COURT FILE NO.: CV-20-00650557-00CL DATE: 2022-02-25

SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: Centurion Mortgage Capital Corporation, Applicant AND: Brightstar Newcastle Corporation, Brightstar Seniors Living Corporation, The Estate of Alan Chapple, John Blackburn, James Buckler and Lawson Gay, Respondents

BEFORE: Penny J.

COUNSEL: Gerald Rasmussen on his own behalf Adrian Visheau and Adrienne Ho as Amicus Curiae on behalf of Gerald Rasmussen Mani Kakkar for the Guarantee Company of North America George Benchetrit for BDO Canada Limited in its capacity as Court-Appointed Receiver Richard Mazar for Brightstar Newcastle Corporation, Brightstar Senior Living Corporation, The Estate of Alan Chapple, John Blackburn, James Buckler, Lawson Gay and 2153491 Ontario Inc.

HEARD: February 15, 2022

ENDORSEMENT

Overview

[1] This is a motion for directions brought by the Receiver of Unit 417 in a condominium project. The unit is owned by Gerald Rasmussen. Mr. Rasmussen was prevailed upon by the principals of the condominium developer to prepay the final balance of his purchase price to the developer directly. This payment was not deposited into the deposit trust account established by the developer for that purpose.

[2] After investigation, the Receiver initially advised interested parties that Mr. Rasmussen appeared to be a bona fide purchaser for value of Unit 417 and that the Receiver proposed that Mr. Rasmussen should receive clear title to that unit. This outcome was opposed by the Guarantee Company of North America which is the remaining secured creditor with an interest in the condominium project. GCNA maintains that Mr. Rasmussen’s payment was not bona fide and that its mortgage security should prevail over Mr. Rasmussen’s interest. In the face of this dispute, the Receiver brought this motion for directions.

[3] For the reasons that follow, I find Mr. Rasmussen is a bona fide purchaser for value and that, subject to the payment of all ordinary course closing adjustments, he is entitled to an order vesting clear title to Unit 417 in his name.

Background

The Project and the Receivership

[4] Brightstar developed a 78-unit condominium building known as “Brookhouse Gate” in Newcastle, Ontario. Centurion loaned Brightstar $5.965 million to finance the project, secured by a mortgage on the project. Brightstar failed to repay the loan on maturity and committed other defaults. As a result, Centurion commenced these proceedings.

[5] GCNA issued performance bonds on the project to cover deposit insurance and new home warranty claims. Its bond was also secured by a mortgage on the project. A dispute arose between Centurion and GCNA over which mortgage had priority. Pending resolution of that dispute, all parties agreed that Brightstar would continue to sell and to close sales of condominium units, with proceeds held under an escrow agreement.

[6] Centurion, in addition, challenged the entitlements of two purchasers of units in the project: 1) in relation to Unit 101; and, 2) in relation to Unit 417. The Receiver was appointed by order of this Court on November 25, 2021 to deal with these two units. At the time of the Receiver’s appointment, the other 76 units had all been sold. The dispute over Unit 101 is no longer in issue. This motion concerns Unit 417, owned by Mr. Rasmussen.

[7] The priority dispute between Centurion and GCNA was resolved in Centurion’s favour by a decision of Cavanaugh J. released on July 23, 2021 (2021 ONSC 5181). Centurion has since been paid out and no longer has an interest in these proceedings.

[8] Thus, the dispute before the court in this matter is over Unit 417 and involves the interests of Mr. Rasmussen, the purchaser, Brightstar, the vendor, and GCNA, as mortgagee.

Mr. Rasmussen’s Purchase of Unit 417

[9] Mr. Rasmussen entered into the Unit 417 agreement of purchase and sale (APS) with Brightstar on October 30, 2014, for the price of $337,900. There is no dispute that Mr. Rasmussen has advanced the full value of the purchase price. Deposits and payments totaling $67,580 were paid into the trust account of the deposit trustee, Schneider Ruggiero LLP (SR Law). And, the Receiver has confirmed that Mr. Rasmussen paid $270,320 (the balance of the purchase price under the APS) into Brightstar’s bank account, in accordance with a Loan and Amendment Agreement of May 29, 2018 (the L&A Agreement).

[10] The dispute between Mr. Rasmussen and GCNA arises because the balance of the purchase price ($270,320) was paid, not to the deposit trustee, SR Law, but to Brightstar directly.

[11] The evidence is that Brightstar, in particular, Mr. Blackburn, an officer and director of Brightstar, pressured Mr. Rasmussen to prepay the balance of his purchase price to help the development through a “rough stretch”. Mr. Rasmussen has deposed that Brightstar informed him that it needed money to complete construction of the project and that the balance of his purchase price could not be used for construction purposes unless it was paid in the form of a loan specifying it was the final balance of the purchase price.

[12] Mr. Rasmussen initially refused but, he says, Brightstar continued to pressure him. Ultimately, Mr. Rasmussen agreed. He testified that he was in a weakened and vulnerable state because his wife had recently died, he had been diagnosed with cancer and he was in therapy for depression associated with these disturbing events.

[13] Brightstar has not responded to the specific allegations of pressure raised by Rasmussen. Neither Brightstar nor GCNA has cross examined Mr. Rasmussen on his affidavit. Brightstar, in its affidavit materials, supports title to Unit 417 being transferred to Mr. Rasmussen on the basis that the purchase price was paid in full and that he acted in good faith.

[14] As noted above, the prepayment on the final balance of the purchase price was structured as a loan and amending agreement between Brightstar and Mr. Rasmussen. The L&A Agreement states, amongst other things, that:

(a) Clause 2: The Principal Sum of $270,320 “represents the balance due and payable upon occupancy, registration of the condominium and closing of [Unit 417] pursuant to the APS”;

(b) Clause 4: The Principal Sum is to be interest-free, but if closing does not occur within six months from the date of agreement, interest will accrue from the seventh month of the agreement until closing or repayment; and

(c) Clause 8: Brightstar is to provide an amendment to Unit 417 APS, “acknowledging that the Principal Sum advanced will be applied to the purchase price of [Unit 417] on Closing by way of a credit to the Lender. At the time of closing no other purchase funds shall be required save for adjustments provided for in the APS and there shall be no charge for any upgrades or changes”. [1]

[15] In addition, the bank transfer slip issued by Mr. Rasmussen’s bank, CIBC, to Brightstar and accepted by Brightstar and deposited at the time, specifically indicated that this payment of $270,320 was the final balance of the purchase price for Mr. Rasmussen’s unit.

[16] Mr. Rasmussen moved into and took occupancy of Unit 417 in October 2018. He has since incurred additional expenses to significantly upgrade and renovate the unit. The condominium project was registered in November 2019. Mr. Rasmussen says that when he attended for the final closing with his lawyer on November 18, 2019, he was unable to close and receive clear title. This was because Centurion took the position that his unit was subject to a significant “unapproved credit or discount” that would not generate sufficient sales proceeds to Centurion.

[17] Mr. Rasmussen takes the position he has paid in full for Unit 417 and is entitled to receive clear title to his unit.

GCNA’s Claims Under Its Mortgage

[18] GCNA maintains an objection similar to that originally raised by Centurion on Unit 417’s closing. GCNA takes the position, among other things, that its deposit trust is $270,320 short because of the diversion of the final purchase price for Unit 417 to Brightstar directly. GCNA says the shortfall matters in this case because it is owed at least $85,905 of unpaid premiums and $202,787.29 for legal fees; as well, it says it faces potential liabilities in the form of future new home warranty claims from purchasers of units in the project. Brightstar disputes these claims advanced by GNCA. The amount remaining in the deposit trust account is insufficient to cover all these potential liabilities.

[19] To understand better GCNA’s position, it is necessary to consider GCNA’s agreements with Brightstar and how they fit into the scheme of condominium project construction and regulation in general.

[20] GCNA’s involvement with the project arises from two credit instruments issued to Brightstar. GCNA’s first commitment letter issued to Brightstar (and to named principals of Brightstar) provides a bond in favour of Tarion regarding new home warranty claims as well as required deposit insurance. Each of these commitments provides credit to the project secured by GCNA’s mortgage. Later, when construction financing was confirmed and the project was underway, GCNA issued an amended commitment letter, containing further details regarding these two fundamental commitments.

[21] GCNA emphasizes that the Condominium Act, 1998, S.O. 1998, c. 19, requires all deposits paid by purchasers of condominiums to be held in trust by an authorized trustee unless prescribed security is provided to the trustee, in which case the trustee may release secured deposit funds to the developer to finance the development of the new condominium units. Brightstar appointed its solicitor for the project, SR Law, to hold all deposits paid on the purchase price of condominium units in the project in accordance with the requirements of the Act.

[22] In particular, GCNA relies upon an “extended” definition of deposit in its deposit trust agreement with Brightstar. Under GCNA’s March 31, 2014 deposit trust agreement, Brightstar granted GCNA security in respect of all deposit monies received in the project, which were required to be held in the escrow account maintained by SR Law. In section 1.1. of the agreement, “Deposit” and “Deposits” were defined to “have the meaning ascribed to that term in Part I(1) of Regulation 892 to the Ontario New Home Warranty Program Act, R.S.O. 1990, c. O.31.” Regulation 892 to the ONHWPA defines “Deposits” to include all money received on account of the purchase price:

“deposits” means, in respect of a home, all money received before the date of possession by or on behalf of the vendor from a purchaser on account of the purchase price payable under a purchase agreement, and, in the case of a condominium dwelling unit, includes money received by or on behalf of the vendor after the date of possession and prior to the date of transfer but does not include money,

(a) paid under the purchase agreement as rent or as an occupancy charge and not part of the purchase price, or

(b) specified in the purchase agreement as money paid under subsection 80 (4) of the Condominium Act, 1998.

[23] Thus, GCNA’s essential position is that under the terms of its agreement with Brightstar, all funds for the purchase of Unit 417 had to be paid into the deposit trust account held by SR Law. Because this was not done, Mr. Rasmussen’s “loan” to Brightstar cannot qualify as a final payment on Unit 417. GCNA says Mr. Rasmussen must either repay the $270,320 or provide GCNA with a mortgage in that amount (or some lesser negotiated amount).

The Receiver’s Motion for Directions

[24] To bring this issue to a head, following its investigation the Receiver gave notice of its preliminary view that Mr. Rasmussen was a bona fide purchaser for value and should, subject to payment of standard adjustments on closing, receive clear title to Unit 417.

[25] GCNA notified the Receiver that it opposed this outcome on the basis that Mr. Rasmussen was not a bona fide purchaser for value because he had, effectively, assisted Brightstar in doing an end run around Brightstar’s obligations under the commitment letters and the deposit trust agreement. This, GCNA says, had the effect of depriving it of the benefit of payment of the balance of Mr. Rasmussen’s purchase price.

[26] Faced with this opposition, the Receiver brought the present motion for directions from the court.

The Issue

[27] The issue for determination on this motion is whether Mr. Rasmussen’s prepayment of the final balance of the purchase price for his unit satisfies all his obligations under the APS such that, subject to payment of standard closing adjustments, he is entitled to clear title free and clear of the GCNA mortgage.

The Parties’ Arguments

[28] Mr. Rasmussen’s position is that he has paid in full the entire purchase price for Unit 417 required under his APS. He was asked for advance payment and consented to do so in the form of the L&A Agreement. He says that the L&A Agreement and the terms of payment at the time were absolutely clear: the $270,320 advanced, although it took the form of a loan, was never intended to be repaid unless the project for some reason could not be completed. The advance was, explicitly and in substance, payment (albeit in advance) of the final balance of the purchase price for Unit 417 under the APS. Upon closing, the “loan” would cease to exist. Mr. Rasmussen says he was not a party to and had no knowledge of Brightstar’s contractual obligations to GCNA or to any other third party. Nor did he assist or conspire with Brightstar to breach its obligations to GCNA or anyone else.

[29] GCNA advances, essentially six arguments for why Mr. Rasmussen is not entitled to the transfer of his unit free and clear of GCNA’s mortgage:

• First, it says that Mr. Rasmussen’s advance of $270,320 to Brightstar was, on its face, a loan and not a payment at all.
• Second, the payment did not comply with the terms of the APS. It says Mr. Rasmussen must re-tender the amount of $270,320 (or give GCNA a mortgage) if he wishes to take clear title to Unit 417.
• Third, GCNA claims that its mortgage has priority over any interest Mr. Rasmussen is found to have in Unit 417.
• Fourth, it says that Mr. Rasmussen is estopped from requesting a vesting order against GCNA by virtue of clause 72 of the APS, which bars the purchaser from initiating proceedings against third party entities in respect of the APS.
• Fifth, it says that the final payment cannot be set-off against the amounts due under its charge from Brightstar because GCNA does not owe Brightstar any money.
• Finally, even though Mr. Rasmussen advanced value to Brightstar, he cannot be considered a bona fide purchaser without notice of GCNA’s claims because, among other things: i) he knew the payment was out of the ordinary course and, by his own admission, agreed to it against his better judgment; ii) he had a lawyer acting for him in connection with the L&A Agreement and should be presumed to know and understand the law of condominium project financing, including Brightstar’s obligations to GCNA and others; and iii) he was given explicit notice in the L&A Agreement of GCNA’s prior mortgage.

Analysis

Loan or Final Payment?

[30] GCNA argues that, on its face, the advance by Mr. Rasmussen of $270,320 was a loan, not a final payment on account of the purchase of his unit. GCNA argues that the L&A Agreement says the payment was a loan, the funds were not paid into the deposit trust account, and the transaction appears to be an an attempt to conceal payment to Brightstar. I am unable to accept this argument.

[31] The L&A Agreement expressly provides that the principal sum of $270,320 “represents the balance due and payable upon occupancy, registration of the condominium and closing of [Unit 417] pursuant to the APS”. The L&A Agreement also provides there shall be an amendment to the APS, “acknowledging that the Principal Sum advanced will be applied to the purchase price of [Unit 417] on Closing by way of a credit to the Lender. At the time of closing no other purchase funds shall be required…”

[32] The L&A Agreement was structured as a loan in the sense that, if the project could not be completed, Mr. Rasmussen would be repaid his final payment. But once the condominium was registered, on closing the advance was to be taken as the final payment, in full, under the APS.

[33] Although no amendment to the APS setting this out was ever provided, I find that it does not matter in the circumstances. This is a case for the application of the maxim that equity “looks on that as done which ought to be done”: Grant Forest Products Inc. (Re), 2010 ONCA 355, 101 O.R. (3d) 383, at paras. 13-18. In applying this maxim, the court must consider whether:

(a) the contract imposes a contractual obligation on a contracting party to do something it has not done;

(b) the contract is one that can be specifically enforced; and

(c) the party seeking relief is not a stranger but a party who would be entitled to specifically enforce the contract.

Equity permits the court to recognize the obligation from the time it should have been performed, even if the time for performance has passed.

[34] The Unit 417 APS imposes an obligation on Brightstar to deliver title and to undertake to discharge any mortgages, which are not to be assumed by Mr. Rasmussen as purchaser. The L&A Agreement is consistent with this obligation in stipulating that the advance of $270,320 represents the balance of the purchase price due on closing and that no further purchase funds shall be required. Brightstar, however, failed to fulfill its obligation to provide clear title and to obtain the discharge of any project mortgages on closing.

[35] The APS (as amended by the L&A Agreement) is a contract for which the remedy of specific performance is available. The only material steps remaining are for title to be conveyed to Mr. Rasmussen and any project mortgages discharged.

[36] In some receivership cases courts have declined to grant specific performance of purchase agreements if doing so would amount to “a mandatory order that requires the incurring of borrowing obligations against the subject property and completion of construction ordered to bring the property into existence”: 1565397 Ontario Inc. (Re) (2009), 54 C.B.R. (5th) 262 (Ont. S.C.), at para. 33. Such concerns are not present here. The project is complete and all units are sold and fully occupied.

[37] Finally, Mr. Rasmussen is unambiguously a party to the APS and the L&A Agreement.

[38] The Ontario Court of Appeal has recognized that:

(a) once a unit purchaser enters into an agreement of purchase of sale, he becomes an equitable owner of the unit even though the agreement cannot be closed until the condominium is registered;

(b) the owner is in a fiduciary relationship with unit purchasers and actually holds the property in trust for them; and

(c) the owner has a duty to protect the interests of the unit owners and cannot put its own interests in conflict with theirs: York Condominium Corp. No. 167 et al. v. Newrey Holdings Ltd. et al. (1981), 32 O.R. (2d) 458 (C.A.), leave to appeal to SCC denied.

[39] In light of these obligations it would be inequitable for Brightstar to be permitted to take advantage of its breach of the APS and retain title in Unit 417, which it holds in trust, notwithstanding its conflicting obligations to GCNA.

[40] I find that Brightstar was short of money and was struggling to keep the project going. It structured this prepayment as a loan as a strategy to do an end run around its obligations to its lenders to hold all purchaser payments in trust unless release of these funds was specifically authorized. Brightstar was the recipient of the final payment for Unit 417. If this was contrary to its obligations under the GCNA commitments and mortgage, that is not Mr. Rasmussen’s problem. If GCNA must be made whole, that is Brightstar’s responsibility, not Mr. Rasmussen’s.

[41] For all these reasons, I find that, under the L&A Agreement, properly interpreted in the context of the APS and the surrounding circumstances, Mr. Rasmussen’s advance of $270,320 to Brightstar was the final payment for the purchase of Unit 417 under the APS.

Did the APS Prohibit Payment to Brightstar Directly?

[42] I am also unable to agree that Mr. Rasmussen was under any contractual obligation to make his final payment of $270,320 to SR Law. The APS quite specifically limits the payments required to be made to SR Law to two initial deposits which had to accompany the APS: i) an initial $5,000 deposit; and, ii) an initial down payment of $62,580.00 (20% of the purchase price less $5,000). By contrast, under the APS the balance of the purchase price was required to be paid to the vendor (or as the vendor might direct).

[43] Paragraph 1(b) of the APS states:

The following amounts comprising part of the Purchase Price shall be payable to Schneider Ruggiero LLP, in Trust, as deposits pending completion or termination of this Agreement and to be credited on account of the Purchase Price on the Closing Date and/or Unit Transfer Date (as such terms are hereinafter defined):

(1) the sum of $5,000.00 by cheque or bank draft submitted with this Agreement;

(2) the sum of $62,580.00 being 20% less $5000.00 of the Purchase Price, submitted with this Agreement, by a cheque post-dated one (1) month following the execution of this Agreement by the Purchaser…

[44] Paragraph 1(c) of the APS states:

The balance of the Purchased Price to the Vendor (or as it may further direct) by certified cheque, bank draft, or wire transfer (using Large Value Transfer protocols) on the Unit Transfer Date (as hereinafter defined), subject to the adjustments hereinafter set forth…

[45] I also note that the APS addresses, in para. 20, how existing project mortgages are to be discharged on closing. Although the purchaser acknowledges project mortgages might exist, the APS stipulates that such mortgages are not intended to be assumed by the purchaser. In effect, the vendor undertakes to obtain partial discharges of project mortgages and to direct the necessary funds to the mortgagee from the purchase price to do so.

[46] Thus, the APS does not impose any obligation on Mr. Rasmussen to pay the balance of the purchase price to SR Law. Rather, the APS provides that Mr. Rasmussen shall direct this payment to Brightstar and that Brightstar may direct how such funds are to be paid. Mr. Rasmussen was entitled to take Brightstar’s direction: Armadale Properties Ltd. v. 700 King Street (1997) Ltd..

[47] Furthermore, the APS contemplates that while project mortgages would still exist on the unit transfer date, the vendor would undertake to register a subsequent discharge. The obligations to deal with the funds tendered by Mr. Rasmussen in final payment for Unit 417 appropriately, and to attend to the discharge of any project mortgages, fell on Brightstar, not Mr. Rasmussen.

[48] It appears to be true that under the deposit trust agreement with GCNA, Brightstar was obligated to direct all amounts received for the purchase of a unit into the deposit trust account; but that was an obligation of Brightstar’s, not Mr. Rasmussen’s. Further, there is no evidence that Mr. Rasmussen was even aware of, let alone that he was involved in trying to thwart, Brightstar’s obligations in this regard.

[49] As noted earlier, Brightstar ran out of money. It was scrambling to keep the project going and, to generate some cash, did an end run around its contractual obligations to GCNA by prevailing on Mr. Rasmussen to prepay his final payment. Mr. Rasmussen advanced the full amount in good faith. That these funds were misdirected to pay project expenses instead of going into the deposit trust account is on Brightstar, not Mr. Rasmussen. It was Brightstar and its principals, not Mr. Rasmussen, who breached their obligations to GCNA. Mr. Rasmussen had no contractual obligations to GCNA. Under the term of its commitment letters, GCNA has indemnities from Brightstar and its principals to cover precisely this kind of thing; the responsibility for making GCNA whole is on them, not Mr. Rasmussen.

[50] Mr. Rasmussen breached no obligations under the APS by advancing his final payment to Brightstar.

Does GCNA’s Mortgage Take Priority Over Mr. Rasmussen’s “Loan” To Brightstar?

[51] GCNA maintains that its security has priority over any interests Mr. Rasmussen may have. Mr. Rasmussen had specific knowledge of GCNA’s mortgage when he advanced final payment to Brightstar. Therefore, GCNA’s interest should prevail. I do not agree.

[52] Under the terms of the receivership order, the Receiver can obtain a vesting order to convey Unit 417 to a purchaser free and clear of any liens or encumbrances. Whether and in what circumstances a vesting order may be granted where third party rights could be extinguished has been addressed by the Ontario Court of Appeal in Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416, at paras. 109-110.

[53] Before granting a vesting order that could extinguish rights, the court should conduct a “rigorous cascade analysis”. This begins with an assessment of the nature and strength of the interest that is proposed to be extinguished (which may be the determinative factor), and whether the interest holder had consented to vesting out during the insolvency proceedings or in other agreements reached prior to insolvency. If these factors are inconclusive, the court will consider the equities of the case. A consideration of the equities would include the question of prejudice, whether the party whose interest is being extinguished can otherwise be adequately compensated and whether the parties have acted in good faith.

[54] GCNA has objected to the closing of the transaction of Unit 417 without provision of additional security. It states the funds currently held in escrow, along with the closing proceeds of Unit 417, are required for:

(a) indemnity with respect to unpaid premiums owed by Brightstar to GCNA under the credit facility;

(b) indemnity with respect to legal expenses incurred by GCNA in the priority dispute with Centurion and the receivership of Brightstar;

(c) continuing collateral for GCNA’s future premiums that may be owed by Brightstar; and

(d) continuing security for GCNA’s exposure to future loss and expense under the GCNA facility (which includes deposit insurance and future new home warranty claims).

[55] Under the first component of the Third Eye Capital analysis, it is clear that GCNA’s interest is purely financial, whereas Mr. Rasmussen’s interest is both proprietary in nature (this is his home) and financial.

[56] Under the second component, GCNA did agree to the discharge of its mortgage in agreements prior to the receivership proceedings. Under the terms of its commitment letter, GCNA agreed that it “will discharge its collateral mortgage upon the final closing of each unit and the discharge will be provided at no charge to the Principal, other than legal fees” and that GCNA “shall require evidence of transfer of title from the Principal/Declarant to purchasers as a condition of discharge.”

[57] There is no factual dispute that Mr. Rasmussen paid for his unit in full, thereby fulfilling his financial obligations under the APS to pay for his unit. The problem in this case is that Brightstar diverted Mr. Rasmussen’s final payment of funds away from the deposit trust account and to itself, which it then used, presumably, for ongoing project expenses. This was, as discussed above, in breach of its obligations to GCNA.

[58] On the basis of the two principal Third Eye Capital factors, I find that a vesting order giving Mr. Rasmussen clear title to Unit 417 is appropriate. Even if the two primary factors resulted in some ambiguity, I have no hesitation in concluding, on the evidence, that equitable considerations are entirely in favour of Mr. Rasmussen in any event.

[59] On the question of prejudice, GCNA’s position is that Mr. Rasmussen must advance a further $270,320 into the deposit trust account in order to receive clear title (or, alternatively, take on a mortgage in GCNA’s favour in this amount). Mr. Rasmussen does not have the means to make the final payment for his unit twice. The alternative proposed, a mortgage, would negate his equity in his unit in the same amount.

[60] GCNA claims to need these funds to protect itself against unpaid premiums owed or potentially owed by Brightstar, its legal expenses arising out of its unsuccessful priority dispute with Centurion, and potential future claims under its bond.

[61] The question of unpaid premiums and GCNA’s legal fees is a matter of ongoing dispute with Brightstar. In any event, no legal basis has been established by GCNA to justify making Mr. Rasmussen responsible for these claims.

[62] The question of GCNA’s potential liability on the bond involves deposit insurance and new home warranty claims. Most of the unit sales in this project closed in early 2019. There is no evidence of any deposit insurance claims whatsoever.

[63] The new home warranty program lasts for seven years. It is now three years since most units closed. Again, GCNA has advanced no evidence of any claims. Thus, what remains is an entirely contingent liability. Again, it is unclear what legal basis GCNA has for making Mr. Rasmussen responsible for these potential claims. The very purpose of the Tarion regime is to protect individuals like Mr. Rasmussen and to ensure buyers of newly built homes receive protection against defects, which includes resolving claims where the developer has failed to do so. It strikes me as somewhat contrary to the purposes of the new home warranty program that Mr. Rasmussen would be, in effect, called upon and required to pay for such warranties before the developer and GCNA.

[64] In any event, GCNA has indemnity claims available against Brightstar, its affiliates and its principals. Under its credit facility documents, GCNA obtained an unlimited joint and several indemnity from Brightstar, as well as guarantees from Brightstar Seniors Living Corp., L.R.G. Corp., Lawson Gay, John Blackburn, Jim Buckler and Alan Chapple. There is no evidence that any of these entities and individuals are unable to make good on any liabilities they may have under their indemnities and guarantees.

[65] GCNA says Mr. Rasmussen has a claim for repayment of his loan to Brightstar and that he should repay the final payment into the deposit trust account for the benefit of GCNA and sue Brightstar for his money back on the loan. I am unable to give any credence whatsoever to this argument. GCNA is in the business of offering bonds and taking on, and managing, the risks of doing so (by, for example, obtaining indemnities and guarantees from a wide base of involved parties on the developer side). Mr. Rasmussen simply bought a residential condominium unit and made the final payment on his unit in good faith. It is no answer to say to Mr. Rasmussen, in these circumstances, that he can always sue Brightstar for the repayment of his loan.

[66] The pre-existence of GCNA’s collateral mortgage is not a basis, in these circumstances, for denying Mr. Rasmussen a vesting order giving him clear title to the unit he has paid for in full. In light of Mr. Rasmussen’s equitable interest, the appropriate remedy in this case is for the Receiver to fulfill Brightstar’s outstanding obligations to Mr. Rasmussen (which crystallized prior to the receivership) and transfer clear title to Mr. Rasmussen. A vesting order shall issue in aid of this result.

Does Clause 72 of the APS Set Up An Estoppel Against Mr. Rasmussen?

[67] Clause 72 of the APS provides that the purchaser may not assert any claim in respect of the APS against anyone other than the vendor and creates an estoppel against doing so. It states:

the Purchaser shall not assert any of such rights, nor have any claim or cause of action whatsoever as a result of any matter or thing arising under or in connection with this Agreement (whether based or founded in contract law, tort law or in equity, and whether for innocent misrepresentation, negligent misrepresentation, breach of contract, breach of fiduciary duty, breach of constructive trust or otherwise), against any person, firm, corporation or other legal entity, other than the person, firm, corporation or legal entity specifically named or defined as the Vendor herein…[and that]… this acknowledgment and agreement may be pleaded as an estoppel and bar against the Purchaser in any action, [etc.]…

[68] GCNA argues that the relief sought by Mr. Rasmussen is contrary to this clause 72 of the APS.

[69] The problem with GCNA’s argument is that Mr. Rasmussen has not commenced any action or other proceeding against GCNA or any other third party. Clause 72 cannot reasonably be read as precluding Rasmussen from seeking clear title from Brightstar, as this is exactly what he contracted for in the APS.

Does Mr. Rasmussen’s Argument Depend on Set Off?

[70] GCNA argues that the amount of the final payment should not be credited against any amounts owing to it by Brightstar, since GCNA did not receive the funds, does not consent to set off and, in any event, owes no money to Brightstar against which the final payment for Unit 417 could be set off. The matter of whether funds are owed by GCNA to Brightstar is a matter of dispute between those parties. This does not stand in the way of Mr. Rasmussen obtaining clear title to Unit 417 since he is not privy to the dispute between GCNA and Brightstar. His claim to clear title based on full payment does not depend on set off; it is a free-standing claim in equity. In any event, as noted above, GCNA has recourse to other avenues of recovery against Brightstar and its affiliates and principals.

[71] I find that Mr. Rasmussen’s request for a vesting order giving him title to Unit 417 does not depend on Mr. Rasmussen, or anyone else, having a set off claim against GCNA.

Was Mr. Rasmussen’s Conduct Bona Fide and Without Notice of GCNA’s Claims?

[72] I have already dealt with most of the issues raised in connection with this argument.

[73] While Mr. Rasmussen undoubtedly had notice of GCNA’s prior mortgage, it was in the context of Brightstar’s obligations under the APS and GCNA’s obligations under its funding agreements with Brightstar. In other words, Mr. Rasmussen had a reasonable expectation that, if he paid the full purchase price for his unit, he would be able to close and get clear title. What Mr. Rasmussen did not have notice of, crucially, was that Brightstar was using the L&A Agreement to do an end run around its obligations to GCNA or that his prepayment of the final tranche of the purchase price to Brightstar would be in anyway detrimental to GCNA’s interests.

[74] The fact that Mr. Rasmussen had legal advice on the L&A Agreement, standing alone, changes nothing. There is no evidence about what that advice was. In any event, it is hard to see how Mr. Rasmussen’s lawyer would be concerned with Brightstar’s obligations to its own creditors. There is absolutely no basis for any inference that Mr. Rasmussen had constructive knowledge that Brightstar would act in a manner that was offside its obligation to GCNA or that the prepayment was in any way improper or detrimental to third parties.

[75] I find that Mr. Rasmussen was a bona fide purchaser for value without notice that the manner of his final payment for Unit 417 would put Brightstar offside its obligations, or be detrimental to any third party interests.

Conclusion

[76] For the foregoing reasons, I find that Mr. Rasmussen was a bona fide purchaser for value and direct the Receiver to close Mr. Rasmussen’s purchase of Unit 417, subject only to standard closing adjustments. In furtherance of this direction, an order shall issue vesting clear title to Unit 417 in Mr. Rasmussen’s name once the closing adjustments are resolved and satisfied.

Other Outstanding Issues

[77] During the course of oral argument of the Receiver’s motion regarding Unit 417, it became clear that there are some potential issues in dispute about what closing adjustments are necessary and who is liable to pay them. Since there was no evidence about this, and effectively no submissions, I declined the invitation of certain parties to wade in on this issue now.

[78] With the benefit of my disposition on the main issue in dispute, the affected parties shall confer and attempt to resolve all outstanding accounting and other issues affecting the calculation and payment of the appropriate closing adjustments for Unit 417. If, and only if, the parties (having made Herculean efforts) are unable to resolve these issues, the Receiver may return to court for further advice and direction on this issue.

Costs

[79] No one sought costs. The issues and circumstances were, in any event, such that I would not have been inclined to make any order as to costs. Accordingly, no costs are ordered on the Receiver’s current motion for directions.

Penny J. Date: 2022-02-25

[1] No such amendment to the APS was ever delivered.