Kentville (Town) v Mike’s Clothing Limited, 2022 NSSC 145

SUPREME COURT OF Nova Scotia Citation: Kentville (Town) v Mike’s Clothing Limited , 2022 NSSC 145 Date: 20220525 Docket: KEN No. 511564 Registry: Kentville Between: Town of Kentville Applicant v. Mike’s Clothing Limited Respondent Judge: The Honourable Justice Gail L. Gatchalian Heard: April 25, 2022, in Kentville, Nova Scotia Counsel: John Shanks, for the Applicant Richard Norman, for the Respondent By the Court: Introduction [ 1 ] The Town of Kentville started this proceeding as an Application.

The Respondent, Mike's Clothing Limited, wants to convert the Application to an Action. [ 2 ] In the Application, the Town seeks specific performance of an Agreement for Purchase and Sale (the "Agreement"). Under the Agreement, Mike’s Clothing bought a piece of property on Main Street in Kentville from the Town. [ 3 ] The Agreement required that certain construction deadlines be met by Mike’s Clothing, failing which it was required to reconvey the property to the Town at the original purchase price.

The construction deadlines included a deadline by which the first 15% of the building was to be completed, defined as the installation of the footings. The parties amended the Agreement three times to extend the deadline to install the footings. [ 4 ] The last amendment, made on June 29, 2021, extended the deadline for the installation of the building’s footings to September 30, 2021. The June 29, 2021 amendment also included the following two clauses: 3.

The dates agreed to herein are critically important and Mike’s shall not request any further extension thereof and Mike’s specifically understands and agrees that the Town may buy back the property pursuant to the agreement, as amended, if Mike’s does not strictly comply with the terms of the agreement, as amended. 4.

All terms of the agreement (as amended), except as specifically amended in this Amending Agreement, are confirmed and survive this Amending Agreement, including (without limitation) the Town’s right to buy back the property. [ 5 ] In October of 2021, Mike’s Clothing requested a further extension of the deadline to install the footings. In November of 2021, Kentville municipal council voted against extending the deadline and voted in favour of enforcing the term requiring re-conveyance of the property.

The Town says that, at the time of the vote, Mike’s Clothing had not yet commenced any work to prepare the property for the installation of the footings. This Application was started to seek specific performance of the term of reconveyance.

[ 6 ] Mike’s Clothing filed a Notice of Contest and a Notice of Respondent’s Claim. Mike’s Clothing alleges that the Town breached an implied or express term of the Agreement that further extensions would not be unreasonably denied, that the Town breached its duty of good faith contractual performance, and that the Town was improperly motivated by animus towards Andrew Zebian, the principal of Mike’s Clothing. [ 7 ] Mr. Zebian was elected to Kentville municipal council after the parties entered into the Agreement. Mike’s Clothing says that, after he was elected, Mr.

Zebian became aware that former CEO Kelly Rice had alleged that the mayor and certain councillors had created an unsafe work environment for staff. Mike’s Clothing says that Mr. Zebian wanted those allegations to be discussed at a council meeting. Mike’s Clothing alleges that the dispute between Mr. Zebian and the Town over disclosure of Ms. Rice’s allegations affected the parties’ contractual relations in that: (

a) the current CAO failed to obtain a status update on the development of the property despite being directed to do so by council, (

b) certain councillors circulated false information about the progress of the development and the financial wherewithal of Mike’s Clothing and Mr. Zebian, and (

c) among those voting to refuse the extension were the mayor and some councillors referred to in Ms. Rice’s allegations. Mike’s Clothing alleges that it was singled out and refused an extension as a form of retribution, whereas many other developers had received extensions from the Town due to the Covid-19 pandemic. Mike’s Clothing also alleges that a councillor with a pecuniary conflict of interest in the matter voted to deny the extension request. [ 8 ] In support of its motion to convert this Application to an Action, Mike’s Clothing says that: 1.

The burden of satisfying the judge that the Application should not be converted to an Action rests with the Town under Civil Procedure Rule 6.02(2) because the claim cannot be heard in four days or less and within two years after the day it started. Mike’s Clothing plans to have ten witnesses, some of whom may not agree to provide affidavits and therefore may have to give viva voce evidence, and the Town plans to have three witnesses. 2. The presumptions in favour of an Application in Rule 6.02(3) do not apply.

In particular, substantive rights will not be eroded in the time it will take to bring the action to trial, and the court will not have to hold several hearings in one proceeding. 3. One presumption in favour of an Action in Rule 6.02(4) applies: Mike’s Clothing is seeking a jury trial and it would be unreasonable to deprive it of that right. 4. There is only one factor that weighs in favour of an Application under Rule 6.02(5): the parties can quickly ascertain who their important witnesses will be.

The countervailing factors are that the parties cannot be ready to be heard in months, the hearing is not of predictable length and content, and the hearing cannot be heard in less than four days because: (

a) the list of witnesses is extensive, and (

b) Mike’s Clothing expects that it will have to bring multiple motions for discovery subpoenas and for permission to call viva voce evidence. 5. It will likely be more expensive to proceed by way of Application because of the above-noted motions. [ 9 ] The Town responds as follows: 1. The burden of satisfying the judge that the Application should be converted to an Action rests with Mike Clothing under Rule 6.02(2).

The Application can be heard in four days or less and will be ready for hearing within two years of the date it was commenced because the evidence of seven of the witnesses proposed to be called by Mike’s Clothing is irrelevant. 2. The presumption in favour of an Application under Rule 6.02(3) applies because the Town’s substantive right to reconveyance of the property and to move forward with its plans to develop the property will be eroded by the time it will take to bring an action to trial. 3.

As the presumption in favour of proceeding by way of Application applies, the Court need not consider whether there are any presumptions in favour of a trial in Rule 6.02(4). In the alternative, there are cogent reasons to deny the request of Mike’s Clothing for a jury trial because (

a) the core issue is one of contractual

interpretation, a legal exercise, and (

b) conversion of this matter to a jury trial would cause significant delay. 4. The factors in Rule 6.02(5) support the matter proceeding by way of Application: the parties have been able to ascertain who their important witnesses will be, the parties can be ready to be heard in months, the hearing is of predictable length and content, it can be heard in four days or less, and credibility can be satisfactorily assessed in an Application.

Who Bears the Burden? [ 10 ] A party who proposes that a claim, that can be tried or heard in four days or less and within two years after the day it was started, be determined by an Action, rather than an Application, has the burden of satisfying the judge that an Application should be converted to an Action, or an Action should not be converted to an Application: Civil Procedure Rule 6.02(2). [ 11 ] There is some uncertainty about whether this claim can be heard in four days or less. On the one hand, if Mike’s Clothing has

ten witnesses, some of whom may have to give viva voce testimony because they will not voluntarily provide affidavits, the claim probably cannot be heard in four days or less. On the other hand, if the proposed testimony of several of those witnesses turns out to be irrelevant, the claim may not require more than four days of hearing.

Because it is not clear at this stage whether the claim can be heard in four days or less, I find that Rule 6.02(4) does not apply, and that the burden is on Mike’s Clothing as the moving party to establish that the Application should be converted to an Action: see Superport Marine Services Limited v. Balodis Incorporated , 2021 NSSC 196 at para.23. Presumption in Favour of Application: Substantive Rights Eroded [ 12 ] The Town says that it is experiencing a shortage of both commercial and residential properties. It entered into the Agreement to encourage such development within Kentville.

It included development milestones in the Agreement for this purpose. Those development milestones have not been met. The land sits vacant. It is located in a prominent intersection in the Town’s downtown core. If the matter is converted to an Action to be heard by a judge and jury, is it likely that it will not be heard until at least September 2024. Application dates are available in December of 2022 and June and November of 2023.

Counsel for Mike’s Clothing agreed that there is a real possibility that the lands will continue to remain vacant until this dispute is determined. [ 13 ] The substantive right asserted here is the right that the Town asserts to reconveyance of the property, and to move forward with development the land. [ 14 ] I am satisfied that, should the claim be converted to an Action, the substantive rights asserted by the Town will be eroded in the time it will take to bring an action to trial: see Payne v. Elfreda Freeman Alter Ego Trust (2015) , 2018 NSSC 160 at paras.47-54, upheld 2019 NSCA 28 .

Each day that goes by is a day on which the Town cannot retake possession of these lands and move forward with its plan to have the land developed to alleviate the shortage of residential and commercial properties in the Town of Kentville. I am satisfied that erosion of the Town’s asserted substantive rights will be lessened if the dispute is resolved more quickly by Application, and that the Town expeditiously brought the Application to assert its rights.

Council voted against extending the construction deadlines in November of 2021, and this Application was filed in December of 2021. [ 15 ] There is, therefore, a presumption in favour of an Application under Rule 6.02(3). Presumptions in Favour of Trial [ 16 ] It is not necessary for me to go on to consider whether any presumptions apply in favour of an action under Rule 6.02(4): see Hong v. Lavy , 2018 NSSC 54 at para.37, cited in Payne v. Elfreda Freeman Alter Ego Trust (2015) , 2018 NSSC 160 at para.54.

Factors Favouring Application [ 17 ] I find that the additional factors in Rule 6.02(5), considered as a whole, support the position of the Town that this matter remain an Application, and that the presumption in favour of an Application is not rebutted. [ 18 ] Four factors favour an Application. Identification of Important Witnesses [ 19 ] The parties have been able to ascertain who their important witnesses will be: Rule 6.02(5)(a). Parties Can Be Ready in Months [ 20 ] I am satisfied that the parties can be ready to be heard in months rather than years: Rule 6.02(5)(b).

As noted, the parties have identified their important witnesses. The legal issues are defined and relatively straightforward. I am satisfied that any motion by Mike’s Clothing for discovery subpoenas can be heard and decided this fall. Discoveries can be completed before the end of this calendar year. The parties can prepare and file affidavits well within the first six months of 2023. During that time, any motion by Mike’s Clothing for permission to call viva voce evidence can be heard and decided. The Application can be heard in the summer or early fall of 2023.

Any issues regarding the relevance and admissibility of the proposed evidence of Mike’s Clothing can be determined within that twelve to eighteen month time frame. Credibility Can Satisfactorily Be Assessed in Application

[ 21 ] In my view, credibility in this case can satisfactorily be assessed by considering the whole of the evidence at the hearing of the Application, including affidavit evidence, permitted directed testimony and cross-examination: Rule 6.02(5)(e). Mike’s Clothing acknowledges that credibility can be determined by way of cross-examination on an affidavit. It submits, however, that in this case, credibility is better determined by hearing direct evidence and cross-examination because the proceeding will involve multiple witnesses presenting potentially conflicting evidence about a complex series of events.

However, Mike’s Clothing has not identified a particular issue of credibility that cannot be satisfactorily dealt with by way of cross-examination: see Kings (County) v. Berwick (Town) , 2009 NSSC 398 at paras.40-41. Hearing Content is Predictable [ 22 ] The content of the hearing is predictable: Rule 6.02(5)(c).

It will concern the Town’s request for specific performance of the Agreement based on an alleged breach by Mike’s Clothing of the development milestones in the Agreement, as well as the allegations by Mike’s Clothing that the Town breached an implied or express term of the Agreement that further extensions would not be unreasonably denied, that the Town breached its duty of good faith contractual performance, and that the Town was improperly motivated by animus towards Mr. Zebian.

Uncertainty as to Length of Hearing [ 23 ] The factors that favour an Action are that there is some uncertainty as to the length of the hearing (Rule 6.02(5)(c)) and therefore uncertainty as to whether the claim can be heard in four days or less (Rule 6.02(5)(d)) because of the number of witnesses that Mike’s Clothing intends to rely on and the potential for viva voce evidence to be given at the hearing. [ 24 ] Mike’s Clothing intends to call the following five non-party potentially adverse witnesses to testify about the following subjects: 1.

Kelly Rice, CAO from November, 2019 to July, 2020: the first extension granted, how Council made that decision, and evidence about the allegations she made about the mayor and certain councillors. 2. Mark Phillips, CAO from April, 2011 to September, 2019: how other properties were sold by Kentville and how Kentville normally approached extensions to development milestones. 3. Bill Boyd, CAO from 1994 to 2008: other land deals involving Kentville and extensions of time and the method of negotiation. 4.

Beverly Gentleman, an employee of Kentville: the normal process involving developers seeking extensions of development timelines and how that process was different for Mike’s Clothing. 5. Lindsay Young, an employee of Kentville: the allegations made by Ms. Rice against the mayor and other councillors. [ 25 ] Based solely on the materials before me at the present time, I am skeptical about the relevance of the proposed evidence of Mr. Phillips, Mr. Boyd and Ms.

Gentleman regarding the Town’s normal approach to extensions to development milestones, given that the Town already granted Mike’s Clothing three extensions and given the explicit contractual language negotiated in the June 29, 2021 amendment prohibiting Mike’s Clothing from requesting any further extensions and granting the Town the right to reconveyance of the property if Mike’s Clothing did not strictly comply with the terms of the Agreement. Furthermore, Mr. Boyd’s tenure as CAO ended eleven years before the Agreement was entered into by the parties in 2019, and thirteen years before the June, 2021 amendment.

Mr. Phillips’ tenure as CAO ended two years before the June, 2021 amendment. For a

summary of the pertinent principles of contractual

interpretation, see the decision of Warner J. in R & D Holdings Ltd. v. Buranello and French , 2021 NSSC 359 at paras.4-18. [ 26 ] Again, based solely on the materials before me at the present time, I am also skeptical of the relevance of the proposed evidence of Ms. Rice and Ms. Young regarding the merits of Ms. Rice’s allegations about the mayor and certain councillors. Those allegations are apparently the subject of a non-disclosure agreement that binds Ms. Rice, the Town and the Town’s employees. It is not clear to me how the merits of Ms.

Rice’s allegations are relevant to whether council breached its duty of good faith contractual performance. Mike’s Clothing says that if it is unable to prove the truth of Ms. Rice’s allegations, it will be open to the Town to argue that there is no basis for the allegation of retaliation. I am not persuaded, at this stage, by this argument. Mike’s Clothing proposes to call an additional five witnesses, including Mr. Zebian. Mike’s Clothing gave very little detail about the proposed testimony of the other four witnesses:

1. Donna Conrad: the property and development plans. 2. Councillor Cathy Maxwell: the agreement and the conduct of the Town. 3. Blake Wilson, an employee of a financial institution: the financial arrangements of Mike’s Clothing with respect to the development of the property. 4. A representative from Roscoe Construction: the work of Mike’s Clothing on the property. [ 27 ] Mike’s Clothing believes that Ms. Conrad, Ms. Maxwell and the Roscoe Construction representative will voluntarily provide affidavits. He is unsure whether Mr. Blake will cooperate. However, Mr. Blake’s evidence will be very limited.

As well, the proposed evidence of Ms. Rice regarding the first extension appears to be quite limited. I believe that it is safe to assume, based on the limited information before me, that the direct examination, if permitted, and any cross-examination of Ms. Rice and Mr. Blake, as well as any cross-examination of Ms. Conrad, Ms. Maxwell and the Roscoe Construction representative, will take no more than a day-and-a-half. I believe it is reasonable to assume that any cross-examination of Mr. Zebian will take half a day. [ 28 ] The town intends to have evidence from: 1.

CAO Dan Troke, regarding the negotiations of the amendments and the status of completion of the project at the property; 2. Brian Smith, interim CAO, regarding the negotiation of the Agreement and amendments, and 3. Stacy de Vries, concerning the negotiation of the Agreement and amendments. I believe that it is reasonable to assume that cross- examination of these witnesses may take up to a day-and-a-half. I assume that half a day will be required for closing arguments. [ 29 ] In

summary, I estimate that approximately four days will be required to hear the evidence and closing arguments, if the evidence of five of Mike’s Clothing’s witnesses is determined to be irrelevant (including Ms. Rice’s evidence regarding the merits of her allegations).

I note that the judge who hears the motion for directions may limit the duration or subjects for cross-examination: Rule 5.13(7)(h). [ 30 ] In the circumstances of this case, I find that the factors favouring an Application have more weight, individually and cumulatively, than the uncertainty regarding the length of the hearing and whether it can be heard in four days or less (see Payne v Elfreda Freeman Alter Ego Trust (2015) , 2018 NSSC 160 at para.95), because the potential need for more than four hearing days turns in large part on proposed evidence that may be determined to be inadmissible.

The parties have already ascertained who their important witnesses will be, the legal issues are relatively uncomplicated, the matter can be heard in months rather than years, and credibility issues can be satisfactorily assessed through cross-examination. I conclude that the Rule 6.02(5) factors do not displace the presumption in favour of an Application. Relative Cost and Delay [ 31 ] Mike’s Clothing suggests that, because of pre-hearing motions that will be required, proceeding by way of Application will be more expensive and lengthy. I am not satisfied that such motions will cause undue expense or delay.

I believe that any such motions can be heard and determined with within the next twelve to eighteen months. I am satisfied that converting this matter to an Action will result in significantly more delay as well as cost. The greater expense of a jury trial is obvious. This factor weighs in favour of proceeding by way of Application: Rule 6.02(6). Conclusion [ 32 ] I have carefully considered the submissions of the parties and weighed the relevant factors in Rule 6.02. On balance, I am convinced that it is more appropriate for this matter to proceed by way of Application.

I have been able to come to a definitive decision regardless of which party bears the burden of proof. [ 33 ] I am also guided by the instruction of the Supreme Court of Canada to take a more pro-active approach to the management of hearings in order to promote more timely and affordable access to the civil justice system: see Superport Marine, supra at para.31, citing Hryniak v. Mauldin , 2014 SCC 7 at para.2.

Having considered the relevant factors, I am not persuaded that a conventional trial, far into the future, is proportional to the needs of this particular case. [ 34 ] The motion of Mike’s Clothing to convert the claim to an Action is dismissed. If the parties cannot agree on the costs of this motion, I will receive written submissions from them within 30 calendar days of this decision.

Gatchalian, J.