COURT FILE NO.: CV-20-634647
DATE: 2021 09 24
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 2730453 ONTARIO INC., Plaintiff
- and -
2380673 ONTARIO INC., Defendant
BEFORE: Associate Justice Todd Robinson
COUNSEL: M. Veneziano and J. Langley, for the plaintiff (moving party)
J. Irving, for the defendant
HEARD: June 24, 2021 (by videoconference)
REASONS FOR DECISION
[1] The plaintiff, 2730453 Ontario Inc., has sued the defendant, 2380673 Ontario Inc., for specific performance of an alleged agreement of purchase and sale for the defendant’s property at 1456 Lower Base Line Road East, Milton. That property abuts an 84-acre parcel of land owned by another company with the same principals as the plaintiff, which they purportedly plan to develop. On this motion, the plaintiff seeks leave to issue a certificate of pending litigation (CPL) against the defendant’s property.
[2] This motion originally came on for a hearing on March 2, 2020, but was adjourned with an order extending the plaintiff’s caution registered against title to the defendant’s property pending disposition of the motion. As a result of the COVID-19 pandemic, the motion was further adjourned sine die. It was ultimately brought back on and came before me. The prior order extending the caution remains in effect.
[3] The crux of the parties’ dispute is whether there was any agreement for purchase and sale of the defendant’s property and, if so, whether it was breached by the defendant’s failure to close the sale. On this motion, the plaintiff asserts that it has a reasonable claim to an interest in the land and, given the uniqueness of the property to the plaintiff and the insufficiency of damages as a remedy, a CPL is warranted. The defendant opposes the motion primarily on the basis that there was no agreement for sale of the land at all, but even if there was, the agreement was not in writing and signed by the defendant so is unenforceable by operation of s. 4 of the Statute of Frauds, RSO 1990, c S.19.
[4] From the parties’ written and oral arguments, I have distilled three main issues in dispute on this motion. They are as follows:
(a) whether a triable issue has been demonstrated on the existence of an agreement of purchase and sale for the defendant’s property, including whether the real estate agent alleged to have negotiated the deal on behalf of the defendant had authority to do so, whether the alleged terms were agreed, and whether the plaintiff was the intended purchaser;
(b) if there is a triable issue on the existence of an agreement, whether a triable issue has also been demonstrated on compliance with the Statute of Frauds; and
(c) whether the equities favour granting a CPL.
[5] I have determined that leave for a CPL should be granted. I am satisfied that there are triable issues about the plaintiff’s claim to an interest in the property that must be adjudicated and that the equities overall favour granting leave.
Analysis
[6] My authority for granting leave to issue a CPL is found in s. 103 of the Courts of Justice Act, RSO 1990 c C.43 and Rule 42.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). Granting leave for a CPL is discretionary. The applicable two-part analysis is set out in the oft-cited decision of Perruzza v. Spatone, 2010 ONSC 841 (Master) at para. 20. I must first determine if the plaintiff has demonstrated a triable issue regarding its claimed interest in the lands. If I am satisfied that threshold requirement has been met, I must then consider whether the equities favour a CPL.
[7] Demonstrating a reasonable claim to an interest in land has repeatedly been held to be a low threshold. I must examine the whole of the evidence as it now stands after the cross-examinations and Rule 39.03 examinations that have occurred and, without deciding disputed issues of fact and credibility, consider whether a reasonable claim to an interest in land has been made out: Roseglen Village for Seniors Inc. v. Doble, 2010 ONSC 3239 (Master) at para. 11. In doing so, I am only deciding if there is a triable issue to such interest, not whether the plaintiff will likely succeed: Perruzza v. Spatone, supra at para. 20(ii); Roseglen Village for Seniors Inc. v. Doble, supra at para. 13.
[8] Equitable factors assessed on CPL motions include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party from the CPL: Perruzza v. Spatone, supra at para. 20(iv). These factors, though, are not exhaustive. My discretion is to be exercised having regard to all relevant factors in the circumstances of this particular case: Carttera Management Inc. v. Palm Holdings Canada Inc., 2011 ONSC 4573 at para. 21.
Is there a triable issue on the existence of an agreement for purchase and sale?
[9] There are several hurdles that the plaintiff must overcome to establish a binding and enforceable agreement in this action. Three are particularly relevant on this motion: (i) since there were no direct dealings with the defendant’s principal, whether Frank Varga (the real estate agent alleged to have been acting for the defendant) had authority to negotiate the agreement; (ii) whether there was, in fact, agreement to the terms of the purported agreement of purchase and sale; and (iii) given the timing of the plaintiff’s incorporation in relation to alleged formation of the agreement, whether the plaintiff was the purchaser under that agreement.
[10] I am satisfied that the plaintiff has demonstrated a triable issue on whether an agreement for purchase and sale for the defendant’s property was reached between the parties.
[11] The defendant’s position is that it never agreed to sell the property to the plaintiff or its principals at all. Although various documents were prepared that lend support to the plaintiff’s position that an agreement was reached, they do not appear to have been fully executed by both parties (although there is a dispute on that). Even if there was no signed agreement, that does not preclude an agreement being found. Where parties have agreed on all essential terms to be incorporated into a formal document and they intend the agreement to be binding, a valid and binding agreement exists. The fact that a formal written document is to be prepared and signed does not alter the binding validity of the original contract: Erie Sand & Gravel Ltd. v. Seres’ Farms Ltd., 2009 ONCA 709, at paras. 42-44.
[12] In this case, whether an agreement was reached first requires a determination on agency. John Pantalone, the real estate agent for the plaintiff (or one of its principals, Anthony Petrozza), swore the primary affidavit in support of this motion. His evidence, as well as other evidence from his cross-examination and the Rule 39.03 examination of Frank Varga, supports that all negotiations were between John Pantalone and Frank Varga. There were no direct dealings by anyone on behalf of the plaintiff with the defendant’s sole shareholder and apparent principal, Moses Segal.
[13] The defendant argues that Mr. Varga had no instructions or authority or to negotiate a sale of the property. However, on this motion, I am not deciding whether Mr. Varga did, in fact, have actual or ostensible authority to negotiate on behalf of the defendant. I am only assessing whether there is a triable issue about it.
[14] In my view, the issue of Frank Varga’s authority is triable. Evidence supports that the property was previously listed for sale with Mr. Varga as the listing agent. It further supports that Mr. Varga was communicating with Moses Segal during negotiations with John Pantalone. On cross-examination, Mr. Segal confirmed that Mr. Varga had acted as a real estate agent for companies in which Mr. Segal was a director, officer, or shareholder. Although Mr. Segal unequivocally denies that Mr. Varga had authority to negotiate with John Pantalone about the potential sale of the property, Mr. Varga’s own evidence during his Rule 39.03 examination and his contemporaneous conduct is inconsistent with Mr. Segal’s evidence. In my view, the record before me could support necessary findings of fact to establish actual or ostensible authority.
[15] I am also satisfied that there is a triable issue on agreement to specific terms. In John Pantalone’s affidavit, he address his communications with Frank Varga on agreement to the terms of the purchase and sale, including the purchase price of $4.3 million with allocation of $200,000 of that price to real estate commissions. In addition, I have been directed to Mr. Pantalone’s contemporaneous notes confirming that, on September 23, 2019, the financial terms of the deal were confirmed and, on September 24, 2019, Mr. Varga called Mr. Pantalone and confirmed a deal.
[16] Mr. Pantalone’s evidence is supported by Frank Varga’s examination testimony. During examination, Mr. Varga confirmed that he communicated with Mr. Segal about the $4.3 million offer made in John Pantalone’s email dated September 18, 2019, that Mr. Segal had agreed to the financial terms (at least in principle), and that Mr. Varga had communicated that agreement to Mr. Pantalone.
[17] Conversely, Moses Segal expressly denies ever agreeing to the terms of sale for the property. During cross-examination, Mr. Segal denied providing Mr. Varga with any instructions in response to the $4.3 million offer. However, I was also directed to several emails about the paperwork and closing from “Charles Harvey” to Frank Varga. An email from Mr. Varga’s counsel to plaintiff’s counsel, which Mr. Varga’s counsel confirmed could be treated as evidence from Mr. Varga, relays that “Charles Harvey” is an alias email name or email account for Moses Segal, and that the emails were from Mr. Segal. Those emails support the plaintiff’s position that Mr. Segal was aware of the deal, albeit that he seemed to have issues with the documentation prepared by the plaintiff’s real estate lawyer and was unwilling to close.
[18] I need not determine whether or not Mr. Segal actually agreed to the terms, nor do I need to address the credibility of Mr. Segal’s sworn evidence with reference to other evidence and documents, as raised by plaintiff’s counsel. There is more than enough evidence before me to find a triable issue on whether an agreement for purchase and sale of the property was reached.
[19] The third issue is whether the plaintiff is a proper party. This was not a focal point during oral submissions, but is implicated by the facta and a portion of the defendant’s oral submissions. The issue arises from the date of the plaintiff’s incorporation. John Pantalone’s affidavit evidence is that he was engaged as the real estate agent for the plaintiff in spring 2015, and was negotiating a purchase of the property for the plaintiff throughout 2018 and 2019. However, the plaintiff was not incorporated until December 5, 2019, after the agreement was purportedly reached.
[20] The discrepancy was noted by Moses Segal in one of his responding affidavits. A reply affidavit was sworn by an articling student with the plaintiff’s lawyers. It sets out her understanding from Anthony Petrozza (the plaintiff’s president) that the principals of the plaintiff were the ones who initially retained Mr. Pantalone, and that the plaintiff is a special purpose entity incorporated specifically for the purchase and sale transaction. During his cross-examination, Mr. Pantalone confirmed that he was acting on behalf of Anthony Petrozza.
[21] I am satisfied there is a triable issue on whether the plaintiff is entitled to enforce an agreement made prior to its incorporation. Incorporation of single purposes entities to close real estate transactions is not uncommon. Regardless, in this case, contemporaneous documentation supports that the plaintiff was intended to be the ultimate purchaser once it had been incorporated. For example, under cover of letter dated December 8, 2019, a lawyer named David Dolson wrote to the plaintiff’s real estate lawyer to confirm that he was acting for the defendant in the purchase and sale transaction. Mr. Dolson enclosed draft closing documents that he confirmed “will be executed by the vendor for delivery to your office on closing.” All of those documents list the plaintiff as the purchaser. In a subsequent letter dated December 23, 2019, Mr. Dolson further confirmed the draft documents “have been executed by the vendor and will be delivered to your office on or before closing.”
[22] The defendant challenges Mr. Dolson’s authority to act, similar to the challenge made to Mr. Varga’s authority. Moses Segal did acknowledge during cross-examination, though, that he had used David Dolson as a lawyer in the past. Similar to Mr. Varga’s authority, I find a triable issue on Mr. Dolson’s authority.
[23] Nevertheless, there is sufficient correspondence before me between the two real estate counsel and Frank Varga referring to the plaintiff as purchaser to support a triable issue on whether the plaintiff is entitled to enforce the claimed agreement of purchase and sale.
Is there a triable issue on compliance with the Statute of Frauds?
[24] Enforceability of an agreement for purchase and sale is another hurdle for the plaintiff. If not in writing, it potentially runs afoul of s. 4 of the Statue of Frauds, which requires that an agreement for the sale of lands (or some note or memorandum thereof) be in writing and signed by the party to be charged.
[25] I am satisfied that the plaintiff has demonstrated a triable issue with respect to compliance with the Statute of Frauds.
[26] The plaintiff argues that the communications and documentation exchanged between the real estate agents and lawyers sufficiently memorialize the agreement. The defendant submits that is not enough to comply with s. 4 of the Statute of Frauds, since there is no evidence of any signed agreement of purchase and sale. The defendant points out that the documents referenced in David Dolson’s letter of December 23, 2019 as having already been signed by the vendor did not include an agreement of purchase and sale.
[27] Section 4 of the Statute of Frauds is not limited to a signed agreement. It states that “the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged” (emphasis added). In my view, considering the volume of emails, outstanding issues of agency, and representation by Mr. Dolson in his letter dated December 23, 2019 that closing documentation had been signed by the defendant (even if those documents did not include a formal agreement of purchase and sale), a trial judge could find that there was compliance with the Statute of Frauds. Newbould J. made a similar observation on the facts of the case before him in Carttera Management Inc. v. Palm Holdings Canada Inc., 2011 ONSC 4573, at para. 13.
[28] Alternatively, the plaintiff argues that the agreement became binding and enforceable by reason of part performance. Part performance of a contract may be sufficient to exclude it from operation of s. 4 of the Statute of Frauds. If one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations, the first party will be precluded from relying on the requirements in the Statute of Frauds to excuse its own performance: Erie Sand & Gravel Ltd. v. Seres’ Farms Ltd., supra at paras. 49 and 64.
[29] The plaintiff argues that its acts of part performance include obtaining an environmental assessment in respect of the property; conducting necessary due diligence, including all surveys and title searches; negotiating and preparing an executed commission agreement; drafting and amending a written agreement of purchase and sale, all relevant schedules, and other closing documents; and tendering a certified cheque for the purchase price net of real estate commission. Despite the defendant’s arguments that many of these acts of “part performance” are actually nothing more than due diligence, there is in my view a triable issue on whether some or all of these may constitute part performance by the plaintiff.
Do the equities favour a CPL?
[30] Two primary arguments were made by the defendant for why the equities are against granting leave for a CPL: (i) that the property is not truly “unique” to the plaintiff; and (ii) that the defendant is prejudiced by a long-term encumbrance of the property in circumstances where the plaintiff has paid nothing for the property, including a deposit.
[31] I deal first with uniqueness. Uniqueness means that the property has a quality (or qualities) that makes it especially suitable for the proposed use that cannot be reasonably duplicated elsewhere. It must be shown to have distinctive features that make an award of damages inadequate, not that the property is incomparable: John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001), 2001 CanLII 28012 (ON SC), 56 OR (3d) 341 at para. 60.
[32] The plaintiff’s evidence on uniqueness is somewhat vague. John Pantalone’s affidavit sets out that the plaintiff’s principals intend “to develop an expansive commercial and industrial development”, that “future development would be assisted by the acquisition of the [defendant’s property] in order to assemble a unified parcel of land unbroken by other land-owners”, and that the defendant’s parcel of land was expressly selected due to its “unique suitability” for future development in the area.
[33] As pointed out by the defendant, no real particulars are provided in the plaintiff’s affidavit evidence about the proposed development nor is there any evidence on its proposed timing. The defendant has tendered an opinion letter from an urban planning firm. The firm reviewed applicable provincial and Halton Region policies and opines that the defendant’s property is designated within an agricultural area, and that there is no indication that it will be included in the urban area of the Town of Milton or Halton Region prior to 2031, when the current policies are said to expire and future urban expansion may or may not be considered.
[34] The plaintiff argues that the letter is inadmissible as evidence on this motion, since it does not comply with requirements for tendering an expert report on a motion as set out in Sanzone v. Schechter, 2016 ONCA 566. I need not consider the discussion in Sanzone in any detail. Defendant’s counsel took the position during oral submissions that the report was no longer needed given concessions made by Anthony Petrozza during his examination (discussed below). I would not have considered the opinion letter in any event. It has no evidentiary value. There is no indication of the qualifications of its author or his firm and the letter provides conclusions without analysis. As a result, the ultimate opinion that “development of the lands will not be considered until sometime after 2031, and only the if political will and urban need warrants it” lacks foundation.
[35] Anthony Petrozza’s examination evidence on uniqueness and development plans was arguably vaguer than John Pantalone’s affidavit. Mr. Petrozza’s evidence was that having a larger property would provide “more clout” when applying to the city for development. His evidence also supports that there are no definitive plans for development, which is not expected to occur for 15-20 years. The following exchange is demonstrative of the lack of certainty:
Q. So, Mr. Petrozza, I asked you to look at the exhibit to Mr. Segal’s Affidavit, the land planning opinion. I’m not asking you to go back and look at it, but here’s my question: What, in your mind, is the timing of development of this land?
A. I’ve been told in the range of 15 to 20 years.
Q. Okay, and what’s the nature of the development you have in mind?
A. It’s not what I have in mind, it’s what the...the designation that the region or the city has in terms of employment lands.
Q. Right, so let me put this a different way. What would be your preferred development, commercial, industrial, or residential?
A. Any one to tell you the truth.
Q. So your understanding would be that of those three categories, it wouldn’t particularly matter which category?
A. Not in my mind, no.
[36] I agree with the defendant that the evidence before me does not support any material uniqueness of the property. Providing clout in seeking approval for uncertain development plans sometime in the not-so-near future is insufficient. Moreover, the role of the plaintiff in those development plans, if any, is unclear in the materials. John Pantalone’s affidavit suggests that the plaintiff is the owner of the abutting lands, but they are actually owned by a separate corporation, Rivanera Holdings Inc. (which has the same principals as the plaintiffs).
[37] My determination that the record does not support a finding that the property is unique should not be taken out of context. It does not mean that the plaintiff cannot prove some peculiar or special value to the land at trial and, accordingly, that specific performance is warranted. I am simply unsatisfied that the materials on this motion contain sufficient evidence to support uniqueness of the property. Whether or not the plaintiff is able to make out its claim for specific performance is a separate matter that requires adjudication.
[38] Since uniqueness is only one of the equitable factors to be considered, I deal next with the defendant’s arguments of prejudice. There is no doubt that the defendant will suffer presumptive prejudice from a CPL, which will prevent financing, other encumbrance, and sale of the property. However, the property is currently unencumbered and there is no evidence of any intention to obtain financing with the property as security or to sell it. During cross-examination, Moses Segal indicated that the property was off the market and not for sale pending determination of this action. Conversely, though, there is evidence from the plaintiff’s real estate lawyer, both in his affidavit and during cross-examination, that Frank Varga advised him after the closing date that the vendor had instructed Mr. Varga to re-market the property for sale.
[39] The prejudice to the plaintiff if the property is encumbered or sold prior to determination on its specific performance claim is evident. In my view, the potential prejudice to the plaintiff is greater than to the defendant, particularly in the absence of any evidence supporting actual prejudice from a CPL. This factor favours the plaintiff.
[40] The defendant also points to the risk of long-term encumbrance of the property in circumstances where the plaintiff has not paid anything, including a deposit. In my view, this is not materially distinct from the presumptive prejudice from a CPL, which I have already addressed. Also, there is no evidence supporting any agreed (or potentially agreed) term for a deposit. No request was made that I impose any monetary term to post funds in trust or into court in the event of granting a CPL.
[41] Since I must consider all relevant matters, I have also considered other equitable factors, as follows:
(a) The plaintiff is acknowledged to be a single-purpose entity incorporated solely for the property purchase. Contrary to John Pantalone’s affidavit, it does not own the abutting property and there is no evidence that the plaintiff has any assets. The plaintiff appears to be a shell corporation. This factor favours the defendant.
(b) An alternative claim for damages is pleaded by the plaintiff, which is also a factor favouring the defendant.
(c) There is no evidence before me and no argument was made regarding how damages might be calculated or the difficulty in calculating damages as an alternative remedy. I am thereby unable to assess if damages would be a satisfactory remedy. I view these factors as neutral.
(d) Based on the evidence before me, there is no other purchaser and the plaintiff evidently remains a willing purchaser, which favour the plaintiff.
[42] The equitable factors are mostly balanced between the plaintiff and the defendant. Nevertheless, in my view, when considering the overall equities in all the circumstances of this case, the scale tips sufficiently in favour of granting leave to issue a CPL.
Disposition
[43] I accordingly grant leave to the plaintiff to issue a CPL against the defendant’s property. Order to go in an amended form of the draft order submitted at the hearing, as amended electronically prior to signing.
Costs
[44] Costs outlines have been exchanged and filed. I encourage the parties to settle costs. If they cannot, then written costs submissions shall be exchanged. The plaintiff shall serve any costs submissions within fourteen (14) days. The defendant shall serve its responding costs submissions within fourteen (14) days of being served with the plaintiff’s costs submissions. There shall be no reply submissions. Costs submissions shall not exceed four (4) pages, excluding any offers to settle and case law. They shall be filed by email directly with my Assistant Trial Coordinator, Christine Meditskos, with proof of service.
[45] Unless costs submissions are exchanged and filed in accordance with the above, the parties shall be deemed to have agreed on costs.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: September 24, 2021