COURT FILE NO.: CV-17-587310

DATE: 2021-01-28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sevenplex Developments Inc., Plaintiff

AND:

Mazzen Holdings Inc. and Frank Mazzotta, Defendants

BEFORE: Pollak J.

COUNSEL: Marc Kestenberg for the Plaintiffs Ron Moldaver, for the Defendants

HEARD: November 23, 2020

ENDORSEMENT

[1] This is a motion brought pursuant to Rule 21.01(1)(a) for a declaration that the Plaintiff, Sevenplex Development Inc., has standing to make claims for breach of contract as a third-party beneficiary to an agreement of purchase and sale for the Defendants, Mazzen Holdings Inc. and Frank Mazzotta, purchase of an interest in land adjacent to the Plaintiff’s property (the “APS”).

[2] There is a provision in the APS that the Defendants will not oppose any applications by the Plaintiff to vary by-laws affecting its neighbouring property.

[3] In this action, the claim is based on an allegation that the Plaintiff is a third party beneficiary of an obligation alleged by the Plaintiff to continue to exist with a non-party to this action.

[4] In September of 2017, the Plaintiff applied to vary by-laws with respect to its property. The Defendants objected. The Plaintiff commenced this action for, among other things, breach of contract. The Defendants, in part, defend on the basis that the Plaintiff has no standing to assert claims for breach of contract because it is not a party to the APS.

[5] Rule 21.01(1) of the Rules of Civil Procedure provides that:

A party may move before a judge,

(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly. R.R.O. 1990, Reg. 194, r. 21.01 (1). [emphasis added]

[6] The Defendants submit that the interpretation of a contract is in almost every case a question of mixed fact and law. In the Supreme Court of Canada case of Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53, it was held that the interpretation of a contract is a question of mixed fact and law, as the interpretive exercise is not one limited to giving words their plain and ordinary meaning, but is a determination of the objective intent of the parties.

[7] The Moving Party submits that although evidence is not admissible without leave on a motion pursuant to Rule 21.01(1)(a), the question of Sevenplex’s standing as a third-party beneficiary does not require any evidence, as there are no material facts relevant to the determination of Sevenplex’s standing that are in dispute. The Defendants dispute this submission and rely on the fact that they are precluded from having the opportunity to submit evidence because of the procedure chosen by the Plaintiff on this motion.

[8] The Plaintiff argues that a plain reading of the Restrictive Covenant in the APS discloses an unambiguous intention by the contracting parties to extend a benefit to Sevenplex. Specifically, subparagraph (a) of the Restrictive Covenant identifies both Sevenplex and the benefit extended to it, as follows:

The purchaser acknowledges that an application may be made to rezone a portion of the Property contained with the Condominium’s description or those lands situate adjacent thereto or in its neighbouring vicinity whether owned by the Vendor, any company controlled by or associated with the Vendor, or by a predecessor in title to the Vendor, and the Purchaser hereby covenants and agrees that it shall not oppose any such rezoning application(s), nor any other applications ancillary thereto, including without limitation, any applications made for a minor variance before the relevant Committee of Adjustment or any other governmental body or authority having jurisdiction, so as to enable a change in the present use of such lands or any portion thereof, or for any other lawful purpose, and the Purchaser further acknowledges and agrees that this covenant may be pleaded as an estoppel or bar to any opposition or objection raised by the Purchaser thereto. [emphasis added]

[9] It is submitted that the Third-Party Beneficiary Exception is clear and settled law.

[10] It is submitted that as none of the material facts relevant to the determination of the Plaintiff’s standing as a third-party beneficiary are in dispute, the resolution of this issue may dispose of all, or part of the action, or it will substantially shorten the trial and result in costs savings to both parties. The facts are not in dispute. They are confirmed by the pleadings in the Amended Statement of Claim and the admissions in the Amended Statement of Defence, and/or the documents incorporated by reference therein.

[11] The Plaintiff submits that a third party has standing to assert claims for breach of contract where: (i) the parties to the initial agreement intended to extend a benefit to the third party; and (ii) the activities of the third party are the very activities contemplated as coming within the scope of the contract. The Defendants admit in their Amended Statement of Defence that:

(i) the Defendants made the Objections; and

(ii) Sevenplex’s Property is adjacent to the Roybridge Property. These, it is argued, are the only facts required to determine the legal issue regarding Sevenplex’s standing.

[12] In the event that the Court determines that Sevenplex does have standing, the issues to be addressed at the trial of this Action will be reduced. This would shorten the trial and result in cost savings to both parties.

[13] However, the Defendants dispute these submissions arguing that the question ultimately to be determined will necessitate an interpretation of the relevant contract, which in accordance with the Sattva case and our Court of Appeal in the case of Sauve v. Quebec (Attorney General), 2011 ONCA 369, is a question of mixed fact and law. On this motion, the parties can not rely on any evidence. The Defendant’s are therefore deprived of their opportunity to lead any relevant evidence by reason of the procedure chosen and the Rule relied on by the Plaintiffs.

[14] The Defendants rely on the Supreme Court of Canada decision in the Sattva case wherein the court held that:

With respect for the contrary view, I am of the opinion that the historical approach should be abandoned. Contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.

The purpose of the distinction between questions of law and those of mixed fact and law further supports this conclusion. One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than in providing a new forum for parties to continue their private litigation. For this reason, Southam identified the degree of generality (or “precedential value”) as the key difference between a question of law and a question of mixed fact and law. The more narrow the rule, the less useful will be the intervention of the court of appeal:

If a court were to decide that driving at a certain speed on a certain road under certain conditions was negligent, its decision would not have any great value as a precedent. In short, as the level of generality of the challenged proposition approaches utter particularity, the matter approaches pure application, and hence draws nigh to being an unqualified question of mixed law and fact. See R. P. Kerans, Standards of Review Employed by Appellate Courts (1994), at pp. 103-108. Of course, it is not easy to say precisely where the line should be drawn; though in most cases it should be sufficiently clear whether the dispute is over a general proposition that might qualify as a principle of law or over a very particular set of circumstances that is not apt to be of much interest to judges and lawyers in the future. [para. 37]

Similarly, this Court in Housen found that deference to fact-finders promoted the goals of limiting the number, length, and cost of appeals, and of promoting the autonomy and integrity of trial proceedings (paras. 16-17). These principles also weigh in favour of deference to first instance decision-makers on points of contractual interpretation. The legal obligations arising from a contract are, in most cases, limited to the interest of the particular parties. Given that our legal system leaves broad scope to tribunals of first instance to resolve issues of limited application, this supports treating contractual interpretation as a question of mixed fact and law.

Nonetheless, it may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law (Housen, at paras. 31 and 34-35). Legal errors made in the course of contractual interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor” (King, at para. 21). Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on.

[15] I do not agree with the Moving Party’s submission that although evidence is not admissible on a motion pursuant to Rule 21.01(1)(a), without leave, the question of Sevenplex’s standing as a third-party beneficiary does not, under any circumstances, require any evidence or that evidence will not be required at trial with respect to the interpretation of the APS. The issue at trial before the court, most probably will require an interpretation of the APS, which has been held to be a question of mixed fact and law. On this motion, the parties can not rely on any evidence which has the effect of limiting the possible submissions for the Defendant. I find that the pre-requisite for the application of the Rule has not been satisfied. The question to be considered is not a question of law, but one of mixed fact and law. I therefore dismiss the motion.

[16] Alternatively, the Defendants argue that if the question raised by Plaintiff is a question of law, which they submit is not clear from the pleadings or the grounds in the Notice of Motion, the answer would not “dispose of all or part of the action”, “substantially shorten the trial” “or result in a substantial saving of costs” in the circumstances. The Statement of Defence would remain and the impact on trial time, cost and outcome would be minimal. There is no motion to strike any of the Defence pursuant to R. 21.01 (1) (b). I agree with all of these submissions. There are other avenues of relief the Plaintiff could have pursued and did not. It would be unjust and may tie the hands of the trial judge to deprive the Defendants of the opportunity to submit evidence on this motion, with respect to the interpretation of the contract. Most importantly, I do not agree that it would achieve the goals and purpose of the Rule the Plaintiff has chosen to move under. The motion is therefore, denied.

Costs

[17] The parties have reached an agreement on costs to be awarded on a partial indemnity basis to the successful party on these motions at the hearing of this matter. The successful parties, the Defendants, are therefore awarded costs on a partial indemnity basis of $4,000, in accordance with the agreement of the parties.

Pollak J.

Date: January 28, 2021