COURT FILE NO.: CV-18-590285

MOTION HEARD: 2021-03-11

REASONS RELEASED: 2021-04-21

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

EUROPRO (KITCHENER) LIMITED PARTNERSHIP by its general partner, EUROPRO (KITCHENER) GP INC.

Plaintiff

• and-

DREAM OFFICE REAL ESTATE INVESTMENT TRUST, DUNDEAL CANADA LIMITED PARTNERSHIP, DUNDEE REALEX HOLDINGS LIMITED PARTNERSHIP, DUNDEAL CANADA (GP) INC., REALEX (GALLERIA) INC., REALEX (20 SPETZ) INC., DREAM OFFICE LP, DREAM OFFICE (GP) INC., A.W. (BILL) DAVIS, PETER SENST, JAYSEN SMALLEY and CBRE LIMITED

Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: S. Thakker Email: sthakker@lolg.ca -for the Plaintiff

C. Gleason-Mercier Email: cgleasonmercier@osler.com -for Dream Office Real Estate Investment Trust, Dundeal Canada Limited Partnership, Dundee Realex Holdings Limited Partnership, Dundeal Canada (GP) Inc., Realex (Galleria) Inc., Realex (20 Spetz) Inc., Dream Office LP and Dream Office (GP) Inc. (the “Dream Defendants”)

J. Klein Email: jklein@ksalaw.com

• for the Defendants CBRE Limited, A.W. (Bill) Davis, Peter Senst and Jaysen Smalley (the “CBRE Defendants”)

REASONS RELEASED: April 21, 2021

Reasons For Endorsement

I. Introduction

[1] The Plaintiff brings motions to compel the Dream Defendants and the CBRE Defendants to answer undertakings and refusals arising from examinations for discovery. The Dream Defendants have also brought a motion to compel the Plaintiff to answer refusals.

[2] Case management has been provided over 4 telephone case conferences since December 7, 2020 and counsel have had ongoing discussions and exchanged documents and positions right up to the hearing. As set out below, this has resulted in a significant reduction to the number of disputed questions on all 3 motions.

II. The Parties and the Action

[3] The Plaintiff is a property investment, management and leasing company with over 350 tenants at 10 locations in Ontario. On December 14, 2016, the Plaintiff purchased a portfolio of 8 office properties in Kitchener-Waterloo (the “Portfolio”) from the Dream Defendants and other related entities (the “Sale”). The Defendant CBRE Limited (“CBRE”) is a commercial real estate broker which acted for the Dream Defendants on the Sale. The Defendants A.W. (Bill) Davis, Peter Senst and Jaysen Smalley are sales representatives employed by CBRE.

[4] This action arises from the Plaintiff’s purchase of one property in the Portfolio, the Galleria office complex in Kitchener (the “Galleria”). The largest tenant of the Galleria was MCAP which accounted for 40% of the Galleria’s base rental revenue. The Plaintiff alleges that it did not learn until March 7, 2017, over 3 months after the Sale closed, that MCAP retained CBRE in September 2016 to find alternate office space in the Kitchener-Waterloo area. On May 1, 2017, MCAP advised the Plaintiff that it had secured new space and would not be renewing its tenancy. The Plaintiff alleges that had it known this prior to closing, it would have negotiated a lower purchase price for the Galleria which it claims is worth $10,000,000 less without MCAP as a tenant.

[5] In its Statement of Claim issued on January 18, 2018, the Plaintiff claims, among other things, damages of at least $10,000,000 for breach of contract, negligence and/or intentional misrepresentation and/or breach of the duty of good faith or in the alternative damages of at least $10,000,000 for unjust enrichment and punitive damages of $500,000.

III. The Law and Analysis

Generally

[6] Rule 31.06(1) provides that a person examined for discovery shall answer, to the best of his or her knowledge, information and belief, any proper question relevant to any matter in issue in the action.

[7] Rule 29.2.03 sets out the proportionality factors which apply to oral and documentary discovery:

(1) In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether,

(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;

(b) the expense associated with answering the question or producing the document would be unjustified;

(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;

(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and

(e) the information or the document is readily available to the party requesting it from another source.

(2) In addition to the considerations listed in subrule (1), in determining whether to order a party or other person to produce one or more documents, the court shall consider whether such an order would result in an excessive volume of documents required to be produced by the party or other person.

[8] Discovery questions must be relevant to the issues as defined by the pleadings such that they have probative value and adequately contribute to the determination of the truth or falsity of a material fact (Ontario v. Rothmans Inc., 2011 ONSC 2504; Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2013 ONSC 917). Overbroad and speculative discovery and “fishing expeditions” are not permitted (Rothmans at paras. 129 and 154-157).

[9] Rules 1.04(1) and Rule 1.04(1.1) are integral to any undertakings and refusals motion. Rule 1.04(1) provides that the Rules of Civil Procedure shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. Rule 1.04(1.1) requires the court to make orders and give directions that are proportionate to the importance and complexity of the issues and to the amount involved.

[10] In total, approximately 17 refusals remain in dispute on the 3 motions. My dispositions and/or the parties’ agreements with respect to these remaining refusals are set out below.

Plaintiff’s Motion Re: Dream Defendants

[11] The Plaintiff initially sought answers to 10 refusals from the Dream Defendants arising from the examination for discovery of Gurvinder Bhatti. Only 4 refusals remain at issue all of them related to the use of the Sale proceeds (the “Proceeds”) by the Dream Defendants.

[12] Refusals 1, 6, 7, 8 – The Plaintiff requests that the Dream Defendants advise how the Proceeds were deployed and whether any portion of the Proceeds were used to acquire A class units of Dream Office REIT for cancellation, distributions to Dream Office REIT unitholders or to directly or indirectly acquire other assets held by Dream Office REIT. The Plaintiff submits that given the Dream Defendants’ assertion that all Dream entities were involved in the Sale, these questions are relevant to understanding the corporate structure and relationship between these entities to determine which ones were responsible for the alleged misrepresentations. I am not satisfied that these questions are relevant or proportionate. The use of the Proceeds after closing is not probative of which entity made the alleged misrepresentations prior to closing which is largely based on witness testimony and pre-closing documentation related to the Sale. By way of undertakings, the Dream Defendants will be producing documentation and information regarding their corporate structure including the relevant corporate charts which may provide a complete response to the Plaintiff’s inquiries. To the extent to which this documentation gives rise to any relevant inquiries regarding the Proceeds, the Plaintiff can pose these by follow-up questions and they may be brought back before me if necessary.

Plaintiff’s Motion Re: CBRE Defendants

[13] The Plaintiff originally moved on 74 outstanding undertakings and 45 refusals from the examinations for discovery of Mr. Smalley, Mr. Davis and Mr. Senst. With the exception of the 12 refusals set out below, all of these questions have now been resolved, largely as a result of the the CBRE Defendants agreeing to answer a substantial number of the questions or to otherwise provide responsive documentation and information.

[14] Refusals 11, 12 and 13 – The Plaintiff seeks documents, records and communications between Mr. Smalley and the Plaintiff and all relevant internal communications with respect to the Plaintiff’s purchase of One Riverside Drive in Windsor (the “Windsor Sale”), a previous transaction unrelated to the Portfolio. The Plaintiff submits that these questions are relevant given that CBRE acted on the Windsor Sale which I understand was the first and only time before the Sale that the Plaintiff dealt with CBRE. The Plaintiff asserts that the Windsor Sale gave it more reason to rely on the representations made by the CBRE Defendants with respect to the Portfolio and is therefore relevant to establishing the reasonable expectations of the parties. I am not satisfied that these requests are relevant or proportionate. In my view, other than some limited inquiries as to how the Windsor Sale relates to the establishment of a prior relationship between the Plaintiff and CBRE, the specifics of the Windsor Sale are not probative of the issues in this action regarding the Portfolio. Even to the extent to which there is relevance, the nature and volume of the documentation and correspondence sought by the Plaintiff is overreaching and disproportionate. This includes the obvious fact that the Plaintiff should be in possession or control of its own correspondence with CBRE and there is no basis for the production of internal communications on an unrelated sale. The CBRE Defendants are not required to answer these questions without prejudice to the Plaintiff’s right to pose more targeted questions regarding the relationship to the extent to which such questions have not already been asked. This can be brought back before me if necessary.

[15] Refusal 15 – The Plaintiff asks whether there are any financial models which CBRE prepared and presented to the Dream Defendants which were not included in the Confidential Information Memorandum (“CIM”) prepared by CBRE and TD Securities (“TD”), the Dream Defendants’ agent on the Sale. The CIM contained detailed information about each of the properties in the Portfolio and stated that MCAP was the Galleria’s largest tenant with 2.3 years remaining on its lease and included cash flow projections based on a renewal probability of 75%. I agree with the Plaintiff that any financial models that were excluded from the CIM are relevant as potential material information that was not communicated to Plaintiff prior to closing. The CBRE Defendants shall answer this question.

[16] Refusal 20 – The Plaintiff requests the identity of anyone else at CBRE who would have been aware of the mandate that CBRE’s National Investment Team was assuming with respect to the Portfolio. I am satisfied that this is relevant as it may identify additional CBRE personnel who have relevant information or documentation. The CBRE Defendants have agreed to make best efforts to identify any other persons at CBRE who were aware of the mandate.

[17] Refusal 28 – The Plaintiff asks CBRE to make inquiries of Ashley Martis of TD regarding the marketing of the Portfolio. The Plaintiff submits that Ms. Martis attended tours of the Galleria and other properties and may have documents and information relevant to the alleged misrepresentations. I am satisfied that Ms. Martis may have relevant information or documentation and the CBRE Defendants shall make the necessary inquiries.

[18] Refusals 31 and 52 – In Refusal 31, the Plaintiff requests that CBRE produce its policies, procedures and guidelines regarding conflicts or potential conflicts of interest and to disclose any actual or potential conflicts of interest both internal and external (ie. clients and customers). I agree that the policies and procedures are relevant to the alleged conflict in this case and CBRE has agreed to produce them. However, in my view, specific examples of actual or potential conflicts of interest unrelated to the present case are not probative of the issues in this action. I am satisfied that it is sufficient that the CBRE Defendants have agreed to answer Refusal 53, on a yes or no basis, specifically, whether or not in Mr. Senst’s experience, CBRE has ever declined a mandate because of a conflict or potential conflict with a National Investment team mandate or other mandate within CBRE.

[19] Refusals 40 and 48 – The CBRE Defendants have agreed to make inquiries of Regina Annis, MCAP’s facilities manager who was Mr. Davis’ primary contact and Lucy Lombardi of MCAP regarding whether they took any notes or have any documents from an initial September 2016 meeting between CBRE and MCAP. The CBRE Defendants have also agreed to make inquiries of Ms. Annis with respect to what opinion she was seeking from Mr. Davis in her email dated December 6, 2016.

[20] Refusal 45 – The CBRE Defendants have confirmed that MCAP had 9 months to exercise its renewal option under its lease at the Galleria prior to its expiry in May 2019.

[21] Refusal 46 – The Plaintiff requests copies of the responses to the RFPs which CBRE issued in Fall 2016 when searching for MCAP’s new office space. The Plaintiff submits that the responses are relevant to what CBRE knew about MCAP’s intention to vacate the Galleria and the allegations that CBRE withheld material information. I conclude that some, but not all of this information is relevant. I am satisfied that the RFP and response with respect to the office space to which MCAP ultimately relocated should be produced. This led to the subsequent steps related to MCAP’s departure and is probative of the timing and substance of the alleged misrepresentations. With respect to the balance of the RFPs and responses, I conclude that copies of the RFPs and a list of who they were sent to, when they were sent and when the responses were received is sufficient and shall be produced.

Dream Defendants’ Motion Re: Plaintiff

[22] The Dream Defendants initially sought answers to 9 undertakings and 16 refusals from the examination for discovery of Moshe Faust on behalf of the Plaintiff. Only 1 refusal remains.

[23] Refusal 3 – The Dream Defendants ask Mr. Faust to confirm whether he agrees that the “as is where is” provision in section 4.5 of the Agreement of Purchase and Sale relates only to the building and its contents, not the leases. The Plaintiff submits that this requires a legal conclusion and Mr. Faust is not a lawyer. While I agree with the Plaintiff that Mr. Faust is not required to provide his legal position, the Plaintiff is and it shall do so.

III. Disposition and Costs

[24] Order to go on the terms set out above. The parties have agreed that they will schedule a telephone case conference with me after the release of these Reasons For Endorsement to speak to next steps including timelines for the delivery of answers and documentation.

[25] If the parties cannot agree on the costs of these motions, they may file written costs submissions (not to exceed 3 pages excluding Costs Outlines) on a timetable to be agreed upon by counsel. If the parties cannot agree on a timetable, they may speak to one during the case conference.

Released: April 21, 2021

Master M.P. McGraw