



COURT OF APPEAL FOR ONTARIO

CITATION: Genstar Development Partnership v. The Roman
    Catholic Episcopal Corporation of the Diocese of Hamilton in Ontario, 2019 ONCA
    506

DATE: 20190618

DOCKET: C66059

MacPherson, Tulloch and Harvison Young JJ.A.

BETWEEN

Genstar Development Partnership

Applicant (Appellant)

and

The Roman Catholic Episcopal Corporation of the
    Diocese of Hamilton in Ontario

Respondent (Respondent)

Alan Merskey and Geoff Mens, for the appellant

Jonathan Lancaster and Sean Carter, for the respondent

Heard: June 12, 2019

On appeal from the judgment of Justice Andra Pollak of
    the Superior Court of Justice, dated October 1, 2018, with reasons reported at
    2018 ONSC 3702 and 2018 ONSC 4119.

REASONS FOR DECISION

[1]

The appellant Genstar brought an application for
    specific performance to enforce its purported right to purchase a block of land
    from the respondent Diocese, pursuant to an Agreement of Purchase and Sale,
    dated August 21, 1998, between Imasco Enterprises Inc. (Genstars purported
    predecessor) and the Diocese. The Agreement provided Imasco (as vendor) the
    option to repurchase the property from the Diocese (as purchaser) if the
    property was not developed as a church within 10 years.

[2]

The application judge dismissed Genstars
    application, finding that Genstar had not established that it was neither  successor
    to Imasco nor equitable assignee of the repurchase option and, in any event,
    that its various tenders to the Diocese were deficient. Genstar appeals,
    arguing that the application judge made palpable and overriding errors of fact
    on the evidentiary record before her in so concluding.  It also argues that she
    erred in not in deciding not to convert the application to an action and in
    refusing to permit supplementary evidence on the successor/assignee issues.

Background

[3]

In 1998, Imasco sold a block of land within a
    subdivision development to the Diocese, pursuant to an Agreement of Purchase
    and Sale, dated August 21, 1998. The property was zoned as a place of
    worship, and could only be sold to a purchaser who planned to use it for its
    designated purpose. The purchase price was $576,000. There is no dispute that
    the purchase price was less than the market value of the property, given the
    limited pool of potential purchasers for property zoned exclusively for
    religious purposes.

[4]

The Agreement provided Imasco the right to
    repurchase the property from the Diocese if it was not developed as a church
    within 10 years or if the property was subsequently not required for a church
    (the repurchase option). Section 5  the operative provision of the Agreement
     provided as follows:

If the Property is not developed
    for a church within 10 years hereof or if the Property is not required for a
    church, the Vendor shall be notified thereof and be entitled to repurchase the
    Property within 90 days of such notification at a price equal to the herein
    purchase price multiplied by the increase in the Ontario Consumer Price Index
    between the date of closing hereunder the date of repurchase.

[5]

The repurchase option was apparently included
    because municipal planning rules contemplated that a property initially zoned
    as a place of worship could be re-zoned residential if it was not developed
    into a place of worship after a certain period of time.

[6]

Following the sale of the property to the
    Diocese, Imasco transferred certain assets to other entities. These
    transactions were summarized by the application judge at para. 28 of her
    reasons reported at
Genstar Development Partnership v. The Roman Catholic
    Episcopal Corporation of the Diocese of Hamilton
, 2018 ONSC 4119 (the Second
    Endorsement).

[7]

Pursuant to a Transfer Agreement, dated February
    1, 2000 (the 2000 Transfer Agreement), Imasco transferred certain
    Transferred Assets  defined to be all of Imascos assets
other
than the Excluded Assets listed in a schedule to
    the 2000 Transfer Agreement  to Genstar Development Company Limited (GDCL). Shortly
    thereafter, pursuant to a Transfer Agreement, dated January 15, 2001 (the 2001
    Transfer Agreement), GDCL transferred all of its assets to a newly formed
    partnership  the appellant Genstar. Imasco and GDCL are no longer active corporations.

[8]

The Diocese did not develop the property as a
    church. It also did not give notice after the expiration of the 10 year period
    referred to in the repurchase option. It appears that nothing of substance
    happened until 2016, when the Diocese decided to sell the property. The Diocese
    issued a request for proposals, seeking bids to purchase the property.

[9]

Genstar learned that the Diocese planned to sell
    the property in April 2016. it wrote the Diocese, taking the position that the
    Diocese had breached the terms of the Agreement and expressing its position
    thatGenstar was entitled to exercise the repurchase option as a successor to
    Imasco. Significant correspondence between counsel for Genstar and counsel for
    the Diocese ensued. Genstar twice attempted to tender on the Diocese, but the
    Diocese refused to close citing deficiencies in the tenders and taking the
    position it was not obligated to sell the property to Genstar.

[10]

Genstar then commenced an application to enforce
    its rights under the repurchase option. The Diocese defended the application
    primarily on the basis that:

1)

both
    of Genstars tenders were deficient, as it had failed to use the Ontario
    Consumer Price Index to calculate the repurchase price and thus understated the
    repurchase price by approximately $20,000;

2)

Genstar
    was not Imascos legal successor; and

3)

if
    Genstar was properly construed as Imascos assignee, Genstar had failed to give
    the Diocese notice pursuant to the
Conveyance and Property Act
, R.S.O.
    1990., c. C. 34. In response to this latter argument, Genstar argued that it
    was an equitable assignee of the repurchase option.

[11]

At the hearing of the application, the
    application judge raised concerns about the sufficiency of Genstars evidence
    as to whether Genstar was Imascos successor or, alternatively, whether Imasco
    had assigned the Agreement to Genstar. In particular, she noted that Genstar
    had not included the schedule of Excluded Assets to the 2000 Transfer
    Agreement. She invited the parties to make further written submissions as to
    whether it was appropriate to convert the application to an action, pursuant to
    r. 38.10(b) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg 194: see
Genstar Development Partnership v. The Roman Catholic Episcopal Corporation
    of the Diocese of Hamilton
, 2018 ONSC 3702 (the First Endorsement).

[12]

In its written supplementary submissions,
    Genstar acknowledged that the evidentiary record lacked potentially relevant
    information relating to Genstars status as a successor. It urged the
    application judge not to take the draconian procedural step of converting the
    application to an action. It requested that the application judge allow it to
    adduce further evidence, in the context of the application, to cure the
    deficiencies in the evidentiary record. The Diocese took no position on whether
    it was appropriate to convert the application to an action, but objected to
    Genstars request that it be permitted to file supplementary evidence.

Decision Below

[13]

The application judge determined that she would
    not exercise her discretion to convert the application to the action. However,
    she also held that it would be unfair to allow Genstar to adduce further
    evidence on its status as a successor to Imasco. She noted that Genstar [had]
    never requested an adjournment and [had] consistently submitted that the Court
    should proceed on the present evidentiary record: Second Endorsement, at
    paras. 24, 32. In her view, it would be improper to allow Genstar to introduce
    new evidence after receiving comments and a ruling from the court. The Diocese
    was entitled to know the case it had to meet before the conclusion of the
    hearing.

[14]

The application judge held that Genstar had not
    established that it was a successor to Imasco, because it was not possible to
    determine which assets had been transferred from Imasco to GDCL, and
    subsequently to Genstar, in the absence of the schedule of Excluded Assets in
    the 2000 Transfer Agreement: Second Endorsement, at paras. 32-34. She also
    rejected Genstars alternate position that it was the equitable assignee of the
    repurchase option because it was not possible to determine if there was an
    intention to assign the Agreement in the absence of the schedule of Excluded
    Assets to the 2000 Transfer Agreement: Second Endorsement, at para. 39. As such,
    Genstar had failed to prove it was entitled to exercise the repurchase option.

[15]

The application judge further held, in
obiter,
that Genstars tenders were deficient and precluded it from enforcing the
    repurchase option. Genstar had not used the Ontario Consumer Price Index (as
    contemplated in the repurchase option) to calculate the purchase price and thus
    had understated the correct purchase price by approximately $20,000. She held
    that the Diocese was entitled to insist on strict compliance with the terms of
    the repurchase option. She also rejected Genstars argument that correspondence
    from the Diocese evidenced an anticipatory breach of the Agreement, and thus
    relieved Genstar of the obligation to tender: Second Endorsement, at para. 42.

Issues on Appeal

[16]

Genstar raises the following arguments on
    appeal:

·

The application judge made palpable and
    overriding errors of fact in not finding that Genstar was the successor to
    Imasco or, that Genstar was the equitable assignee of the repurchase option;

·

In the alternative, the application judge erred
    in not exercising her discretion to accept additional evidence or to convert
    the application to an action; and

·

The application judge erred in finding that Genstars
    tenders were deficient and precluded enforcement of the repurchase option.

[17]

For the reasons that follow, we are of the view
    that the appeal can be resolved solely on the basis of the first two asserted
    errors. In particular, we would dismiss the appeal on the basis that the
    application judge was entitled to find, on the record before her, that Genstar
    had not discharged its onus of proving that it was the successor to Imasco or
    the equitable assignee of the repurchase option. We also see no basis upon
    which to interfere with either the application judges refusal to convert the
    application to an action, or her refusal to accept supplementary evidence, in
    the circumstances of this case. In light of these conclusions, there is no need
    to resolve the question of whether the application judge erred in finding that Genstars
    tenders were deficient.

Analysis

[18]

As to the first asserted error, we do not agree
    that the application judge made a palpable and overriding error of fact in
    finding that the evidentiary record did
not
establish that Genstar was a successor to Imasco, or the equitable assignee of
    the Agreement and repurchase option. We note that Genstar agrees that the
    application judge correctly stated the law relating to succession and equitable
    assignment.

[19]

It was only possible to determine which assets
    flowed from Imasco to GDCL to Genstar on a consideration of the contractual documents
    evidencing the transfers  including the schedule of Excluded Assets to the
    2000 Transfer Agreement. The absence of the schedule of Excluded Assets left
    a critical gap in Genstars claim that it was a successor because it had
    [assumed] the burdens and become [vested] with the rights of Imasco and its
    alternative claim that it was an equitable assignee of the repurchase option
    because the intention was for Genstar to have the benefit of the repurchase
    option. The application judge could not determine if the Agreement had been
    transferred to Genstar on the record before her.

[20]

Genstar argues that the application judge erred
    because the uncontested evidence from Genstars affiant was that Imascos real
    estate contracts were transferred from Imasco to GDCL to Genstar. We do not
    accept this characterization of the affiants evidence. The portion of the
    affiants affidavit relied upon by Genstar in this regard  which was also
    reproduced by the application judge  simply describes and attaches the 2000
    Transfer Agreement and 2001 Transfer Agreement. While the affiant states that
    the Transferred Assets in the 2000 Transfer Agreement included Imascos real
    estate contracts  which is clear on the face of the definition of
    Transferred Assets in the 2000 Transfer Agreement  it is not possible to
    determine whether the specific Agreement at issue in this appeal was
    transferred in the absence of the schedule of Excluded Assets. While Genstar
    argues that the test for successorship outlined in
National Trust Co. v.
    Mead
, [1990] 2 S.C.R. 410, at p. 423 does not require that the purported successor
    assume all of the predecessors rights and obligations, it has provided no
    authority for the proposition that a successor can exercise a right
not
assumed.

[21]

As counsel for the appellant acknowledged during
    oral argument, Genstar had the burden to establish that it was entitled to
    enforce the repurchase option as against the Diocese. We are not satisfied that
    the application judge made a palpable and overriding error in concluding that
    she could not make a positive finding that Genstar was a successor of Imasco or
    the equitable assignee of the repurchase option in the absence of the relevant
    documentary evidence.

[22]

As to the second asserted error, we do not agree
    that the application judge erred in not exercising her discretion to receive
    additional evidence or to convert the application to an action.

[23]

An application judges discretionary decisions
    are entitled to significant deference. An appellate court will only interfere
    where the lower court misdirected itself, came to a decision that is so clearly
    wrong so as to amount to an injustice, or gave no or insufficient weight to a
    relevant consideration:
Pennyfeather v. Timminco Ltd.
, 2017 ONCA 369,
    at para. 135, citing
Penner v. Niagara Regional Police Services Board
,
    2013 SCC 19, [2013] 2 S.C.R. 125, at para. 27.

[24]

Here, the application judge raised the issue of
    the missing schedule of Excluded Assets at the hearing of the application.
    There was no request for an adjournment. She was never provided with the
    schedule of Excluded Assets. While Genstar asked to provide additional
    evidence on the succession issue in its supplementary written submissions, it
    did not expressly identify what that evidence would be. The application judge
    was clearly concerned that to allow additional evidence would result in
    unfairness to the Diocese. In these circumstances, we are not satisfied that
    the application judge exercised her discretion in such a manner so as to
    warrant appellate intervention. Moreover, Genstar urged the application judge
    not to convert the application to an action in its written supplementary
    submission and, for that reason, it does not lie for it to argue before this
    court that she ought to have converted the application to an action.

[25]

Finally, we are not persuaded that the manner in
    which the hearing of the application unfolded was procedurally unfair. The
    issue of whether Genstar was a successor to Imasco, or an assignee of the
    repurchase option, was put in issue in the parties written submissions before
    the hearing of the application. While it is true that the application judge
    raised the issue of whether it was necessary to convert the application to an
    action at the hearing of the application  due in large part to the fact that
    the schedule of Excluded Assets to the 2000 Transfer Agreement was not in
    evidence  the parties were provided an opportunity to make additional written
    submissions on this issue. We therefore disagree with Genstars submission on
    appeal that it was blindsided by what it referred to as the application
    judges overemphasis on the missing schedule of Excluded Assets.

Disposition

[26]

For the forgoing reasons, the appeal is
    dismissed. The Diocese is entitled to costs of the appeal in the agreed upon
    amount of $35,000, inclusive of HST and disbursements.

J.C. MacPherson J.A.

M. Tulloch J.A.

A. Harvison Young
    J.A.


