Court File and Parties

COURT FILE NO.: CV-23-693016 MOTION HEARD: 20230222 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: StorageVault Canada Inc., Plaintiff AND: NYX Capital Corp., NYX Appleby Storage LP, Appleby Storage Inc., NYX Sheridan Storage LP, Sheridan Storage Inc., Bluebird Ingram Storage LP, Bluebird Ingram Storage Corp., Bluebird Sandford Storage LP, Bluebird Sanford Storage Corp., Cityview Selfstorage LP, Cityview Storage GP Inc., Esandar Selfstorage LP, Esandar Storage GP Inc., Lakeshore Selfstorage LP and Lakeshore Storage GP Inc., Defendants

BEFORE: Associate Justice B. McAfee

COUNSEL: Philip Underwood and Paul Fruitman, Counsel, for the Moving Party, the Plaintiff J. Thomas Curry and Aoife Quinn, Counsel, for the Responding Parties, the Defendants

HEARD: February 22, 2023

Reasons for Decision

[1] The plaintiff StorageVault Canada Inc. (StorageVault) brings this motion pursuant to rule 42 of the Rules of Civil Procedure and section 103 of the Courts of Justice Act, R.S.O. 1990, c.C.43, for an order for the issuance of certificates of pending litigation (CPLs) with respect to seven parcels of land (the Properties). At the request of StorageVault, the motion was scheduled to be heard on an urgent basis.

[2] The defendants oppose the motion.

[3] StorageVault is an Alberta corporation that buys, manages and rents self-storage space. StorageVault is publicly listed on the Toronto Stock Exchange under the symbol “SVI”. It owns or operates approximately 230 self-storage facilities across Canada, including 19 in Toronto, 47 in the Greater Toronto Area and 113 in Ontario. Acquisition is part of StorageVault’s business strategy. Each year since 2015, it has closed or announced acquisitions worth between $146.2 million and $485.4 million.

[4] The defendant NYX Capital Corp. (NYX) is a private equity real estate investment firm incorporated in Ontario. Since it was founded in 2012, NYX has accumulated over $1 billion in assets under management and development. NYX manages investments in many real estate sectors, including the self-storage sector. The other defendants are certain limited partnerships that are beneficial owners of the Properties and the corporate entities that act as the general partners of those limited partnerships and are the registered owner of each parcel.

[5] The Properties consist of seven parcels of land upon which self-storage facilities are located:

(a) PIN 03327-8199, municipal address 411 Cityview Blvd, Vaughan, Ontario, registered owner Cityview Storage GP Inc. (Cityview);

(b) PIN 10369-0190, municipal address 19 Esandar Drive, Toronto, Ontario, registered owner Esandar Storage GP Inc. (Esandar);

(c) PIN 13485-0304, municipal address 1230 Lakeshore Road East, Mississauga, Ontario, registered owner Lakeshore Storage GP Inc. (Lakeshore);

(d) PIN 13429-0952, municipal address 2068 South Sheridan Way, Mississauga, Ontario, registered owners Sheridan Storage Inc. and NYX Sheridan Storage LP (Sheridan);

(e) PIN 17199-0017, municipal address 24 Sanford Ave. North, Hamilton, Ontario, registered owner Bluebird Sanford Storage Corp. (Sanford);

(f) PIN 07181-1327, municipal address 1770 Appleby Line, Burlington, Ontario, registered owner Appleby Storage Inc. (Appleby); and

(g) PIN 10337-003, municipal address 7 Ingram Drive, Toronto, registered owner Bluebird Ingram Storage Corp. (Ingram).

[6] StorageVault has been attempting to purchase some portion of the Properties since 2019.

[7] On July 27, 2022, StorageVault sent NYX a draft letter of intent to purchase four of the parcels (Esandar, Cityview, Lakeshore and Sanford) for $113 million (the July 27 Draft). The July 27 Draft contained the following provision:

10. BINDING AGREEMENT The Vendors and Purchaser acknowledge that this Letter of Intent constitutes a binding agreement between them. The terms of an agreement for the purchase of the Properties by the Purchaser from the Vendors will be governed solely by the Purchase Agreement.

[8] The July 27 Draft containing this language was never executed.

[9] On October 21, 2022, StorageVault provided NYX with a draft letter of intent dated October 21, 2022, to purchase the Properties (all seven parcels) for $240 million, together with a draft purchase agreement for Sanford (the October 21 Draft). The October 21 Draft and all subsequent draft letters of intent included the following provision:

10. NON-BINDING AGREEMENT This Letter of Intent is an expression of our present intention and our willingness to continue negotiations, which we would anticipate shall lead to the satisfactory negotiation of Purchase Agreements. This Letter of Intent is not, except with respect to the paragraphs entitled “Confidentiality Clause”, a legally binding agreement and neither the expenditure of funds nor undertaking of actions in the furtherance of the proposed transaction shall be considered partial performance of a binding agreement.

[10] The October 21 Draft also included the following wording, which remained consistent in subsequent drafts. The October 21 Draft provided that any purchase of the Properties would proceed only after the negotiation, drafting and possible completion of purchase agreements for each parcel (Parcel Purchase Agreement):

The basic terms and conditions of the proposed acquisition upon which agreements of purchase and sale shall be based (the “Purchase Agreements) are as follows:

The Purchaser has delivered to the Vendors a form of Purchase Agreement. The Vendors and the Purchaser covenant to negotiate in good faith toward the completion of the Purchase Agreements within five (5) business days, unless mutually extended, of the execution of this Letter of Intent.

The Vendors and the Purchaser acknowledge that this Letter of Intent sets forth the basic terms and conditions upon which the Purchase Agreements shall be based, subject to other terms and conditions as may be negotiated by the Parties or their counsel, acting reasonably.

[11] The October 21 Draft also contained a provision for the payment of deposits, which remained consistent in the subsequent drafts:

(a) $5 million payable within two business days after receipt of the waiver notice; and

(b) $7 million payable within two business days after the acceptance and execution of the Parcel Purchase Agreements.

[12] Thereafter the parties exchanged further versions of draft letters of intent until NYX sent, but did not sign, a draft on November 7, 2022 (the November 7 Draft).

[13] After November 7, 2022, the parties and their counsel continued discussions with respect to the terms of the proposed purchase.

[14] No letter of intent was signed by NYX. No Parcel Purchase Agreements were signed. No deposit was paid.

[15] On December 16, 2022, NYX advised StorageVault that NYX had received an offer from a third party to purchase the Properties for $250 million.

[16] On December 23, 2022, StorageVault’s litigation counsel sent an email to NYX stating that the parties had reached an agreement on the essential terms of the transaction and that StorageVault expects NYX to comply with its obligation to complete the sale to StorageVault.

[17] On December 30, 2022, NYX’s litigation counsel responded stating the basis for their position that there is no binding agreement.

[18] On January 16, 2023, StorageVault issued its statement of claim seeking specific performance of the purported agreement, including an order requiring the defendants to transfer title of the Properties to StorageVault or such entity or entities as StorageVault directs.

[19] The applicable test on a motion for an order for a CPL is the same as that on a motion to discharge a CPL (Perruzza v Spantone, 2010 ONSC 841 (Ont. S.C.J.) at para. 20). The analytical framework has two steps: first, whether there is a triable issue as to an interest in the land; and second, whether the equities between the parties favour the granting of the order (Global West Development Ltd. v. 16380 Jane Street Inc., 2021 ONSC 4284 (Ont. S.C.J.) at paras. 26-28).

[20] The threshold of whether there is a triable issue as to the interest in land is a low one (Global West at para. 27). The plaintiff need not show that it is likely to succeed on its claim. Rather, the party resisting the motion has the onus of showing that there is no triable issue as to whether the party seeking the CPL has a reasonable claim to the interest in the land. In assessing this issue, the Court should examine the whole of the evidence, without resolving disputed questions of fact or assessing the credibility of deponents (Huntjens v. Obradovic, 2019 ONSC 4343 (Ont. S.C.J.) at paras. 20-21).

[21] The second step of the analysis requires the court to consider all relevant matters between the parties in determining whether a CPL should be granted. The factors to be considered include what are often referred to as the Dhunna factors: (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether the damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (Perruzza at para. 20, citing 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (Ont. S.C.J.) at paras. 10-18).

[22] Where a plaintiff claims a CPL in relation to an underlying claim for specific performance, there must be a triable issue with respect to both breach of contact and the equitable remedy of specific performance (Interrent v. 1167750 Ontario, 2013 ONSC 4746 (Ont. S.C.J.) at para. 15).

[23] As stated by Justice Doi in Global West at para. 29:

[29] In exercising its discretion on a CPL motion, the court should be mindful of the purpose and impact of this relief:

The purpose of a CPL is to provide notice to the world that there is an issue with respect to the title of the property and/or that there is an interest claimed in the property. Once registered, the CPL prevents a subsequent purchaser from asserting the defence of a bonafide purchaser for value without notice. It has the same general effect on a subsequent encumbrancer. This has profound consequences for the titleholder, the CPL effectively acts like an injunction because virtually no one will complete a purchase of the property with an outstanding unresolved claim looming. This impact has been judicially recognized: see Matheson v. Gordon at para. 22; Bowbriar Investments Inc. v. Wellesley Community Homes Inc., [1977] O.J. No. 66 (S.C.) at para. 9.

[24] The defendants have demonstrated that there is no triable issue with respect to a reasonable claim to an interest in the Properties.

[25] StorageVault confirms that there is no formal signed agreement. StorageVault argues that it and NYX reached an agreement on the essential terms of the agreement to purchase the Properties in early November 2022 and that the November 7 Draft memorialized the essential terms of that contract.

[26] StorageVault relies in part on the decision of Justice Leiper in Ruparell v. J.H. Cochrane Investments Inc., 2020 ONSC 7466 (Ont. S.C.J.) at para. 21:

[21] When parties agree on the essential provisions to be incorporated in a formal document with the intention that their agreement is binding, they will have fulfilled all the requisites for a contract. The fact that a formal written document will be prepared and signed later does not alter the binding nature of the original contract: Canadian Northern Shield v. 2421593 Canadian Inc., 2018 ONSC 3627: Bawitko at p. 12 [Bawitko Investments Ltd. v. Kernels Popcorn Ltd.]; UBS Securities Canada, Inc. v. Sands Brothers Canada., Ltd., 2009 ONCA 328 at para. 47.

[27] In Ruparell, at para. 22, Justice Leiper states in part: “…where the parties intend that there is no binding agreement until a subsequent formal contract is executed, there is no enforceable agreement…”.

[28] In the circumstances of this case, the November 7 Draft contained a term that it was non-binding and contemplated the signing of Parcel Purchase Agreements.

[29] Unlike the circumstances in Carterra Management Inc. v. Palm Holdings Canada Inc., 2011 ONSC 4573 (Ont. S.C.J. – Commercial List) where the defendant acknowledged a triable issue as to whether the parties agreed on the terms of the final agreement, in the circumstances before me there is no such acknowledgement and no signed letter of intent.

[30] There is no triable issue as to whether any purported agreement satisfied the Statute of Frauds. There is no signed agreement. There is no assertion of acts of part performance such as were found in 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660 (Ont. S.C.J.).

[31] I am satisfied that there is no triable issue with respect to a breach of contract.

[32] If I am wrong and there is a triable issue with respect to a breach of contract, I am satisfied that there is no triable issue with respect to specific performance.

[33] The alleged agreement was not capable of performance.

[34] Firstly, three of the parcels could not be sold until November 2024. The October 21 Draft, which remained unmodified in subsequent versions, provides that approvals from the limited partners would be required for any proposed purchase to close and that the Vendors would use reasonable commercial efforts to obtain such approvals. The Limited Partner Agreements for Ingram, Appleby and Sheridan expressly prohibit a purchase of those parcels until November 2024 unless the limited partners unanimously consent. There was no unanimous approval as one of the limited partners refused to consent to the sale.

[35] Secondly, the right of first refusal (ROFO) process would need to run its course before any sale could proceed. All parcels were subject to a ROFO in favour of each limited partner. Section 12 of the November 7 Draft outlined detailed provisions to account for the ROFO held by each limited partner, including a break up fee if a limited partner bought a parcel pursuant to its ROFO.

[36] Thirdly, the parties did not deal with the issue of competition law approval.

[37] Mr. Khan, Chief Financial Officer of StorageVault, deposes as follows at paras. 12 and 13 of his affidavit:

12. The Properties are desirable acquisition targets for StorageVault. They occupy favourable locations in the GTHA, with good access to transportation infrastructure and strong local demand for self-storage services. The buildings themselves are in good shape: most of them are either newly built or have been recently renovated. The Properties would also complement StorageVault’s current operations in southern Ontario.

13. To my knowledge, there is no reasonable substitute for the Properties, as a portfolio of assets, available on the market, and I am not aware of any reasonable substitute that is likely to become available in the near future. Nor would construction of new facilities be a reasonable alternative to buying the Properties, given the amount of time that it would take to do so and the shortage of buildable land of the size and type necessary for such construction in the GTHA.

[38] In 2144688 Ontario Ltd. v. 1482241 Ontario Ltd., 2016 ONSC 1475 (Ont. S.C.J.) Justice Faieta denied specific performance of an agreement of purchase and sale for a commercial property near Highway 401in North York. A representative of the prospective buyer gave evidence that the property was an “excellent investment opportunity” in part because “it appeared to provide a high return on an operating income basis”. Justice Faieta concluded that the purchaser agreed to purchase the property to generate income. His Honour denied specific performance because the party seeking specific performance must give evidence of some “non-economic value” of the property to them. I was not referred to any such evidence on this motion.

[39] This is a purely commercial matter. StorageVault seeks the properties as an investment. The properties are not unique. Damages are an adequate remedy in the circumstances (Redfox Land Co. v. 770 Brookfield Properties Limited, 2015 ONSC 4153 (Ont. S.C.J.) at paras. 12-13).

[40] If I am wrong and there is a triable issue with respect to breach of contract and specific performance, I am satisfied that the equities do not weigh in favour of the ordering of a CPL.

[41] StorageVault is not a shell corporation. This factor weighs in favour of a CPL.

[42] The Properties are not unique. This factor weighs against a CPL.

[43] The Properties are an investment in which StorageVault has a purely financial interest. This factor weighs against a CPL.

[44] The fact that there is currently no alternative claim for damages is not determinative and although it weighs in favour of a CPL, is given little weight (Hassanzadeh v. Davoodi, 2022 ONSC 6977 (Ont. S.C.J.) paras. 18-21).

[45] StorageVault asserts that damages are difficult if not impossible to calculate. I was not referred to evidence in support of this assertion. StorageVault is in the business of self-storage properties. Based on the record before me, I do not accept that it would be difficult if not impossible to calculate damages. I have found that damages are an adequate remedy in this purely commercial matter. This factor weighs against a CPL.

[46] The evidence demonstrates there was a willing purchaser for the Properties as of December 16, 2022. This factor weighs against a CPL.

[47] Granting a CPL could effectively prevent any dealings with the Properties. StorageVault argues that there would be significant prejudice to them should the CPLs not be granted. They argue that the defendants could then encumber the Properties or transfer them to a third party, frustrating StorageVault’s claim for specific performance. I have found that there is no triable issue with respect to the claim for specific performance and that damages would be an adequate remedy. This factor weighs against a CPL.

[48] Overall, the equities favour the defendants.

[49] In all of the circumstances, it would be unjust to order CPLs. I decline to exercise my discretion to order CPLs. The motion is dismissed.

[50] The parties agree that costs of the motion shall be payable to the successful party in the all-inclusive amount of $30,000.00. On consent, the StorageVault shall pay to the defendants the costs of this motion fixed in the all-inclusive amount of $30,000.00.

Associate Justice B. McAfee Date: February 27, 2023