COURT FILE NO.: CV-19-633197

DATE: 20210625

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Intermarket Cam Limited, Applicant

AND:

Ursula Weiss, Hans Weiss and Fritz Kammerer, Respondents

BEFORE: J.E. Ferguson, J.

COUNSEL: Lars Brusven and John Carlo Mastrangelo, for the Applicant

Jacqueline Armstrong Gates and Jonathan Minnes, for the Respondents

HEARD: April 19, 2021

ENDORSEMENT

[1] The applicant, Intermarket CAM Limited (“Intermarket”), is a real-estate management and development company. Among Intermarket’s projects is the IP Park Industrial Campus, a multi‑use prestige industrial park in the northwest area of Cambridge, Ontario.

[2] The respondents (together, the “Weiss parties”) are commercial farmers and experienced real estate investors. Hans Weiss (“Mr. Weiss”) and Ursula Weiss (“Mrs. Weiss”) are owners, or co‑owners, of a dozen farms in Southwestern Ontario, and also an apartment building in Waterloo. Mr. Kammerer resides in Germany and is a passive investor in the subject lands.

[3] The Weiss parties owned a 192-acre parcel of farmland at 105 Middle Block Road in Cambridge (the “property”) north of the first two phases of the IP Park. The property has, and continues to be, subject to land use regulation by the Region of Waterloo (the “Region”), the City of Cambridge (the “City”) and the Grand River Conservation Authority (the “Conservation Authority”). Pursuant to the City’s Zoning By-Law 101-18 (the “by-law”), the majority of the property is zoned for industrial and agricultural uses. Some parts are zoned as “open space”, and subject to stringent use and development restrictions.

[4] On July 19, 2017, Intermarket offered to purchase the property from the Weiss parties. It also offered to purchase lands to the south of the property, owned by Mary Vasiga (“Ms. Vasiga”) and (the “Vasiga property”) on similar terms.

[5] Intermarket, the Weiss Parties, and Ms. Vasiga were jointly represented by a real estate broker, Peter Benninger (“Mr. Benninger”), who prepared the offers. After consulting with their real estate solicitor, Robert Sutherland (“Mr. Sutherland”), the Weiss parties proposed various amendments which Intermarket accepted. The offer became binding in its final form on September 19, 2017 (the “APS”).The APS was scheduled to close on November 20, 2019.

[6] Schedule “A”, clause 2, to the APS sets out the purchase price for the property (the “purchase price clause”):

It is agreed and understood that the Purchase Price is based upon and calculated at a purchase price of $123,420.00 per acre of lands comprising the Net Area of the property. “Net Area” means those lands comprising the property which are specifically developable for mixed use commercial, industrial and/or residential uses by the Buyer and without limiting the generality of the foregoing shall not include valley floodplain, wetlands or non-developable lands identified by the Conservation Authority or other governing agencies. The Net Area of developable land of the property is estimated to be 147.93 acres for the purposes of this Agreement of Purchase and Sale and shall be certified by survey in writing by an Ontario Land Surveyor (OLS) as selected by the Seller, at the Buyer’s expense 30 days prior to Closing. The Seller shall be provided a copy of the survey.

[7] At the time of the APS, the net area at closing was not known to the parties. As a result, Mr. Benninger estimated the net area as 147.93 acres, which he included in the purchase price clause. Unfortunately, neither party independently verified his estimate before finalizing the APS. It is alleged that there were “bad actions” on the part of Intermarket, however there is no evidence of this nor is there any evidence that Intermarket took any steps to exploit the Weiss parties.

[8] The second paragraph of the APS is not engaged in this transaction but provides for an increased purchase price in the event Intermarket received approval for residential zoning before closing (which it did not). The relevant part reads:

Notwithstanding the aforesaid, in the event that on or before expiry of term for the Buyer’s Second Condition the Buyer applies for and completes a rezoning of part of the Property in Final Form (as hereinafter defined) for use and development of such part of the Property for residential development, as determined by the Buyer, acting reasonably, (the “Residential Property”) the Purchase Price for and with respect only to that portion of the Property being the Residential Property shall be increased to the amount of $300,000 per Net Area of land comprising the Residential Property, including but not limited to, all lands required for parking and landscaping, park lands, streets, walkways, utility easements, municipal easements and school sites. [. . .]

[9] The Weiss parties amended the definition of net area for a residential subdivision to expressly include, among other things, landscaping, park lands, streets, and utility easements. They did not amend the first paragraph.

[10] The purchase price clause required Intermarket to work in a commercially reasonable manner and in good faith to optimize the area of developable lands. Intermarket met with the Weiss parties and Ms. Vasiga on multiple occasions to discuss strategies to optimize the developable lands.

[11] On June 12, 2018, the City passed a by-law, which added industrial zoning to the property and designated areas on the property as protected open space. Mr. Weiss attended City council meetings to speak in favour of this by-law, including the designation of open space on the property.

[12] On August 20, 2019, Intermarket entered into a separate agreement with HOOPP Realty Inc. (“HOOPP”), pursuant to which Intermarket would sell the Weiss and Vasiga properties to HOOPP (the “HOOPP agreement”). HOOPP purchased these lands with the intention of developing them for industrial and commercial uses.

[13] The HOOPP agreement provided for a fixed purchase price and was not contingent on the amount Intermarket paid for the Weiss and Vasiga properties. This dispute, and the finding of the net area, will have no impact on HOOPP, or the HOOPP agreement.

[14] An amendment to the HOOPP agreement required Intermarket to assign its rights under the APS to a HOOPP affiliate - Port Cambridge GP Inc. (“IPort”) prior to closing, rather than take title to the property from the Weiss parties and then re-sell it. Article 13 of the APS expressly permits this transaction. The HOOPP agreement amendment includes a carve-out, in which Intermarket retained the right to sue the Weiss parties over any dispute arising out of the APS.

[15] The Weiss parties continue to raise the issue of the assignment in this application. That issue has however been dealt with. After Intermarket commenced this application, the Weiss parties moved to dismiss it on the basis of the assignment to IPort. At that motion the Weiss parties submitted that Intermarket’s application was an abuse of process, and that it lacked capacity to bring the proceeding. Their motion was dismissed. The Weiss parties sought leave to appeal to the Divisional Court which was also dismissed.

[16] The Weiss parties continue to submit that Intermarket did not act in good faith. This issue as well has been dealt with. There was no finding of bad faith (nor is there any such evidence).

[17] Throughout 2018 and 2019, Intermarket conducted studies and consulted with municipal authorities to determine the “specifically developable” areas of the property. It delivered the results of these studies to the Weiss parties in August of 2019 with a corresponding net area calculation. The studies concluded that the “specifically developable” area of the property was 123.39 acres – 24.54 acres less than Mr. Benninger’s estimate.

[18] On October 11, 2019, the Weiss parties delivered a net area survey sketch (the “survey”), which purported to certify 156.07 acres of net area. The survey was not supported by any studies or any other documentation.

[19] Intermarket immediately objected to the survey. Mr. Sutherland asserted that the APS required the parties to use the broker’s estimate of 147.93 acres to calculate the purchase price.

[20] Intermarket then delivered a chart to the Weiss parties illustrating that certain parts included survey’s net area including a road right-of-way (the “road right‑of‑way”); the hydro easement (the “hydro easement”); a portion of a provincially significant wetland (the “knob/lobe”); and the wildlife corridor - had either been identified by governing agencies as non‑developable, or were not otherwise specifically developable for commercial, industrial and/or residential use.

[21] On November 5, 2019, the Weiss parties delivered a responding chart containing a newly developed justification for the inclusion of these non-developable lands in the net area. Their chart reflected them as developable on the basis that limited, passive uses (i.e. recreational activities in protected open spaces areas; landscaping in the easement; and servicing extensions on the road) could potentially support development elsewhere on the property.

[22] Intermarket contacted the City on November 5, 2019 in respect of the developability of certain lands on the property, including the wildlife corridor and the “knob/lobe”. On behalf of the City, the Region, and Conservation Authority, a senior planner confirmed that the wildlife corridor and knob/lobe were non-developable.

[23] On November 14, 2019, Intermarket and Ms. Vasiga closed their transaction. They used the same definition of “net area” as the one in the APS with the Weiss parties. Ms. Vasiga had retained a professional planning firm whose conclusion respecting “non‑developable land” on the Vasiga property was consistent with that of Intermarket, the City, the Region and the Conservation Authority.

[24] Ms. Vasiga also reimbursed Intermarket at a rate of $85,000 per acre, for Intermarket’s costs to discharge the hydro easement and to make those lands available for development.

[25] The APS closed on November 22, 2019, even though Intermarket and the Weiss parties had not resolved their disagreement over the disputed lands:

(a) two days before closing, Intermarket’s solicitor advised Mr. Sutherland that Intermarket would close the deal subject to and on condition of a reservation of rights in respect of the purchase price calculation;

(b) at 4:16pm on the day before closing, Mr. Sutherland responded that the Weiss parties “do not recognize or accept” Intermarket’s reservation of rights;

(c) at 4:20pm that same day, Intermarket tendered the purchase price in satisfaction of the conditions of closing to complete the transaction, but made clear that it “does not agree with the purchase price calculations and is not waiving its rights or remedies in this regard”; (I do not accept the Weiss parties’ submission that this was not a responding letter); and

(d) the Weiss parties received Intermarket’s reservation of rights and accepted Intermarket’s conditional tender of the purchase price.

[26] At the time of closing, the Weiss parties agreed that three of the parts of the property were non-developable but continued to dispute five other parts, as reflected below:

Lands Agreed to between the Parties as Non‑Developable and Excluded from Net Area

Lands in Dispute between the Parties as to Exclusion from Net Area

Area of Property

Acreage

Area of Property

Acreage

A) Provincially Significant Wetland

25.35

D) Knob/Lobe + Buffer

2.07

B) Woodlot

10.21

E) Wildlife Corridor

8.60

C) Portion of Aquatic Buffer

2.67

F) Road Right-of-Way

5.86

G) Linkage

1.51

H) Hydro Easement

TOTAL

38.23

TOTAL

18.04

[27] Intermarket commenced this application in December of 2019 to recover its payment for these disputed parts.

[28] After Intermarket commenced this application, HOOPP/IPort submitted a draft plan of development to the City for approval. This resulted in guidance from the City in respect of the precise boundaries of each part within the property, as they existed at the time of closing.

[29] In February of 2021, Intermarket retained an expert, Dan Currie (“Mr. Currie”) of MHBC Planning Group, to opine on which parts of the property had been identified by the City, Region and Conservation Authority as non‑developable. Intermarket instructed Mr. Currie to take into account the technical studies submitted to the City in November of 2019 and April of 2020, and the City’s assessment of those studies. Mr. Currie’s report confirms that governing agencies identified the following areas of the property as non‑developable at the time of closing: the wildlife corridor; the knob/lobe; a sloped woodlot; and natural linkage in the northwest corner of the property (the “linkage”); and the road right‑of‑way.

[30] Based on Mr. Currie’s opinion, the acreage calculations for the non‑developable areas total 18.04 acres, and together with Intermarket’s hydro easement discharge costs which resulted in a payment of $2,442,595 for the disputed lands.

[31] Weiss disputes this claim for the following reasons:

(i) the interpretation of the Weiss agreement;

(ii) the calculation of the net area of developable acres in favour of Weiss’ position;

(iii) the key legal principles associated with contract interpretation, agency, assignment, doctrine of merger, and commercially reasonable actions; and

(iv) disagreement between the parties on the monies being sought under the principles of unjust enrichment or restitution by Intermarket.

Applicable Law

Contractual Interpretation

[32] The Supreme Court of Canada confirmed in Sattva Capital Corp. v. Creston Moly Corp. that contracts are to be read “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”.[1] This approach advances the object of contractual interpretation, which is to ascertain the parties’ objective intentions and give effect to their reasonable expectations.[2]

[33] The interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” …[To] do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning.[^3]

[34] While the surrounding circumstances of a contract are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement.[^4]

[35] I agree with Intermarket for the following reasons:

(i) the APS required the purchase price to be calculated by applying the base per-acre price to parts of the property that are “specifically developable” for industrial, commercial and/or residential uses. “Net Area” is defined in the purchase price clause as:

... those lands comprising the property which are specifically developable for mixed use commercial, industrial and/or residential uses by the Buyer and without limiting the generality of the foregoing shall not include valley floodplain, wetlands or non‑developable lands identified by the Conservation Authority or other governing agencies.

(ii) properly interpreted in its Sattva context, the definition of “net area” requires Intermarket to pay only for prime lands that permit the construction of buildings or infrastructure for industrial, commercial, or residential uses by Intermarket. This is not only consistent with the language of the APS, but also the objective intention and reasonable expectation of the parties:

(a) when Intermarket and the Weiss parties entered into the APS, the parties knew that Intermarket intended to develop the property and had no intention of maintaining it as farmland;

(b) the parties objectively intended that the $123,420 per-acre purchase price would only be applied to lands that permit the construction of buildings or other infrastructure for commercial, industrial or residential uses;

(c) the purchase price clause reflects the parties’ understanding and reasonable expectations because it (a) provides a per-acre purchase price formula based on the “net area” of “specifically developable” lands and; (b) excludes lands identified as non-developable by governing agencies like the City, the Region and the Conservation Authority. Were this not the case, the APS would have provided for a fixed purchase price for the entire property; and

(d) the objective intention of the parties is underscored by the inclusion of the adverb “specifically developable” in the definition of “net area”. Lands will not be included in the net area if they are not “specifically developable”, even if they might provide some indirect or collateral benefit to a development. The standard for “specifically developable” is a high one.

(iii) this interpretation is also consistent with land use regulations from governing authorities. Both the City and the Province define the term “development” in official planning documents as:

. . . the creation of a new lot, a change in land use, or the construction of a building(s) or structure(s), requiring approval under the Planning Act, but does not include activities that create or maintain infrastructure authorized under an environmental assessment process or works subject to the Drainage Act.[^5]

(iv) the purchase price clause contemplates that these official planning instruments - specifically, the official plans of the City and the Region, as well as zoning by-laws - would be relied upon, in part, to determine what lands Intermarket is required to pay for. Net area categorically excludes “valley floodplains, wetlands [and] lands identified as non-developable by the Conservation Authority or other governing bodies”. Both experts rely on these planning documents when opining on whether parts of the property were in fact identified by the City, Region and Conservation Authority as “non-developable”.

[36] The lands in issue include the following:

(a) a portion of wetland; a wildlife corridor; and a natural linkage designated by government agencies as environmental features. These lands do not permit the construction of any buildings or development infrastructure;

(b) a road right-of-way created before Intermarket’s purchase of the property. The right‑of‑way does not permit construction of buildings or development infrastructure, and must be dedicated to the City upon construction of the road; and

(c) hydro easement lands expressly prohibiting the construction of buildings. These lands became “specifically developable” only after Intermarket paid $107,000 to Hydro One to discharge the easement. Intermarket seeks recovery of the costs incurred to return these lands to a developable state.

[37] Intermarket’s submission is that based on the plain language none of these disputed lands satisfy the definition of net area within the meaning of the parties’ APS.

[38] Based on the evidence it appears that neither Mr. Weiss nor Mr. Sutherland fully appreciated the purchase price clause at the time the Weiss parties entered into the APS in September of 2017.

[39] During his examination, Mr. Weiss confirmed that he considered Mr. Benninger’s preliminary acreage estimate of 147.93 acres to be binding on Intermarket for the purpose of determining the purchase price. I agree with Intermarket that this is incorrect. I also agree that Mr. Weiss also improperly characterized Mr. Benninger’s estimate as an “offer” to lure the Weiss parties into selling the property. He accused Intermarket of “trying to rip [them] off” when Intermarket presented the results of studies establishing a different net area calculation than Mr. Benninger’s estimate. Mr. Sutherland similarly accused Intermarket of using Mr. Benninger’s estimate to “induce” the Weiss parties into entering the APS “with the intention of later producing a significantly reduced net area calculation to extract purchase price reductions through litigation or litigation”. There is no evidence of this.

[40] Mr. Weiss and Mr. Sutherland’s allegations are contradicted by the record, which confirms that Intermarket had no knowledge of the property’s developability, and no involvement in Mr. Benninger’s estimate. On cross-examination, Mr. Sutherland confirmed that he did not ask Mr. Benninger about whether Intermarket was involved in the estimate before making such inflammatory accusations.

Unjust Enrichment and Remedy of Restitution

[41] There was nothing wrong with Intermarket amending its application to claim unjust enrichment and to not purse this as a breach of contract case. The application comes before me as an unjust enrichment case.

[42] Canadian law recognizes restitution as a remedy for unjust enrichment in “circumstances where justice and fairness require one party to restore a benefit to another”.[^6] In order to succeed on an unjust enrichment claim the plaintiff must prove three elements:

(a) that the defendant was enriched;

(b) that the plaintiff suffered a corresponding deprivation; and

(c) that the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason - i.e. that it cannot be justified by a valid contractual or statutory obligation, was not the result of a gift, or has no other legal or equitable basis.^7

[43] In order to find that the enrichment/deprivation was without juristic reason, the plaintiff must first establish that their deprivation was not justified by any of the established categories (being the intention to make a gift, the existence of a contract, the disposition of law, and/or other valid common law, equitable or statutory obligations) and, if the prima facie case is established, the defendant may show there is some residual reason to deny recovery[^8].

[44] In rebutting a claim on unjust enrichment, a prima facie case is rebuttable, where the defendant can show that there is another reason to deny recovery…[This] stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery. As part of the defendant's attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties and public policy considerations. It may be that when these factors are considered, the court will find that a new category of juristic reason is established. In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstance of a case but which does not give rise to a new category of juristic reason that should be applied in other factual circumstances.[^9]

Analysis

[45] I agree with Intermarket. Unjust enrichment requires the plaintiff to have given “something to the defendant which the defendant received and retained” and “which can be restored to the plaintiff in specie or by money”.[^10] This is precisely what occurred in this case - Intermarket delivered to the Weiss parties a $2,442,595 million overpayment in circumstances where they were under practical compulsion/duress to close the APS as described below. There is no dispute that Intermarket paid the full purchase price demanded by the Weiss parties at closing, including the 2,442,595 million attributable to the non-developable lands. The Weiss parties were enriched by this amount at Intermarket’s expense. The first two elements of the unjust enrichment test are satisfied.

[46] The assignment of the APS to HOOPP/IPort is immaterial to this analysis because the loss resulting from the overpayment was borne by Intermarket alone. As noted above, the purchase price that HOOPP/IPort agreed to pay for the Weiss and Vasiga properties was fixed, and not contingent on the purchase price formula in the APS. It was therefore unaffected by the net area dispute between Intermarket and the Weiss parties. HOOPP/IPort got exactly what they bargained for at the price they agreed to pay.

[47] The third element of unjust enrichment is also satisfied. There is no juristic reason for the Weiss parties to retain the $2,442,595 million overpayment. The purchase price clause is clear: the Weiss parties are entitled to a purchase price calculated only on the portion of the property that is “specifically developable for mixed-use commercial, industrial or residential uses”. While this provision justifies the purchase price paid on account of the “specifically developable” lands, it does not provide a juristic reason for the Weiss parties to retain the $2,442,595 million overpayment attributable to the non-developable lands.

[48] The purpose of the third element is to reverse transfers of wealth where “there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention ‘unjust’ in the circumstances of the case”.[^11] Here, the retention of the overpayment by the Weiss parties is unjust. The Weiss parties cannot have reasonably expected Intermarket to pay for parts of the property that could not be developed. There is no justification at law or in equity for the Weiss parties’ retention of the $2,442,595 million overpayment.

[49] The Weiss parties’ position is problematic:

(i) properly interpreted, the agreement requires Intermarket to pay only for lands that have not been identified by governing agencies as non‑developable, and which are otherwise “specifically developable” for commercial, industrial and/or residential uses;

(ii) the Weiss parties did not reasonably expect to be paid for environmental features protected from development, or lands subject to use restrictions and encumbrances prohibiting the construction of buildings or infrastructure by Intermarket. The Weiss parties knew that Intermarket planned to develop the land and had no intention of maintaining it as farmland. They nonetheless demanded payment for the disputed lands, and unreasonably resisted Intermarket’s attempts to resolve the dispute prior to closing;

(iii) Intermarket did not acquiesce, or otherwise waive its rights, in respect of the purchase price. It conditionally tendered the purchase price at closing and reserved its rights to recover the amount paid for the disputed lands. The Weiss parties accepted this conditional tender;

(iv) prior to closing, Intermarket contracted to sell the property to a third party, which threatened Intermarket with a “legal shit-show” if the transaction with the Weiss parties did not close and the property was not transferred to the third party. Intermarket was under practical compulsion to close the transaction with the Weiss parties notwithstanding its payment for the disputed lands. The Supreme Court of Canada makes clear that restitution is available for precisely this form of practical compulsion, namely where a party is forced to complete an agreement or a transaction under threat of litigation by a third party;

(v) the Weiss parties cannot rely on the doctrine of merger to avoid repayment to Intermarket because this is not a breach of contract case - it is one of restitution. The Weiss parties were unjustly enriched at Intermarket’s expense. There is no juristic reason - under the agreement of purchase and sale or otherwise - that justifies their retention of the $2,442,595.

Transfers Under Duress

[50] The common law has long recognized that transfers made under duress are vulnerable to judicial intervention, and are subject to reversal on the basis of restitution.[^12] A basic premise of the law of restitution is that “a benefit conferred involuntarily upon another may generally be recovered in restitution”, including in circumstances where “the victim had [no] practical alternative but to capitulate to the demand”.[^13] The source of the compulsion - whether it be the defendant or some third party - is irrelevant, “[a]s long as the claimant can prove that the transfer was not a function of free choice”.[^14]

[51] In Knutson v. The Bourkes Syndicate, decided by the Supreme Court of Canada[^15], the defendant agreed to sell certain lands to the plaintiff at a specified price, free and clear of a caution registered on title. The defendant later acquired the right under caution and demanded an additional payment from the plaintiff to remove the caution. By that point, the plaintiff had already agreed to transfer its interest in the purchase agreement to a third party corporation. It made the additional payment to the defendant under protest in order to avoid breaching its obligations to the third party.

[52] The Supreme Court ordered restitution because “the payments were made under protest” and “were not voluntary”:

The circumstance that [Mr. Knutson] thought he had a right to insist upon the payments cannot alter the fact that . . . he had no such right. In order to protect its position under the option agreement and secure title to lands which it was under the obligation to transfer to the incorporated company, the Syndicate was under a practical compulsion to make the payments in question and is entitled to their repayment.^16

[53] In Universe Tankships Inc. of Monrovia v. International Transport Workers’ Federation, Lord Scarman explained that the “classic case of duress is . . . not the lack of will to submit but the victim’s intentional submission arising from the realisation that there is no other practical choice”.[^17] I agree that this is precisely the situation in which Intermarket found itself at closing. With threats of a “legal shit-show” from Hoopp/IPort and the proverbial “gun to its head”, it had no alternative but to submit - under strong protest - to the demands of the Weiss parties. I agree that the overpayment must be restored to Intermarket on the basis of unjust enrichment and the doctrine of practical compulsion.

The Doctrine of Merger

[54] Intermarket submits that this doctrine has no applicability because it brings the application seeking unjust enrichment and restitution and not for breach of contract. Intermarket does not dispute the law on merger. I agree that it does not apply. Intermarket is not suing the Weiss parties for breach of a contractual obligation under the APS. This application is for restitution of the overpayment on the purchase price that Intermarket paid under protest, in circumstances of practical compulsion. There is no Canadian case in which a court has denied the purchaser of real property restitution of an overpayment on account of the merger doctrine. That is because to do so would conflict with the Supreme Court of Canada’s decision in Knutson and other controlling authority.

[55] Nor does the merger doctrine demand that the terms of the contract be completely ignored after closing. The Supreme Court of Canada’s approach to unjust enrichment in Garland and Moore requires the court to consider whether the impugned enrichment and corresponding deprivation occurred on the basis of a juristic reason, including a contractual right. It is necessary in these circumstances to scrutinize the contract, even after closing, to determine whether it justifies the defendant’s retention of the disputed monies. I agree that merger does not change this.

[56] When Intermarket tendered the purchase price, it did so while clearly stating its intention to reserve all rights and remedies to dispute the overpayment after closing. Unlike Intermarket, the Weiss parties were not operating under practical compulsion. It was open to them to reject Intermarket’s tender and sue for specific performance or damages. They chose not to and instead accepted Intermarket’s conditional tender. The Weiss parties accepted this tender knowing that Intermarket had not given up its right to pursue recovery of the overpayment after closing. The Weiss parties did not have any reasonable expectation that completion of the APS would bring an end to this dispute and cannot have been surprised or prejudiced by this application.

[57] Such a construction of the terms based on changes sought by one party would lead to not only commercial uncertainty for the vendor, but commercial absurdity in such transactions. In Minto v. Metropia v. Neighbourhoods of Windfields, the court noted that [there] needed to be a specific provision for post-closing adjustments of a fundamental contractual term such as a purchase price adjustment and/or deduction or abatement of the principal amount secured by the charge or mortgage, and that to permit otherwise, would create intolerable uncertainty in commercial relations, and potentially commercial absurdity. Such a change without a provision would be to permit [the plaintiff] to unilaterally and fundamentally alter the purchase price and vendor take back mortgage at its choosing by changing its development plan or by planning changes subsequently imposed by regulatory authorities.[^18]

Environmental Features as Identified as Non-Developable by the City and the Region

The Knob/Lobe and the Wildlife Corridor

[58] The knob/lobe is part of the provincially significant wetland on the property. The entire wetland (including the knob/lobe) is designated as a “core environmental feature” under the Region’s official plan, and described as among “the most significant elements of the regional landscape in terms of maintaining biodiversity and important ecological functions”.[^19]

[59] Both the knob/lobe and the wildlife corridor are part of the same designated natural open space system as the non-developable woodlot and wetland (Areas “A” and “B” in the diagram).[^20] All of these environmental features are zoned “open space” in the by‑law, which is the most restrictive zoning classification.[^21]

[60] The Weiss parties have never disputed that the wetland and the woodlot are “non‑developable” for the purpose of the net area determination. I agree that there is no basis for treating knob/lobe and wildlife corridor - other parts of the same core environmental feature and natural open space system - any differently. The City, Region, and Conservation Authority have confirmed the knob/lobe and wildlife corridor as non-developable. Mr. Weiss agreed with this on cross-examination, when he confirmed that the knob/lobe are not “developable lands” under the APS.

The Linkage

[61] The linkage is a tree-covered, sloped woodlot on the property. It is currently zoned agricultural, and is not being used for any industrial, commercial or residential purposes.[^22]

[62] In 2013, the Region prepared a master environmental servicing plan (the “MESP”) that identified this part of the property as a “linkage” that connects Allendale Creek to a supporting environmental feature north of Middle Block Road. The MESP defines a “linkage” as an area that “connect[s] environmental features along which plants and animals can propagate, genetic interchange can occur, populations can move in response to environmental changes and life‑cycle requirements, and species can be replenished from other environmental features”.[^23]

[63] According to the MESP, the linkage is “an important environmental feature in its own right”.^24 It is designated as an environmental feature and like the knob/lobe and wildlife corridor, and is not developable.

[64] The Weiss parties do not suggest that the knob/lobe, wildlife corridor, or linkage lands permit the construction of buildings or development infrastructure for industrial, commercial and/or residential uses. They nevertheless assert that these lands are developable. I agree that their assertion is contradicted by the plain language of the purchase price clause. The Weiss parties rely on Mr. Pidgeon. Mr. Currie has opined on Mr. Pidgeon as follows:

(i) Mr. Pidgeon opines that the knob/lobe is developable land because “it could be removed from the Core Environmental Feature and used for development purposes”. But “Net Area” is defined as including lands that “are specifically developable”, not those that could be specifically developable if the City and Region were to change their planning policies. His opinion also relies on an Environmental Assessment Report that Intermarket commissioned in July 2019, which proposed removing the knob/lobe from the balance of the Wetland. This Report was rejected by the City, the Region and the Conservation Authority. The knob/lobe was and remains a Core Environmental Feature protected from development;

(ii) Mr. Pidgeon opines that the wildlife corridor is developable because it can support low-impact infrastructure for stormwater management, and because it would have walking trails. This opinion is speculative, as neither was present on the wildlife corridor at closing. Ms. Padgett made clear to Mr. Sutherland before closing that this part of the property “is to function first and foremost as a wildlife corridor”, with any stormwater management facility “subject to agency approval/agreement and a permit from the [Conservation Authority]”. In any event, the same use restrictions under the wildlife corridor also apply to the balance of the Natural Open Space System. If Mr. Pidgeon’s reasoning for why the wildlife corridor is “developable” were accepted, then the entire Property would be included in Net Area under the APS (including the Woodlot and Wetland at paras (a) and (b) of the diagram);

(iii) Mr. Pidgeon acknowledges that the linkage is a tree-covered area on a sloped hill that has been identified as an environmental feature, but he opines that it is still developable because it “is possible that the parcel could be parkland”. Parkland does not permit the construction of buildings or major infrastructure. It is not “specifically developable” within the meaning of the Purchase Price Clause. However, even if parkland could meet the high threshold of being “specifically developable” under the APS (which it does not), the linkage was not designated as parkland at the time of closing, so Mr. Pidgeon’s tenuous justification relies on entirely hypothetical circumstances.

[65] Each of the environmental features on which Mr. Pidgeon opines has been identified by governing agencies as non‑developable lands”. These lands do not meet the definition of net area in the first paragraph of the purchase price clause.

The Road Right of Way

[66] The road right-of‑way is a 5.8 acre area of land intersecting the property that will be constructed as a 30-metre wide, four-lane collector road extending several kilometres south of the property. Once the road is constructed, it must be dedicated to the City at no cost to the City. The City established the road right-of-way pursuant to the 2013 MESP before the parties entered into the APS, with the result that it will have to be conveyed to the City regardless of how the property is developed. It is an encumbrance on the property that pre-dated the APS, and for which the Weiss parties could not have expected any compensation from Intermarket. I agree that it is not “specifically developable”.

[67] The City’s definition of development in the official plan excludes “activities that create …infrastructure under an environmental assessment”, like the road right-of‑way.

[68] Mr. Pidgeon opines that the road right-of-way is developable because it would provide vehicular access and servicing for commercial, industrial or residential uses. This opinion appears to be based on a flawed understanding of applicable planning documents.

[69] Mr. Currie has again opined on Mr. Pidgeon as follows:

(i) despite clear language in the City’s official plan, Mr. Pidgeon speculates that the City intended to exclude from its definition of “development” only such infrastructure under an environmental assessment that “serves a broad regional or City‑wide area and population”;

(ii) his suggestion that the road right-of-way is not the kind of infrastructure that the City intended to exclude makes no sense. The City’s official plan describes the function of a collector road as providing benefits to the broader community - specifically by connecting neighbourhoods, distributing traffic to and from arterials and providing transit routes.[^25] Mr. Pidgeon acknowledged in his affidavit that road right-of-way in particular “will service both the adjacent land uses and provide connectivity to the broader community” by distributing traffic and providing future public transit opportunities;

(iii) Mr. Pidgeon relies on the definition of “total developable land” from another policy instrument - the Province’s growth plan for the Greater Golden Horseshoe - which excludes only “the area occupied by key natural heritage features, key hydrologic feature and any related vegetation protection zone”. In his reply report on behalf of Intermarket, Mr. Currie confirms that the term “total developable land” applies only to one specific section in the growth plan that concerns density within a natural heritage system. It has no application here. Conversely, the Province’s growth plan shares the City’s definition of “development”, which excludes infrastructure - like the road right-of-way - developed under an environmental assessment.

[70] The road right-of-way does not permit the construction of buildings or major infrastructure by the buyer, pre-dates Intermarket’s involvement with the property, and will eventually be dedicated to the City whether the surrounding lands are developed or not. I agree that the road right-of-way should be excluded from the net area within the meaning of the purchase price clause.

Hydro Utility Easement

[71] When Intermarket and the Weiss Parties entered into the APS, 1.26 acres of the property ere subject to a hydro utility easement in favour of Hydro One, requiring those lands to be “clear of all buildings, trees, and brush”.

[72] In October 2019, Intermarket paid $107,000 to release the hydro easement and return the lands to their full development potential. Intermarket then proposed to include the 1.26 acres in the net area, as long as it was reimbursed the cost of discharging the easement. Intermarket’s proposal was to the benefit of the Weiss parties, as it increased the net area, resulting in an additional $56,129 owing to the Weiss parties. This was accepted by Ms. Vasiga, whose APS has the same net area definition.

[73] The Weiss parties refused this proposal, asserting that (i) the APS states that the Intermarket accepted title subject to the easement; and (ii) easement lands somehow included net area. I agree that these assertions are flawed:

(a) Intermarket’s acceptance of title subject to the easement does not make the easement lands “specifically developable”. Intermarket agreed to accept title to various areas of the property that are non-developable - e.g. the wetland and the woodlot - without those parts becoming developable lands and therefore compensable under the purchase price clause;

(b) Mr. Sutherland does not explain how the definition of net area “implicitly” includes the easement. Easements impair the development value and potential of the underlying land, and it is appropriate to subtract these lands from an overall calculation of developable acreage;[^26] and

(c) a harmonious reading of the purchase price clause supports the exclusion of the easement from the net area. Before executing the APS, the Weiss parties amended the second paragraph of the purchase price clause to specify that the per acre purchase price for lands zoned residential applies to utility easements and other land uses. They did not ask for the same amendments to the first paragraph. Nothing else in the APS reflects any intention by the parties to include easement in this first paragraph.

[74] The inclusion of the knob/lobe, the wildlife corridor, the linkage, the road right‑of‑way and the hydro easement resulted in a purchase price overpayment at closing of $2,442,595 million. Intermarket did not agree to or acquiesce in this overpayment. It paid the amount demanded by the Weiss parties while under practical compulsion to satisfy its obligations to HOOPP/IPort and it reserved its right to recover the overpayment post- closing. Intermarket is entitled to the return of this $2,442,595 million on a restitutionary basis.

Costs

[75] I urge the parties to agree on costs. If the parties cannot agree on costs, I am prepared to receive brief submissions from the applicant by July 15, 2021 and from the respondents by July 31, 2021. Any cost submissions may be emailed to my assistant at: lorie.waltenbury@ontario.ca.

J.E. Ferguson J.

Released: June 25, 2021

[^1]: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.

[^2]: Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60.

[^3]: Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 at para. 47.

[^4]: Glaswegian Enterprises Inc. v. BC Tel Mobility Cellular Inc., 1997 4085 (BCCA), para. 20.

[^5]: City of Cambridge Official Plan (2018) (“City’s Official Plan”), p. 212; Provincial Policy Statement under the Planning Act (2014), p. 41 (“Provincial Policy Statement”); Growth Plan for the Greater Golden Horseshoe (2019) (“Growth Plan”), p. 69.

[^6]: Moore v. Sweet, 2018 SCC 52, [2018] 3 SCR 303.

[^8]: Moore v. Sweet, Ibid, para. 57.

[^9]: Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 SCR 629.

[^10]: Kerr v. Baranow, 2011 SCC 10.

[^11]: Kerr v. Baranow, Ibid, 2011 SCC 10.

[^12]: M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014) at Chapter 9 - Donative Intent – Illegitimate Inducement.

[^13]: P. D. Maddaugh and J. D. McCamus, The Law of Restitution (loose-leaf ed.) at p. 26-45, citing NAV Canada v. Greater Fredericton Airport Authority Inc., 2008 NBCA 28.

[^14]: M. McInnes, The Canadian Law of Unjust Enrichment and Restitution, supra. - Two-Party Duress and Three-Party Duress.

[^15]: Knutson v. The Bourkes Syndicate, 1941 7 (SCC), [1941] S.C.R. 419.

[^17]: Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1981] UKHL 9.

[^18]: Minto Metropia v. Neighbourhoods of Windfields, 2014 ONSC 3846, paras. 44,45 and 49.

[^19]: Currie Report, pp. 7 & 12, AR, pp. 323-328; Regional Official Plan of the Region of Waterloo, p. 93.

[^20]: Currie Report, p. 9 & 12-16, AR, pp. 328-332; City’s Official Plan, p. 329.

[^21]: Currie Report, p. 9 & 12-16, AR, pp. 328-332; Zoning By-law 101-18, Schedule “C”.

[^22]: Zoning By-law 101-18, Schedule “C”.

[^23]: East Side Lands (Stage 1) Master Environmental Servicing Plan and Community Plan, Appendix B1 – Freeport Creek and Tributary to the Grand Subwatershed Study (November 2013), p. 291 & 309.

[^25]: City’s Official Plan, p. 84.

[^26]: Runnymede Development Corp. Ltd. v. City of Oshawa, 1982 2013 (Ont. Sup. Ct.).