



COURT OF APPEAL FOR ONTARIO

CITATION: M & M Homes Inc. v. 2088556
    Ontario Inc., 2020 ONCA 134

DATE: 20200218

DOCKET: M51177, M51186 (C67632)

Paciocco J.A. (Motions Judge)

BETWEEN

M & M Homes Inc.

Plaintiff (Respondent)

and

2088556 Ontario Inc
., Royal Lepage Real Estate Services Ltd., John Redvers, 697350
    Ontario Limited, 1375051 Ontario Limited, Dorothy Kushner, Sam Goldman, Frank
    Goodman, Lillian Goodman, Dinapet Holdings Limited, 614921 Ontario Limited,
    Maria Traina, Howard Brian Goldman, Joseph Burdi, Doris Miller, Carole
    Greenspan, Community Trust Company, 2178875 Ontario Inc., Jong Suk Im, Sung Ran
    Lee, Yeon Hee Huh and In Hee Woo

Defendants (
Appellant
)

Robert S. Choi and Gina Rhodes for the
    appellant, responding party on M51177, and moving party on M51186

Elliot Birnboim, for the respondent, moving
    party on M51177, and responding party on M51186

Heard: February 5, 2020

REASONS FOR DECISION

OVERVIEW

[1]

The appellant, 2088556 Ontario Inc. (208
    Ontario), as vendor, and the respondent, M & M Homes Inc. (M & M
    Homes), as purchaser, entered into an agreement of purchase and sale (APS)
    relating to development land. The sale did not close, and litigation ensued. In
    the trial decision appealed from, the respondent purchaser, M & M Homes,
    prevailed, receiving an order for specific performance to be enforced through a
    vesting order (the vesting order), and costs on a substantial indemnity
    basis. 208 Ontario is appealing both the vesting order and the costs order.

[2]

There are now two interconnected motions before
    me, arising out of that appeal.

[3]

In motion M51177, M & M Homes moves to set
    aside a certificate of stay relating to the costs order that was issued by the
    registrar of this court, pursuant to r. 63.01 of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194.

[4]

In motion M51186, 208 Ontario moves for a stay
    of the vesting order and the costs order pending appeal.

[5]

I address both motions in this decision after
    setting out the material facts, most of which are common to the two motions.
    For the reasons below, I find that the costs order was automatically stayed
    under r. 63.01 and do not set aside the certificate of stay issued by the
    registrar. I also find that it is in the interests of justice to stay the
    vesting order.

MATERIAL FACTS

[6]

The respondent, 208 Ontario, under the directing
    mind of Mr. Lam, severed land for development purposes. 208 Ontario initially retained
    one part of that land for residential development (the residential property).
    On September 14, 2012, 208 Ontario entered an APS to sell the other part of
    that land to M & M Homes (the commercial property), for a purchase price
    of $2,150,000.

[7]

Under the APS, 208 Ontario was obliged to bring
    municipal services to the land and obtain written confirmation from the
    municipality relating to those services. This was not accomplished by the
    initial closing date, leading to closing extensions being mutually granted.

[8]

Ultimately, litigation ensued, with M & M
    Homes seeking specific performance of the APS and an abatement relating to the
    costs of bringing the required services to the land. M & M Homes filed a Certificate
    of Pending Litigation

(the CPL) on title.

[9]

After the CPL was filed, 208 Ontario transferred
    the property to CRC Sutton Inc. (CRC), another corporation controlled by, and
    under the directing mind of, Mr. Lam. In addition, collateral mortgages were
    placed on the commercial property as additional security for loans on the
    residential property.

[10]

M & M Homes prevailed at trial, securing an
    order for specific performance and two abatements (a services abatement and a
    management fee abatement) together amounting to close to two-thirds of the agreed
    purchase price. The trial judge provided for enforcement of the specific
    performance order by specifying that upon payment into court of an adjusted
    purchase price and other adjustments that may be ordered on motion in writing brought
    before her, the commercial property would vest in M & M Homes.

[11]

Although the relief requested in the litigation
    would affect CRC and CRC was not a party to the litigation, the trial judge
    found that CRC had adequate notice through Mr. Lam to protect its interests,
    had it wished to do so.

[12]

In her judgment, the trial judge specified the
    amount of the adjusted purchase price, $713,979.05, that M & M Homes would
    have to pay into court to secure its vesting order. That adjusted purchase
    price was arrived at after itemizing the services abatement and the management
    fee abatement.

[13]

In para. 129 of her judgment the trial judge wrote:

[M & M Homes] also seeks its costs in this
    action, and submits that any costs awarded should be payable, in the first
    instance, as an abatement of the purchase price. [Trial counsel for 208
    Ontario] has not responded to this submission. Costs will be determined after
    review of the written submissions. Absent a r. 49 offer from the defendant that
    could trigger r. 49.10(2), the plaintiff will have its costs in this action. I
    agree that these costs should be deducted from the adjusted purchase price
    prior to payment into court.

[14]

The parties could not agree on costs. In a
    separate Reasons for Decision on Costs, the trial judge awarded M & M Homes
    $210,000 in substantial indemnity costs based on her finding that 208 Ontario
    had misconducted itself in its dealing with the land despite the CPL having
    been registered on the property, and again repeatedly misconducted itself during
    the trial proceedings. The Reasons for Decision on Costs makes no mention of
    the costs being deducted from the adjusted purchase price, as referenced in
    para. 129 of the judgment, above.

[15]

208 Ontario now appeals the specific performance
    order (C67632). As part of that appeal, 208 Ontario has also appealed the costs
    decision, but it has not sought leave to appeal the costs order.

[16]

After filing its notice of appeal, 208 Ontario
    requisitioned a certificate of stay from the registrar of this court relating
    to the costs order, which was granted.

[17]

In response, M & M Homes moves in motion
    M51177 to have that certificate of stay set aside.

[18]

In response to that motion, 208 Ontario has
    applied for a stay of the vesting order and the costs order. A stay of the
    vesting order would forestall the risk of M & M Homes seeking to enforce the
    vesting order pending appeal by paying the full $713,979.05 adjusted purchase
    price set out in the judgment and taking its chance on collecting the costs
    award without the benefit of the abatement referred to by the trial judge in
    para. 129 of the judgment, reproduced above.

MOTION M51177 FOR AN ORDER STRIKING THE
    CERTIFICATE OF STAY

[19]

The primary argument M & M Homes offers in
    support of an order setting aside the registrars certificate of stay is its
    contention that a certificate of stay can only properly be issued, absent an
    order for a stay pending appeal, if an automatic stay is in place. It argues
    that r. 63.01, the relevant rule, does not automatically stay the costs award
    in this case because the trial judge did not make an order for the payment of
    money within the meaning of r. 63.01. Instead, M & M Homes contends that
    the trial costs are ordered to be collected through an abatement from the money
    required to be paid into court when M & M Homes triggers the vesting order.
    In its view, the registrars certificate of stay was therefore improperly
    issued.

[20]

208 Ontario disputes M & M Homes contention
    that the trial judge ordered the costs abatement. 208 Ontario points out that when
    the trial judge set out the adjusted purchase price in her judgment, she did
    not include a deduction for the costs order, and she made no mention of such a deduction
    in the Reasons for Decision on Costs she provided. Neither party has taken out
    a formal order that can be consulted to resolve this dispute.

[21]

In my view, it does not matter whether the trial
    judge ordered an abatement from the adjusted purchase price for the costs order
    she made. The costs order itself is an order for the payment of money and is
    automatically stayed under r. 63.01, even if provision was made to deduct the
    costs award from the adjusted purchase price.

[22]

Rule 63.01 provides as follows:

63.01(1) The delivery of a notice of
    appeal from an interlocutory or final order stays, until the disposition of the
    appeal, any provision of the order for the payment of money, except a provision
    that awards support or enforces a support order.

[23]

There is authority supporting the notion that a
    costs order is an order for the payment of money within the meaning of r. 63.01(1):
    see
City Commercial Realty (Canada) Ltd. v. Backich
, [2005] O.J. No.
    6443 (C.A.) (In Chambers). I agree with this, and it remains true even where a
    trial judge orders the costs awarded to be collected through an abatement. M
    & M Homes conceded during the hearing that a proper formal order in this
    case would have to specify the costs order of $210,000, even if an abatement
    relating to the costs order had been ordered. That concession was correct,
    since it is through the costs order that the debt obligation that permits the
    abatement would arise. It necessarily follows that the costs order is a
    provision for the payment of money, even where a short-cut mechanism such as an
    abatement is provided for in a judgment to ensure the payment of this debt
    obligation.

[24]

For this reason, I also reject M & M Homes
    ancillary argument, that it was misleading for 208 Ontario not to disclose the
    abatement in its requisition. In my view, because r. 63.01 automatically stayed
    the costs order, mention that the costs order was enforceable by way of
    abatement was immaterial to the requisition request. There was nothing
    misleading on the part of 208 Ontario in failing to mention this unimportant
    detail to the registrar when seeking the certificate of stay relating to the
    costs order.

[25]

It is evident that I reject, as well, M & M
    Homes alternative argument that the automatic stay of a costs order under r. 63.01
    operates only if the substantive order under appeal is itself automatically
    stayed by r. 63.01. In
Backich
the substantive order did not provide
    for the payment of money. The appeal was from an order dismissing a claim for
    unpaid commission, yet Lang J.A. said: By rule 63.01, the trial judgment,
    insofar as it awards costs to the moving party, is automatically stayed pending
    the outcome of the appeal, at para. 4.

[26]

Finally, I will not entertain M & M Homes oral
    submissions relating to whether the certificate of stay should be removed after
    consideration of factors analogous to those in
RJR-MacDonald Inc. v. Canada
    (Attorney General)
, [1994] 1 S.C.R. 311. When M & M Homes made these
    submissions, I understood it to be responding to Ontario 208s argument that M
    & M Homes was advancing the wrong test when challenging the propriety of
    the certificate of stay, and that a similar standard to that used in
RJR-MacDonald
    Inc.
should apply. I do not decide this motion on the basis that M & M
    Homes used the wrong test and should have used the
RJR-MacDonald Inc.
test,
    and so I need not consider this further. Moreover, M & M Homes did not plead
    this theory as an alternative basis for setting aside or removing the certificate
    of a stay.

[27]

The motion to set aside the certificate of say
    is therefore denied.

MOTION M51186 FOR A STAY PENDING APPEAL

[28]

208 Ontario brings a motion for a stay of both
    the vesting order and the costs order pending appeal. I would stay the vesting
    order.

[29]

The overarching consideration in whether to
    grant a stay is the interests of justice:
Zafar v. Saiyid
, 2017 ONCA
    919, at para. 18. This is determined by a holistic consideration of the factors
    identified in the
RJR-MacDonald Inc
., at p. 334, for assessing whether
    an interlocutory injunction should be granted, namely:

(1)

A preliminary assessment must be made of the
    merits of the case to ensure that there is a serious question to be tried;

(2)

It must be determined whether the applicant
    would suffer irreparable harm if the application were refused; and

(3)

An assessment of the balance of convenience must
    be made as to which of the parties would suffer greater harm from the granting
    or refusal of the remedy pending a decision of the merits.

[30]

Although M & M Homes concedes for the
    purpose of this motion that the first factor has been satisfied given its low
    standard, it urges that 208 Ontario has not met its burden of showing that it
    would suffer irreparable harm if its application were refused, and that the
    balance of convenience lies with M & M Homes, rather than 208 Ontario.

[31]

M & M Homes also asks that 208 Ontarios
    motion be denied because 208 Ontario does not come forward with clean hands: see
Morguard Residential v. Mandel
, 2017 ONCA 177, at paras. 26-28. M
    & M Homes relies on the findings of the trial judge that 208 Ontario
    misconducted itself by dealing with the commercial property in ways designed to
    complicate M & M Homes recovery in the face of a CPL, and by being
    spectacularly inattentive to its litigation obligations both before and at
    trial. Counsel for M & M Homes also relies upon allegations it makes that
    208 Ontario misled the registrar in seeking the certificate of stay, and by
    presenting the registrar with a false affidavit of service.

[32]

I will begin by noting that I have considered
    but am not materially influenced by clean hands considerations in resolving
    this motion.

[33]

I have already rejected the claim that 208
    Ontario misled the registrar through non-disclosure when requisitioning the
    certificate of a stay. Nor am I persuaded that the evidentiary foundation supports
    the allegation that counsel for 208 Ontario filed a false affidavit of service.

[34]

Moreover, the most central findings relied upon
    by the trial judge to impose substantial indemnity costs against 208 Ontario
    are going to be before this court during the appeal, including whether the
    post-CPL

transactions were improper. This court will have to consider whether
    the trial judge misapprehended the evidence and argument in finding that 208
    Ontario attempted to hoodwink the court relating to the status of the
    servicing to the commercial property. Since these findings are the subject of
    the appeal, they should not be held against 208 Ontario in deciding an
    interlocutory issue relating to that appeal.

[35]

Finally, the conduct of counsel for M & M
    Homes itself has been questioned. As indicated, on M & M Homes behalf, unproven
    allegations of misrepresentation against opposing counsel were made, and such
    allegations were communicated to the registrar of this court in email exchanges.
    There may also have been a lapse in expected standards of civility that
    occurred when counsel for M & M Homes called Mr. Lam an egregious liar at
    the end of his cross-examination on this motion.

[36]

In my view, this motion therefore turns on the
    traditional
RJR-MacDonald Inc.
factors, and the holistic assessment of
    the interests of justice.

[37]

As indicated, M & M Homes concedes that
    there are serious issues to be tried in this appeal. That concession was
    well-taken. The appeal is not frivolous and warrants consideration on its
    merits.

[38]

I do agree with M & M Homes that some of 208
    Ontarios irreparable harm submissions are unimpressive, and there are
    complications in finding that 208 Ontario, itself, would be prejudiced if a
    stay is not ordered.

[39]

Specifically, 208 Ontarios main claim relating
    to the harm it would experience is that if the vesting order is triggered, the
    encumbrancers who registered their mortgages after the CPL could lose their
    mortgage security on the commercial property, and those mortgagees would immediately
    enforce their debts against 208 Ontario, causing the insolvency of 208 Ontario.
    I need not decide whether the evidentiary foundation for this risk has effectively
    been established before me because were this to happen, 208 Ontario would be
    the author of its own misfortune. When the litigation began, it was not exposed
    to the risks these mortgages may present. Knowing that it could lose the commercial
    land in litigation, it made a conscious choice to encumber that land, thereby
    courting the risk of defaulting on its financial obligations if that commercial
    land was lost in the pending litigation. It does not lie in the mouth of a
    litigant who did not face the risk of irreparable harm from the enforcement of
    a pending claim, to voluntarily assume such risk after the litigation is
    pending, and then rely upon that risk to impede the enforcement of that claim
    after it succeeds.

[40]

Nor am I impressed by the risks to the post-CPL mortgagees
    themselves. They too chose to run the risk that 208 Ontario or its assignees
    could lose the land in this litigation. The materialization of that accepted
    risk does not qualify as irreparable harm. In any event, the vesting order
    cannot be triggered without the competing priorities being determined. Those
    holding encumbrances on the land are entitled to participate and protect their
    legitimate interests in a priority hearing.

[41]

I do accept, however, that there is a material
    risk that irreparable harm will be caused by now enforcing a vesting order
    remedy that may be overturned in the future. By its very nature, the
    enforcement of that vesting order will deprive the owners of the land, which M
    & M Homes itself contends is unique enough to warrant a specific
    performance remedy. There is no assurance that should 208 Ontario prevail on
    appeal, it will be possible to reverse the enforcement of a vesting order
    pending appeal. If the vesting order is enforced pending appeal, M & M
    Homes will be entitled to transfer the land, putting it out reach of
    restoration. Or, a party holding title after the vesting order could make
    changes to the land that diminish its value, or that may require costly reinstatement.
    Or, improvements could be made to the land that could require settlement negotiations
    or litigation that ensnares the owners of the land. Or, liens could be placed
    on the land, impeding effective restoration.

[42]

I appreciate that there is an impediment to 208
    Ontario relying on the risks of prejudice that I have described. As counsel for
    M & M Homes stresses, technically, such harm will not be caused to 208
    Ontario, the moving party, or applicant, because 208 Ontario no longer owns the
    land. CRC does. If the second
RJR-MacDonald Inc.
factor  relating to
    irreparable harm to the applicant - was a strict precondition to staying an
    appeal, this would prove fatal to the current motion. However, irreparable harm
    to the applicant is not a strict precondition to a stay. The ultimate test for
    granting the stay is the interests of justice, and the
RJR-MacDonald
considerations
    are factors, not prerequisites. In the unusual circumstances of this case, the
    absence of irreparable harm to the applicant does not undercut this motion.

[43]

First, as a matter of law, the risk of
    irreparable harm that I describe does not evaporate simply because 208 Ontario
    no longer owns the land. Those risks obtain, and are faced by the current
    owner, CRC.

[44]

Second, substance cannot be ignored. CRC currently
    owns the land as a legal vehicle to facilitate a development plan involving several
    parties. The enforcement of the vesting order and the loss of the control of
    the land that this would entail would pose risk of prejudice not only to CRC
    but to the principals of CRC and the participants in the development project.

[45]

Finally, M & M Homes cannot have it both
    ways. It obtained an order of specific performance against 208 Ontario even
    though 208 Ontario is not the owner, on the clear premise that, in substance, 208
    Ontario is sufficiently connected to the land that such order is just. It is
    not equitable for M & M Homes to now resist a stay of that remedy on the
    premise that 208 Ontario is not sufficiently connected to the land for material
    prejudice to arise.

[46]

I am therefore persuaded that there is a risk of
    irremediable harm, if not to 208 Ontario, then to CRC and others associated
    with the development project. Regardless of whether the irreparable harm to
    these third parties is to be considered under
RJR-MacDonald Inc.
s irreparable
    harm head, or under the balance of convenience inquiry, these interests warrant
    consideration.

[47]

Of importance, M & M Homes has not presented
    evidence that it would be prejudiced by delaying the enforcement of the vesting
    order until the appeal can be resolved on its merits. Its sole claim is that a
    stay will obstruct or scuttle the priorities hearing that is scheduled. This is
    not material prejudice. If the vesting order is reversed on appeal, that hearing
    will prove to have been moot. The priorities hearing can wait.

[48]

Any other inherent prejudice there may be can
    adequately be remedied by an order expediting the appeal, which both parties
    agree to do.

[49]

Given the balance of convenience and the
    irreparable harm that may arise, I am persuaded that it is in the interests of
    justice to stay the vesting order. I have already found that the costs order is
    automatically stayed pending appeal, but I would also have stayed the costs
    order pending appeal, in any event, had that not been so.

[50]

I therefore allow 208 Ontarios motion and stay
    the vesting order made by the trial judge, pending determination of the appeal.
    However, I order that this appeal be expedited. As suggested by counsel for M
    & M Homes, the appellant must perfect its appeal within 45 days of receipt
    of notice that the required transcripts have been transcribed. The respondent
    must serve and file the respondents factum and compendium within 30 days of
    service of the appeal book, compendium, exhibit book, transcript and appellants
    factum.

COSTS

[51]

I am reserving a decision on the costs of these
    motions. The parties may file written costs submissions, not to exceed 5 pages,
    along with supporting bills of costs, on the following deadline: ten business
    days after the release of this decision for the appellant, 208 Ontario, and five
    business days after the receipt of the appellants written costs submission by
    the respondent, M & M Homes.

[52]

I direct that this decision be filed in both
    motion records, M51177 and M51186.

David
    M. Paciocco J.A.


