COURT FILE NO.: CV-11-44096 DATE: 20220223

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

S & A DEVELOPMENTS LIMITED, ALEXANDER STRASSER and CAMPUS 2000 DEVELOPMENTS INC. personally and as general partner of 1162185 LIMITED PARTNERSHIP Plaintiffs – and – HENRY H. N. HUNG and DANIEL H. C. HUNG as trustees of THE HUNG RICHMOND HILL TRUST, SHIU PONG DEVELOPMENTS LIMITED, SHIU PONG ENTERPRISES (CANADA) LIMITED and SHIU PONG CONSTRUCTION LTD. Defendants

AND BETWEEN:

Paul Dollak, for the Plaintiffs and Defendants to the Counterclaim William A. Chalmers, for the Defendants and Plaintiffs by Counterclaim

HENRY H. N. HUNG and DANIEL H. C. HUNG as trustees of THE HUNG RICHMOND HILL TRUST, SHIU PONG DEVELOPMENTS LIMITED, SHIU PONG ENTERPRISES (CANADA) LIMITED and SHIU PONG CONSTRUCTION LTD. Plaintiffs by Counterclaim – and – S & A DEVELOPMENTS LIMITED, ALEXANDER STRASSER, S & A STRASSER LIMITED, JOHN DOE, JIM DOE and JOE DOE Defendants to the Counterclaim

HEARD: May 10-14, 19 and July 26, 2021

REASONS FOR JUDGMENT

VERMETTE J.

[1] The parties became partners in a land development project in 1996. In 2005, they decided to end their partnership and divide up the lands among themselves. It was agreed that the respective values of the lands transferred to each group would be determined by appraisers, and that in the event the valuations were not equal, an adjustment would be made by way of an “equalization payment” representing one-half of the amount by which the value of one set of lands exceeded the value of the other set of lands.

[2] From 2006 to 2011, the parties entered into a number of agreements to implement their decision to end their partnership and divide up the lands.

[3] In 2011, it became clear that, contrary to what had been assumed by at least one of the parties, the lands transferred to the Plaintiffs were going to be subject to significant future development charges. The Plaintiffs argue that this mistaken assumption resulted in the lands not being divided on an equal and equitable basis because the value assigned to the lands transferred to the Plaintiffs was almost $3 million too high. The Plaintiffs’ position is that this is inconsistent with the intentions of the parties to divide the lands on an equal basis.

[4] The Plaintiffs request the following relief, based on the doctrines of equitable common mistake and rectification as well as general equitable principles: (a) rectification of certain agreements to correct the value of the lands inserted in these agreements, and (b) compensation in the amount of approximately $1.4 million to correct the equalization payment that was made to the Defendants which, the Plaintiffs allege, was too high as a result of the mistake in the value assigned to the lands transferred to the Plaintiffs. The Plaintiffs also seek contribution from the Defendants with respect to legal fees incurred by the Plaintiffs in connection with prior litigation on the issue of development charges.

[5] While I find that there was a common mistake in this case, I also find that the relief sought by the Plaintiffs is not available to them. As a result, the action is dismissed. The counterclaim, which is only relevant in the event the Defendants are liable to the Plaintiffs, is also dismissed.

A. FACTUAL BACKGROUND

1. The Parties

[6] The Plaintiff and Defendant to the Counterclaim Alexander Strasser has more than 40 years of experience in real estate development. He is the President of the Plaintiff and Defendant to the Counterclaim S & A Developments Limited (“S&A”). He was the Secretary Treasurer of the Defendant to the Counterclaim S & A Strasser Limited, a corporation related to S&A. All of the assets of S & A Strasser Limited, including its contractual rights and liabilities, were transferred to S&A and 2076204 Ontario Limited on July 28, 2005. The assets of 2076204 Ontario Limited were subsequently transferred to S&A and Mr. Strasser. These parties are generally referred to in these reasons as the “Strasser Group”. Alexander Strasser testified at trial.

[7] The Defendants and Plaintiffs by Counterclaim Daniel Hung and Henry Hung are brothers. They are the trustees of the Hung Richmond Hill Trust (“Hung Trust”). They are also directors and officers of the Defendants and Plaintiffs by Counterclaim Shiu Pong Developments Limited (“Shiu Pong”), Shiu Pong Enterprises (Canada) Limited and Shiu Pong Construction Ltd. (together, “Shiu Pong Corporations”). The Shiu Pong Corporations are owned by Daniel and Henry Hung or parties not dealing at arm’s length with them. The parties mentioned in this paragraph are generally referred to in these reasons as the “Hung Group”. The Hung Group’s experience before they got involved in the project in issue in this litigation was principally related to the development and management of condominium buildings, mostly in Toronto. Daniel Hung testified at trial.

[8] The Plaintiff Campus 2000 Developments Inc. (“Campus 2000”) is the general partner of 1162185 Limited Partnership (“Limited Partnership”). The Limited Partnership was created in April 2016 by Campus 2000 as general partner, and the Hung Trust, S & A Strasser Limited and Alexander Strasser as limited partners.

2. The Limited Partnership and the Project Lands

[9] The Limited Partnership was formed to own and develop and sell or lease the “Project Assets”, i.e. the Project Lands (defined below), together with residential condominium buildings and commercial retail and office buildings to be developed and constructed on the Project Lands by the Limited Partnership, together with all other improvements and structures located on the Project Lands from time to time.

[10] The “Project Lands” are composed of Lots 13, 14, 51, 52, 53, 54, 55 and 56, Plan GSM-2104, Town of Richmond Hill. The Project Lands included the “Residential Lands”, which were comprised of part of Lot 54; the “Industrial Lands”, which were comprised of Lot 51, part of Lot 52, Lot 53 and part of Lot 54; and the “Commercial Lands”, which were comprised of part of Lot 52 and Lots 55 and 56.

[11] The Project Lands were originally registered in the name of S & A Strasser Limited, Alexander Strasser and related companies. The original owners conveyed registered title to the Project Lands to Campus 2000 (then called 1162185 Ontario Limited) on April 3, 1996. Campus 2000 agreed to hold registered title to the Project Lands as a bare trustee acting for and on behalf of the beneficial owners.

[12] On April 12, 1996, the Hung Trust acquired a 50% beneficial interest in the Project Lands pursuant to unregistered transfers. On completion of these beneficial transfers, the beneficial owners of the Project Lands were as follows:

a. Lots 13, 14, 51, 53, 54, 55 and 56: the Hung Trust and S & A Strasser Limited, each as to an undivided 50% beneficial interest as tenants in common; b. Lot 52: the Hung Trust and Alexander Strasser, each as to an undivided 50% beneficial interest as tenants in common.

[13] At or about the time of the creation of the Limited Partnership, the limited partners (i.e. the Hung Trust, S & A Strasser Limited and Alexander Strasser) transferred their beneficial interest in the Project Lands to the Limited Partnership in exchange for interests in the Limited Partnership equivalent to the fair market value of their respective beneficial interests in the Project Lands.

[14] On July 28, 2005, S & A Strasser Limited transferred its interest in the Limited Partnership to S&A.

[15] In October 2008, the Hung Trust transferred part of its interest in the Limited to Partnership to the Shiu Pong Corporations.

[16] Effective as of January 1, 2011, the Hung Group transferred the interest they had in the Limited Partnership to S&A. After the transfer, the only limited partners of the Limited Partnership were S&A and Alexander Strasser.

3. The 1980 Lot Levy Agreement

[17] S & A Strasser Limited, along with other owners of land in the Leslie Industrial Area of the Town of Richmond Hill (“LIA Owners”), entered into an agreement with the Corporation of the Town of Richmond Hill (“Richmond Hill”) dated September 23, 1980 and amended on February 28, 1981 (“1980 Lot Levy Agreement”). The 1980 Lot Levy Agreement covered the Project Lands.

[18] The 1980 Lot Levy Agreement required each of the LIA Owners to make payments for its proportionate share of the “cost of common facilities” serving the Leslie Industrial Area. Such costs included, among others, costs related to storm water management, trunk sanitary sewage system, watermain and road improvements. Pursuant to the 1980 Lot Levy Agreement, S & A Strasser Limited paid Richmond Hill approximately $1.8 million by way of letter of credit and land dedications.

[19] In the 1980 Lot Levy Agreement, Richmond Hill and the LIA Owners, including S & A Strasser Limited, agreed that the LIA Owners’ lands within the Leslie Industrial Area would be exempt from future levies for municipal services, provided that the lands were used for a use permitted by the relevant by-law. Section 9.7 of the 1980 Lot Levy Agreement reads as follows:

The Town agrees with each Owner that the Town will not impose any levies in respect of municipal services on the lands of an Owner in the Community, provided that such lands are used for a use permitted by By-law 150-60 as amended from time to time.

4. Development charges

[20] For the purpose of understanding the facts of this case, it is necessary to summarize in a very general way the scheme that applies to the imposition of development charges.

[21] From 1959 to 1989, the various versions of the Planning Act set out the authority of municipalities to enter into subdivision agreements with owners of land within their boundaries. The Act also gave municipalities the authority to impose and collect fees for infrastructure called “lot levies”. Lot levies were routinely imposed for municipal services under agreements with developers, such as the 1980 Lot Levy Agreement, or as a condition of subdivision approval under the provisions of the Planning Act.

[22] With the adoption of the Development Charges Act, 1989, S.O. 1989, c. 58, the process of imposing lot levies was replaced by a more standardized process of requiring a developer to pay development charges pursuant to a specific statutory scheme. Under the statute, a municipality was allowed to impose development charges against lands with respect to certain types of developments of the land that increased the need for services. Development charges were levied pursuant to a development charge by-law passed by the municipality.

[23] Section 14(1) of the Development Charges Act, 1989 required a municipality to give an owner of land a credit for a charge related to development paid by the owner to the municipality pursuant to a development agreement entered into prior to the coming into force of the municipality’s development charge by-law. Section 14(4) provided that if a conflict existed between such an agreement and the provisions of a development charge by-law, the provisions of the agreement prevailed to the extent of the conflict.

[24] The Development Charges Act, 1989 was replaced by the Development Charges Act, 1997, S.O. 1997, c. 27 (“DC Act”). Section 68 of the DC Act provides that the Lieutenant Governor in Council may make regulations setting out transitional rules relating to credits given under section 14 of the Development Charges Act, 1989. Such transitional rules were adopted in 1998 and are set out in section 17 of O. Reg. 82/98 (“Regulation”). Section 17 imposed a time limit for applications for credit recognition. It reads, in part:

The following rules apply with respect to credits given or required to be given under section 14 of the old Act:

1. The owner or former owner of land is entitled to the recognition of a credit towards a development charge imposed under a development charge by-law passed under the new Act by the council of the municipality that gave the credit.
2. If there is a conflict between a development charge by-law passed under the new Act and an agreement referred to in paragraph 3, the provisions of the agreement prevail over the by-law to the extent of the conflict.
3. Paragraph 2 applies with respect to an agreement made between a municipality and the owner or former owner of land if, before the coming into force of a development charge by-law under the old Act, i. the owner or former owner of the land paid all or a portion of a charge related to development under the agreement with respect to the land and the land is within the area to which a development charge by-law passed under the new Act may apply, or ii. the owner or former owner of the land provided services in lieu of the payment referred to in subparagraph i.
4. An application for the recognition of a credit under paragraph 1 must be made, i. on or after March 1, 1998 and on or before March 1, 1999, or ii. on or after September 27, 1999 and on or before October 31, 1999.
5. An application for the recognition of a credit shall set out the amount of the credit that is sought and the services to which the applicant claims the credit should be applied.
6. If the municipality refuses to recognize a credit in accordance with an application, the applicant may appeal the municipality’s decision to the Ontario Municipal Board by filing with the clerk of the municipality, within 30 days after the applicant receives the notice of the municipality’s refusal, a notice of appeal.

[25] Richmond Hill has passed three development charges by-laws under the DC Act: (1) By-law 167-99 which was in effect from September 1, 1999 to July 19, 2004; (2) By-law 144-04 which was in effect from July 20, 2004 to June 22, 2009; and (3) By-law 59-09 which was passed on June 23, 2009 and remains in effect.

[26] By-laws 167-99 and 144-04 provide that no development charges are payable for development of land where a charge imposed pursuant to an agreement made with respect to the development of the same land has previously been paid to Richmond Hill, unless there is a change in the proposed development: (a) from residential to non-residential; (b) from non-residential to residential; or (c) that would increase the density of development from that proposed or permitted at the time the agreement was made.

[27] Contrary to By-laws 167-99 and 144-04, By-law 59-09 does not contain a section that provides for an exemption from development charges for lands where a charge imposed pursuant to an agreement has previously been paid to Richmond Hill.

5. Creation of the Limited Partnership

[28] In January 1995, there was a meeting between the Strasser Group and the Hung Group during which the creation of a partnership was discussed in relation to the Project Lands. The two groups were introduced to each other by CIBC. During the meeting or shortly thereafter, a copy of the 1980 Lot Levy Agreement was provided to the Hung Group, but it was not discussed in any detail. The Strasser Group also gave to the Hung Group a brochure prepared by S&A with respect to the Beaver Creek Business Park, which included the Project Lands. The brochure stated the following, among other things:

Full services (paid for by S & A Developments): water, underground hydro, sanitary and storm services. [Emphasis in the original.]

[29] By an agreement made as of April 15, 1996 (“Limited Partnership Agreement”), Campus 2000, as general partner, and the Hung Trust, S & A Strasser Limited and Alexander Strasser, as limited partners, created the Limited Partnership to own and develop and sell or lease the Project Assets.

6. The Development Agreement

[30] The Limited Partnership, as owner of the Project Lands, entered into a Development Agreement with Shiu Pong, as developer, made as of April 15, 1996 (“Development Agreement”). The preamble of the Development Agreement states that the Limited Partnership wishes to engage Shiu Pong “as an independent contractor responsible for, coordinating and expediting the design, financing, management, administration, construction, development and sale of the Project”. The “Project” is defined as follows: “the Project Lands, the Improvements and all other property, whether real or personal, now or hereafter acquired in connection with the Project to be developed in Phases as Approved by the Owner.” The defined term “Phase” means “each separate condominium building or commercial building or subdivision of dwellings into which the Project is divided in accordance with a master plan for the Project Approved by the Owner, together with the Project infrastructure necessary to service such buildings.” In order to be “Approved by the Owner” for the purpose of the Development Agreement, the approval of the board of directors of Campus 2000 was required.

[31] The Development Agreement also includes the following clauses, among others:

2.1 Representation and Warranty: The Developer represents and warrants to the Owner that it has and shall continue to have the facilities, personnel and expertise to provide to the Owner the services herein set forth in a competent and efficient manner and that it has, or will obtain, all licences and approvals necessary to perform the services set forth herein.

2.2 Appointment of Developer: Relying on the foregoing representation and warranty, the Owner hereby appoints and retains the Developer as developer of the Project to perform the services herein set forth. The Owner hereby expressly acknowledges and agrees that, without in any way diminishing the responsibilities of the Developer hereunder, any of the duties to be carried out by the Developer under this Agreement may be carried out by any person engaged by the Developer as the Developer reasonably considers appropriate.

2.3 Developer as Independent Contractor: Nothing contained in this Agreement shall be construed so as to constitute the Developer a partner or a joint venturer of the Owner. The duties to be performed, obligations assumed and expenses incurred by the Developer as developer of the Project under this Agreement shall be performed, assumed and incurred by it as an independent contractor on behalf of the Owner and only with the approval and consent of the Owner and not as an employee or in any other way as representative of the Owner.

2.4 Exclusivity: The Owner confirms that the appointment of the Developer hereunder is exclusive and no other person or persons shall he appointed to perform such function except in accordance with the provisions of this Agreement.

3.1 Scope: Upon and subject to the terms hereinafter set forth and subject to and in accordance with any and all instructions consistent with such terms which may from time to time be given by the Owner (which instructions shall have been Approved by the Owner) the Developer shall carry out all necessary services for and on behalf of the Owner to arrange for, coordinate and expedite planning and design, the obtaining of all necessary approvals and permits, financing, management, preparation of plans of subdivision, plans of condominium, administration and arranging of marketing and sale of, and the construction of, residential dwellings and commercial retail and office buildings in the Project in order to complete the Project in Phases in accordance with the Schedule and the Budget in a manner consistent with the philosophy of development, marketing and sale as Approved by the Owner.

It is acknowledged that the Construction Manager shall be hired by the Owner to manage all construction required for the Project.

3.2 Zoning Approvals: The Parties acknowledge that all rezoning and official plan amendments required to implement the Project shall be undertaken by S & A Strasser Limited for and on behalf of the Owner and shall not be the responsibility of the Developer under this Agreement. S & A Strasser Limited shall be compensated for such services as shall be Approved by the Owner.

3.3 Duties Relating to Planning and Design: Without limiting the generality of, and subject to, Section 3.1 hereof, the Developer covenants and agrees to supervise the completion of all matters relating to the planning and design of each Phase of the Project, and in such regard the Developer covenants and agrees with respect to each Phase of the Project to:

(a) negotiate and settle the terms of the contracts for the Project architect, landscape architect, structural, mechanical, electrical and accoustical [sic] engineers, surveyors, quantity surveyors, traffic consultants and all project consultants; (b) appoint the members of a design team in consultation with the Project architect and supervise negotiation of their contracts; (c) co-ordinate and monitor the design team to ensure timely preparation of design concept drawings, drawings for governmental approvals and working drawings; (d) arrange for market research into the feasibility of the Project; (e) approve all professional consultants necessary or appropriate to be retained to advise in connection with the design and development of the Project; (f) co-ordinate and expedite the securing of all necessary permits, approvals and consents; (g) subject to Section 3.2, negotiate and settle the terms of any servicing agreements and plans of subdivision, plans of condominium and site plan agreements and other agreements required with governmental authorities or private parties for the Project; (h) prepare and refine on a periodic basis the Budget and the Schedule; (i) arrange for architects and engineers to prepare all necessary working drawings and construction specifications for the Project; and (j) arrange for the application for and obtaining of all building permits.

12.4 Risks: The Owner acknowledges and agrees that the obligation of the Developer is limited to the use of its diligent, reasonable, commercial efforts in the performance of its duties and obligations hereunder. All costs, expenses, liabilities and risks which flow from the construction and development of the Project, unless the Developer has failed to use diligent, reasonable, commercial efforts in the performance of its duties and obligations hereunder, or unless it has acted outside the scope of its authority set forth in this Agreement, shall be for the account of the Owner and not for the account of the Developer and for greater certainty, but without limiting the foregoing, provided it has used its diligent, reasonable, commercial efforts in the performance of its duties and obligations hereunder, the Developer shall not be responsible for any delay in achieving any completion date, nor for any defect in the designs and plans of the Project architect nor for any inability of any insurer to perform its obligations.

[32] The Development Agreement also outlines the duties of Shiu Pong as developer with respect to construction, project financing, administration and marketing of the Project.

[33] Section 5.1 of the Development Agreement provides that Shiu Pong is to receive a development fee equal to one and one-half percent of “Total Project Costs”, which is defined as including all costs incurred by the owner in connection with the development, construction, ownership, marketing, sale and leasing of the project, including “sewer import costs, planning approval costs, cash in lieu of parkland payments, levies and other development charges”.

7. April 22, 1996 letter from Alexander Strasser to Daniel Hung

[34] On April 22, 1996, Alexander Strasser sent the following letter to Daniel Hung:

I would like to take this opportunity to thank you for your co-operation in the speedy closing of our agreement regarding the Beaver Creek Urban Centre.

I will be out of the country until May 2, 1996. I would like us to get together in early May so that we can structure a development plan.

I enclose copy of Bill 20 Planning Act Revisions and Amendments to the Development Charges Act as provided to us by our solicitor for your information.

[35] The letter enclosed memoranda prepared by the law firm Goodman Phillips & Vineberg regarding proposed amendments to the Planning Act and the Development Charges Act. The memoranda do not directly discuss the provisions that are relevant for the purposes of this case, such as the transitional rules relating to credits given under section 14 of the Development Charges Act, 1989.

[36] Alexander Strasser’s evidence at trial was that he sent this information to the Hung Group because he thought that they should be aware of it given that they were managing the Project. He said that he never heard back from the Hung Group about this. Daniel Hung’s evidence was that the Hung Group and the Strasser Group had a discussion after the receipt of the April 22, 1996 letter regarding what the joint venture should do, and Alexander Strasser stated that the Strasser Group would look after this as it was their responsibility to handle “City Hall” work. Mr. Hung did not remember at which meeting this statement was made by Alexander Strasser and he confirmed that there was nothing in writing stating that the Strasser Group would handle issues under the Development Charges Act. Because this was the first time that Mr. Hung was asserting that Mr. Strasser had made such a statement and that this alleged statement was not put to Mr. Strasser during his cross-examination, I allowed reply evidence by Mr. Strasser on this narrow point. Mr. Strasser denied making such a statement in connection with the memoranda prepared by Goodman Phillips & Vineberg.

[37] I do not accept Mr. Hung’s evidence on this point. As mentioned above, the memoranda do not deal with the issue of the need to apply for credit recognition and, at the time the letter and the memoranda were sent by Alexander Strasser on April 22, 1996, the Regulation had not been adopted. There was nothing to “look after” at that time. Further, the parties usually confirmed action items in writing, and they followed up. None of this was done in relation to these memoranda.

[38] I find that, as stated in Alexander Strasser’s cover letter, the memoranda were sent to the Hung Group for their information only. This was an exchange of information between two partners who jointly owned development lands regarding proposed amendments to relevant legislation.

[39] On December 17, 1996, Alexander Strasser sent another letter to Daniel Hung in which he advised that Richmond Hill had “stopped all development applications until February 1997 while they review the new Development Charge Act proposed by the Province.” Mr. Strasser also invited Mr. Hung to attend a meeting to finalize all required reports and prepare for their application for the following year. It does not appear that the parties took any steps at that time to investigate whether the DC Act could have an impact on the Project Lands regarding any obligation to pay development charges.

8. Development work between 1996 and 2005

[40] Over the years, the parties jointly attended numerous meetings with planners, architects and other consultants to discuss and plan the development of the Project Lands.

[41] The description of the responsibilities of each Group in the Development Agreement was not watertight, and it was even blurrier in practice given their joint ownership of the Project Lands through the Limited Partnership, their involvement in Campus 2000, their joint participation in meetings and the fact that they were keeping each other informed of each other’s activities. At times, this overlap was a source of tension between the parties, as illustrated by a letter dated April 9, 2003 from Henry Hung to Alexander Strasser, in which Mr. Hung seems to convey the message that Shiu Pong was the one in charge. The letter reads, in part:

We have reviewed your letter of April 1, 2003, and the contractual arrangements between us as joint venturers with respect to the Campus 2000 Project, both the formal agreements and informal understandings under which work to date has been performed. We want to reply to your letter in the order of the issues raised by you:

1. Under the terms of our joint venture arrangement, Shiu Pong Developments Limited is the project developer and is entitled to a fee equal to 1.5% of the Total Project Costs as defined in the Development Agreement. Pursuant to Section 3.2 of the Development Agreement, S. & A. Strasser Limited was given the responsibility of making rezoning and/or official plan amendment applications for the Project and is to be compensated for such services as approved by the joint venture. Although the services of S. & A. Strasser Limited for Block N did not include obtaining any rezoning or official plan amendments, consistent with our past informal understanding, S. & A. Strasser Limited has been paid for municipal work performed at a rate of $2,000 per month. For the record, a total of $106,000 has been paid to your company over the years.

With the greatest respect, in relation to Block N, although you had a role in dealing with the municipality, for which you were compensated as noted above, the overall development responsibility for the project was undertaken and completed by Shiu Pong Developments Limited. We insist that Shiu Pong is entitled to a fee in accordance with the terms of the Development Agreement.

[42] Ultimately, between 1996 and 2005, development work was done with respect to Lots 55 and 56, as well as part of Lot 52. No development charges were imposed in connection with this development. However, the development did not involve any changes to the existing zoning or any severance.

[43] In the fall of 1999, i.e. at the time of the deadline to apply for the recognition of a credit under section 17 of the Regulation, Campus 2000 was in the process of developing Lots 55 and 56, and no building permits had been issued by then. In 1998, prior to developing Lots 55 and 56, the Project was still in the planning stage and the parties were discussing various scenarios. There was no active development at that time.

[44] Daniel Hung’s evidence at trial was that the Hung Group asked the Strasser Group whether there were development charges to pay in the context of the development of an office building on Lot 52. The Strasser Group confirmed to the Hung Group and their consultants at the time that there were no development charges to pay for developing the office building.

9. Discussions to split the lands and end the partnership

[45] On March 11, 2005, Henry Hung sent the following e-mail to Alexander Strasser:

Dear Alex,

Understand you are leaving for a trip to China and Asia next week and we wish you a very pleasant trip.

With the favourable OMB decision, we wish to propose the following to you “for discussion” only but please do NOT consider this as an offer of any kind.

Our corporate philosophy is very different from yours.

You are more familiar with industrial developments and want to pursue that vigorously. But, we must admit we lack experience on industrial side and have been reluctant to pursue something that, rightly or wrongly, we feel have [sic] below our acceptable level of yields.

At the same time, we are bullish on residential condo developments and, rightly or wrongly, you are hesitant to pursue residential developments that do not show substantial gains.

Due to the above, our partnership have [sic] been pulling in opposite directions and we feel both sides have differences of opinions on the [sic] how to develop the lands.

Therefore, it might be better if we were to split the lands and you keep the industrial development portions while we keep the residential development portions.

Aside from philosophical differences, we both have been relatively good partners and, if the above was acceptable in principle, we are sure that we could come to an amiable formula to split the lands.

Each side can obtain appraisals from its own sources. Due to our good relationships, we probably do not need to treat those appraisals as binding on either side but merely to form the basis for discussion.

After we come to a conclusion on the values of the residential lands vs. the industrial lands, we can then off-set against each other with the party having the higher value pay the difference to the other party.

There is, of course, the case of who will keep 125 and who will keep 120 East Beaver Creek but that could be ironed out later on.

We can also deal with any legal issues such as land severances later on.

Have a nice trip!! Kindly “sleep” on the above and let’s discuss further upon your return from your trip.

Thanks very much and best regards

Henry

[46] On April 6, 2005, the Strasser Group and the Hung Group had a meeting and started discussing the general concept of each group taking certain portions of the lands. It was agreed in principle that the Strasser Group would take the Industrial Lands and the Hung Group would take the Residential Lands, and that their respective values would be determined by appraisers. The parties also discussed the sale of the Commercial Lands upon which were located one industrial building and one commercial office building and related improvements.

[47] In the following months, the discussions continued between the parties and their respective consultants and lawyers. Among other things, the parties discussed how to separate their interests in a tax-effective manner and how to structure the necessary transactions. The parties also discussed the construction of a new road over the Industrial Lands to ensure that the lands to the rear of the existing office building on Lot 52 would not be landlocked. The underlying concept remained the same throughout: the division of lands with an equalization of value.

10. August 23, 2005 internal memorandum prepared by Aird & Berlis

[48] On August 23, 2005, Edmund Smith of Aird & Berlis (“A&B”), the Hung Group’s lawyer, sent the following memorandum to Ernie Victor, a municipal law clerk at Aird & Berlis (“A&B Memorandum”):

The property comprising the Campus 2000 joint venture development consists of Lots 51, 52, 53, 54, 55 and 56, Plan 65M-2104, Richmond Hill, Ontario. The parties to the joint venture, Hung Family Trust (our client) and S & A Strasser Limited, wish to divide up their ownership of the property and dissolve the joint venture.

At issue is the proper valuation of their respective parcels of land which they intend to acquire. This land was previously all zoned for commercial and industrial uses and we are advised that prior to 1995 Strasser paid all development levies associated with the property. Attached is an OMB decision whereby Parts of Lots 53 and 54, Plan 65M-2104, were rezoned to permit residential use.

The Hungs wish to know whether, upon developing residential uses on this portion of the property, they will get credit for the levies prepaid by Strasser. In addition, in order to value the remaining land which will remain commercial and industrial in use, we wish to know whether the prepayment of levies will still be a credit to future development on this portion of the lands as well.

Would you please research this issue with the Town of Richmond Hill and determine their response. [Emphasis added.]

[49] Daniel Hung’s evidence at trial was that the Hung Group did not discuss the issues raised in the A&B Memorandum with Messrs. Smith and/or Victor, and that Messrs. Smith and Victor’s internal communications were not within his knowledge.

[50] A&B conducted a search of its files, but it did not locate any documents related to the A&B Memorandum, aside from the memorandum itself. Mr. Victor passed away in November 2007, and Mr. Smith retired from the active practice of law in 2011.

[51] It is of note that in addition to acting for the Hung Group, Mr. Smith also acted as the lawyer for Campus 2000, i.e. the “joint venture” between the Hung Group and the Strasser Group.

[52] While Mr. Hung may not remember such discussions more than 15 years later, the A&B Memorandum strongly suggests that the Hung Group had discussions with Mr. Smith in the summer of 2015 about the prepaid lot levies for the Project Lands and the impact of such prepaid levies on the value of the lands. At a minimum, the A&B Memorandum shows that the Hung Group’s lawyer was aware of these issues and was of the view that the prepayment of levies was relevant for the purpose of a valuation of the lands.

11. Restructuring Agreement

[53] As of August 1, 2006, the Hung Group, the Strasser Group and Campus 2000 entered into a Restructuring Agreement with respect to the Limited Partnership (“Restructuring Agreement”). The objective of the Restructuring Agreement is set out in section 2 as follows:

The Hung Trust and the Strasser Group acknowledge that it is their desire to amend and restructure the Limited Partnership and the Campus 2000 development which has been undertaken by the Limited Partnership to date as provided in this Agreement. The objective of the Hung Trust and the Strasser Group is to sell the Commercial Lands on the most favourable terms that can be achieved under current market conditions, and, subject to the terms of this Agreement, to transfer the Industrial Lands to the Strasser Group and the Residential Lands to the Hung Trust so that the Industrial Lands and the Residential Lands may be developed independently by the Strasser Group and the Hung Trust, respectively. The purpose of this Agreement is to set forth the basis upon which the parties have agreed to amend the Limited Partnership Agreement and their business relationship to achieve the foregoing objectives. In the event that there is any disagreement between the parties relating to the proper and effective manner in which to carry out the purpose and intent of this Agreement, the matter may be submitted to binding arbitration pursuant to Section 12 hereof.

[54] The Restructuring Agreement provides that the Hung Trust and the Strasser Group were to each retain a reputable property valuator who would provide a valuation of both the Industrial Lands and the Residential Lands and complete such valuation process in accordance with Schedule “C” to the Restructuring Agreement. The Restructuring Agreement further provides in section 6 that it was the intention of the parties that the value at which the Industrial Lands and the Residential Lands were transferred to each group was to be equal. In the event that the valuations of the Industrial Lands and the Residential Lands were not equal, an adjustment was to be made by way of an “equalization payment” representing one-half of the amount by which the value of one set of lands exceeded the value of the other set of lands.

[55] The memorandum attached as Schedule “C” to the Restructuring Agreement states that the valuators retained by the Hung Trust and the Strasser Group would: (a) deal at arms’ length with Hung Trust and Strasser Group; (b) not discuss or have discussed the matter with either Hung Trust or Strasser Group; (c) be given specific instructions in writing by the solicitors for Hung Trust and Strasser Group, which instructions were to have been approved by Hung Trust and Strasser Group, acting reasonably, as to the method of valuation to be provided; and (d) value the Residential Lands and the Industrial Lands separately. With respect to the Industrial Lands, the valuators were to provide valuations of the Industrial Lands with a road and without a road. The process that was agreed upon after the valuations were completed is set out as follows in the memorandum:

If the two valuations obtained for each of the Residential Lands, the industrial lands with the Road and the industrial lands without the Road, respectively, do not vary by more than ten per cent (10%) of the amount of the lowest valuation, the target value (the “Target Value”) for the undisputed type of lands shall be the average of the two valuations applicable to the type of lands. If the valuations for any of the type of lands (the “Disputed Lands”) vary by more than ten per cent (10%) of the amount of the lowest valuation, the two valuators shall select a third valuator who will value the Disputed Lands (separately, if applicable). The third valuator shall (i) deal at arms’ length with Hung Trust and Strasser Group, (ii) not discuss or have discussed this matter with either Hung Trust or Strasser Group, and (iii) not receive a copy of the valuations of the two valuators. The two valuators will only provide the third valuator with a copy of the specific instructions regarding the valuations the two valuators initially received. The Target Value for the Disputed Lands shall be the median of the three valuations for the Disputed Lands. For example, if the three (3) valuations are $10,000,000, $16,000,000 and $20,000,000, the Target Value for the Disputed Lands shall be $16,000,000.

The Target Values so determined may not be reduced. If Hung Trust and Strasser Group agree upon the Target Values, they shall proceed with the reorganization transaction on that basis, subject to adjustment as required to balance the amounts received by each of the parties in cash or by land. If Hung Trust or Strasser Group (the “Disputing Party”) believe that the Target Value determined for the industrial lands or the residential lands, respectively (the “Questioned Lands”), is too low, the Disputing Party may, on any date (the “Notice Date”) within sixty (60) days following the date of determination of the Target Value, require the Limited Partnership to enter into a sixty (60) day (the “Listing Period”) listing agreement (the “Listing”) for the sale of the Questioned Lands with any one of the following real estate brokers […]

12. Joint instructions for the appraisers prepared by the lawyer for the parties

[56] Pursuant to the Restructuring Agreement, the parties selected two appraisers. The appraiser selected by the Hung Group was Altus Helyar, and the appraiser selected by the Strasser Group was Wagner, Andrews & Kovacs Ltd. (“WAK”).

[57] The joint instructions to the appraisers were contained in a memorandum dated November 23, 2006 from A&B, the lawyers for the Hung Group, and Speigel Nichols Fox LLP (“SNF”), the lawyers for the Strasser Group (“Joint Instructions Memorandum”). The final version of the Joint Instructions Memorandum provides, in part:

The Residential Lands have an area of 9.322 acres and the Industrial Lands have an area of 33.078 acres. All development charges (not including school levies) based on the MC1 use [high performance commercial industrial] have been paid. It is anticipated that additional levies may be required to be paid in respect of the Residential Lands [sic]

It is proposed that a new road (the “Road”) will be constructed to bisect the Industrial Lands as shown on the attached site plan. The owners have determined that the estimated cost of construction of the Road will be $1,500,000.00 exclusive of GST (the “Estimated Road Cost”) and that the Road will occupy 3.36 acres (the “Acreage”) which will be excluded from the area for development of the Industrial Lands.

You are requested to provide to us an appraisal of each of the Residential Lands and the Industrial Lands based upon the following principles:

(a) The use of the Residential Lands and the Industrial Lands for residential purposes and high performance commercial industrial purposes, respectively, as currently zoned shall be deemed to be their highest and best use. (b) The appraised value is to be based upon the direct comparison approach to value. (c) The effective date of the appraisals shall be November 1, 2006. (d) With respect to the determination of value of the Industrial Lands, we request that you provide us with two valuations: (i) One valuation which will include the value of the Industrial Lands on the assumption that the Road has been constructed and paid for; and (ii) The other valuation based on the assumption that the Road has not been constructed and that a potential purchaser may be required to construct the Road to effectively use the Industrial Lands at the Estimated Road Cost and dedicate to the Road the Acreage determined as aforesaid. (e) Each appraisal must be in writing with an explanation of the basis for the conclusion of value contained in it. (f) The owners have retained another valuation firm to undertake an identical appraisal assignment. You are requested to prepare an appraisal independent of any other firm that you may encounter undertaking this work and you are not to divulge any information to any other appraiser nor have any communication with any other appraiser or the owners or their representatives other than our firms, jointly. (g) Any communication or questions with respect to this assignment must be made to each of our firms, jointly, and we will jointly provide you with written instructions in response to any enquiry that you may have. (h) You are not to disclose any of your preliminary opinions to either of our firms or the owners or their representatives until the appraisal is delivered. (i) You will be provided with full access to all project documentation and information relating to the Lands. (j) You are requested to present your appraisal by January 31, 2007. [Emphasis added.]

[58] The Joint Instructions Memorandum was prepared by A&B and SNF. A number of drafts and blacklined versions were circulated. The third version of the memorandum is the first version to mention levies/development charges. It included the following subparagraph in a list of information that would be enclosed with the memorandum: “details of prepayment of levies for the Lands [Irving – please provide].” The reference to “Irving” is a reference to Irving Fox of SNF.

[59] This subparagraph was deleted in version 4 of the Joint Instructions Memorandum and the sentence on development charges that is in bold/underlined in the final version of the Joint Instructions Memorandum reproduced above was inserted. The evidence of both sides is that the wording of the Joint Instructions Memorandum was agreed upon between the lawyers.

[60] Mr. Strasser’s evidence at trial was that he had a discussion with Mr. Fox about the prepayment of levies at the time the Joint Instructions Memorandum was being prepared.

13. Initial Appraisal Reports

[61] The appraisal report prepared by WAK does not discuss the issue of development charges in any detail, but it contains the following paragraph:

Our valuation does not discount the indicated acreage rates for time or risk, and assumes that all lands are zoned, serviced, have all development charges paid (not including school levies), and are therefore readily developable as of the effective date of valuation.

[62] WAK’s market value estimate of the Industrial Lands was $27,489,150 with a road, and $25,462,400 without a road.

[63] Altus Helyar’s appraisal report valued the Industrial Lands at $22.3 million without a road, and at $16.8 million with a road. The latter value was arrived at after deducting $3.2 million for “Town-wide and Regional DC’s [development charges]”. The report includes the following paragraph in its Executive Summary:

Development Charges

Our interpretation of the impact of development charges that may be prepaid under Scenario One [without a road] and payable under Scenario Two [with a road] is based on discussions with the Town of Richmond Hill and the Region of York. In particular, the development charges that may be required by the Town and Region if the lands are to be rezoned or severed in Scenario Two have a substantial impact on the market value according to municipal officials. We strongly recommend a review of any applicable agreements between the property owner and the municipalities and any other relevant documentation by a lawyer to confirm the municipal staff’s interpretation.

[64] The following paragraphs are also included in the body of Altus Helyar’s report:

Development Charges

We have conducted detailed discussions with the Town of Richmond Hill and Region of York regarding development charges relating to the subject lands. According to the Town and Region, town-wide and regional development charges have been paid. Therefore, these charges are not owing for future development on the property unless a rezoning or severance is pursued. Full development charges will be payable for the Residential Lands given their recent change in use, according to the Town and Region.

Direct Comparison Approach – Industrial Lands

For each of the properties, we have confirmed that Town-wide and Regional development charges were paid at the time of registration of the subdivision plans or subdivision agreement with the exception of the 1621 Major Mackenzie Drive transaction. Therefore, development charges are not payable at building permit for these cities. However, the Towns of Richmond Hill and Markham and the Region of York each indicated the full development charges are payable in the event of a rezoning or severance of these properties, as well as the Industrial Lands.

Direct Comparison Conclusion – Scenario Two

We have assigned a premium on the market land value under Scenario Two by applying a range of value between $700,000 and $750,000 per acre. However, we have been instructed to deduct the cost to construct the required road and related services based on an estimated total cost of $1,500,000.

Furthermore, the Town of Richmond Hill and Region of York require that full development charges be paid in the event of a rezoning or severance. Since Scenario Two would require at least severances to allow for a new road and lotting, we have concluded that a downward adjustment to the market value estimate is necessary. [Emphasis added.]

[65] Despite the statements in the Altus Helyar report, none of the parties or their lawyers looked into the issue of development charges at the time.

14. Metrix’s Appraisal Report

[66] Given that the conclusions of the two appraisers retained by the parties were significantly different with respect to values, a third appraiser, Metrix Realty Group (“Metrix”), was retained in accordance with the Restructuring Agreement. It was agreed that Metrix would not receive a copy of the reports of the other appraisers. The Joint Instructions Memorandum, with some minor changes, was provided to Metrix.

[67] On May 3, 2007, Gus Dal Colle of Metrix sent an e-mail to A&B and SNF asking for clarifications on a few points. The first point set out in his e-mail was the following:

I understand that the Industrial Lands are to be valued under two separate scenarios. I also understand that all development charges (except school levies) have been paid, and we have confirmed same with the Town. There is some concern at the Town level that if a plan of subdivision and severance is proposed as a result of the Road that it could trigger development charges? I was under the impression and have made the assumption that all development charges are paid (except school levies), regardless of the scenario. [Emphasis in the original.]

[68] The response provided to Metrix by A&B and SNF on this point was as follows:

If there is a possibility that any additional development charges may be payable as a result of the development (by plan of subdivision, severance or otherwise) of the Industrial Lands, you should not assume that those development charges are paid.

[69] This response was sent by Irving Fox of SNF, after consultation with A&B.

[70] Metrix provided its report to the parties’ solicitors on May 18, 2007. It estimated the market value of the Industrial Lands to be $19.9 million without a road, and $21.4 million with a road.

[71] The section of the appraisal report setting out the appraisal terms of reference and the instructions that were provided to Metrix includes the following: “Development charges (excluding school levies) for the Industrial Lands have been paid however development charges for the Residential Lands have not been paid.” The report does not refer to the further instructions provided in response to Mr. Dal Colle’s May 3, 2007 e-mail.

[72] Metrix indicated in its appraisal report that the fact that development charges had been paid for the Industrial Lands constituted a strength for the site. It identified development charges as a market variable that was most likely to impact land value and stated the following in this regard:

We understand that development charges are pre-paid under the subdivision agreement and thus we have attempted to illustrate the potential benefit to the end user. It is typically the end user that pays development charges at the building permit stage, and not the developer. The benefit of having development charges paid is significant since most suburban business parks do not share a similar advantage. We have attempted to illustrate the extent of the potential benefit based on a typical building coverage ratio of 40% to 60% for a prestige employment function.

The extent of the benefit is measured from approximately $86,000 to $129,000 per acre based on a coverage ratio of 40% to 60%. Having the benefit of pre-paid development charges is thus likely to result in a premium compared to development blocks without a similar advantage. The extent of the premium could be as high as the actual dollar amount saved or some discount thereof. In conclusion, the market is likely to recognize the advantage and a premium will likely be applied.

[73] The report further stated:

In regards to the development charges the advantage or benefit is anticipated to remain regardless of the Scenario. The Planning Act permits municipalities to pass by-laws to exempt any or all lots or blocks within registered plans of subdivision from part lot control, so further subdivision of individual lots or blocks can take place. Through Part Lot Control Exemption the development blocks can thus be altered to accommodate smaller lots without draft plan of subdivision approval and without invoking development charges.

[74] Ultimately, the Strasser Group chose the option of the Industrial Lands with a road, with a Target Value of $21.4 million.

[75] Daniel Hung’s evidence at trial was that at the time the Metrix report was prepared, it was his and his brother’s understanding that the development charges for the Industrial Lands had been paid, and that they would not have to be paid in the future.

15. Further agreements entered into to implement the terms of the Restructuring Agreement

[76] The parties entered into a number of transactions to implement the terms of the Restructuring Agreement. They eventually agreed to vary the terms of the Restructuring Agreement and entered into a Restructuring Amending Agreement made as of October 10, 2008 (“Restructuring Amending Agreement”) and an Amended and Restated Limited Partnership Agreement also made as of October 10, 2008 (“Amended and Restated Limited Partnership Agreement”).

[77] In the Restructuring Amending Agreement, the parties acknowledged that they had completed the valuation procedure set out in Schedule “C” to the Restructuring Agreement with respect to the Industrial Lands and that “the value attributed to the Industrial Lands has been settled at Twenty-One Million, Four Hundred Thousand Dollars ($21,400,000.00) which has been selected by the Strasser Group as the Road Industrial Value”. One of the agreed-upon amendments was the following regarding the value of the Residential Lands and the adjustment payment to be made:

The value of the Residential Lands shall be determined at Eighteen Million, Four Hundred and Eighty Thousand, Two Hundred and Twenty-One Dollars ($18,480,221.00). The adjustment payment (the “Adjustment Payment”) referred to in paragraph 6 of the Restructuring Agreement shall be One Million, Four Hundred and Fifty-Nine Thousand, Eight Hundred and Eighty-Nine Dollars and Fifty Cents ($1,459,889.50) and shall be payable in accordance with the terms of the Amended And Restated Limited Partnership Agreement;

[78] The Amended and Restated Limited Partnership Agreement incorporates the values attributed to the Industrial Lands and the Residential Lands set out in the Restructuring Amending Agreement (i.e., $21,400,000.00 for the Industrial Lands, and $18,480,221.00 for the Residential Lands).

[79] On October 28, 2009, the parties entered into an Acknowledgement Agreement in which, among other things, they agreed to reduce the value of the Industrial Lands from $21,400,000 to $21,193,621 because the acreage of the Industrial Lands indicated on the surveyor’s certificate was slightly less than the acreage used in the appraisals.

[80] By an Assignment and Assumption Agreement dated as of January 1, 2011, the Hung Group assigned all their interests in the Limited Partnership to the Strasser Group, and both Henry Hung and Daniel Hung agreed to resign as directors of the general partner, Campus 2000. Daniel Hung also resigned as Vice-President of Campus 2000 on January 1, 2011.

16. Credit application and OMB Decision

[81] In or around April 2010, S&A became aware that Richmond Hill was considering imposing new development charges in respect of the Industrial Lands pursuant to its 2009 development charges by-law, i.e. By-law 59-09. S&A wrote to the town solicitor seeking clarification and, eventually, made an application on October 13, 2010 for a credit for all development charges previously paid pursuant to the 1980 Lot Levy Agreement. The application also requested the recognition of a credit for the full amount of any development charges payable under Richmond Hill’s development charge by-law. S&A relied on an alleged conflict between Richmond Hill’s By-law 59-09 and the 1980 Lot Levy Agreement. On February 10, 2011, Richmond Hill advised S&A that its credit application was refused on the basis that it had not been made before the deadline set out in the Regulation.

[82] On March 2, 2011, S&A appealed the refusal to the Ontario Municipal Board (“OMB”). On August 19, 2011, the OMB released a written decision holding that it did not have the jurisdiction to hear S&A’s appeal. The OMB’s reasons stated, in part:

The Board finds that regardless of whether or not a conflict is known it is the credit that must be applied for. Had the known credit been applied for and granted, any future conflict would clearly favour the agreement. Any clarification with respect to the all-inclusive nature of the credit could also have been resolved as part of the application process as confirmed by the Court in the Mississauga case. In the case at hand, if that had been done, there would have been no need for this motion.

The Applicant’s reliance on exemption clauses in earlier Development Charges By-laws, in retrospect, was not prudent. A careful reading of Section 17 [of the Regulation] should have resulted in an application being made for recognition of any existing credit. That application process could have included the resolution of any clarifications necessary to avoid future conflicts.

There was a clear intent to sunset the old subdivision agreement credits as the Development Charges regime advanced in Ontario. The Board can find nothing in the reading of Section 17 suggesting any remaining open-ended right of appeal to resolve conflicts. That should have been done as part of the credit recognition application process prior to October 31, 1999.

In conclusion, the motion by the Applicant is denied. There is no valid appeal before the Board and its files will now be closed in that regard.

17. November 14, 2011 letter from SNF to A&B

[83] On November 14, 2011, the Strasser Group’s solicitor sent the following letter to the Hung Group’s solicitor:

I am writing to advise you regarding a decision (the “Decision”) made by the Ontario Municipal Board (the “OMB”) that has a material effect on the undeveloped lands (the “Industrial Lands”) held by the 1162185 Limited Partnership. I enclose a copy of the Decision.

Alex Strasser, 2076204 Ontario Limited, and S & A Developments Limited (collectively, the “Strasser Group”), The Hung Richmond Hill Trust (the “Hung Trust”) and Campus 2000 Developments Inc. (“Campus 2000”) entered into an agreement (the “Restructuring Agreement”) as of August 1, 2006. The Restructuring Agreement provided for an amendment to the pre-existing partnership relationship whereby the Strasser Group would have the benefit of the Industrial Lands and the Hung Trust would have the benefit of the Residential Lands (as defined [sic] the Restructuring Agreement). The Restructuring Agreement contemplated that both the Industrial Lands and Residential Lands would be appraised and that appropriate adjustments would be made between the Hung Trust and the Strasser Group so that the values of each of their interests would be the same.

Pursuant to the Restructuring Agreement, the parties had the Industrial Lands and the Residential Lands appraised. The Industrial Lands were appraised on the basis that no development charges would ever be applicable to those lands. It was the understanding of all parties that all steps necessary to exempt the Industrial Lands from development charges had been taken and that there was no possibility that development charges could be imposed in the future.

After the properties were appraised and based upon those appraisals, the Hung Trust, the Strasser Group and Campus 2000 entered into an agreement (the “Restructuring Amending Agreement”) made as of October 10, 2008. The Restructuring Amending Agreement indicated that the parties valued the Industrial Lands at $21,400,000. The Restructuring Amending Agreement contemplated that adjustments would be made between the parties to reflect that value. That value was also used for the purposes of another agreement (the “Amended and Restated Limited Partnership Agreement”) entered into as of October 10, 2008, by Campus 2000, the Strasser Group, the Hung Trust, Shiu Pong Enterprises (Canada) Limited, Shiu Pong Developments Limited and Shiu Pong Construction Limited. The partnership was restructured pursuant to those two agreements in a manner [sic] contemplated that development charges would not be applicable to the Industrial Lands.

The result of the Decision is that the Industrial Lands are subject to development charges. I have been advised by my clients that the amount of the applicable development charges will be millions of dollars. In the Decision, the OMB indicated that the exposure to development charges could have been eliminated had certain steps been taken between September 27, 1999 and October 31. 1999. At that time, Shiu Pong Developments Limited, a Hung entity, was responsible for the management of the Limited Partnership and the development of the Industrial Lands. My clients are contemplating challenging the Decision. However, at this point in time, they have received not [sic] assurances that they will likely be successful.

In view of the foregoing, it is my clients’ position that the arrangements described above were made under a mutual mistake of fact and that your clients have been negligent by failing to take steps between September 27, 1999 and October 31, 1999 in respect of development charges. They are requesting that your clients make suitable adjustments to reflect the common intention of the parties that the Hungs and the Strasser Group receive equal value.

Please contact me once you have had an opportunity to obtain instructions from your clients.

[84] The Statement of Claim in this action was issued less than two weeks later, on November 23, 2011.

18. Application in the Superior Court of Justice

[85] On December 9, 2011, the Limited Partnership brought an Application in this Court for a declaration that the Industrial Lands were exempt from the payment of development charges imposed pursuant to Richmond Hill’s development charges by-law and any future development charges by-law enacted by Richmond Hill. The Application was heard by Justice Goldstein on August 13, 2012.

[86] Justice Goldstein released his decision dismissing the Application on November 9, 2012. He agreed with and adopted the OMB’s interpretation of the Regulation and found that the Limited Partnership was required to apply for a credit for development charges payable pursuant to the 1980 Lot Levy Agreement prior to October 31, 1999. Justice Goldstein also concluded that the Application should be dismissed based on issue estoppel which prevented relitigation of the issues decided by the OMB.

19. Evidence of Paul Stewart

[87] In addition to Alexander Strasser and Daniel Hung, Mr. Paul Stewart testified at trial. Mr. Stewart is one of the signatories of Metrix’s appraisal report. He was retained by the Plaintiffs as an expert in appraisal of real property for the purpose of this trial. He was asked to provide revised calculations with respect to the Industrial Lands, based on the analysis and procedures previously used by Metrix, that do not assume that development charges had been prepaid (i.e. revised calculations that take into account that development charges would have to be paid in the usual course).

[88] In Metrix’s appraisal report, the Industrial Lands were estimated to have a value of $800,000 per acre. This per acre value included a “development levy advantage”. Mr. Stewart’s evidence at trial was that had Metrix not been instructed to ignore development levies, they would have concluded that the value estimate was $700,000 per acre, and they would have estimated the market value of the Industrial Lands to be $17,248,519 million without a road, and $18,561,033 with a road.

[89] In performing his revised calculations, Mr. Stewart only used Metrix’s original report as Metrix’s original files and source materials had been destroyed given the time elapsed.

[90] Ultimately, the road that was contemplated in the appraisal reports was never built. The Strasser Group came to the view that it would be uneconomical to do so as more than $10 million would be payable in development charges.

B. POSITIONS OF THE PARTIES

1. Position of the Plaintiffs/Strasser Group

[91] The Plaintiffs seek rectification of the Restructuring Amending Agreement and the Amended and Restated Limited Partnership Agreement to correct the value of the Industrial Lands inserted in these instruments, as well as the value of the equalization payment. They also seek compensation in the amount of $1,405,794.12 because the equalization payment that they made to the Hung Group was too high as a result of the parties’ mistake. Finally, the Plaintiffs claim a further $107,988.35, which represent half the amount of the Strasser Group’s legal fees in connection with the litigation before the OMB and the Superior Court of Justice relating to the imposition of development charges by Richmond Hill against the Industrial Lands.

[92] The Plaintiffs rely on three main grounds for the relief that they are seeking: equitable common mistake, rectification and general equitable principles.

[93] According to the Plaintiffs, both sides proceeded with the appraisals and the subsequent split under the common misapprehension that the Industrial Lands would be exempt from any future development charges. The result was that the Project Lands were not divided on an equal and equitable basis because they were divided on the basis of a value for the Industrial Lands that was almost $3 million too high.

[94] The Plaintiffs submit that the Strasser Group was not responsible for issues related to development charges. They argue that, under the Development Agreement, Shiu Pong was responsible for issues related to development charges, including ensuring the grandfathering of the levies paid under the 1980 Lot Levy Agreement. They point to the April 9, 2003 letter sent by Henry Hung in which Mr. Hung emphasized that Shiu Pong had overall development responsibility for the Project. They also point out the fact that the calculation of Shiu Pong’s development fee was based, in part, on amounts payable in respect of development charges.

[95] In the alternative, the Plaintiffs state that the Limited Partnership, i.e. the owner of the Project Lands and the only other party to the Development Agreement with Shiu Pong, was responsible for these issues. They point out that the Strasser Group’s responsibility under the Development Agreement for “all rezoning and official plan amendments required to implement the Project” was “for and on behalf of the Owner”, i.e. the Limited Partnership. The Hung Group had a 50% interest in the Limited Partnership at the time, as did the Strasser Group. The Plaintiffs state that the Strasser Group did not become solely responsible for keeping abreast of issues relating to development charges as a result of the limited role that they played in the development of the Project.

[96] Similarly, the Plaintiffs submit that any risk of error relating to development charges was either mainly for the Hung Group to shoulder or, alternatively, was intended to be shouldered equally by the Hung Group and the Strasser Group as 50-50 owners. They also argue that the terms of the Restructuring Agreement provide for an equal allocation of risk, i.e. neither party was required to shoulder any more risk than the other and each was equally protected.

[97] The Plaintiffs submit that they cannot be said to be “at fault” merely because their lawyer is the one who first suggested the wording regarding development charges in the Joint Instructions Memorandum. They state that the suggested wording was agreed to by the Hung Group’s lawyer, that all instructions to the appraisers were provided jointly, that a clarification was sent to Metrix regarding development charges, and that the A&B Memorandum shows that Mr. Smith made inquiries of Mr. Victor regarding development charges.

[98] As stated above, the Plaintiffs seek rectification of the Restructuring Amending Agreement and the Amended and Restated Limited Partnership Agreement. They submit that rectification is necessary to correct a mistake in carrying out the settled intentions of the parties and to implement the parties’ true intentions, i.e. the equal division of the Limited Partnership’s property, with an adjustment as required to balance the amounts received by each of the parties by cash or by land. They argue that the correct number that should have been inserted in the two agreements is $18,561,033, i.e. the revised figure provided by Paul Stewart for the value of the Industrial Lands, which simply “backs out” the mistaken assumption that development charges had been prepaid. The Plaintiffs’ position is that the $21,400,000 figure was inserted in the two agreements in issue due to the parties’ mistake, and that the agreements fail to record accurately their prior agreement.

[99] The Plaintiffs also rely more generally on the principle that superior courts have equitable jurisdiction to relieve persons from the effect of their mistakes and to effectuate justice and fulfil the bona fide intention of the parties. They argue that this Court can provide the Plaintiffs with the requested remedies on the basis of this and other general equitable principles, without resorting to the equitable doctrines of common mistake and rectification.

[100] The Plaintiffs’ position is that their claims are not statute-barred. They submit that the limitation period did not start running until January 1, 2011 because, until that date, the implementation of the agreement that resulted in the Plaintiffs’ loss was not complete and, therefore, there was no “claim” within the meaning of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (“Limitations Act”). Since this action was commenced on November 23, 2011, it cannot be said to have been commenced too late. The Plaintiffs also point out that any claim that the Strasser Group may have had against the Hung Group in connection with the separation of their partnership did not become apparent to the Strasser Group and their lawyers until 2011, after they lost their application at the OMB.

[101] In addition, the Plaintiffs argue that commencing a proceeding against the Hung Group was not an appropriate means to remedy their loss or damage (under section 5(1)(a)(iv) of the Limitations Act) until after January 1, 2011, the effective date of the separation of interests of the Strasser Group and the Hung Group and when the parties were no longer partners.

2. Positions of the Defendants/Hung Group

[102] The Defendants’ position is that there was no common mistake. They state that the lawyer for the Strasser Group was, alone, the author of the sentence on development charges in the Joint Instructions Memorandum, and that the Hung Group did not have any knowledge, information or belief as to whether the sentence was correct. The Defendants submit that there was no common understanding in this regard. They simply accepted at face value what the Strasser Group represented to be facts.

[103] The Defendants also argue that the statement regarding development charges in the Joint Instructions Memorandum was correct to the extent that it meant that lot levies were paid by the Strasser Group pursuant to the 1980 Lot Levy Agreement or that no development charges would be payable to Richmond Hill as long as By-Law 144-04 was in force. They state that the statement did not mean that no development charges could or would be payable in the future, and that only the Strasser Group interpreted the statement as precluding the obligation to pay development charges in the future. According to the Defendants, such an interpretation was unjustified.

[104] In the same breath, however, the Defendants argue that the statement regarding development charges in the Joint Instructions Memorandum was incorrect because it did not differentiate between development charges paid or payable to Richmond Hill and development charges paid or payable to York Region. Only Richmond Hill was a party to the 1980 Lot Levy Agreement.

[105] The Defendants state that Metrix’s appraisal report was not based on the assumption that development charges would never be payable in the future. They submit that Metrix provided an opinion of value based on the facts and the state of the law as at the date of valuation, i.e. November 1, 2006. The Defendants’ position is that there is no error in the Metrix report regarding development charges that impacts the valuation.

[106] According to the Defendants, the alleged error or mistake was the error of the Strasser Group in interpreting the law and in erroneously believing that the payment of lot levies pursuant to the 1980 Lot Levy Agreement resulted in development charges not being required to be paid in connection with the Industrial Lands in the future. They point out that both the OMB and Justice Goldstein concluded that the Strasser Group’s interpretation of the law was wrong.

[107] The Defendants submit that the law of mistake cannot be used to place a risk on a party where the contract has allocated the risk to another party. They state that no terms of the Development Agreement imposed on the Hung Group the obligation to deal with development charges in any way, and that there is no evidence that the Hung Group agreed to be responsible for development charges issues. Their position is that there was neither an express nor an implied contractual obligation of the Hung Group to monitor the law regarding development charges or to apply for a credit for development charges previously paid for the Project Lands. The Defendants argue that the Strasser Group was responsible for zoning and “City Hall work” and that such responsibilities necessarily included dealing with any and all issues concerning development charges. They further argue that the Strasser Group should have applied for a credit under the DC Act, and that its failure to do so is not the fault of the Hung Group. The Defendants state that the Strasser Group knew or ought to have known that an application for a credit for lot levies had to be made within the strict timelines set out in section 17 of the Regulation.

[108] The Defendants submit that there is no justification for rectification. They state that there was no prior oral agreement between the parties regarding development charges that was not correctly reduced to writing. They note that the only agreement that governs the issues related to the appraisals and the process for determining the value of the Industrial Lands is the memorandum attached as Schedule “C” to the Restructuring Agreement. The Strasser Group does not allege that there was any breach of the Restructuring Agreement or any failure to comply with Schedule “C”. The parties agreed in writing to a process to deal with the appraisals, and they did not agree to change that process if any appraisal was too high. The Defendants argue that the Strasser Group is estopped from challenging a process to which they agreed.

[109] Further, the Defendants submit that it cannot be established that the parties had a common continuing intention that the Industrial Lands were valued at $18,561,033 as at November 1, 2006, instead of $21,400,000. They state that they never agreed on the figure of $18,561,033 as the value of the Industrial Lands as at November 1, 2006, and point out that they heard of this figure for the first time when they received Paul Stewart’s expert report in June 2016.

[110] The Defendants also submit that rectification for unilateral mistake is not available in this case because the necessary preconditions are not met.

[111] The Defendants’ view is that there is nothing unjust about the situation in which the Strasser Group finds itself. They state that the Hung Group and the Strasser Group only agreed to value the Industrial Lands as at November 1, 2006, based on the state of the law at that point in time, and no development charges were payable to Richmond Hill at that time. They argue that the Hung Group never agreed that no development charges would be payable if, at some point in the future, the law changed, nor did they agree to re-appraise the Industrial Lands and renegotiate the Restructuring Agreement if, at some future point, the law changed and development charges became payable. The Defendants submit that an obligation to guarantee the value of the Industrial Lands for some unspecified period of time should not be imposed on the Hung Group.

[112] The Defendants also submit that they were not unjustly enriched. The Hung Group received from the Strasser Group an approved amount of money after an agreed-upon complicated valuation process that had been negotiated and implemented by sophisticated parties and their lawyers.

[113] Finally, the Defendants’ position is that the Plaintiffs’ claims are statute-barred. They submit that the Strasser Group or a reasonable person with the abilities and in the circumstances of the Strasser Group first ought to have known of the errors in the Restructuring Amending Agreement and the Amended and Restated Limited Partnership Agreement as of the date that these agreements were made in October 2008. They also submit that the Strasser Group or a reasonable person with the abilities and in the circumstances of the Strasser Group first ought to have known of any unjust enrichment by the same date. The Defendants further argue that the Strasser Group knew as of October 31, 1999 that there had been no application for the recognition of a credit towards development charges in accordance with section 17 of the Regulation.

C. DISCUSSION

[114] I discuss below the three main legal grounds advanced by the Plaintiffs: equitable common mistake, rectification and general equitable principles. I also address the factual issue of who was responsible to apply for the recognition of a credit under section 17 of the Regulation. But first, I deal with the preliminary issue of whether this action is statute-barred.

[115] As set out below, my view is that, in order to be successful in this case, the Plaintiffs need to meet the test for rectification, which is the true remedy that they are seeking. Accordingly, I will discuss the issue of the limitation period in the context of the Plaintiffs’ claim for rectification.

1. Limitation period

[116] The Limitations Act applies to equitable relief. Rectification is a “claim” within the meaning of the Limitations Act, i.e. “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission” (section 1). See Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202 at para. 26 (“Alguire”).

[117] Section 5(1) of the Limitations Act reads:

5 (1) A claim is discovered on the earlier of, (a) the day on which the person with the claim first knew, (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or damage was caused by or contributed to by an act or omission, (iii) that the act or omission was that of the person against whom the claim is made, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and (b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[118] I disagree with the Defendants’ position that the limitation period in this case started running at the time of the execution of the agreements that are alleged to contain mistakes. In my view, this does not make any sense. If the parties had known about the mistakes at the time of the execution of the agreements, they would have raised the issue at that time.

[119] The Defendants rely on the objective/reasonable person part of the test in section 5(1)(b) in support of their position. However, when applying this part of the test in a rectification case, it must be acknowledged that most cases of mistakes involve a degree of carelessness on the part of the parties and due diligence is not a condition precedent to rectification: see Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 at paras. 61-66. In my view, section 5(1)(b) of the Limitations Act should not be applied in a way that would introduce through the backdoor a due diligence requirement to a claim of rectification.

[120] In Alguire, the Court of Appeal considered the issue of when the limitation period starts to run with respect to a rectification claim. It did not find that the limitation period started to run at the time the mistake was made, nor did it find that the limitation period started to run at the time the mistake was discovered. The Court of Appeal stated the following:

[30] The foregoing leads to the critical issue of when the limitation period for the rectification claim began to run. A claim is not discovered until a party knows, or reasonably ought to have known, that injury, loss, or damage caused or contributed to by an act or omission by the person against whom the claim is made has occurred: Limitations Act, ss. 5(1)(a)(i)-(iii) and 5(2). In this case, Manulife’s internal discovery of the error in the Policy occurred in 2007. Manulife, however, did not seek to rectify the Policy until after Mr. Alguire filed his application in 2012. The question thus arises as to when the injury, loss, or damage for the rectification claim occurred.

[31] To answer this question regard must be had to the grounds asserted for rectification. In the present case, the trial judge determined that rectification was appropriate to remedy a common mistake. On the evidence accepted by the trial judge that the mistake was common, when Manulife discovered the error in 2007, it did not know that Mr. Alguire would seek to resile from the parties’ common understanding that the paid-up values were per $5,000 of the face amount coverage, not per $1,000 as mistakenly indicated in the Policy. In other words, until Mr. Alguire instituted his claim and sought to change what the parties had actually agreed to, he had not committed an act or omission causing or contributing to Manulife’s injury, loss, or damage for purposes of the rectification claim.

[32] As Manulife only knew that injury, loss, or damage occurred when Mr. Alguire sought a declaration that the erroneous paid-up values were correct, the claim for rectification was not made after the expiry of the limitation period and is not statute-barred.

[121] In this case, the Strasser Group discovered the possibility of a mistake regarding development charges in April 2010 in the context of an exchange of e-mails with Richmond Hill. At the time, Alexander Strasser wished to ask a municipal lawyer to review the issue and argued that Campus 2000 should be responsible to pay for the associated legal fees. Henry Hung disagreed and took the position that this was a Strasser Group issue, not a Campus 2000 issue. The Strasser Group then took steps to clarify Richmond Hill’s position and applied for the recognition of a credit for development charges in October 2010. That application was refused by Richmond Hill in February 2011. In March 2011, the Strasser Group appealed the refusal to the OMB who ruled on the issue on August 19, 2011. On November 14, 2011, the Strasser Group’s solicitor sent a letter to the Hung Group’s solicitor to advise them of the OMB’s decision and to request that adjustments be made “to reflect the common intention of the parties that the Hungs and the Strasser Group receive equal value.” No resolution was achieved, and the action was commenced on November 23, 2011.

[122] Applying the reasoning of the Court of Appeal in Alguire, the earliest possible date on which the Hung Group could be said to have committed an act or omission causing or contributing to the Strasser Group’s injury, loss, or damage for purposes of the rectification claim is in April 2010, when Henry Hung took the position that the issue of development charges raised by Richmond Hill was an issue for the Strasser Group only, and not Campus 2000. Before that time, the Strasser Group did not know, and a reasonable person in its circumstances could not have known, that the Hung Group would decline to make any adjustments to take into account the required payment of development charges in connection with the development of the Industrial Lands. In my view, a more appropriate starting point for the limitation period would be in 2011, when the issues surrounding development charges and the mistaken assumptions made by the parties became clearer (or would have become clearer to a reasonable person with the abilities and in the circumstances of the Strasser Group). However, I do not need to determine a specific starting point for the limitation period as even if one selects the earliest possible date, i.e. April 2010, the action was commenced within the two-year limitation period.

[123] Consequently, this action is not statute-barred.

2. Responsibility to apply for the recognition of a credit under section 17 of the Regulation

[124] Both sides argue that the other side was responsible to apply for the recognition of a credit under section 17 of the Regulation with respect to the development charges paid in relation to the Industrial Lands, and they blame each other for not doing so.

[125] As set out in more detail below, I conclude that the responsibility to apply for the recognition of a credit lay with the owner of the Project Lands, and not with any individual partner or with Shiu Pong as the developer under the Development Agreement.

[126] Under the Development Agreement, the Hung Group, through Shiu Pong, was to:

[…] carry out all necessary services for and on behalf of the Owner to arrange for, coordinate and expedite planning and design, the obtaining of all necessary approvals and permits, financing, management, preparation of plans of subdivision, plans of condominium, administration and arranging of marketing and sale of, and the construction of, residential dwellings and commercial retail and office buildings in the Project in order to complete the Project in Phases in accordance with the Schedule and the Budget in a manner consistent with the philosophy of development, marketing and sale as Approved by the Owner. [Section 3.1 of the Development Agreement]

[127] Pursuant to section 3.2 of the Development Agreement, S & A Strasser Limited was to undertake all rezoning and official plan amendments required to implement the Project, which were not going to be the responsibility of Shiu Pong.

[128] As stated above, the Strasser Group’s position is that, as a result of the provisions of the Development Agreement and Shiu Pong’s role as developer, the Hung Group was “more responsible” for applying for a credit with respect to development charges than the Strasser Group. The Hung Group’s position, in contrast, is that the Strasser Group was responsible for “City Hall work” under section 3.2 of the Development Agreement and, as a result, the Strasser Group was the one who should have applied for the recognition for a credit regarding development charges.

[129] To interpret the Development Agreement, the court 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: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 47.

[130] Under the Development Agreement, the Project was to be developed in phases over several years. Each phase, as well as the sequence of activities and decisions required for the implementation of each phase from inception to completion (i.e. the “Schedule”), needed to be approved by the owner. Given that the Project was to proceed incrementally, with the need for the approval of the owner each step along the way, it cannot be inferred, in my view, that the Development Agreement imposed upon the developer the broad duty to independently monitor any and all legislative changes that could have an impact on the Project Lands. The way in which the Project was structured under the Development Agreement militates against the imposition of broad duties on the developer which were not directly relevant to a specific phase of the Project that was underway.

[131] Further, at the time that the Development Agreement was entered into, the DC Act had not been adopted and applications for the recognition of a credit did not exist. Thus, such applications were not within the contemplation of the parties. In addition, the information necessary to apply for the recognition of a credit was, generally speaking, within the owner’s knowledge, not within the developer’s knowledge.

[132] The fact that Shiu Pong’s development fee was based on the “Total Project Costs”, which included development charges, does not have any impact on this analysis because the parties were anticipating that development charges could be payable in relation to residential development, among other things.

[133] I also see no basis to conclude, based on the Development Agreement, that the responsibility to make an application for the recognition of a credit belonged to S & A Strasser Limited under section 3.2 of the Development Agreement. S & A Strasser Limited is not a party to the Development Agreement. Section 3.2 states that it will undertake certain tasks on behalf of the owner, but there is no agreement outlining the scope of its responsibilities. The letter dated April 9, 2003 from Henry Hung to Alexander Strasser shows that the Hung Group saw itself as being in charge and wished to keep the Strasser Group in check. I find that the work done by the Strasser Group was on behalf of and at the direction of the owner, and there is no evidence that the Strasser Group was instructed by the owner to make an application for the recognition of a credit.

[134] I reject the Hung Group’s submission that the Strasser Group was exclusively responsible for “City Hall work” and that this work encompassed the responsibility to apply for the recognition of a credit. The evidence adduced by the Hung Group on this point was not convincing.

[135] According to Daniel Hung, working with Richmond Hill’s planning department was “City Hall work”, but not working with the building department. He stated that the Hung Group was dealing with Richmond Hill with respect to building permit issues, and not overall planning issues. In his view, lot levies are a planning issue, and the 1980 Lot Levy Agreement was about land development process, not building permit process. However, he acknowledged that: (a) if development charges are payable, they are to be paid before a building permit is issued; and (b) Shiu Pong was dealing directly with Richmond Hill with respect to development charges in the context of the building permit process.

[136] Further, contrary to Daniel Hung’s evidence, the record is clear that the Hung Group was involved in discussions with Richmond Hill’s planning department. For instance, on August 1, 2000, a senior planner of the Town of Richmond Hill sent a letter to Daniel Hung at the “Shiu Pong Group of Companies” referring to a prior telephone conversation regarding preliminary comments on Campus 2000’s Site Plan Application, and setting out the planning department’s preliminary comments on the application. While Mr. Hung stated at trial that this letter should have been addressed to Campus 2000 instead of the “Shiu Pong Group of Companies”, he confirmed that he had participated in a prior telephone conversation with the senior planner, as referred to in the letter. Other correspondence was sent by Richmond Hill’s planning department to the attention of Mr. Hung for Campus 2000. Mr. Hung also acknowledged that he had attended meetings with the planning department.

[137] As stated above, the description of the responsibilities of each Group in the Development Agreement was not watertight, and it was even blurrier in practice given their joint ownership of the Project Lands through the Limited Partnership, their involvement in Campus 2000, their joint participation in meetings and the fact that they were keeping each other informed of each other’s activities.

[138] While the Strasser Group was the former owner of the Project Lands and had relevant information regarding the lot levies that had been paid pursuant to the 1980 Lot Levy Agreement, this does not constitute a legal basis to assign to it the responsibility to independently monitor any and all legislative changes that could have an impact on the Project Lands. The Strasser Group was no longer the owner of the Project Lands. The responsibilities associated with the Project Lands belonged to the Limited Partnership as owner. The Limited Partnership was a legal entity separate from its individual partners.

[139] Accordingly, the responsibility to apply for the recognition of a credit under section 17 of the Regulation was neither the Strasser Group’s nor the Hung Group’s. It was the responsibility of the Limited Partnership as owner of the Project Lands.

3. Equitable common mistake

(a) Applicable legal principles

[140] Miller Paving Ltd. v. B. Gottardo Construction Ltd. (2007), 2007 ONCA 422, 86 O.R. (3d) 161 (C.A.) (“Miller Paving”) is the leading authority in Ontario with respect to the doctrine of equitable mistake. In Miller Paving, the parties signed an agreement in which the plaintiff acknowledged that it had been paid in full for all the materials that it had supplied to the defendant. However, the plaintiff subsequently discovered that it had inadvertently failed to bill the defendant for various loads of material, and it rendered a further invoice. The defendant refused to pay, even though it had itself been paid by the owner of the project for most of the material.

[141] The Court of Appeal found that this was a case of common mistake as both parties shared an error with respect to an important contextual circumstance, i.e. that all material supplied by the plaintiff had been paid for by the defendant. The question for the Court was whether the contract should be set aside because of that common mistake. See Miller Paving at para. 20.

[142] The Court of Appeal discussed the test for determining whether a contract is void for mistake at common law, as well as the equitable jurisdiction to set aside as voidable contracts that might be found enforceable at common law: see Miller Paving at paras. 22-24. Under the common law approach, the plaintiff must show that, as a result of the common mistake, the subject matter of the contract has become something essentially different from what the parties believed it to be. Pursuant to the equitable jurisdiction, the court can provide relief for common mistake when it would be “unconscientious” in all the circumstances to allow a contracting party to avail itself of the legal advantage it had obtained and where granting relief can be done without injustice to third parties. The contract is liable to be set aside in equity if the parties were under a common misapprehension as to the facts or their respective rights, provided the mistake was fundamental and the party seeking to set aside the contract was not at fault. The Court of Appeal noted that in considering whether to apply the doctrine of common mistake either at common law or in equity, the court should look to the contract itself to see if the parties have provided for who bears the risk of the relevant mistake. If the parties have, that will govern. See Miller Paving at para. 27 and Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201 at paras. 246-247.

[143] Ultimately, the Court of Appeal refused to set aside the contract in Miller Paving. It found that when read in the context of the factual matrix, the contract allocated to the plaintiff the risk that payment in full had not been received: see para. 28. The Court also stated that even if the plaintiff could resort to the doctrine of common mistake, neither the common law doctrine nor the equitable doctrine of common mistake would result in the contract being set aside. With respect to the common law doctrine, the Court held that nothing about the mistaken assumption changed the subject matter of the contract. With respect to the equitable doctrine, it found that the plaintiff was at fault as the mistake was due to unexplained errors in the plaintiff’s own procedures and that the defendant had altered its position. See Miller Paving at paras. 29-32.

[144] Miller Paving and other cases applying the doctrine of equitable mistake (including all the cases cited by the Plaintiffs) are cases where a party is seeking to set aside or rescind a contract based on the mistake. Rescission is an “all or nothing” remedy. Its purpose is to eliminate a benefit one party has received due to a mistake made by one or both parties to a contract. This is accomplished by cancelling and unwinding the contract and by issuing whatever ancillary orders are necessary to restore the parties to their original rights. Partial rescission is not a recognized equitable remedy. See Canada Life Insurance Company of Canada v. Canada (Attorney General), 2018 ONCA 562 at paras. 89-90.

(b) Application to this case

[145] In my view, the doctrine of equitable mistake does not apply in this case. The Plaintiffs are not seeking to set aside the various agreements that they signed with the Defendants. Rather, they are trying to “correct” these agreements. As set out below, the test for rectification is different than the test to set aside a contract based on equitable mistake.

[146] In any event, given all the steps that have been taken by the parties to separate their interests and put an end to their partnership, I find that rescission is not an available remedy in this case as it is not possible to restore the parties to their original, pre-contractual positions: see Oberoi v. Newtek Automotive Distribution Inc., 2010 ONSC 4093 at para. 47 and Place Concorde East Ltd. v. Shelter Corp. of Canada Ltd. at para. 210 (Ont. S.C.J.); aff’d on this point: at paras. 44, 69 (Ont. C.A.).

[147] During his closing submissions, counsel for the Plaintiffs said that he was relying on the doctrine of equitable mistake in the context of a claim for unjust enrichment. In my view, this does not work. If the contract is not set aside, then it remains in force and constitutes the justification or juristic reason for the alleged enrichment and deprivation. Thus, there cannot be unjust enrichment if the contracts are not set aside or rectified.

[148] Given my conclusion that the doctrine of equitable mistake does not apply, I do not need to discuss it further. However, given the extensive submissions of the parties on the issue of mistake, I will make a few comments on some of the required elements under the doctrine of equitable mistake. Had I concluded that the doctrine of equitable mistake applied in this case, I would have found that the parties were under a common misapprehension with respect to development charges and Metrix’s appraisal report, but that the agreements between the parties allocated the risk of such mistakes to the Plaintiffs.

[149] The parties have characterized the alleged misapprehension(s) in this case in various ways, but I am of the view that, at a minimum, there were two. First, the statement in the Joint Instructions Memorandum that all development charges (not including school levies) based on the MC1 use [high performance commercial industrial] had been paid is incorrect as the 1980 Lot Levy Agreement was with Richmond Hill only and no levies or development charges had been paid to York Region. Second, and most importantly, the parties failed to realize that Metrix did not comply with the following joint instruction provided by the parties’ lawyers in May 2007:

If there is a possibility that any additional development charges may be payable as a result of the development (by plan of subdivision, severance or otherwise) of the Industrial Lands, you should not assume that those development charges are paid.

[150] While Mr. Stewart maintained in his testimony that there were no errors in Metrix’s original appraisal report, I disagree. Based on the record before me, Metrix inexplicably failed to comply with the instruction set out in the previous paragraph, which was provided after Metrix itself raised the issue of development charges being triggered if a plan of subdivision and severance was proposed as a result of the road. This issue is not addressed in any detail in Metrix’s appraisal report. Instead, Metrix assumed that no development charges would be payable, regardless of the scenario, and concluded that this constituted a significant advantage as development charges would not be payable at the building permit stage. Clearly, and contrary to the Defendants’ submission, this is a future-oriented statement, i.e. a conclusion that development charges would not be payable in the future.

[151] In my view, the two misapprehensions identified above were common ones. Among other things:

a. The evidence of both Alexander Strasser and Daniel Hung was that, at the time of the appraisals, they understood that development charges for the Industrial Lands had been paid and would not have to be paid in the future. According to Daniel Hung, this was also the understanding of his brother, Henry Hung. b. This understanding was consistent with the experience of both Groups as no development charges had been required to be paid by that time. c. Both Groups were “joint owners” through the Limited Partnership, and no Group had a “stronger” obligation than the other with respect to investigating the issue of development charges. d. All instructions to the appraisers were provided jointly by the lawyers for the parties, after discussion. e. Both the Strasser Group and the Hung Group, including their lawyers, received the same information from all the appraisers, including Altus Helyar’s appraisal report which raised serious concerns with respect to the issue of development charges. However, no steps were taken. f. Both the Strasser Group and the Hung Group had lawyers and consultants and had the opportunity to investigate the issue of development charges, but it appears that neither did in any detailed fashion.

[152] I reject the Hung Group’s submission that because the parts of the Joint Instructions Memorandum dealing with development charges were allegedly drafted by the Strasser Group’s lawyer, only the Strasser Group is responsible for this mistake. It was a fundamental term of the process agreed upon by the parties that all instructions to and communications with the appraisers were to be joint ones. As stated above, both the Strasser Group and the Hung Group had lawyers and consultants and had the opportunity to investigate the issue of development charges. In fact, the A&B Memorandum shows that the Hung Group and their lawyer made inquiries as to whether the prepayment of levies would still be a credit to future development on the Industrial Lands. In addition, the evidence as to who drafted what was largely speculative. The evidence before me consisted only of draft memoranda, without cover e-mails or details about the discussions between the lawyers with respect to the various drafts. Based on the drafts, it is possible that the idea of including a statement on the issue of development charges in the Joint Instructions Memorandum was the idea of the Hung Group’s lawyer, who had previously raised the issue in the A&B Memorandum.

[153] While I find that a common mistake was made, it is my view that the parties have provided for who bears the risk of the relevant mistake in their contractual arrangements, and this governs: see Miller Paving at paras. 27-28.

[154] The parties negotiated and agreed on a detailed process regarding how the value of the Industrial Lands and the Residential Lands would be determined. This process recognized that valuators could come to different conclusions on value and that valuations could vary by a significant percentage (as illustrated by the three appraisal reports prepared in this case). The process also provided that the values determined in accordance with the process could not be reduced, but that certain steps could be taken if there was a view that the values were too low. In my view, in light of the agreed-upon process, each Group was bearing the risk of an appraisal that was too high with respect to the portion of the Project Lands that they were going to keep. Once the process was completed, it was not open to one Group to challenge the value of the lands. I conclude that, under the parties’ contracts, the risks of a mistake or of future events rest with the party owning the lands.

[155] In summary, I conclude that the doctrine of equitable mistake does not apply in this case as rescission is neither sought nor available. Further, despite the fact that the parties made a common mistake, relief is not available because the parties have provided for who bears the risk of a faulty appraisal in their contractual arrangements.

4. Rectification

(a) Applicable legal principles

[156] Rectification is an equitable remedy designed to correct errors in the recording of terms in written legal instruments. If by mistake a legal instrument does not accord with the true agreement it was intended to record — because a term has been omitted, an unwanted term included, or a term incorrectly expresses the parties’ agreement — a court may exercise its equitable jurisdiction to rectify the instrument so as to make it accord with the parties’ true agreement. In other words, rectification allows a court to achieve correspondence between the parties’ agreement and the substance of a legal instrument intended to record that agreement, when there is a discrepancy between the two. Its purpose is to give effect to the parties’ true intentions, rather than to an erroneous transcription of those true intentions. See Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56 at para. 12 (“Fairmont”).

[157] Rectification must be used with great caution because a relaxed approach to rectification as a substitute for due diligence at the time a document is signed would undermine the confidence of the commercial world in written contracts: Fairmont at para. 13. Rectification is limited solely to cases where a written instrument has incorrectly recorded the parties’ antecedent agreement. It is not concerned with mistakes merely in the making of that antecedent agreement. Thus, rectification is unavailable where the basis for seeking it is that one or both of the parties wish to amend not the instrument recording their agreement, but the agreement itself. The court’s task in a rectification case is to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other. See Fairmont at para. 13.

[158] Two types of error may support a grant of rectification: common mistake and unilateral mistake. The first arises when both parties subscribe to an instrument under a common mistake that it accurately records the terms of their antecedent agreement. In such a case, rectification is available upon the court being satisfied that, on a balance of probabilities, there was a prior agreement whose terms are definite and ascertainable; that the agreement was still in effect at the time the instrument was executed; that the instrument fails to accurately record the agreement; and that the instrument, if rectified, would carry out the parties’ prior agreement. See Fairmont at paras. 14 and 38.

[159] In the case of a unilateral mistake, the party seeking rectification must also show that the other party knew or ought to have known about the mistake and that permitting the defendant to take advantage of the erroneously drafted agreement would amount to fraud or the equivalent of fraud. The claimed mistake can be unilateral either because the instrument formalizes a unilateral act (such as the creation of a trust), or where the instrument was intended to record an agreement between parties, but one party says that the instrument does not accurately do so, while the other party says it does. See Fairmont at paras. 15 and 38.

[160] It falls to a party seeking rectification to show not only the putative error in the instrument, but also the way in which the instrument should be rectified in order to correctly record what the parties intended to do. Thus, where an instrument recording an agreed-upon course of action is sought to be rectified, the party seeking rectification must identify terms which were omitted or recorded incorrectly and which, correctly recorded, are sufficiently precise to constitute the terms of an enforceable agreement. See Fairmont at para. 32.

[161] In Fairmont, the parties had intended that a financing arrangement, both at its inception and on an ongoing basis, would operate on a tax-neutral basis. However, because of the particular financing mechanism chosen, an unanticipated tax liability was incurred. The issue was whether the parties’ intention with respect to tax neutrality could support a grant of rectification. The Supreme Court of Canada found that it could not. Brown J. held that rectification was available to align “the instrument with what the parties agreed to do, and not what, with the benefit of hindsight, they should have agreed to do.” (para. 19) He stated the following at paragraph 3:

Rectification is limited to cases where the agreement between the parties was not correctly recorded in the instrument that became the final expression of their agreement: A. Swan and J. Adamski, Canadian Contract Law (3rd ed. 2012), at §8.229; M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at p. 817. It does not undo unanticipated effects of that agreement. While, therefore, a court may rectify an instrument which inaccurately records a party’s agreement respecting what was to be done, it may not change the agreement in order to salvage what a party hoped to achieve.

[162] I note that some of the cases relied upon by the Plaintiffs precede Fairmont and are not consistent with the principles set out above. I am bound by the law as set out in Fairmont.

(b) Application to this case

[163] As stated above, the Plaintiffs seek rectification of the Restructuring Amending Agreement and the Amended and Restated Limited Partnership Agreement. In both instruments, they seek to: (a) delete the figure of $21,400,000 as the value attributed to the Industrial Lands and replace it by $18,561,033; and (b) delete the figure of $1,459,889.50 as the value of the adjustment/equalization payment and replace it by $40,406.

[164] In my view, this case raises similar issues as in Fairmont and rectification is not available. The Restructuring Amending Agreement and the Amended and Restated Limited Partnership Agreement did not incorrectly record the parties’ antecedent agreement. Based on Metrix’s appraisal report, the parties agreed that the value of the Industrial Lands was $21.4 million. As stated by the Defendants, the Hung Group first heard of the figure of $18,561,033 as the value of the Industrial Lands when they received the report of Paul Stewart in June 2016, more than 4 years after this action was commenced. Thus, the Defendants could not have agreed to this figure before executing the two agreements. This is a case where the Plaintiffs are attempting to amend not the instruments regarding their agreements, but the agreements themselves.

[165] It is true that the parties in this case hoped and wanted to achieve an equal division of the Project Lands. However, they negotiated and agreed on a detailed process regarding how the value of the Industrial Lands and the Residential Lands would be determined. As stated above, this process recognized that valuators could come to different conclusions on value and that valuations could vary by a significant percentage. The process also provided that the values determined in accordance with the process could not be reduced, but that certain steps could be taken if there was a view that the values were too low. In my view, it is not appropriate for the Court to ignore the process agreed-upon by the parties and only “rectify” the outcome of the process in the absence of evidence that: (a) the process was not followed, or (b) the process itself should be rectified because the written agreements do not reflect the process that was agreed upon by the parties. There is no such evidence in this case.

[166] Accordingly, I decline to grant rectification.

5. General equitable principles

[167] The Plaintiffs rely on TCR Holding Corporation v. Ontario, 2010 ONCA 233 at para. 26 (“TCR Holding”). [1] In that case, the Court of Appeal affirmed the application judge’s decision to set aside an amalgamation based on the superior court’s equitable jurisdiction to relieve persons from the effect of their mistakes. The Court of Appeal also noted that a superior court has all the powers that are necessary to do justice between the parties.

[168] TCR Holding was referred to by the Alberta Court of Appeal in Harvest Operations Corp. v. Attorney General of Canada, 2017 ABCA 393. In that case, the Court concluded that the doctrine of rectification did not allow for the rectification of the instruments in issue. The appellant argued that relief should be granted based on the general equitable jurisdiction to remedy mistakes. The Alberta Court of Appeal rejected this submission and stated the following:

[73] The appellant asks us to adopt the opinion expressed by the Ontario Court of Appeal in TCR Holding Corp. v. Ontario to this effect: “Broadly speaking, a superior court has ‘all the powers that are necessary to do justice between the parties’ … . More specifically, ‘superior courts have equitable jurisdiction to relieve persons from the effect of their mistakes’ … .”

[74] Without commenting on the merits of the assertion that a superior court has “equitable jurisdiction to relieve persons from the effect of their mistakes”, we fail to see how we can do this without undermining the rectification doctrine and ignoring the precedential value of Fairmont Hotels.

[75] There is no principled basis, in the guise of exercising our equitable jurisdiction, to pump theoretical steroids into the rectification doctrine and give it the strength or force that the Supreme Court of Canada recently and consistently has declined to do. This is really what the appellant is asking us to do.

[169] The Court of Appeal for Ontario referred to this passage with approval in Canada Life Insurance Company of Canada v. Canada (Attorney General), 2018 ONCA 562 at paras. 81-82.

[170] The true relief that the Plaintiffs are seeking in this case is rectification. They cannot get around their failure to meet the test for rectification by relying on broad and general equitable principles. If that were possible, legal tests would be meaningless.

[171] The Plaintiffs also refer to Storthoaks v. Mobil Oil Canada, Ltd., [1976] 2 S.C.R. 147. This case was an action to recover moneys paid under mistake of fact. The principles outlined in that case do not apply here – the adjustment payment made by the Strasser Group to the Hung Group was not a payment made under mistake of fact. The payment was owed under the parties’ contractual arrangements and the Hung Group was contractually entitled to receive it.

[172] In light of the foregoing, and given that the more specific test for rectification is not met in this case, I decline to grant the remedies requested by the Plaintiffs on the basis of broad and general equitable principles and ill-defined notions of equitable fairness.

6. Revised value of Industrial Lands

[173] Had I been prepared to grant relief in this case, I would have accepted the new figures put forward by the Plaintiffs with respect to the value of the Industrial Lands and the amount of the adjustment payment, which figures are based on the evidence of Paul Stewart. Mr. Stewart was one of the signatories of Metrix’s appraisal report. In my view, there was no need for a new, full-blown appraisal in the circumstances of this case. Metrix had already done the necessary work to do a valuation of the Industrial Lands as of November 1, 2006. I am satisfied that Mr. Stewart could, based on the analysis and procedures previously used by Metrix and the revised assumption provided by the Plaintiffs with respect to development charges, perform revised mathematical calculations to deduct the “development levy advantage” that was added to the per acre value of the Industrial Lands in Metrix’s original appraisal report. The Defendants did not propose any alternative figures.

D. CONCLUSION

[174] Accordingly, the Plaintiffs’ claim and the Defendants’ counterclaim are dismissed.

[175] If costs cannot be agreed upon, the Defendants shall deliver submissions of not more than four pages (double-spaced), excluding the bill of costs, within 14 days of the date of this Judgment. The Plaintiffs shall deliver their submissions (with the same page limit) within 14 days of their receipt of the Defendants’ submissions.

Vermette J.

Released: February 23, 2022

[1] The Plaintiffs also rely on GT Group Telecom Inc. (Re) at paras. 4-5 (Ont. S.C.J.). However, this case is no longer good law in light of the Supreme Court of Canada’s decision in Fairmont.