and other amenities as part of their development. Once completed, the defendants would return the land on which they had been temporarily parking to the plaintiffs, and would receive title to new parking lands, mostly in the underground parking lot. The purchase price for the property was $6,552,100 comprised of staggered deposits, some of which are non-refundable, and the value of the construction and conveyance of the new parking lands.

[6] There have been a number of problems since the option agreement was executed. Sedona argues that the plaintiffs are responsible for delay in advancing the development, while the plaintiffs claim the defendants are responsible. The plaintiffs say that there are four agreements extending the date by which the option was to be exercised; Sedona denies those agreements exist. To the extent these allegations are relevant to the analysis of the issues on this motion, I address them below.

Should a Certificate of Pending Litigation be Issued?

[7] The first issue is whether a certificate of pending litigation should be issued.

[8] In a hearing on December 4, 2020, Master Brott made an order directing the parties to consent to an order in the Superior Court of Justice that provided for injunctive relief. In particular, the order provides that any person having knowledge of the injunction is prohibited from transferring or encumbering the property, including the optioned lands. The order also provides that the injunction does not prevent any of the defendants from transferring any of the individual units owned on the condition that the injunction is brought to the knowledge of the purchaser of such unit so as to make certain that the purchaser will be bound by the injunctive relief provided in the order.

[9] The parties filed a motion in writing on consent seeking that Master Brott’s order be turned into an order of the Superior Court of Justice. At the time of the hearing before me, that motion had been assigned but not yet adjudicated. Given that the consent order also provided for the injunction motion to proceed, the parties indicated that their consent should be revised to remove reference to the motion, since it was heard prior to the adjudication of the motion in writing. I understand that the order that has been signed reflects the parties’ updated consent as expressed to me at the hearing.

[10] Sedona says this injunction is sufficient to protect the plaintiffs. It argues that a certificate of pending litigation would need to be issued for each individual unit and would prove to be an unnecessary and unwieldy task.

[11] The plaintiffs argue that the injunction is not sufficient. First, they note that Master Brott’s order provided that service of any materials on the individual defendants would be effective three days from the date of service of the material on Sedona lawyers. It required that Sedona post the material for service on the website it maintains for the defendants within the three days of receipt. These orders are obviously related – it is by Sedona posting the material on the website that the individual defendants get notice. However, Sedona did not post Master Brott’s order on the website for over 2 ½ months, creating a situation where the defendants, to the extent they would be bound by Master Brott’s order on notice, had no actual notice of it. [^2]

[12] Second, the plaintiffs argue that, in order to deal with the city with respect to their development plan, the plaintiffs require an interest in the optioned land. Since the option agreement has, on its face, expired, the plaintiffs require a certificate of pending litigation so they are not prejudiced in their attempts to advance the development process, and can do so concurrently with the arbitration process.

[13] Third, the plaintiffs argue that their proceeding is one in which an interest in land is in question. They rely on section 103(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, under which the commencement of the proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and registered in the proper land registry office.

[14] The parties agree on the test for a motion for leave to issue a certificate of pending litigation; it is set out in Perruzza v. Spatone, 2010 ONSC 841, at para. 20.

[15] First, there must be a triable issue involving an interest in land. Sedona accepts that an option to purchase creates an immediate interest in land at the time is granted: 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, at paras. 19 and 24. Sedona also accepts that the plaintiffs’ claim raises triable issues.

[16] Second, the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a certificate of pending litigation should be granted.

[17] In my view, it is just that leave to issue a certificate of pending litigation should be granted in this case. The plaintiffs claim specific performance of the option agreement. The land in question is unique to their proposed development, and damages are not an adequate remedy if the development cannot proceed.

[18] The plaintiffs are more likely to be able to advance their development process with the certificate of pending litigation registered on title than with only the injunction order. If the arbitrator eventually concludes that the plaintiffs are entitled to an extension of the option agreement due to wrongdoing on the part of the defendants, it will be in everyone’s interest if the development process has not been unnecessarily slowed as a result of the dispute between the parties. Additional, unnecessary delay will be prejudicial to the plaintiffs.

[19] A certificate of pending litigation is the most effective way to protect the plaintiffs’ interest in the land while the arbitration process unfolds, without unduly hampering the ability of the individual defendants to transfer their individual units if it is necessary to do so, through the temporary lifting of the certificate of pending litigation.

[20] In concluding that a certificate of pending litigation should issue, I do not rely on Sedona’s delay in posting Master Brott’s order on the website. Although the delay was unacceptable, and is unexplained, notice of the order to the individual defendants has now been given, and there is no allegation that any actual harm resulted from the delay.

Injunctive Relief: Compelling Consent to the Severance Application

[21] The plaintiffs seek an interlocutory mandatory injunction requiring the individual defendants to execute as the owners, or to authorize Sedona to execute, the consent application in the form attached to their motion materials in accordance with section 3.04(a) of the option agreement.

[22] The plaintiffs seek this relief in furtherance of their application to sever the optioned land from the rest of the land owned by the individual defendants, in accordance with the option agreement. Under the option agreement, the plaintiffs cannot exercise their option to purchase the land until it has been severed. The severance is separate and apart from the overall development process.

[23] The parties agree that the severance of the land is a precondition to its transfer, but it does not cause the transfer to take place. The individual defendants will continue to own the severed land.

[24] The parties agree that under section 3.04 of the option agreement, the defendants agreed to execute the consent application within 10 days of receiving it. The agreement requires them to cooperate with, and to support, the consent application.

[25] Sedona acknowledges that section 3.04(a) does not provide for conditional approval.

[26] There is no dispute that the consent application was provided to the defendants in accordance with the option agreement on August 26, 2020. There is no dispute that there was no reason for the defendants not to execute the consent application at that time. The option agreement was valid and in force. The defendants were obliged under its terms to execute the consent agreement. However, the defendants did not execute the consent agreement.

[27] The day after the plaintiffs delivered the consent application for the defendants to execute, the board obtained an appraisal of the optioned lands. On cross-examination, Sedona’s representative gave evidence that the board wanted to be informed of the value of the land because they were obligated to protect the interests of the co-owners, and they wanted an appraisal to approach the plaintiff to offer an extension of the option agreement for more money.

[28] The plaintiffs argue that, had the severance application been signed when it should have been signed, they could have exercised the option before the expiry of the option agreement. They also argue that there already existed an agreement to extend the option agreement in any event. The board’s efforts were, in the plaintiffs’ view, an attempt to leverage the pressure the defendants’ actions could place on the plaintiffs’ development plans to extract more money from the plaintiffs.

[29] The test for an interlocutory injunction is set out in RJR Macdonald Inc. v. The Attorney General of Canada, [1995] 3 S.C.R. 199. It requires: a. a serious issue to be tried; b. irreparable harm will be suffered by the party seeking the injunction if the injunction is not granted; c. the balance of convenience favours granting the injunction.

[30] In this case, there is a serious issue to be tried. Sedona has acknowledged that the plaintiffs’ claims raise serious issues.

[31] The plaintiffs argue that they will suffer irreparable harm if the injunction is not granted. The severance is a precondition to their ability to exercise the option to purchase the land. The land is unique and is uniquely folded into the larger development that the plaintiffs are seeking to advance. If the development fails due to the fault of the defendants, or if the plaintiffs suffer losses as a result of having to proceed with the less advantageous development due to the fault of the defendants, the plaintiffs argue that the damages could be incalculable. At the same time, they note that it appears that the defendants have purchased property with the refundable deposits the plaintiffs have paid them under the option agreement, suggesting that the defendants are without liquid funds to make good any damages award in the plaintiffs’ favour.

[32] If the plaintiffs are successful in the arbitration, the severance of the lands will be necessary to proceed with the development in its current iteration. Unnecessary delay in severing the lands may cause irreparable harm. It is unknown how failure to sever the land may impact the development process.

[33] In my view, the balance of convenience favours granting the injunction. While Sedona argues that there is no need to sever the lands now, they suffer no prejudice by doing so because they continue to own the lands. On the other hand, the plaintiffs were entitled to the defendants’ consent to the severance of the land by early September 2020, and they did not receive it in breach of the agreement – a breach for which no explanation or justification is offered. In my view, it is not just for the defendants to fail to meet their obligations under the agreement and then rely on their delay and breaches of the agreement to resist the severance of the land, when doing so causes them no prejudice but may cause irreparable harm in the form of additional delay to the plaintiffs.

[34] The plaintiffs have provided an undertaking as to damages about which no complaint has been made.

[35] In effect, the plaintiffs are seeking this relief to restore the status quo that should have existed by September 2020, and in which context the issues for arbitration ought to be determined. Although the signing of the consent application, viewed only in the context of the severance, is a final step, I find that the severance is properly characterized an interim step in the context of the parties’ agreement, and the development process as a whole. I conclude that the mandatory interim injunction is appropriate and shall be granted.

Injunctive Relief: Preventing the Defendants from Interfering with the LPAT hearing

[36] The plaintiffs seek an interlocutory injunction preventing the defendants from interfering, commenting upon, negatively speaking about, or in any way interfering with the LPAT proceedings scheduled on May 11, 2021 with respect to the plaintiffs’ development plan.

[37] The relevant test is the test from RJR Macdonald, set out above.

[38] There is no dispute that section 3.03 of the option agreement requires the cooperation of the defendants with respect to the plaintiffs’ development plans.

[39] Sedona argues that injunctive relief enjoining the defendants from interfering with the development process is unnecessary because there is no evidence to support the allegation that the defendants will interfere with the development process.

[40] The plaintiffs disagree. They point to the following: a. The defendants have already acted in breach of the option agreement, including the breach I describe above. Moreover, there is evidence of other breaches by the defendants in the record before me. b. There is some evidence of bad faith on the part of the defendants, related to their refusal to sign the consent application and attempts to extract more money from the plaintiffs. There is evidence that the board member responsible for communicating with the appraiser in 2020 claims to have “deleted” all her emails. c. On cross-examination, Sedona’s representative indicated that the board had not determined what position it would take with respect to the issues that are before the LPAT; d. Correspondence in the record indicates that the individual defendants, or at least some of them, expressed disagreement with the proposed development and opposed the extension of the option agreement at a meeting called for the purpose of determining their position on those issues.

[41] Again I note that the plaintiffs’ claim raises serious issues to be tried with respect to the option agreement, including whether the defendants bear responsibility for its expiry before the option could be exercised due to their breaches of the agreement, and whether an agreement existed to extend the date by which the option had to be exercised.

[42] If the defendants, or any of them, interfere with the LPAT hearing, the development process into which the plaintiffs have invested significant time and resources may be jeopardized. Doing so could undermine the integrity of the arbitration process and cause irreparable harm to the plaintiffs’ efforts to continue their development project before the arbitration process is concluded. Delay may have an impact on the overall success of the plaintiffs’ plans. There is evidence that there is another, possibly competing, development project that the LPAT will consider for the area at the May 2021 hearing.

[43] The balance of convenience favours the plaintiffs. The injunction the plaintiffs seek is in furtherance of the preservation of the status quo, and prevents irreparable harm to the plaintiffs’ development project. On the other hand, it forces the defendants to abide by a bargain they already entered into. While they allege that bargain has expired, that allegation is contested, and the issue will be determined in the arbitration.

[44] As I have already noted, the plaintiffs have given an undertaking as to damages, about which Sedona has raised no concerns.

[45] Accordingly, I conclude that the interim injunction sought is just and shall be ordered.

Stay Pending Arbitration

[46] Based on the consent of the plaintiffs and Sedona, the relief being unopposed by the other defendants, I order a stay of this action to allow the parties to proceed to arbitration as contemplated in the option agreement on the following terms: a. the dispute shall proceed to arbitration in accordance with the option agreement; b. the parties shall be entitled to return to court to seek relief in the event that: i. the parties require expeditious or urgent assistance from the court; ii. the arbitrator is not available; or iii. the arbitrator determines that the assistance of the court is necessary.

Costs

[47] The parties were unable to agree on costs. Each has provided me with their costs outline so that I may determine the costs of this motion.

[48] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 46 O.R. (3d) 330, at para. 22.

[49] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario (2004), 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[50] In this case, the plaintiffs have been successful and are entitled to their costs. Also before me are the costs of the motion before Master Brott, as these were reserved to the judge hearing the plaintiffs’ motion.

[51] I note that the claim for costs is against Sedona only. None of the individual defendants opposed the relief sought.

[52] The plaintiffs’ costs outline claims partial indemnity costs of $47,035.00, inclusive of disbursements, but apparently exclusive of the fee for attendance at the hearing. The costs outline does not break out the costs referable to the plaintiffs’ motion, the motion before Master Brott, or the stay motion that resolved on consent. There is a breakdown of hourly rates and hours spent by the timekeepers, but that seems to result in partial indemnity costs of about $35,000, which, after HST, would be just under $40,000. Disbursements are $672.00, but the plaintiffs’ costs outline notes that a further schedule of disbursements will be provided to deal with service and copying of the motion record on all the defendants. I directed that costs submissions be delivered by March 12, 2021, a timeline the plaintiffs indicated they could meet. There is no indication when the plaintiff intends to deliver this further schedule of disbursements, and no request that I set a timetable for so doing. As a result, I will proceed to determine costs without the schedule of disbursements.

[53] Sedona’s costs outline identifies its total partial indemnity costs, including HST and disbursements, as $25,333. It expressly includes time for all three motions – the plaintiffs’ motion, the motion before Master Brott, and the stay motion that resolved on consent.

[54] With respect to the quantum of costs, I note the following: a. Although Sedona’s counsel spent considerably less time on the motions than did the plaintiffs’ counsel, to some extent that reflects the plaintiffs’ burden in preparing the motion records for their motion before me and before Master Brott. The motion records were voluminous. Although Sedona argues that the motion records were unnecessarily voluminous, I do not find that they were excessive or that the plaintiffs included irrelevant materials. However, the time spent by plaintiffs’ counsel was excessive, even allowing for their greater burden of preparation; b. Counsel’s hourly rates were reasonable; c. The issues raised were serious and of great importance to the plaintiffs. They were of moderate complexity; d. Sedona should reasonably have expected the plaintiffs’ costs to be higher than its own, although perhaps not as high as has been claimed; e. By failing to assist with the service of the motion materials on the individual defendants, Sedona increased the plaintiffs’ disbursements unnecessarily; f. No offers were made.

[55] In these circumstances, I find that costs of $40,000 all inclusive are fair and reasonable in the circumstances. In calculating this amount, I have taken into consideration the cost of serving the motion record on the individual defendants even though the plaintiffs did not produce the schedule describing those disbursements. I am aware that the motion records were voluminous and had to be copied and served on 116 individual defendants. It is appropriate that the costs the plaintiff receives on this motion reflect some portion of those costs even if they have not been particularized, because Sedona could have facilitated service in a more cost-efficient manner, but it did not.

[56] Sedona shall pay the plaintiffs $40,000 in costs, all inclusive, within thirty days.

The Order

[57] Given the number of individual defendants, the fact that none of them opposed the relief sought in these motions, and the evidence of the difficulties in communicating with the individual defendants on matters relating to the option agreement, I order that the order arising from these reasons need only be approved as to form and content by the plaintiffs and Sedona.

J.T. Akbarali J. Date: March 15, 2021

Footnotes

[^1]: Several individual owners attended the hearing to observe only. One, Arthur Birnbaum, made very brief submissions. With respect to the issues before me on this motion, Mr. Birnbaum indicated he agreed that the orders the plaintiffs seek are appropriate. [^2]: Master Brott’s order is not actually the injunction, but rather an order to consent to the injunction.