[CITATION](http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/): 2638023 Ontario Inc. v. 1701288 Ontario Inc, 2021 ONSC 2333 COURT FILE NO.: CV-19-00640009-0000 DATE: 20210329
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2638023 ONTARIO INC.
Plaintiff
– and –
1701288 ONTARIO INC,
YAO JUN SITU, XIE TAO SU and HUI YING CAO
Defendants
Ken MacDonald, lawyer for the plaintiff
Eric Turkienicz, lawyer for the Defendants, 1701288 Ontario Inc. and Yao Jun Situ
Eric Brousseau, lawyer for the Defendants, Xie Tao Su and Hui Ying Cao
Amiri Dear, lawyer for the non-party, Fortis Consulting Ltd.
HEARD: March 24, 2021
ENDORSEMENT
DIAMOND J.:
Overview
[1] As per the terms of my Endorsement dated February 25, 2021 and March 1, 2021, the defendants’ joint motions for summary judgment were rescheduled to be heard by me on March 24, 2021. The adjournment was at the Court’s request to grant Fortis Consulting Ltd. (“Fortis”, a tenant in the subject property described in greater detail below) the opportunity to participate on the motions.
[2] On or about March 12, 2021, Fortis delivered a responding motion record and factum. None of the parties cross-examined Fortis upon its responding material.
[3] The motions for summary judgment proceeded before me as scheduled on March 24, 2021. Fortis did not actively participate other than filing its factum to advise the Court of its position with respect to the form and validity of its lease of one of the units at the property.
[4] At the conclusion of the hearing, I took my decision under reserve
Summary of Relevant Facts
[5] A concise summary of the salient facts giving rise to this proceeding is set out at paragraphs 5 through 9 of my Endorsement dated March 1, 2021. The following is a more detailed recitation of that factual matrix, which for the most part is not in dispute.
[6] On or about March 28, 2019, the plaintiff entered into an Agreement of Purchase and Sale (“the Agreement”) to purchase the property municipally known as 110-120 Mack Avenue, Toronto, Ontario (“the property”) from the defendant 1701288 Ontario Inc. (“170”) for the original sum of $9,680,000.00. The property is an industrial warehouse comprised of four units, two of which were leased to tenants as at the date of the Agreement.
[7] The Agreement was effectively on an “as is” basis, and contained various conditions for the benefit of the plaintiff (property inspection, financing, etc.).
[8] Under the terms of the Agreement, the plaintiff was to assume the two existing leases (including the Fortis lease). 170 was required to provide copies of the two existing leases to the plaintiff prior to the expiry of the conditional period. A copy of the Fortis lease was provided by 170 to the plaintiff in early April 2019. That version of the Fortis lease provided that Fortis, as tenant, was responsible for maintenance including “any structural components of the premises”.
[9] Relying upon, inter alia, the version of the Fortis lease provided by 170, the plaintiff ultimately waived all conditions, and the transaction went firm. In advance of closing, the defendants signed statutory declarations that provided the following:
• The defendants had knowledge of the matters to which they hereinafter deposed;
• The leases were all valid and subsisting leases, and had not been altered or amended in any way;
• All obligations of the landlord (170) had been performed to date; and,
• There was no litigation commenced, pending or threatened by the tenants against 170 with respect to the property, tenancies or leases.
[10] The Agreement contained an “entire agreement” clause which stated:
“This Agreement, including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.”
[11] Prior to closing, the plaintiff became aware of leaks in the property’s roof. The plaintiff maintains that at that time, it understood that Fortis was required to affect all roof repairs above its unit. The plaintiff gave evidence that the existing tenants (including Fortis) were requesting that the roof be repaired and/or replaced. Through its real estate lawyer Henry Hui (“Hui”) the plaintiff contacted the defendants prior to closing and asked that the leaks be rectified by 170.
[12] The plaintiff subsequently advised 170 that the plaintiff now intended to replace the entire roof, and sought a financial contribution from 170 towards the cost of that work.
[13] 170 took the position that since the roof was included “as is” in accordance with the terms of the Agreement, and the plaintiff could have inspected the roof at any time, 170 was not interested in any further negotiations. 170 also advised that it did not believe there were any issues with existing tenants other than Fortis (as Fortis wanted the roof repaired or replaced).
[14] Ultimately, the parties negotiated and agreed to a $100,000.00 abatement to the original purchase price in recognition of the poor state of the roof and the plaintiff’s decision to replace the roof post-closing.
[15] The transaction closed on August 22, 2019. On closing, the plaintiff had not received any of its requested statutory declarations from the tenants, including Fortis.
[16] After closing, the plaintiff submits that it learned of the existence of another version of the Fortis lease which, according to Fortis’ sworn responding materials, was the actual lease between 170 and Fortis. That lease required the landlord (ie. 170 and now the plaintiff) to “repair all roof areas that are causing the leaking from inside the unit”. Such repairs were undertaken to be completed in the spring of 2020 when “weather permits”.
[17] The plaintiff commenced this proceeding against the defendants for false and/or negligent misrepresentation, and breach of contract. The plaintiff alleges that as 170 was a motivated seller (owning approximately $4,900,000.00 to a third party), 170 concealed both the full, poor condition of the roof and the fact that the plaintiff had a contractual obligation under the real Fortis lease to repair or place the roof the following spring.
Summary Judgment
[18] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the Court shall grant a summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence.” As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[19] In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada held that on a motion for summary judgment, the Court must first determine whether there is a genuine issue requiring a trial based only upon the record before the Court, without using the fact-finding powers set out in the 2010 amendments. The Court may only grant summary judgment if there is sufficient evidence to justly and fairly adjudicate the dispute, and if summary judgment would be an affordable, timely and proportionate procedure.
[20] The overarching principle is proportionality. Summary judgment ought to be granted unless the added expense and delay of a trial is necessary for a fair and just adjudication of the case.
[21] As held in Sanzone v. Schechter 2016 ONCA 566, only after the moving party discharges its evidentiary burden of proving that there is no genuine issue requiring a trial for resolution does the burden then shift to the responding party to prove that its claim has a real chance of success. The Court must address the threshold question of whether the moving party discharges its evidentiary obligation to put its best foot forward by adducing evidence on the merits.
[22] Nothing in Hyrniak or the subsequent jurisprudence displaces the onus upon a party responding to a motion for summary judgment to “lead trump or risk losing.” The Court must assume that the parties have put their best foot forward and placed all relevant evidence in the record. If the Court determines that there is a genuine issue requiring a trial, the inquiry does not end there and the analysis proceeds to whether a Court can determine if the need for a trial may be avoided by use of its expanded fact-finding powers.
[23] As recently held by the Court of Appeal for Ontario in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, when hearing a motion for summary judgment, the Court must follow the analytical process set out in Hryniak and carefully analyze all the evidence relied upon by a responding party in his/her efforts to show the presence of a serious issue requiring a trial. First, the Court must consider whether there is a genuine issue requiring a trial based on the record alone and without utilizing the enhanced fact-finding powers in Rule 20.04 (2.1) of the Rules of Civil Procedure.
[24] If the Court finds the presence of a genuine issue requiring a trial on the record alone, then the second question is whether the need for a trial can be avoided by using the said fact-finding powers. In his recent decision Oxygen Working Capital Corp. v Mouzakitis 2021 ONSC 1907, Justice Myers posed the following (non-exhaustive) questions for the Court to consider at the second stage:
a) Will making findings of fact on the evidence before the court provide a fair and just result as compared to a mini-trial or a trial?
b) Does the material before the court illuminate the factual issue sufficiently to allow the judge to make findings of fact and credibility?
c) Is there something missing that is needed for basic fairness despite the fact that the parties chose not to put that evidence forward?
d) Do considerations of the litigation as a whole mandate some further process before making factual or credibility findings?
Is this an Appropriate Case for Summary Judgment?
[25] As stated, Fortis has provided sworn evidence that the final and fully executed valid lease was the version which required the landlord to repair all roof areas that were causing leaking inside the Fortis unit. Fortis was clear that the version of the lease produced by the defendants in their motion records is not a valid copy of the Fortis lease.
[26] Fortis was not cross-examined upon its evidence. As such, Fortis’ evidence filed in response of this motion is unchallenged. The Court is certainly not in a position to make a definitive finding on the writing record alone as to which version of the Fortis lease is valid and binding.
[27] However, the moving defendants submit that even if the lease produced by Fortis is the valid and binding lease, there is still no genuine issue requiring a trial due to the fact that the plaintiff conducted itself right up until closing as if it, as the new landlord, was under a legal obligation to repair and/or replace the roof. In other words, if the plaintiff subjectively believed that it was the party responsible for repairing and/or replacing the roof, its pre-closing conduct, together with the fact that all of the parties’ respective rights and interests merged on closing, should lead the Court to the conclusion that the moving defendants cannot be liable in either breach of contract or misrepresentation.
[28] The moving defendants point to numerous pieces of evidence in the record in support of their position:
• On August 9, 2019, Hui wrote to 170 to advise that the roof was leaking in many places, and the tenants were requesting that the roof be replaced. Hui specifically stated that the plaintiff intended to replace the entire roof, and understood that 170 was willing to consider contributing to some of the associated costs. At the time, the plaintiff proposed that 170 contribute an amount equivalent to a 25% share of the roof replacement costs.
• On August 15, 2019, counsel for 170 responded to Hui and advised that the Agreement was entered into on an “as is” basis, and stated “there are no issues of which I am aware with the other tenants, other than Fortis wanting the roof replaced, but that falls within your client’s responsibilities.”
• Later that same day (August 15, 2019), Hui wrote to 170 to advise that the estimated cost of replacing the entire roof (which was, according to Hui, beyond the age of repair) was approximately $455,000.00. Hui repeated his request that 170 absorb 25% of the costs by way of an abatement to the purchase price in the amount of $113,565.00.
• Hui and 170 ultimately negotiated and agreed upon a $100,000.00 abatement for 170’s contribution to the cost of replacing the roof.
• Hui was cross-examined upon his affidavit filed in response to these motions for summary judgment, and gave the following additional evidence:
i. the plaintiff closed the transaction notwithstanding the fact that it never received a written acknowledgment from Fortis (which the plaintiff had requested) confirming that there were no outstanding claims, lawsuits or other issues arising from the Fortis lease with 170;
ii. in or around August 2019, the plaintiff knew that none of the tenants, including Fortis, were agreeable with paying for any of the costs associated with replacing the roof. The tenants expected the landlord (i.e. the plaintiff) to pay for the roof to be replaced, and that was why Hui was negotiating towards obtaining an abatement of the purchase prince. Hui tried to get the plaintiff the best deal he could for the property in an “as is” condition;
iii. Hui confirmed that as at August 15, 2019, 170 took the position that the plaintiff was responsible for repairing and/or replacing the roof;
iv. at no time did Hui write back to 170 to advise that 170 was wrong and it was Fortis’ responsibility to replace and/or repair any portion of the roof; and,
v. Hui and the plaintiff discussed the options of terminating the deal based on the roof issue, but the plaintiff chose to close the transaction with the abatement to the purchase price.
[29] Accordingly, the moving defendants submit that even if the wrong version of the Fortis lease was provided to the plaintiff, the plaintiff’s conduct leading up to the closing of the transaction shows that at no time did the plaintiff ever rely to its detriment upon the allegedly incorrect Fortis lease, and none of the alleged losses claimed by the plaintiff in this proceeding were caused by the provision of the incorrect Fortis lease.
[30] The moving defendants further submit that this proceeding is in fact an abuse of process barred by the doctrine of estoppel by convention. The plaintiff proceeded with knowledge, or at least an assumption, that the $100,000.00 abatement was 170’s contribution to the replacement cost of the entire roof, and since the defendants closed the transaction based upon that negotiated abatement, it would be unfair or unjust to permit the plaintiff to resile from the Agreement.
[31] For its part, the plaintiff’s evidence is that had it known about the valid Fortis lease, it would not have closed the transaction. Alternatively, the plaintiff gave evidence that had it known about the valid Fortis lease, it would have negotiated for a larger abatement (i.e. a larger contribution percentage from 170 over and above 25%). In addition, now that Fortis has commenced its own legal proceeding against the plaintiff as the new landlord, the plaintiff argues that it is entitled to seek contribution and indemnity from the moving defendants (albeit in the Fortis proceeding) due to the plaintiff relying upon the provisions of the incorrect Fortis lease provided by 170.
[32] There is merit to the moving defendants’ position. The plaintiff seemingly conducted itself in a manner whereby it undertook to repair and/or replace the roof at its own cost. While the plaintiff may not have been aware that it was under a legal obligation to do so under the terms of the valid Fortis lease, it appears that the plaintiff did not rely upon the incorrect Fortis lease in taking the positions it did prior to closing.
[33] However, that does not end the inquiry on these motions for summary judgment. In my view, there is an additional level to the issues created by the provision of the incorrect Fortis lease. While the plaintiff’s responding evidence on these motions for summary judgment is less than particularized, it is still open to the plaintiff to take the position that, based on the provisions of the incorrect Fortis lease, the plaintiff could have looked to Fortis to ultimately contribute a payment towards the replacement costs of the roof. The terms of the incorrect Fortis lease enable the landlord (170/the plaintiff) to ask the tenant (Fortis) to contribute towards the costs of repairing or replacing the roof above the Fortis unit. Even with the plaintiff having closed the transaction with a $100,000.00 abatement, relying upon the terms of the incorrect Fortis lease, the plaintiff’s right to seek compensation from Fortis did not merge upon closing, but rather subsisted as the plaintiff was contractually mandated to assume the terms of the incorrect Fortis lease.
[34] Once the plaintiff received the incorrect Fortis lease, by closing the transaction (even with a $100,000.00 abatement), the plaintiff inherited the right to seek compensation from Fortis for a portion of the replacement costs for the roof. While the plaintiff’s evidence in responding to this motion for summary judgment is arguably “less than trump” on that issue, I am not prepared to foreclose the plaintiff’s right to seek compensation from the moving defendants for the alleged misrepresentations and breaches of contract at this stage. While the plaintiff’s evidence of reliance in support of this issue is not fully fleshed out, I cannot say that it is non-existent.
[35] I have found that the issue requiring a trial (over and above which version of the Fortis lease is the valid one) to be whether the defendants’ alleged misrepresentations and/or breaches of contract caused the plaintiff to lose its opportunity to seek compensation from Fortis for its share of the replacement cost for the roof. Considering the litigation as a whole, including the outstanding Fortis legal proceeding (which the parties may consider consolidating with this proceeding), I do not find it to be in the interests of efficient and proportionate justice to mandate some further mini-trial process. The plaintiff’s evidence is that it would not have closed the transaction had it known the terms of the valid Fortis lease. I am permitting the plaintiff to pursue its claim for compensation at trial.
[36] The moving defendants’ motions for summary judgment are therefore dismissed.
[37] The net sale proceeds have already been paid into court. I see no reason to release those sale proceeds at this time, and believe that the most just and efficient course of action is for the parties to schedule a trial (or perhaps a summary trial) as soon as possible using the materials and cross-examinations filed on these motions for summary judgment as examinations for discovery. I am prepared to order those terms if the parties are agreeable.
Costs
[38] I would ask that the parties exert the necessary efforts to try and resolve the issue of the costs of both the moving defendants’ rule 21 motion and motions for summary judgment. If they are unable to reach an agreement, they may serve and file written costs submissions, totaling no more than five (5) pages including a Costs Outline, in accordance with the following schedule:
(a) the plaintiff shall serve and file its written costs submissions within 10 business days of the release of this Endorsement; and
(b) the moving defendants shall file their responding written costs submissions within 10 business days of the receipt of the plaintiff’s written costs submissions.
Diamond J.
Released: March 29, 2021
[CITATION](http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/): 2638023 Ontario Inc. v. 1701288 Ontario Inc, 2021 ONSC 2333 COURT FILE NO.: CV-19-00640009-0000 DATE: 20210329
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
2638023 ONTARIO INC.
Plaintiff
– and –
1701288 ONTARIO INC,
YAO JUN SITU, XIE TAO SU and HUI YING CAO
Defendants
ENDORSEMENT
Diamond J.
Released: March 29, 2021