Wolfridge Farm Ltd. v. Bonang, 2014 NSCA 70

Nova Scotia Court of Appeal Citation: Wolfridge Farm Ltd. v. Bonang , 2014 NSCA 70 Date: 20140630 Docket: CA 425205 Registry: Halifax Between: Wolfridge Farm Limited Appellant v. Gerald P. Bonang and Dianne Bonang Respondents Judge: The Honourable Justice Joel E. Fichaud Motion Heard: June 26-27, 2014, in Halifax, Nova Scotia in Chambers Held: Motion for stay denied with costs of $1,000 payable forthwith in any event of the cause Counsel: John T. Early III for the Appellant (Applicant) James J.

White for the Respondents Reasons: [ 1 ] Wolfridge Farm Limited applies for a stay pending appeal of a foreclosure order issued by the Supreme Court of Nova Scotia. Background [ 2 ] I will paraphrase the facts that were recited by Justice Robertson’s decision under appeal ( 2014 NSSC 40 ), supplemented by the affidavits for this motion. [ 3 ] The Respondents, Mr. and Mrs. Bonang, sold to Wolfridge a property at 39 Dartmouth Road in Bedford. The closing was on May 5, 2003. The price was $300,000. [ 4 ] For several decades until the 1970s, the property had been the site of a garage with oil storage tanks.

At the time of the sale in 2003, Wolfridge and the Bonangs knew that the property needed some environmental remediation from the hydrocarbon residue. By a separate Indemnification Agreement, the Bonangs agreed to pay for any remediation work that was “required by any governmental authority” and indemnify Wolfridge from “any type of charge, action, lien or suit instituted or commenced with respect to contamination”. Wolfridge agreed to pay the $10,000 toward the expected cost of remediation. [ 5 ] Wolfridge’s down payment for the sale was $30,000.

The remaining $270,000 toward the purchase price, plus Wolfridge’s $10,000 toward remediation was financed by a vendor take back mortgage of $280,000. The Bonangs were mortgagees. Wolfridge was the mortgagor. The mortgage required Wolfridge to pay the property taxes annually. [ 6 ] Wolfridge’s principals are Mr. John Early and Mr. Early’s wife. Wolfridge’s principal business is the operation of a horse farm in the Annapolis Valley.

Wolfridge took the title to 39 Dartmouth Road and signed the mortgage to the Bonangs. [ 7 ] The Dartmouth Road property is zoned residential but is subject to a 1988 development agreement with the Town of Bedford permitting its use for sales and display of used cars. Since the 1990s, and under Wolfridge’s tenure since 2003, the property has been used to display and sell cars. Mr. Early has operated a used car business in Florida, and manages the used car business at 39 Dartmouth Road. The Dartmouth Road business has operated under the name “ColorCars”. [ 8 ] Mr.

Early is a lawyer who practiced law in Connecticut for 32 years. On this appeal, and for this stay motion, Mr. Early represents Wolfridge. [ 9 ] The efforts to environmentally remediate the Dartmouth Road property, and the threshhold of the required remediation were

points of contention at the trial, and hover as a backdrop to aspects of this stay motion (see below, paras 30-31, 36). The trial judge’s decision included findings respecting the dealings between the parties and with the provincial Department of Environment respecting the remediation. The judge’s findings were: (

a) The judge (para 11) found that Mr. Bonang “did intend to clean up the site and communicated with the Department of Environment and Labour (‘DOE’) respecting the site”. The judge (paras 16, 18,) cited evidence that Mr. Bonang “spent between $60,000 and $70,000 attempting to clean up the site”, and that Mr. Bonang “engaged LVM Maritime Testing who were prepared to complete the remediation on the site in October 2012, but that Mr. Early refused LVM permission to enter the property and do the work”. The judge (para 33) said “[a]fter Mr. Early’s refusal to allow LVM on the property to remediate the site in October 2012, no further remediation has been done”. (

b) As to the scope of the necessary remediation, the judge found: [20] It is very clear that all of the plans for the remediation of this site from 2002 forward, advanced on behalf of the Bonangs contemplated a cleanup of the residual hydrocarbons that contaminated the site from early days and that the cleanup would be done to a commercial standard, as required by the guidelines.

It is also very clear that the DOE would be prepared to issue a compliance certificate for the subject property, with notice of the certificate registered at the Registry of Deeds by way of a statutory declaration. [21] The evidence of environmental geologist Robert Bekkers of LVM confirmed this objective as does his report to Mr. Bonang dated October 10, 2012, which outlines the scope of the intended work (see Exhibit 6). The proposed cleanup was not a huge undertaking and according to Mr.

Bekkers’ evidence would have been completed for as little as $13,000, but could escalate depending on the depth of the required excavation. The work would have taken two to three days, he testified. (

c) Mr. Early suggested that the remediation must satisfy stricter residential standard that would involve substantially more expense than the scope of work contemplated by LVM to the commercial standard cited by the judge’s para 20. The judge (paras 43-47) said that: (1) “Mr. Early is not a credible witness”; (2) “[t]he suggestion that the residual remediation must now be done to a residential standard and cost in excess of $200,000 inclusive of HST is a fiction created by Mr. Early to attempt a false setoff against the mortgage debt owing”; (3) “even the protocols he [Mr.

Early] quoted (Exhibit 1, Tab 20) would not preclude COC [Certificate of Compliance] being issued as Mr. Bonang’s expert Robert Bekkers testified” and “[h]is [Mr. Early’s] own consultant STRUM proposed remediation to the commercial standard”; (4) “Mr. Early’s insistence on ‘remediation to a residential standard’ has been a red herring, so Mr. Early could renegue [ sic ] on his obligations under the mortgage, defend the foreclosure action and carry on business an additional two years, without making any payment to the Bonangs on the mortgage debt owing”; and (5) “Mr.

Early has suffered no loss, because of delayed remediation”. [ 10 ] The evidence for the stay motion offers little on these points, other than conclusory assertions in Mr. Early’s affidavit. No particulars in the stay record controvert the judge’s findings on the attempted remediation and the scope of required remediation. [ 11 ] I will turn to the judge’s findings that Wolfridge defaulted under the mortgage. [ 12 ] The mortgage is not in evidence for this motion. I rely on the judge’s findings of its terms. The judge (paras 36-39) found that:

(1) Wolfridge “continued to make the original monthly payments of principal and interest up to and including July 5, 2011”;

(2) Wolfridge “fell in arrears of [its] annual tax payments in 2009, however, once three years in arrears, Mr. Bonang brought the tax account up to date on March 18, 2011 by paying $34,760.96”;

(3) Wolfridge “has made no further payments on account of property taxes from 2009 to the present”; and

(4) Wolfridge committed six further breaches of covenants, including failure to cooperate with remediation, failure to keep the property unencumbered, and failure to make payments on demand. The judge said: [41] The foreclosure proceedings could have been sustained by his single failure to pay the property taxes from 2009 forward. The mortgage was then in default. [ 13 ] The Bonangs sued for foreclosure under the mortgage. Wolfridge counterclaimed. In October 2013, Justice Heather Robertson of the Supreme Court of Nova Scotia conducted a four day trial.

On January 31, 2014, the judge issued a Decision ( 2014 NSSC 40 ). The Decision granted the Bonangs’ claim for a foreclosure order, and dismissed Wolfridge’s counterclaim. [ 14 ] On March 7, 2014, Wolfridge appealed to this Court. Its lengthy grounds of appeal challenge virtually every aspect of the proceeding before the trial judge. The Notice of Appeal concludes: This appeal is brought so that the facts on the record and the law are revisited in this case. It is the position of the Appellant that both were grossly ignored in the trial court. [ 15 ] The foreclosure sale is scheduled for July 2, 2014.

The Municipality has scheduled a tax sale for outstanding property taxes on July 8, 2014. [ 16 ] On June 26, 2014, I scheduled the hearing of the appeal for December 8, 2014. [ 17 ] Wolfridge moved for a stay of the July 2 foreclosure sale until the Decision of this Court on the appeal. [ 18 ] The stay motion was scheduled to be heard on June 26, 2014. The parties’ briefs of argument referred to facts that were not supported by evidence or the trial judge’s Decision. On April 22, 2014, Justice Bryson had issued a decision on this appeal, related to a motion for security for costs ( 2014 NSCA 41 ).

Justice Bryson’s Decision said: [3] Since Wolfridge’s factual submissions had no evidentiary support and the Bonangs lacked proper notice of Wolfridge’s motion, I allowed the parties to file additional material which I have now considered. To the extent that new facts are alleged without evidentiary support, (particularly in Mr. White’s letter), I have ignored them.

On June 26, I reiterated that concern to Messrs. Early and White and made it clear that I would ignore counsel’s bare factual assertionsthat were not properly supported by affidavit or the judge’s findings. I adjourned the stay hearing until June 27 to permit the parties tosubmit further affidavits. Later on June 26, Mr. Early submitted a further affidavit and Mr. White submitted an affidavit of Mr. Bonang. Analysis [19] In some jurisdictions, the filing of a notice of appeal automatically stays the order under appeal.

Nova Scotia isn’t one of them.Rules 90.41(1) and (2) say that the filing of a Notice of Appeal “shall not operate as a stay of execution or enforcement of the judgmentappealed from” but a judge “may, pending disposition of the appeal”, issue a stay “on such terms as may be just”. [20] The test remains that stated by Justice Hallett in Fulton Insurance Agencies Ltd. v. Purdy (1990), (NS CA),100 N.S.R. (2d) 341 (C.A.), paras 28-30, under the former Rule 62.10(2).

The stay applicant must show that either (1) there is anarguable appeal, and denial of the stay would cause him irreparable harm and the balance of convenience favours the stay applicant, or(2) there are exceptional circumstances making it just that a stay be granted. [21] Nothing in this motion engages Fulton’s secondary and rarely applied “exceptional” test. I will address the primary test. [22] In Federated Life Insurance Company v. Fleet, 2008 NSCA 90, Justice Saunders discussed whether the issue was “arguable”: [19] At this stage the Chambers judge does not delve into the merits of the appeal.

Rather, the inquiry focusses on whether the notice ofappeal contains realistic grounds which, if established, could be of sufficient substance to persuade a panel of this court to allow theappeal. [citations omitted] [23] The bar is low. Often the motions judge avoids a detailed analysis of the merits, accepts arguability, and turns to irreparableharm. This is not such a motion.

I am not satisfied that this appeal is arguable. [24] As the judge determined, Wolfridge failed to pay property taxes since 2009, in 2011 the Bonangs brought the tax arrears of$34,760.96 current, and Wolfridge has failed to pay property taxes since 2011. Mr. Early’s affidavit of June 26, 2014 for this staymotion says, of the property taxes: 3. That there are back taxes due in the amount of $35,189.14. In addition there are current property taxes due in the amount $4702.06. 4.

That said taxes due consist of taxes for 5 years (including current year) and as such the property is being advertised as subject toredemption. 5. That the Halifax Regional Municipality has scheduled a tax sale of said property to be held on July 8, 2014. 6. That the amount required to purchase the property at the tax sale is $39,891.20. 7.

That the amount necessary to be paid prior to July 8, 2014 to remove the property from a tax sale by the owner is $35,189.14 as of thisdate plus $12.91 per diem, through July 7, 2014 as payment of the current year taxes is not required to remove from sale. [25] The non-payment of annual taxes is a default under this mortgage. As the trial judge determined, under the mortgage thatdefault entitled the Bonangs to foreclose. [26] Mr. Early’s Affidavit says Wolfridge will pay the overdue property taxes: 8.

That prior to July 8, 2014 the Appellant believes and intends to pay whatever is necessary to remove the property from the tax sale. 9. That the property is being sold with a “Right of Redemption”. 10. That Wolfridge Farm Limited or the Respondents are entitled, if the property is sold for taxes on July 8, 2014, to redeem theproperty until approximately January 8, 2015. As such Respondents’ claim that they will have “little or no prospect of securing their$202,094 judgment against Wolfridge” is simply untrue. 11.

That if the Appellant is unable to have funds assembled by July 7, 2014 to pay the taxes, it is certain that it will redeem the propertyto continue its use and ownership of the property. [27] A promise to pay, after the foreclosure sale and sometime before the redemption period expires, is not a defence to an action fora foreclosure order. [28] Mr. Early’s Affidavit then explains why Wolfridge has not yet paid the overdue property taxes: 12. That the Appellant believes, based on its engineering consultants reports that the property will cost in excess of the $202,094 debtowed the Respondents. 13.

That the debt on the property has served as a form of collateral to secure the promised remediation from the time of the sale and thatthis collateral which started at $280,000 has now been diminished to $202,000. 14. That Appellant believes it is unsecured for the costs to be incurred for the remediation. 15. That had Appellant paid previous property taxes which the Respondent has paid, Appellant’s security would have been decreased by$34,000 inasmuch as the debt today would be less than $168,000. …

17. That Appellant has been reluctant to advance more funds to pay property taxes realizing that its collateral position would be weakened by paying the taxes and strengthened should the Respondents advance them. 18. That Appellant’s position is based on a belief that the Respondents are, and have for eleven years sought to evade their contractual responsibility to remediate the contamination to “the satisfaction of the purchaser” as the contract of sale required. [ 29 ] From this, I infer that Wolfridge could martial the funds to pay the overdue property taxes but, up to now, has chosen not to do so.

Wolfridge decided to default on taxes, and therefore on the mortgage, to gain leverage against the Bonangs. The leverage was to pressure the Bonangs to pay environmental remediation costs “in excess of the $202,094 debt owed” to the Bonangs. [ 30 ] The trial judge (quoted above para 9) found that Mr. Early’s “suggestion that the residual remediation must now be done to a residential standard and cost in excess of $200,000 inclusive of HST is a fiction created by Mr. Early to attempt a false setoff against the mortgage debt owing”, and is “a red herring, so Mr.

Early could renege on his obligations under the mortgage, defend the foreclosure action and carry on business an additional two years, without making any payment to the Bonangs on the mortgage debt owing”. Nothing in the evidence for this stay motion suggests that Wolfridge has an arguable case to upset the trial judge’s findings on these points. Mr.

Early’s affidavit for the stay leads me to the same inferences as the judge’s findings. [ 31 ] In my view, there is no arguable ground of appeal that Wolfridge’s clear default in payments due under the mortgage is justified so Wolfridge may (1) extract additional contribution from the Bonangs toward fictional environmental remediation, or (2) operate its business on lands while the Bonangs pay the property taxes, and the Bonangs receive nothing for their sale price secured by the mortgage. [ 32 ] I will turn to irreparable harm. [ 33 ] As stated in Halifax (Regional Municipality) v.

Casey , 2011 NSCA 69 : [41] An applicant for a stay must prove irreparable harm by evidence. General conclusory statements are insufficient. Myatt v. Myatt , 2004 NSCA 124 , para 10 , and cases there cited; Gill v. Hurst , 2010 NSCA 104 , para 12 . … To similar effect: C.B. v. T.M. , 2012 NSCA 75 , para 13 ; Sydney Steel Corporation v.

MacQueen , 2012 NSCA 78 , para 20 . [ 34 ] Wolfridge says that the foreclosure sale on July 2, 2014 will cause Wolfridge irreparable harm by ending its used car business that operates on the premises. [ 35 ] In my view, Wolfridge’s chain of causation is missing a link. [ 36 ] As discussed, Wolfridge has chosen not to pay the property taxes since 2009, and the other amounts due under the mortgage since 2011.

According to the judge, this was (1) ostensibly to pressure the Bonangs to pay what the judge described as “fictional” remediation costs, and (2) actually just an excuse to refuse payments and property taxes due on the mortgage while Wolfridge has operated its business for years on that property. [ 37 ] I am satisfied that if Wolfridge wished to avoid the tax sale and foreclosure sale, Wolfridge could arrange to do so. Mr. Early’s Affidavit paras 8 and 11 (quoted above para 26) says Wolfridge will pay the outstanding property taxes. Mr.

Early’s other Affidavit of April 28, 2014 attaches extracts of an appraisal, as of January 11, 2011, for 39 Dartmouth Road, prepared by Fennell & Associates Appraisers Ltd.. The appraisal states a market value of $610,000. Mr. Early’s Affidavit says, of this appraisal: THAT I believe the Respondents have adequate protection for their judgment of $202,094 as the property is the subject of a certified real estate appraisal in the amount of $610,000 which is in the possession of this Court and the Respondents. The executive

summary containing the valuation is attached to this affidavit as exhibit “A”. If the $610,000 market value is “adequate protection for [the Bonangs’] judgment of $202,094”, then it also should be adequate to secure a loan to Wolfridge for that amount, take out the Bonangs’ debt, and replace the Bonangs’ existing mortgage. [ 38 ] If Wolfridge loses 39 Dartmouth Road to a foreclosure sale on July 2 or to a tax sale on July 8, that would be the result of Wolfridge’s tactical choice not to pay the Bonangs.

Harm is not “irreparable” if the stay applicant can avoid it but has chosen not to. [ 39 ] There is no evidence on this motion that Wolfridge is insolvent, or unable to raise the funds to pay the overdue taxes and mortgage debt. If, however, Wolfridge was unable to raise the funds, that would not alter my view on irreparable harm. If Wolfridge cannot satisfy the tax arrears, then, even if I stayed the foreclosure sale of July 2, the Dartmouth Road property still will be sold at a tax sale on July 8.

If Wolfridge cannot pay its debts that are secured against the land, then Wolfridge’s used car business at 39 Dartmouth Road has a brief life expectancy, stay or no stay. [ 40 ] Lastly, the balance of convenience favours the Bonangs. Granting a stay would forestall their receipt of the secured purchase price owing to them for the property that they conveyed eleven years ago, and require them to pay yet more property taxes, on lands that Wolfridge continues to enjoy for its own commercial profit. On the other hand, denying the stay would cause Wolfridge no irreparable harm, for the reasons that I have discussed.

Conclusion [ 41 ] I would dismiss the motion for a stay, with costs of $1,000 payable by Wolfridge to Mr. and Mrs. Bonang forthwith in any event of the cause.

Fichaud, J.A.