) ) CROSSLINK BRIDGE CORP. Applicant – v. –, 2013 ONSC 6540

CITATION : Crosslink v. CN Railway, 2013 ONSC 6540 COURT FILE NO.: 886/13 DATE: 2013-10-24 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) CROSSLINK BRIDGE CORP. Applicant – and – CANADIAN NATIONAL RAILWAY COMPANY Respondent ) ) ) ) ) ) ) ) ) Chris Paliare and Jeffrey Larry, Counsel for the Applicant Mark Stewart and Marina Sampson, Counsel for the Defendant ) ) ) HEARD: July 16, 2013 REASONS FOR JUDGMENT MURRAY J. [ 1 ] This is an application.

The defendant’s motion seeking an order directing the application to proceed by way of trial is dismissed. [ 2 ] Crosslink Bridge Corporation (hereinafter “Crosslink”) is a company owned by two individuals, Andrew Penuvchev (hereinafter “Penuvchev “) and Zoran Cocovski (hereinafter ‘’Cocovski”).

Crosslink was incorporated in 2007 in order to purchase approximately 44 acres of property from Canadian National Railway Company (hereinafter “CN”) in the Niagara Falls area. [ 3 ] The 44 acre property is more particularly described as part of Stamford Township Lot 92, designated as parts 1, 2, 3, 5 and 6, Plan 50 9R- 11 645 City of Niagara Falls, Regional Municipality of Niagara, Land Registry office for the Land Titles Division of Niagara South (No.59) identified as PIN 64327-0026 9 (hereinafter "the property" ). [ 4 ] It was the plan of Penuvchev and Cocovski to develop a tourism, entertainment, retail and sports venue on the property.

Penuvchev is currently the sole director of Crosslink although at the time of the purchase of the property both he and Cocovski were directors and shareholders. [ 5 ] In this application, Crosslink seeks an order declaring that the transaction wherein Crosslink purchased the property from CN is void. It further seeks an order that CN return to Crosslink $5.913 million representing all amounts paid by Crosslink to CN including expenses, carrying charges and expenses incurred in maintaining, rezoning and financing of the property. [ 6 ]

Section 197 of the Environmental Protection Act R.S.O. 1990, Ch. E.19 (hereinafter “ EPA ”) provides as follows:

(1) A person who has authority under this Act to make an order or decision affecting real property also has authority to make an order requiring any person with an interest in the property, before dealing with the property in any way, to give a copy of the order or decision affecting the property to every person who will acquire an interest in the property as a result of the dealing. 2001, c. 17, s. 2 (50) .

(2) A certificate setting out a requirement imposed under subsection (1) may be registered in the proper land registry office on the title of the real property to which the requirement relates, if the certificate is in a form approved by the Minister, is signed or authorized by a person who has authority to make orders imposing requirements under subsection (1) and is accompanied by a registrable description of the property. 2001, c. 17, s. 2 (50) .

(3) A requirement imposed under subsection (1) that is set out in a certificate registered under subsection (2) is, from the time of registration, deemed to be directed to each person who subsequently acquires an interest in the real property. 2001, c. 17, s. 2 (50) .

(4) A dealing with real property by a person who is subject to a requirement imposed under subsection (1) or (3) is voidable at the instance of a person who was not given the copy of the order or decision in accordance with the requirement. 2001, c. 17, s. 2 (50) . [ 7 ] Section 197(4) of the EPA provides that the consequences of failing to provide a purchaser with a copy of the Director’s Order makes a sale of property voidable at the instance of the purchaser. [ 8 ] Crosslink purchased property from CN in 2008.

Crosslink says it was never provided with a copy of the Director’s Order before it purchased property from CN.

According to the applicant, it was not until November 23, 2012, that Penuvchev and Cocovski became aware of the Director’s Order dated December 18, 2006, when representatives of the Ministry of the Environment provided Crosslink with a copy of the Order. [ 9 ] Crosslink now seeks to void the property transaction of 2008 and claims $5.913 million from CN being the costs of purchasing, carrying, maintaining and developing the property. [ 10 ] I agree with the applicant that this case falls to be decided on one factual issue.

That issue is: did the respondent CN as the vendor of a property subject to a Director's Order under section 197(1) of the EPA provide a copy of the Director’s Order to the purchaser Crosslink prior to the purchase of the property? For reasons set out below, I conclude that CN did provide a copy of the Director’s Order to the purchaser. Background Information [ 11 ] In May 2007, Crosslink made an offer to purchase the property for $6.5 million. The offer to purchase was accepted by CN on July 24, 2007. The offer initially allowed for due diligence period ending December 28, 2007.

The due diligence period was subsequently extended several times to allow Crosslink to satisfy itself about environmental issues and its ability to have the land rezoned for its intended use. [ 12 ] On March 31, 2008, Crosslink made an unconditional offer to purchase the property and on May 21, 2008, Crosslink and CN entered into a final agreement of purchase and sale pursuant to which Crosslink agreed to purchase the property from CN for $5.4 million. The transaction closed on November 28, 2008.

Some of the financing for the purchase of the property was by way of mortgage in the amount of $2.7 million by Crosslink back to CN which was personally guaranteed by Penuvchev and Cocovski. [ 13 ] The principals of Crosslink, Penuvchev and Cocovski, now assert that when they purchased the property, based on the reports provided to them by CN, they understood that the level of contamination on the property was generally contained and that the property was suitable for its intended commercial use with minimal clean-up. [ 14 ] Rezoning of the property was completed in 2009 and in 2011 at which time Crosslink listed the property for sale together with an adjacent 7 acres which it had purchased from the City of Niagara in 2010. [ 15 ] Litigation between Cocovski and Penuvchev commenced in December, 2010, and resulted in an order by the court that Mr.

Cocovski be removed as a director and officer of Crosslink. It is apparent from the material filed with respect to that litigation that the relationship between Cocovski and Penuvchev has completely broken down. [ 16 ] Crosslink defaulted on its mortgage obligations in 2011. The mortgage by Crosslink in favour of CN which is guaranteed by Cocovski and Penuvchev remains in default and CN has threatened to commence enforcement proceedings. [ 17 ] In July, 2011, Crosslink agreed to sell the property and the adjacent 7 acres to Metrolinx.

However Metrolinx refused to close the transaction because of environmental concerns relating to the property formerly owned by CN which it reported would cost millions of dollars to remediate. [ 18 ] As noted above, the applicant says that it was not until November 23, 2012, that Penuvchev and Cocovski became aware of the Director’s Order dated December 18, 2006. [ 19 ] On December 21, 2012, Crosslink advised CN that it was exercising its right pursuant to the EPA to void the purchase transaction. On January 8, 2013, CN advised Crosslink that it did not accept Crosslink’s right to void the transaction.

The Director’s Order and the Certificate of Requirement [ 20 ] Prior to the purchase of the property by Crosslink, a Director’s Order dated December 18, 2006 relating to the property had been issued pursuant to the EPA . The Director’s Order is the order of Paul Niewglowski, District Manager, Niagara District Office, Ontario Ministry of the Environment dated December 18, 2006.

The Director’s Order specified that certain steps might have to be taken to reduce the risk of contamination. [ 21 ] The Director’s Order issued to CN in 2006 contains the following under the heading “Work Ordered”: In the event of a change in the physical site conditions or receptor characteristics at the site, implement, maintain and operate any risk management measures as are necessary to prevent, decrease or eliminate the adverse effect that will result or is likely to result from the discharge of the contaminant into the natural environment.

[ 22 ] In addition, the Director’s Order contained the following provision: Pursuant to the authority vested in me under subsection 197(1) of the EPA , commencing on December 18, 2006, I order you and any other person with an interest in the property, before dealing with the property in any way, to give a copy of this order, including any amendment thereto, to every person who will acquire an interest in the property as a result of the dealing. [ 23 ] According to the Director's Order, the order is based on environmental information provided to the MOE by CN.

In particular, the Director’s order refers to following documentation provided by CN to the MOE: 1. Record of Site Condition (RSC); 2. Site Specific Risk Assessment(SSRA) as described in a document entitled Final Preliminary Generic Risk Management Plan dated June 12, 2001; 3. Phase II - Environmental Site Assessment dated September 1997; 4. Phase II - Environmental Site Assessment dated August 1997; 5. Site-Specific Risk Assessment prepared by Cantox Environmental Inc.; and 6.

Preliminary Generic Risk Management plan dated June, 2001 completed by Jacques Whitford Environmental Limited. [ 24 ] The Director’s Order was specifically referred to in the Certificate of Requirement which was registered on title. The Certificate of Requirement was registered on title to the property in 2006 by Paul Niewglowski, District Manager in the Niagara District office of the Ontario Ministry of the Environment.

The registered Certificate of Requirement provides: This is to certify that pursuant to an order of Paul Niewglowski, District Manager, Niagara District Office, Ontario Ministry of the Environment, under

section 18 of the Environmental Protection Act dated December 18, 2006 (No. 1748-6UYLFP), relating to contaminants on the property described in box 6, the following person: Canadian National Railway Company and any other persons having an interest in the property described in box 6 are required, before dealing with the property in any way, to give a copy of the order including any amendments that may be made thereto to every person who will acquire an interest in the property as a result of the dealing.

Under subsection 197(3) of the Environmental Protection Act , the requirement applies to each person who, subsequent to the registration of the certificate, acquires an interest in the real property. Evidence of The Applicant 1. The evidence of Andrew Penuvchev. [ 25 ] On March 23, 2007, well prior to the execution of the initial offer to purchase by Crosslink, CN provided to Penuvchev a box of documents containing environmental disclosure including the Certificate of Requirement issued pursuant to section 197(2) of the EPA .

The covering letter sets out a number of environmental reports concerning the property including the Certificate of Requirement issued pursuant to the EPA , s.197(2). In particular, the covering letter accompanying the environmental disclosure states that Environmental Reports that were contained in the box of documents which was provided to Penuvchev included the following: 1. Record of Site Condition (RSC): 2. Site Specific Risk Assessment(SSRA) as described in a document entitled Final Preliminary Generic Risk Management Plan dated June 12, 2001; 3.

Phase II - Environmental Site Assessment dated September 1997; 4. Phase II - Environmental Site Assessment dated August 1997; 5. Site-Specific Risk Assessment prepared by Cantox Environmental Inc.; and 6. Preliminary Generic Risk Management plan dated June, 2001 completed by Jacques Whitford Environmental Limited. [ 26 ] Mr. Penuvchev’s evidence is that he never removed any of the contents from the box except to look briefly at certain of the environmental reports provided. In his affidavit filed in support of this application he states: “Since picking up the box on or about

March 23, 2007, I have never removed any of the contents from the box except to look briefly at certain of the Reports.” In the same affidavit, Mr. Penuvchev states: “I have reviewed all the documents provided by CN during the due diligence process and at any other time prior to the closing and concluded definitively that CN never provided Crosslink with a copy of the Director’s Order.” It is not clear how these two apparently contradictory statements fit together. In cross-examination, Mr.

Penuvchev confirmed that he never removed any of the contents of the box but looked briefly at certain of the reports to the extent that he was able to cross-reference the contents of the box to the covering letter outlining the contents. [ 27 ] In May 2007, Crosslink made an initial offer to purchase the property for $6.5 million. CN accepted the offer on July 24, 2007. The offer allowed for due diligence period ending December 28, 2007.

The due diligence period was subsequently extended several times to allow Crosslink to satisfy itself about its ability to rezone the land as intended. [ 28 ] On March 31, 2008, Crosslink made an unconditional offer to purchase the 44 acre property and on May 21, 2008, Crosslink and CN entered into a final agreement of purchase and sale pursuant to which Crosslink agreed to purchase the property from CN for $5.4 million. Some of the financing for the purchase of the property was by way of mortgage in the amount of $2.7 million by Crosslink back to CN which was personally guaranteed by Penuvchev and Cocovski.

The transaction closed on November 28, 2008. [ 29 ] According to the affidavit filed by Mr. Penuvchev, Mr. Thompson of Thompson Dymond the law firm which represented Crosslink on the acquisition of the property from CN confirmed to Penuvchev, Mr. Thompson never saw the Director’s Order prior to November, 2012. [ 30 ] There is no affidavit evidence from Mr. Thompson or from Ms Giahi a lawyer at Thompson Dymond who was acting for Crosslink on the purchase transaction.

Rule 39.01(5) provides that statements of the deponent’s information and belief may be contained in an affidavit with respect to facts that are not contentious. The assertion that Mr. Thompson, the lawyer for the purchase, never saw the Director’s Order prior to November 2012 is a contentious fact. 2. The Evidence of Zoran Cocovski [ 31 ] Mr. Cocovski is currently a shareholder of Crosslink. He has had experience in the real estate industry since 1984 and is a licensed broker and a land developer. [ 32 ] On or about August 22, 2007, Mr. Cocovski picked up a box of documents from CN.

So far as can be determined by the covering letter which accompanied the documents, the documentation given to Cocovski on August 22 nd was the same as that given to Penuvchev on March 23, 2007. The covering letter indicates that in addition to environmental reports the Certificate of Requirement was contained in that documentation. As with the covering letter accompanying the disclosure provided to Penuvchev in March, the Director’s Order is not specifically mentioned in the itemized list of documents provided by CN on August 22 nd . [ 33 ] Mr.

Cocovski's evidence is that CN never provided a copy of the Director’s Order to Crosslink's officers or directors and that the first time he saw the Director’s Order was in November, 2012. According to Cocovski, prior to the purchase, he never understood that the property being purchased would require significant cleanup. On cross-examination, Cocovski conceded that he never really went through the contents of the box of documents provided to him on August 22, 2007 and that he never read any of the documentation provided including the Certificate of Requirement.

He advised in cross-examination that the box of documents was delivered by him to Thompson Dymond or to Mr. Penuvchev. The Evidence of the Respondent CN [ 34 ] The affidavit evidence from CN is provided by number of individuals who were involved in the 2008 transaction. 1. The evidence of Joseph Debono [ 35 ] Dentons Canada LLP acted for CN on the sale of the property.

Joseph Debono is an experienced real estate practitioner and partner with Denton's Canada LLP who represented CN on the Crosslink purchase. [ 36 ] On or about March 23, 2007, Penuvchev entered into a non-disclosure agreement on behalf of Crosslink and was provided by CN with the disclosure package relating to the environmental condition of the property including a copy of the Certificate of Requirement which had been issued pursuant to section 197(2) of the EPA . [ 37 ] Mr.

Debono's evidence is that he believes that a copy of the Director’s Order was attached to the Certificate of Requirement and provided to Crosslink in its disclosure on March 23, 2007 to Penuvchev and on August 22, 2007 to Cocovski. [ 38 ] Prior to execution of the first purchase agreement, Cocovski advised CN that the environmental reports had been approved and asked that the agreement of purchase and sale be executed. [ 39 ] The first purchase agreement (in s.22) provided that the obligation of Crosslink to complete the purchase of the property was subject to it having satisfied itself with respect to all aspects of the property, including, among others, the physical and environmental condition of the property on or before the due diligence date and that Crosslink was required to provide written notice to CN by no later than 5 p.m. on the due diligence date that such conditions were satisfied or waived, failing which the agreement was to be considered null and void.

In fact, the due diligence period was extended from July 16, 2007, until March 31, 2008. [ 40 ] The parties entered into a second and final purchase agreement on May 21, 2008. Prior to entering into this agreement,

Crosslink waived all conditions with respect to the environmental condition of the property. In the final agreement of purchase and sale, Crosslink warranted and covenanted in favour of CN that it had satisfied itself with respect to all matters respecting the environmental condition of the property and that CN was assuming no liability in this respect.

Crosslink acknowledged that CN had delivered all environmental reports in its possession relating to the property and Crosslink had conclusively waived all requisitions concerning any matters relating to the property and accepted full responsibility for all conditions relating to the property. [ 41 ] On October 30, 2008, Ms Giahi of the law firm of Thompson Dymond, counsel for the purchaser Crosslink, sent a letter of requisition to Mr. Debono the solicitor for CN.

The October 30, 2008 requisition letter from the purchaser’s solicitor required a copy of the Director’s Order referred to in the Certificate of Requirement which was registered on title as instrument number SN148138.

In her requisition letter of October 30, 2008, Ms Giahi made the following requisition on behalf of the purchaser: Instrument number SN148138 registered on December 21, 2006 is a Certificate relating to contaminants on the property which requires CN to give a copy of the Order of Paul Niewglowski, District Manager, Niagara District Office, Ontario Ministry of the Environment dated December 18, 2006 (No. 178-6UYLFP) to any person having interest in the property. To the extent not already provided to the purchaser, we require a copy of the order be provided to our office for review by the purchaser. [ 42 ] Mr.

Debono provided his law clerk, Fran Coffin, with a copy of the requisition letter. According to Mr. Debono, Ms Coffin recalls speaking to Ms Sze at CN who advised her that a copy of the Director’s Order had already been provided to Crosslink by CN. Ms Coffin’s recollection is in accord with Mr. Debono's recollection of what Ms Coffin reported to him at the time. On behalf of the vendor CN, Mr. Debono replied to the requisition letter by letter dated November 17, 2008 to Crosslink’s counsel Ms Giahi in which Mr. Debono stated: “Please advise us if your client has not yet received a copy of this Order.” Mr.

Debono received no letter in reply to his letter to Ms Giahi. [ 43 ] On November 25, 2008, in the context of negotiating an enforceability opinion with the solicitors for the purchaser, Mr. Debono asked counsel for the purchasers whether there were any concerns with respect to the enforceability opinion including any “concerns regarding title or the requisitions submitted in the requisition letter”. Mr.

Debono's evidence is that Ms Giahi advised him that there were none. [ 44 ] On November 25, 2008, Crosslink executed an Acknowledgment and Undertaking (consistent with the terms of the second purchase agreement) in which it takes full responsibility for all orders against the property. The Acknowledgment and Undertaking was provided to the vendor or CN on closing.

The Acknowledgment and Undertaking includes the following provision: [Crosslink] shall be responsible for and hereby indemnify and save harmless [CN] from any costs, including legal and witness costs, claims, demands, civil actions, prosecutions, or administrative hearings, fines, judgments, awards, including awards of costs, that may arise as a result of the condition of the property, order issued in connection with the condition of the property (including any order issued against [CN]), or any loss, damage and injury caused either directly or indirectly as a result of the condition of the property. [ 45 ] Furthermore, Mr.

Debono had exchanges with Crosslink lawyers on other issues including insurance prior to the completion of the transaction. In an e-mail from Mr. Thompson dated November 27, 2008, Mr. Thompson advises: “The only outstanding issue is insurance.” [ 46 ] Mr. DeBono gave evidence that he would have provided a copy of the Director’s Order to the purchasers solicitors if he had been told it had not been received by Crosslink . [ 47 ] The transaction closed on November 28, 2008. [ 48 ] Mr.

DeBono deposes that his belief then and now is that CN had provided a copy of the Order of Paul Niewglowski, District Manager, Niagara District Office, Ontario Ministry of the Environment dated December 18, 2006 (the Director’s Order) and that it was attached to the Certificate of Requirement in the materials delivered to Penuvchev on March 23, 2007 and to Cocovski on August 22, 2007. 2. The Evidence of Fran Coffin [ 49 ] Ms Coffin is a real estate clerk at the law firm of Denton's Canada LLP. She worked with Mr. Debono on the transaction involving the purchase by Crosslink of the CN property.

Ms Coffin was provided with the requisition letter from the law firm Thompson Dymond dated October 30, 2008 in which the purchaser’s solicitors requested a copy of the Director’s Order “to the extent not already provided” to the purchaser.

Ms Coffin recalls speaking on the telephone with Ms Susan Sze, Asset Management Coordinator for Business Development and Real Estate at CN who advised her at the time that a copy of the Director’s Order had been provided by CN to Crosslink. [ 50 ] At the time of the transaction, Ms Sze was employed by CN as the Asset Management Coordinator for Business Development and Real Estate at CN. Apparently she holds the same position today. Evidently, it was Ms Sze who was responsible for providing, and who did provide, environmental disclosure to Crosslink prior to the purchase.

Ms Sze did not provide any affidavit evidence. According to Mr. Debono, Ms Sze has no recollection of the conversation with Ms Coffin or whether she provided a copy of the Director’s Order to Crosslink. Therefore there is no evidence from Ms Sze that she provided Crosslink with a copy of the Director’s Order prior to closing and no evidence from Ms Tze that she reported to Ms Coffin that the Director’s Order had been provided by her to Crosslink. 3. The Evidence of Richard Paton [ 51 ] Richard Payton is a Senior Manager, Finance with CN.

At the time of the sale of the property to Crosslink, he was employed by CN as the Regional Manager, Business Development and Real Estate, Eastern Canada and in this position was involved in

the sale of the property to Crosslink. As noted above, Penuvchev and Cocovski assert that when they purchased the property, based on the reports provided to them by CN, they understood that the property was suitable for its intended commercial use with minimal clean- up. Mr. Payton’s evidence is that the environmental disclosure made by CN and provided to Mr. Penuvchev in March, 2007, indicated that the property being purchased was significantly contaminated and would likely require remediation prior to development. Following Crosslink's receipt of the environmental disclosure, Cocovski sent an e-mail to Mr.

Payton with a copy to Mr. Penuvchev in which he stated as follows: “Further to my voicemail message to you last week, the environmental reports have been approved, please sign the agreement of purchase and sale this week." [ 52 ] According to information set out in the Director's Order, the order is based on environmental information provided to the Ministry of the Environment (hereinafter “MOE”) by CN. The documentation referred to in the Director’s Order is documentation provided by CN to the MOE and is set out in paragraph 22 above.

It is not disputed that all of this information was provided to Penuvchev and Cocovski prior to closing first to Penuvchev on March 23, 2007, and then to Cocovski August 22, 2007, together with the Certificate of Requirement. Analysis [ 53 ] The applicant says CN never provided it with a copy of the Director’s Order prior to closing. Penuvchev and Cocovski both provide affidavit evidence that the first time they saw the Director’s Order was in November, 2012. [ 54 ] The applicant further asserts that there is also no evidence that CN complied with other clear terms of the Director’s Order.

In particular, the applicant asserts that there is no evidence that the respondent complied with other requirements contained therein, namely: to post a Director’s Order in a conspicuous place on the property and to notify the Ministry of the Environment after a change in title to the property.

The applicant argues that CN's disregard for and non-compliance with these other provisions of the Director’s Order is consistent with a finding that CN did not provide a copy of the order to Crosslink prior to the purchase as was required by the Director’s Order. [ 55 ] Representatives of CN believe that the Director’s Order was attached to the Certificate of Requirement which was provided to Penuvchev in March 2007 and to Cocovski in August of 2007 prior to closing. [ 56 ] There is no dispute that the Certificate of Requirement was not only registered on title but was also provided to the purchasers by CN prior to closing.

The Certificate of Requirement refers to the Director’s Order and provided notice to the purchaser Crosslink that there was a Director’s Order outstanding. However, the registration of the Certificate of Requirement is not the same as giving to the potential purchaser a copy of the Director’s Order. Actual notice of Director’s Order was required not only by specific direction to CN contained in the Director’s Order but also by the relevant provisions of the EPA .

As noted above, the Director’s Order mandated disclosure of the Order by CN to any subsequent purchaser as follows: “…, I order you … before dealing with the property in any way, to give a copy of this order, including any amendment thereto, to every person who will acquire an interest in the property as a result of the dealing”.

Section 172(4) of the EPA states: “A dealing with real property by a person who is subject to a requirement imposed under subsection (1) or (3) is voidable at the instance of a person who was not given the copy of the order or decision in accordance with the requirement.” It is clear from s. 172(4) of the EPA that registration on title of a Certificate of Requirement does not relieve the vendor of property from giving specific notice of a Director’s Order if the vendor wishes to negate the risk that the purchaser will void the transaction after finding out the specifics of the Director’s Order.

The consequences of not providing specific notice of Director’s Order are clear and unambiguous. [ 57 ] In my opinion, there are sufficient facts which are not in dispute to establish on a balance of probabilities that CN did provide a copy of the Director’s Order to the purchasers prior to closing. They are as follows: 1.

On or about March 23, 2007, Penuvchev entered into a non-disclosure agreement on behalf of Crosslink and was provided by CN with the disclosure package from CN's files relating to the environmental condition of the property including a copy of the Certificate of Requirement which had been issued pursuant to section 197(2) of the EPA . 2. The Director's Order was issued based on environmental information provided to the MOE by CN. The Director’s Order refers to the following environmental reports provided by CN to the MOE:

a) Record of Site Condition (RSC);

b) Site Specific Risk Assessment(SSRA) as described in a document entitled Final Preliminary Generic Risk Management Plan dated June 12, 2001;

c) Phase II - Environmental Site Assessment dated September 1997;

d) Phase II - Environmental Site Assessment dated August 1997;

e) Site-Specific Risk Assessment prepared by Cantox Environmental Inc.; and

f) Preliminary Generic Risk Management plan dated June, 2001 completed by Jacques Whitford Environmental Limited. All of the environmental reports referred to in the Director’s Order together with the Certificate of Requirement were provided to Penuvchev and Cocovski on March 23, 2007 and August 22, 2007.

3. Penuvchev and Cocovski did not read the environmental disclosure provided by CN. 4.

The first purchase agreement provided that the obligation of Crosslink to complete the purchase of the property was subject to it having satisfied itself with respect to all aspects of the property, including, among others, the physical and environmental condition of the property on or before the due diligence date and that Crosslink was required to provide written notice to CN by no later than 5 p.m. on the due diligence date that such conditions were satisfied or waived, failing which the agreement was to be considered null and void. The due diligence period expired on March 31, 2008. 5.

CN and Crosslink entered into a second purchase agreement on May 21, 2008. Prior to entering into this agreement, Crosslink waived all conditions with respect to the environmental condition of the property; 6. In the final agreement of purchase and sale, Crosslink warranted and covenanted in favour of CN that it had satisfied itself with respect to all matters respecting the environmental condition of the property and that CN was assuming no liability in this respect.

Crosslink acknowledged that CN had delivered all environmental reports in its possession relating to the property and Crosslink had conclusively waived all requisitions concerning any matters relating to the property and accepted full responsibility for all conditions relating to the property. 7. On October 30, 2008, Ms Giahi of the law firm of Thompson Dymond (counsel for the purchaser Crosslink) wrote a letter of requisition to Mr.

Debono the solicitor acting for CN in which she requisitioned a copy of the Director’s Order referred to in the Certificate of Requirement which was registered on title as instrument number SN148138 as follows: Instrument number SN148138 registered on December 21, 2006 is a Certificate relating to contaminants on the property which requires CN to give a copy of the Order of Paul Niewglowski, District Manager, Niagara District Office, Ontario Ministry of the Environment dated December 18, 2006 (No. 178-6UYLFP) to any person having interest in the property.

To the extent not already provided to the purchaser, we require a copy of the order be provided to our office for review by the purchaser. 8. Mr. Debono replied to the requisition letter by letter dated November 17, 2008, to Crosslink’s lawyer Ms Giahi in which he stated: “Please advise us if your client has not yet received a copy of this Order;” 9. Mr. Debono did not receive any written reply to his letter of November 17, 2008, and did not receive any advice from Ms Giahi or from any other person at Thompson Dymond that Crosslink had not yet received a copy of the Director’s Order. 10.

On November 25, 2008, before the closing of the property transaction on November 28 th , in the context of negotiating an enforceability opinion with the solicitors for the purchaser, Mr. Debono asked Ms Giahi for the purchasers whether there were any concerns with respect to the enforceability opinion including any “concerns regarding title or the requisitions submitted in the requisition letter”. Mr. Debono's evidence -which is uncontradicted - is that Ms Giahi advised him that there were none. 11.

On November 25, 2008, Crosslink executed an Acknowledgment and Undertaking (consistent with the terms of the second purchase agreement) in which it agreed to take full responsibility for all orders against the property. The Acknowledgment and Undertaking was provided to CN on closing.

The Acknowledgment and Undertaking includes the following provision: [Crosslink] shall be responsible for and hereby indemnify and save harmless [CN] from any costs, including legal and witness costs, claims, demands, civil actions, prosecutions, or administrative hearings, fines, judgments, awards, including awards of costs, that may arise as a result of the condition of the property, order issued in connection with the condition of the property (including any order issued against [CN]), or any loss, damage and injury caused either directly or indirectly as a result of the condition of the property 12. Mr.

Debono had exchanges with Crosslink lawyers on other issues including insurance prior to the completion of the transaction. In an e-mail from Mr. Thompson dated November 27, 2008, Mr. Thompson advises: “The only outstanding issue is insurance.” [ 58 ] The reasonable inference to be drawn from all of these facts is that Crosslink or its solicitors were provided with a copy of the Director’s Order prior to closing. While all the facts noted above taken together support this inference, there are certain facts which point overwhelmingly to the conclusion that the Director’s Order had been provided prior to closing.

The Director's Order was specifically requisitioned by Ms Giahi by letter dated October 30, 2008. Mr. Debono replied to the requisition letter by letter to Ms Giahi dated November 17, 2008, in which he stated: “Please advise us if your client has not yet received a copy of this Order.” Mr. Debono did not receive a written reply to this letter. In the conversation between Mr. Debono and Ms Giahi which took place on November 25, 2008, Ms Giahi specifically answered the question which had been posed by Mr. Debono in his letter of November 17 th . On November 25, 2008, one week after Mr.

Debono had responded to Ms Giahi’s requisition for a copy of the Director’s Order, Mr. Debono asked Ms Giahi whether there were “any concerns with regarding title or the requisitions submitted in the requisition letter.” Ms Giahi responded that there were none. In my opinion, the only reasonable inference to be drawn from these facts is that Ms Giahi had satisfied herself prior to her conversation with Mr.

Debono on November 25, 2008, that the Director’s Order had been provided to her client or to her solicitors and that her client had no concerns with either the title or requisitions submitted in the requisition letter. In an e- mail from Mr. Thompson dated November 27, 2008, Mr. Thompson advised Mr.

Debono that: “The only outstanding issue is insurance.” The other facts set out above including the provisions of the agreement of purchase and sale and the Acknowledgment and Undertaking executed by Crosslink on November 25, 2008, are consistent with and support this conclusion. [ 59 ] I therefore find on a balance of probabilities that Crosslink or its solicitors were provided with a copy of the Director’s Order prior to closing. [ 60 ] Alternatively, if I am wrong in concluding that the evidence establishes that Crosslink was provided with a copy of the Director’s Order, I find that the applicants are estopped from bringing this application.

The law of estoppel has been reviewed in many

cases. In Maracle v. Travellers Indemnity Co. of Canada, (SCC), [1991] 2 S.C.R. 50, Sopinka J. writing on the doctrineof estoppel stated at paragraph 13: The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which wasintended to affect their legal relationship and to be acted upon. Furthermore, the representee must establish that, in reliance on therepresentation, he acted on it or in some way changed his position. In John Burrows Ltd. v.

Subsurface Surveys Ltd., (SCC), [1968] S.C.R. 607, Ritchie J. stated, at p.615: It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties enteredinto a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not beenforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legalrelations created by the contract would be altered as a result of the negotiations. [61] In Engineered Homes Ltd. v.

Mason, (SCC), [1983] 1 S.C.R. 641, McIntyre J. stated at p. 647 asfollows: The requirements of a successful defence based on promissory estoppel are conveniently set out in Halsbury's Laws of England (4th ed.),vol. 16, para. 1514, in these words: Promissory estoppel.

When one party has, by his words or conduct, made to the other a clear and unequivocal promise or assurancewhich was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him athis word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legalrelations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualificationwhich he himself has so introduced.

This doctrine, which is derived from a principle of equity enunciated in 1877, has been the subject ofconsiderable recent development and is still expanding. It differs from estoppel in pais in that the representation relied upon need not beone of present fact. Cases dealing with the question in this Court include Conwest Exploration Company Limited v. Letain, (SCC), [1964]S.C.R. 20, and John Burrows Ltd. v. Subsurface Surveys Ltd., (SCC), [1968] S.C.R. 607, in which Ritchie J., at p. 615,speaking for the Court, cited the judgment of Lord Denning in Combe v. Combe, [1951] 1 All E.R. 767: In the case of Combe v.

Combe, Lord Denning recognized the fact that some people had treated his decision in the High Trees case ashaving extended the principle stated by Lord Cairns and he was careful to restate the matter in the following terms: The principle, as I understand it, is that where one party has, by his words or conduct, made to the other a promise or assurance whichwas intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at hisword and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations asif no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which hehimself has so introduced, even though it is not supported in point of law by any consideration, but only by his word.

It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties enteredinto a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not beenforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legalrelations created by the contract would be altered as a result of the negotiations. [62] In response to the requisition by Ms Giahi for the Director’s Order contained in her letter dated October 30, 2008, Mr.Debono replied on November 17, 2008 in which he stated: “Please advise us if your client has not yet received a copy of this Order.” Mr.

Debono did not receive a written reply to this letter. In a conversation between Mr. Debono and Ms Giahi on November 25, 2008,Ms Giahi specifically answered the question which had been posed by Mr. Debono in his letter of November 17. In that conversation,Mr. Debono asked Ms Giahi whether there were “any concerns regarding title or the requisitions submitted in the requisition letter.” MsGiahi responded that there were none. Furthermore, Mr. Thompson e-mailed Mr.

Debono on November 27, 2008 to advise that that:“The only outstanding issue is insurance.” The conduct and the statements of the solicitors for the purchaser made to Mr. Debono priorto closing amount to an unqualified representation that a copy of the Director’s Order had been received by Crosslink. [63] As noted above, neither Mr. Thompson nor Ms Giahi provided affidavit evidence. [64] I conclude that the defence of estoppel is available to CN in this case. The solicitors for Crosslink, by words and conduct,gave to Mr.

Debono the lawyer for CN what was in effect a clear assurance that the Director’s Order had been received by Crosslink. Itwould be neither equitable nor just to conclude that the conduct of Crosslink’s solicitors had any other effect. Those assurances wereintended to affect the legal relations between Crosslink and CN and to be acted on accordingly. Mr. Debono accepted the assurances and

acted on them. His evidence was that if he had been advised that Crosslink had not been provided with a copy of the Director’s Order, hewould have provided a copy of the Order to their solicitors prior to closing. Crosslink cannot now be allowed to conduct itself as if nosuch assurance had been given. [65] In applying the principle of promissory estoppel, I am aware of other cases which hold that the defence of estoppel is notavailable if its effect would be to nullify a statutory provision that imposes a positive obligation on a party. See for example: TamglassAmerican Inc. v.

Goldray Inc. (Trustee of), 2005 ABCA 341 , [2005] A.J. No. 1387, 259 D.L.R. (4th) 108 and the cases referredto therein namely: Maritime Electric Co. v. General Dairies Ltd., (UK JCPC), [1937] 1 D.L.R. 609 (P.C.); PrincipalGroup Ltd. (trustee of) v. Anderson, (1997), 1997 ABCA 199 , 147 D.L.R. (4th) 229 (Alta. C.A.); F. Hoffman-La Roche AG v.Canada (Commissioner of Patents), [2004] 2 F.C.R. 405, 2003 FC 1381 (T.D.). [66] In my view, the provisions of

section 197 of the Environmental Protection Act do not bar the defence of estoppel. TheSupreme Court of Canada in Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd. (SCC), [1994]1S.C.R. 80 stated at paragraph 55: “A statute can only affect the operations of the common law principles of restitutionand bar the defence of estoppel or change of position where there exists a clear positive duty on the public utility which is incompatiblewith the operation of those principles.” The duty on a vendor of property subject to a Director’s Order is to disclose the order to apotential purchaser.

In my view, the defence of estoppel is not incompatible with the statutory obligation to notify the purchaser. Thereare no other provisions in the in the EPA which are incompatible with the operation of the defence of estoppel. [67] For the above reasons, the application is dismissed. Costs [68] CN is entitled to its costs. If the parties are unable to agree on costs, CN shall serve and file brief written submissions byNovember 15, 2013. Crosslink shall file brief responding submissions by November 29, 2013. Murray J.

Released: October 24, 2013 CITATION: Crosslink v.CN Railway, 2013 ONSC 6540 COURT FILE NO.: 886/13 DATE: 2013-10-24 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: CROSSLINK BRIDGE CORP. Applicant – and – CANADIAN NATIONAL RAILWAY COMPANY Respondent REASONS FOR JUDGMENT Murray J. Released: October 24, 2013