COURT FILE NO.: CV-18-0178-00

DATE: January 4, 2021

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1324789 ONTARIO INC, Plaintiff

AND:

GAVIN MARSHALL, SUSAN MARSHALL, MAGENTA WATERFRONT DEVELOPMENT CORPORATION, HELIOTROPE INVESMENT CORPORATION, MAGENTA CAPITAL CORPORATION, MAGENTA MORTGAGE INVESTMENT CORPORATION, MAGENTA II MORTGAGE INVESTMENT CORPORATION, and MAGENTA III MORTGAGE INVESTMENT CORPORATION, Defendants

BEFORE: Justice Patrick Hurley

COUNSEL: Bruce Marks, for the Plaintiff

Denise Sayer and Adam Stikuts, for the Defendants

HEARD: December 15, 2020

ENDORSEMENT

[1] As I have stated in other motions, many of the relevant facts with respect to the underlying litigation are set out in my first decision, 1324789 Ontario Inc. v. Marshall, 2019 ONSC 517.[^1]

[2] Gary Beach and Gavin Marshall, who are the principals of the various companies that are also parties to the litigation, have been involved together in four residential land development projects since 2014. Three are subject to essentially identical written agreements that were entered into on February 6 and July 9, 2014. The first one covers properties known as Applewood Lane (“AWL”) and Johnson Point (“JP”) and the second a property called Pine Point (“PP”). The parties to these agreements are the plaintiff 1324789 Ontario Inc. and the defendant Magenta Waterfront Development Corporation. I will refer to these agreements, each entitled “Joint Venture Agreement (Land Development)”, as the JVAs. The fourth property, known as Cranberry Cove, was purchased by one of Mr. Marshall’s companies; Mr. Beach asserts that it was to be treated in the same way as the other properties but Mr. Marshall denies this.

[3] Although there are numerous corporate entities that have been named as parties in the litigation, the protagonists are Mr. Beach and Mr. Marshall. Rather than use the terms plaintiff and defendant or identify the corporations, I will refer to Mr. Beach, his spouse and the companies that they control by his name in this decision and do the same with Mr. Marshall.

[4] Mr. Marshall provided the financing and Mr. Beach was the project manager. There were significant cost overruns and delays. The relationship between Mr. Marshall and Mr. Beach deteriorated over time. Matters came to a head in 2018 and the lawsuits started in May of that year. Despite the passage of time, the main action remains at the pleadings stage.

[5] As part of the land development process, the Ministry of Environment, Conservation and Parks (“MECP”) issued a permit under the Endangered Species Act to 1324789 Ontario Inc. on October 28, 2018. Both parties have referred to it in this litigation as the “benefit permit”. The permit allows the holder to undertake an activity that might affect an at-risk species and includes conditions aimed at protecting the species or its habitat.[^2] Although issued in the name of a corporation, the permit governs activities undertaken by any person in respect of the development which would include Mr. Beach and Mr. Marshall.

[6] In this motion, Mr. Beach is seeking an order that ownership of the benefit permit be transferred to Mr. Marshall and other relief connected to the requested ownership change.

[7] Mr. Marshall opposes the motion on both procedural and substantive grounds. Mr. Marshall submits that Mr. Beach did not comply with an order that I made July 31, 2020 requiring him to post security for costs and therefore cannot, under rule 56.05 of the Rules of Civil Procedure, bring a motion without leave of the court which should not be granted in the circumstances. If leave is granted, the motion should be dismissed, principally because it suffers from a fatal jurisdictional deficiency – it was not served on the MECP and, as a result, I cannot order that the benefit permit be transferred to another party.

[8] Dealing first with the security for costs issue, I ordered that Mr. Beach pay an outstanding costs award that I made on March 29, 2019 within 60 days of the hearing of the motion, failing which he was required to pay $150,000 as security for costs within 90 days . Mr. Marshall agrees that Mr. Beach paid the outstanding costs but did so on September 18 which was five days beyond the stipulated deadline.[^3]

[9] Mr. Marshall acknowledges that, in most circumstances, such a short delay would be excusable but in this case it should not be because the original costs award was made in early 2019; the litigation history includes an award of substantial indemnity costs in another motion because of Mr. Beach’s “reprehensible litigation conduct” [^4]; the likelihood that Mr. Beach will not be able to pay any future costs award made against him arising out of a series of motions I heard in December 2019; and his continuing refusal to disclose any details of his current financial situation.

[10] Rule 1.04 directs me to liberally interpret the Rules in order “to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits” and rule 3.02 gives me the discretion to extend any time prescribed by an order on such terms as are just. I also recognize that my order was made during a pandemic which has caused many delays in the justice system and also significantly affected the financial wherewithal of litigants to comply with court orders.

[11] This does not mean the failure to comply with an order will have no consequences but, in this case, I have concluded that it would be fair and just to grant leave to Mr. Beach to bring this motion. In view of his payment of the costs award, my order of July 31 is varied to dispense with the requirement that Mr. Beach post security for costs of $150,000. Mr. Beach remains bound to pay $20,000 as security for costs within six months of my decision as set out in paragraph 14 of the endorsement.

[12] I accept Mr. Marshall’s submission that I do not have the authority to make an order transferring the ownership of the benefit permit without notice to the MECP or its consent. Even if I concluded that I had the jurisdiction to do so, I would not exercise it absent service of the motion on the MECP. It is obviously an interested party, would likely provide an important perspective for the court to consider and I question whether any such order, if made without notice to the MECP, would relieve Mr. Beach (or Mr. Marshall) from potential liability under the benefit permit or excuse any noncompliance with it.

[13] Mr. Marshall raised other grounds in opposition to the order being sought by Mr. Beach but I find that the failure to serve the MECP with the motion is dispositive. Any ruling on a change in ownership of the benefit permit requires input from the MECP and the current evidentiary record does not contain the necessary information.

[14] The motion is dismissed but without prejudice to Mr. Beach bringing another motion on notice to the MECP. As the successful party, Mr. Marshall is presumptively entitled to the costs of the motion. I asked counsel to exchange cost outlines but not file them until the release of this endorsement. If the parties cannot agree on costs, Mr. Marshall should submit written submissions not to exceed 1 ½ pages exclusive of the costs outline to the Kingston Trial Co-ordinator at Tina.Wood@ontario.ca within seven days of the release of this endorsement. Mr. Beach has five days to file his reply submissions which will be of the same length.

[15] I wish to add a postscript to these reasons. I hope that Mr. Beach and Mr. Marshall can work with the MECP to find a mutually satisfactory solution to the ownership issue. The successful development of the lands cannot take place without the benefit permit and compliance with it. It is clearly to the financial advantage of both that this happen as soon as possible.

Justice P. Hurley

Released: January 4, 2021

[^1]: The plaintiff’s motion for leave to appeal this decision was dismissed by the Divisional Court on November 29, 2019. [^2]: In this case, the Blanding’s Turtle and Gray Ratsnake. [^3]: My calculation is based on excluding July 14 and, because the 60th day was a Sunday, the due date was extended to September 13. See Rules 1.03 and 3.01 [^4]: Canadian Western Trust Company v. 1324789 Ontario Inc., 2019 ONSC 5948 at paras. 8-9