CPL Not Granted in Case Where Specific Performance Claimed

In Starwood Acquisitions Inc. v. 267 O’Connor Ltd., the court made an important finding: it refused to grant a Certificate of Pending Litigation in connection with a failed commercial property deal, because the only remedy being claimed by the plaintiff was for specific performance.  In light of the facts, this was a case where damages should have been claimed instead.

A Toronto property development company agreed to purchase a commercial property from the seller for $11,400,000, with a closing date in May of 2014.  The downtown Ottawa property consisted of a six-story medical building with parking.

Shortly after the agreement was signed, the buyer raised several concerns about existing leases and other matters. Disputes arose; the deal did not close as planned, and the buyer started a lawsuit for specific performance and an abatement of the purchase price.  The buyer also asked for a Certificate of Pending Litigation (CPL).

In considering whether to grant the CPL, the court applied the relevant legal test, finding that the potential buyer clearly had an “interest in land”, and a “triable issue” as to such interest, arising from the potential breach of contract concerns over the leases.  However, the tripping point for granting the CPL was the fact that the buyer was claiming not damages, but rather specific performance. The latter is an equitable remedy available for breach of contract, but is granted only where the land has a peculiar and special value, to the point where money would not be a complete remedy for the breach.

In this case, the commercial property was being purchased by a property developer with a long list of similar projects, undertaken over many years in many different cities and provinces. Other comparable downtown Ottawa properties with similar development potential were still available.  Simply put, there was nothing special about this property; rather, it was merely an attractive investment opportunity, given its location and prospects for development. On this point the court observed:

“Where land is purchased as an investment, damages are an appropriate remedy.”

Since an award of damages rather than specific performance was the appropriate recourse, the court declined to grant a CPL.  See Starwood Acquisitions Inc. v. 267 O’Connor Limited, 2014 (ONSC).