Court File and Parties

COURT FILE NOS.: CV-20-638170, CV-20-638172 MOTION HEARD: 20230501 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 42 Charles Street Limited, Plaintiff AND: Toronto Standard Condominium Corporation No. 2550, Defendant

AND: 1000 Bay Street Limited, Plaintiff AND: Toronto Standard Condominium Corporation No. 2538, Defendant

BEFORE: Associate Justice L. La Horey

COUNSEL: Adam C. Pantel, Agent for Counsel for the Moving Party Plaintiffs John DeVellis and Inderpreet Suri, Counsel for the Responding Party Defendants

HEARD: May 1, 2023

Reasons for Decision

Overview

[1] Each plaintiff in these two actions was the developer, vendor and declarant of a high-rise condominium building in Toronto. In their respective actions they sue the condominium corporation on a promissory note issued by it in favour of the plaintiff/ developer of that condominium. The statements of claim were issued on March 16, 2020, but were not served on the defendants until July 27, 2022. The plaintiffs bring these motions for an extension of time for service of the statement of claim. The defendants oppose.

[2] For the reasons that follow, the plaintiffs’ motions are granted.

Background and Chronology

[3] The plaintiffs are part of the Cresford Group of Companies (“Cresford”). The plaintiff 42 Charles Street Limited (“42 Charles”) was the developer, vendor and declarant of the condominium located at 42 Charles Street, Toronto. It sues Toronto Condominium Corporation No. 2550 (“TSCC 2550”). The plaintiff 1000 Bay Street Limited (“1000 Bay”) was the developer, vendor and declarant of the condominium located at 1000 Bay Street, Toronto. It sues Toronto Condominium Corporation No. 2538 (“TSCC 2538”).

[4] The plaintiffs plead that following registration of the condominiums in 2016, promissory notes were validly executed by the declarant condominium boards as consideration for that condominium’s guest suites. The plaintiffs allege that as a result of a change in policy of the City of Toronto payment for the guest suites was to be secured by a promissory note and made part of the common elements as opposed to being secured by a mortgage.

[5] The plaintiffs plead that in October 2017, one year following the registration of the declarations, payments under the notes commenced and continued for some months. Following the turnover of the condominiums to the owner-elected boards of directors, the condominiums took the position that they were not liable on the notes and did not make the March 1, 2018 payment or any subsequent payment.

[6] By letters dated March 18, 2018 and March 28, 2018, Armand Conant, of the law firm of Shibley Righton LLP, wrote to the plaintiffs’ solicitors Dale & Lessman LLP, and took the position on behalf of the defendants that the promissory notes in respect of the guest suites were unenforceable and contrary to the Condominium Act, 1998. He advised that his clients would not be making further payments.

[7] The plaintiffs retained litigation counsel (“litigation counsel”, not Mr. Pantel or anyone from his firm) who sent demand letters dated September 7, 2018, to each defendant addressed to Mr. Conant. The plaintiffs demanded payment of the arrears under the promissory notes by September 30, 2018, with regular monthly payments commencing October 1, 2018, failing which the promissory notes would be due in full and the plaintiffs/ declarants would commence an action for enforcement of the notes.

[8] The statements of claim were issued on March 16, 2020. The parties agree that the deadline for service of the statements of claim, taking into account the extension of timelines due to the pandemic, was March 16, 2021.

[9] The plaintiffs advised litigation counsel that they were moving the files to a new litigation firm by email dated April 13, 2022. It was shortly thereafter that litigation counsel realized that the statements of claim had not been served and reported the matter to LawPro.

[10] Mr. Pantel, counsel retained by LawPro, sent the statements of claim to Mr. Conant by email on July 27, 2022, advising of his instructions to bring a motion to extend the time for service. [^1]

Law and Analysis

[11] There is no dispute that the leading case on a motion to extend the time for service of a statement of claim is the decision of the Court of Appeal in Chiarelli v Wiens. [^2] The court must consider whether an extension under rule 14.08(2) would advance the just resolution of the dispute without prejudice or unfairness to either party. [^3]

Explanation for the delay

[12] Litigation counsel filed an affidavit on this motion and was cross-examined. Her evidence is that the claims were not served within the requisite time because of her inadvertence. In particular, she failed to diarize the deadline for service. She suffered some personal challenges during the relevant time period. She deposes that the plaintiffs always intended to prosecute the actions.

[13] The acting Chief Financial Officer of Cresford, David Mann, filed affidavits on this motion on behalf of the plaintiffs and was cross-examined. His evidence is that he relied on his lawyers.

[14] The defendants argue that the plaintiffs intended to abandon the actions and have failed to provide an adequate explanation for the delay. They point to the fact that Mr. Mann did not follow up with litigation counsel from August 19, 2020 to April 13, 2022, during which time Mr. Mann testified the he was busy with other matters during this time, including other litigation and the receivership of three other Cresford projects. The defendants take the position that the plaintiffs deliberately failed to follow up on the claims for well over a year and “intentionally prioritized other matters”. I reject this submission. Mr. Mann testified that he was relying on counsel during the period. As the Court of Appeal said in Chiarelli, the court should be concerned mainly with the rights of litigants, not the conduct of their counsel. [^4] The defendants do not suggest that the motion was not brought promptly after discovery of the error.

[15] In the case at bar there was no deliberate decision not to serve the claims, by contrast with the situation in Pagliuso v Primerica Financial Services Ltd., 2019 ONCA 778. [^5] I find that the failure to serve the claims was as a result of inadvertence of the lawyer and that the plaintiffs intended to pursue their claims and did not abandon the actions.

Prejudice

[16] In Chiarelli, the Court of Appeal said: [^6]

The court should not fix in advance rules or guidelines when an extension should be refused. Each case should be decided on its facts, focusing … on whether the defence is prejudiced by the delay.

[17] The Court did however, provide the following principles to be considered: [^7]

(a) the court should not extend the time for service if to do so would prejudice the defendant; (b) the plaintiff bears the onus of demonstrating that the defendant would not be prejudiced by the extension; (c) the defendant has an evidentiary obligation to provide some details of prejudice to it which would flow from an extension of time for service; (d) the defendant cannot create prejudice by its failure to do something that it reasonably could have or ought to have done; and, (e) prejudice that will defeat an extension of time for service must be caused by the delay.

[18] There is a dispute about the applicable limitation period raised in the parties’ factums. The plaintiffs take the position that either the promissory notes are demand obligations triggered in the event of a default, in which case the applicable limitation period began to run from the date of demand, i.e. September 7, 2018, or, the subject promissory notes are notes for which a time, or maturity date, for payment is expressed, in which case, the balances owing under the promissory notes, with all accrued interest thereon, are not due until the maturity date stipulated in the notes (in 2027). The plaintiffs say that in either case, the statements of claim in these actions were commenced before the expiry of the applicable limitation periods. Potentially, the limitation periods have still not expired.

[19] The defendants contend that the limitation period began to run on March 1, 2018, the date of the first missed payment, and thus the statements of claim were issued out of time.

[20] In oral argument, both counsel confirmed that they are not asking me to determine the applicable limitation period, nor would it be appropriate for me to do so. There is no statement of defence filed in these actions [^8] and neither side fully briefed the issue.

[21] The defendants argue that the plaintiffs have not rebutted the presumption of prejudice and that there is actual prejudice.

[22] At the outset, I note that the defendants were on notice of the plaintiffs’ claims on the notes at an early stage, as evidenced by the exchange of correspondence between lawyers for the parties prior to the issuance of the claims.

[23] The defendants submit that they are prejudiced due to the unavailability of witnesses and documents. The focus of the defendants’ concern about available evidence is regarding the alleged City of Toronto policy that caused the plaintiffs to convert the guest suites to common elements which in turn resulted in the plaintiffs causing the condominiums to execute promissory notes in favour of the plaintiffs. This alleged policy is specifically pleaded in the statements of claim.

[24] The defendants’ lawyer asked the new litigation lawyer for the plaintiffs for a copy of this policy. The lawyer replied by saying that this was a discovery question. Litigation counsel does not have particulars of the alleged policy and does not know if it was in writing.

[25] Cresford does not currently have any active developments. The only remaining employees of the plaintiffs and Cresford are Mr. Mann, Mr. Casey (the principal of Cresford), a few of Mr. Casey’s children and an accounting person working for them. The plaintiff can make available the former accounting director to testify. The customer service managers, project managers and other employees are gone.

[26] Mr. Mann admitted that he was not involved in the policy and does not have direct information about it. He testified that the planning development manager, Ryan Millar, would likely have knowledge of the policy. Mr. Millar is no longer with Cresford and Mr. Mann had not spoken to him since 2020.

[27] The defendants delivered the affidavit of Liliana Soengas, who has been the property manager of the defendant condominiums since registration. Until May 2020, the condominiums were managed by a company that was owned by the Cresford Group. Ms. Soengas was employed by them to manage condominiums including 42 Charles Street and 1000 Bay Street. In May 2020, management of the condominiums was transferred to Ms. Soengas’s company. Notwithstanding her long involvement with the condominiums, her evidence is that she has never seen the alleged policy and does not know if it exists. She was not involved in the development aspects of the condominium projects.

[28] Ms. Soengas testified on cross-examination that she knew Mr. Millar when he was working for Cresford. She could not recall his current employer. She said she knew the name of his employer at one point, but did not know if he was still with the same company and could not remember the name of the company. Counsel suggested that Mr. Millar worked Emblem Developments and asked if that name rang any bells for her. She replied that it “does ring a bell”. It appears that Mr. Millar is available as a witness.

[29] The defendants say that even if Mr. Millar is available, it has been many years since he would have dealt with the City of Toronto and it is known that memories fade over time. Even if the statement of claim had been served by the required deadline of March 2021, it still would have been a long time since the alleged discussions about the change in the City of Toronto policy (which would have taken place in 2015 or 2016). Further, Mr. Millar left Cresford’s employment prior to March 2021. Thus even if Mr. Millar could not be located, or his memory is not fresh, the delay in service of the statement of claim is not the cause of the evidence not being available.

[30] The defendants knew about the plaintiffs’ reliance on an alleged City of Toronto policy in 2018 as evidenced by Mr. Conant’s March 14, 2018 letter to Dale & Lessman. In this letter Mr. Conant quotes from an earlier letter from Dale & Lessman that is not in the record. Mr. Conant quotes a passage from the Dale & Lessman letter which states: “The Declarant had the option of removing the guest suites from the project as a result of the City of Toronto’s requirements ” (emphasis added). Mr. Conant goes on to make a detailed argument as to why his client is not liable on the promissory note and says that if the declarant seeks to enforce payment, then the condominium [^9] will have no alternative but to seek a court order declaring the note void and/or oppressive to the condominium corporation. He also said that the condominium reserved its right to seek recovery of the payments made under the note thus far. Thus litigation was squarely on the defendants’ radar and the parties exchanged their positions on the enforceability of the notes. The plaintiffs then made formal demand for payment by their litigation counsel.

[31] If in fact the alleged City of Toronto requirements are as crucial as the defendants now allege, they could have sought particulars and investigated the matter at that time, with Dale & Lessman or the City of Toronto. Prejudice cannot arise as something that the defendants failed to do, that it reasonably could have or ought to have done. [^10]

[32] The plaintiffs submit that the dispute between the parties will likely turn on issues of law, including the interpretation of the Condominium Act, 1998. If so, the relevant evidence will come from Mr. Casey, who was one of the signatories to the notes and who is available to testify as to authenticity, if authenticity is contested.

[33] Further, when Ms. Soengas was cross-examined she could not identify any witness who has knowledge of the promissory notes or the meetings with the City of Toronto who was not available or whose memories have faded.

[34] The defendants assert that they are prejudiced due to the change in the condominium’s unit ownership. They provided evidence that a number of units changed ownership since 2020, and specifically during the period between the deadline for service of the statement of claim and the date that it was actually served. If a new purchaser requested a status certificate prior to service of the statement of claim, the status certificate contained the statement that the condominium corporation is not a party to any proceeding before a court of law, an arbitrator or an administrative tribunal. As a result, the defendants say that, “these unit owners can now refuse liability and responsibly for any related costs in relation to the Claims, which would be detrimental to the Condominiums and the rest of the Condominiums’ owners.”

[35] The condominiums also submit that the purchasers were deprived of information that a reasonable purchaser would want to know, and that the claims would range between $1,200 and $2,200 per unit with interest, excluding legal fees. They further allege that had the purchaser known of the claims, they could have factored the value into the purchase decision, adjusted the purchase price, or made arrangements with the seller to hold back amounts to cover the potential liability.

[36] However, the defendants’ financial statements, which were provided to all new purchasers of units as part of the package delivered with the status certificates, expressly identified the promissory notes, the purpose for which they were granted, and the amount of the obligation. In addition, given the circumstances, including the demand letter and exchange of correspondence, it might have been prudent for the condominiums to have conducted writ searches to determine if proceedings had been commenced. Additionally, the condominium declarations registered on title, that were also provided to purchasers, refer to the notes.

[37] In my view, the concern raised by the defendants in this regard is speculative and remote. Further, the alleged prejudice is not prejudice to the defence of the action. Counsel pointed me to no case where the court considered prejudice of the kind alleged in this case to be prejudice for the purposes of an extension of time to serve the statement of claim.

Conclusion

[38] Having considered the circumstances of this case, I am satisfied that the extension of time for service will advance the just resolution of the dispute, without prejudice or unfairness to the parties.

Disposition and Costs

[39] The plaintiff’s motion is granted without prejudice to any limitation defence the defendants may have, or any other time based defence. It is also without prejudice to any position that the defendants may wish to take regarding the running of interest, should the plaintiffs be successful in their claims.

[40] At the hearing of the motion counsel advised that it was agreed that the successful party would be entitled to partial indemnity costs. Therefore as the plaintiffs are the successful party, they are entitled to their partial indemnity costs. At the hearing, counsel advised me that they expected they would be able to agree on quantum. In the event that they cannot, the parties may each file cost submissions of no more than three double-spaced pages (12 pt font). The plaintiffs shall file their submissions on or before May 26, 2023, and the defendants shall file their submissions on or before June 9, 2023

L. La Horey, A.J. Date: May 12, 2023

[^1]: The defendants refer to July 27, 2022 as the date that the statements of claim were “served” in their factum and treat July 27, 2022, as the relevant end date for calculating the delay in service. [^2]: Chiarelli v Wiens [^3]: Chiarelli at para 12 [^4]: Chiarelli at para 12 [^5]: Pagliuso v Primerica Financial Services Ltd., 2019 ONCA 778 [^6]: Chiarelli at para 17 [^7]: Chiarelli at paras 10, 14 - 16 [^8]: I understand that there may be a defence filed in a related action, but it was not provided to me. [^9]: At this point, Mr. Conant is representing only TSCC 2538. He is then retained by TSCC 2550 and by letter dated March 28, 2018 repeats the arguments in his early letter on behalf of TSCC 2550 [^10]: Chiarelli at para 15