Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220916 DOCKET: C69912

Lauwers, Roberts and Zarnett JJ.A.

BETWEEN

2174372 Ontario Ltd. Plaintiff (Appellant)

and

Galib N.N. Dharamshi and Khadija S. Dharamshi Defendants (Respondents)

Counsel: Richard Macklin and Wei Jiang, for the appellant Alnaz Jiwa, for the respondents

Heard: May 30, 2022

On appeal from the judgment of Justice Robert Charney of the Superior Court of Justice, dated September 17, 2021, with reasons reported at 2021 ONSC 6139.

Reasons for Decision

[1] This appeal arises out of the failed real estate transaction between the appellant vendor and the respondent purchasers for the sale of a house to be built by the vendor. The motion judge allowed the respondents’ motion for summary judgment and dismissed the appellant’s action. He found that because the house was not substantially complete, the appellant was not in a position to close the transaction on the scheduled closing date of November 8, 2018 and the agreement therefore came to an end. The appellant appeals the dismissal of its action.

[2] This appeal turns on the motion judge’s findings of fact. As such, absent reversible error, his decision is subject to a deferential standard on appellate review. We see no error that would permit appellate intervention and dismiss the appeal.

Factual Background

[3] As the motion judge noted, the disposition of this matter turns on its facts. We therefore set out the relevant factual background in some detail in order to frame the motion judge’s findings with which the appellant takes issue.

[4] The appellant builder sold to the respondents a residential house to be constructed for the purchase price of $869,445.64 [1]. The respondents paid a total of $55,000 in deposits over five installments from April 1 to August 1, 2017. The agreement of purchase and sale specified that the closing date was November 8, 2018.

[5] On July 17, 2018, the respondents first advised the appellant through a telephone conversation with its sales representative that they might not be able to close due to difficulty obtaining financing. On August 21, 2018, the respondents repeated in writing that they would be unable to close unless the appellant was willing to grant a price reduction with an extended closing period. The appellant refused and stated that it would close the transaction on the scheduled closing date of November 8, 2018.

[6] An exchange of correspondence between the parties and their counsel continued over the ensuing months in an unsuccessful effort to achieve a resolution. On October 29, 2018, the respondents repeated that they were financially unable to proceed with the transaction and made a proposal (redacted in the record), which the appellant declined. On October 30, 2022, in their last word in this exchange, the respondents asked the appellant to reconsider. The appellant maintained its position that it would close the transaction on the scheduled closing date.

[7] In preparation for the closing, on November 1, 2018, the appellant’s real estate lawyer emailed a list of documents to the respondents’ real estate lawyer. The email stated, “Please be advised that the Vendor is ready, willing and able to complete the transaction on the scheduled Closing Date.” On November 2, 2018, the appellant’s site clerk sent and then retracted an email to arrange a pre-delivery inspection date, after having been advised by another of the appellant’s employees that the respondents did not intend to close. As a result, no pre-delivery inspection date was scheduled.

[8] Unknown to the appellant, the respondent, Galib N.N. Dharamshi, visited the premises on November 5 and 7, 2018. He discovered that the building was, as he described it in his affidavit on the motion, no more than a “shell”, not ready for occupancy, and not substantially completed. He was advised by the City of Clarington that the appellant had not scheduled an inspection and no occupancy permit had been issued.

[9] On November 7, 2018, the respondents’ real estate lawyer was advised by an articling student from the appellant’s real estate lawyer’s office that he would attend the next day to close the transaction. On November 8, 2018, the articling student attended and purported to tender on the respondents’ real estate lawyer by providing the closing documents. The documents included the appellant’s representation in the Vendor’s Certificate that “provisional or temporary occupancy of the home has been authorized under the … Building Code.” The respondents’ real estate lawyer delivered the closing documents signed by the respondents and a copy of but not the actual certified cheque for the entire amount of the necessary closing funds. He advised that because the house was not substantially completed, the respondents would not close the transaction.

[10] On November 9, 2018, the appellant’s real estate lawyer responded by stating that as the respondents had not asked for their deposit to be returned, nor elected to terminate the agreement of purchase and sale, the appellant was, in accordance with the agreement of purchase and sale, setting a new date, December 10, 2018, for the closing of the transaction. The respondents’ reply maintained that the agreement was at an end and required the return of their deposits. According to the appellant’s evidence on the motion, the appellant completed the premises and purported to tender on December 10, 2018. The respondents did not attend on the new closing date. The appellant’s evidence on the motion was that it subsequently sold the property at a loss.

[11] Litigation followed. The appellant sued the respondents for the loss incurred on the resale of the property. The respondents counterclaimed for the return of their deposits and for damages caused by the failed transaction.

[12] The respondents brought a motion for summary judgment. The motion judge allowed the respondents’ motion, dismissing the appellant’s action with costs in the agreed upon amount of $32,500.

[13] The motion judge determined that although the respondents had earlier repudiated the agreement of purchase and sale by their assertions that they were unable to close the transaction, the agreement of purchase and sale did not come to an end at that point because the appellant did not accept the respondents’ repudiation and instead insisted on closing the transaction. He found that the respondents were ready to fulfill their contractual obligations to close on the closing date because they had certified closing funds, but that the appellant was not, because the house was not substantially complete. The agreement therefore came to an end on November 8, 2018 and could not subsequently be resurrected by the appellant’s insistence on an extended closing.

[14] The motion judge ordered the appellant to return the respondents’ deposits plus interest and pay the respondents’ damages in the amount of $26,500, which represented the fees plus interest that they had to pay to the mortgagee for an early discharge of the mortgage that they had entered to obtain the closing funds.

Issues and Analysis

[15] The issues raised by the appellant essentially all boil down to its challenge of the motion judge’s finding that the respondents did not act in bad faith by entering into a mortgage to obtain closing funds without advising the appellant that they were in a position to close, notwithstanding their previous assertions to the contrary. The appellant argues that the motion judge erred in giving effect to what it says amounted to the respondents’ technical tender with funds obtained from a sham mortgage and that he should have permitted the appellant to exercise its right to extend the closing, which it would have done, had the respondents not concealed the true state of affairs.

[16] We are not persuaded by these submissions. In our view, the appellant’s argument simply takes issue with the motion judge’s careful assessment of the evidence and his detailed findings that were open to him on the record and free from any reversible error.

[17] The appellant takes no issue with the motion judge’s foundational findings that (1) the appellant elected not to accept the respondents’ earlier repudiation of the contract and terminate the agreement of purchase and sale, but insisted on its continued performance; (2) the agreement of purchase and sale required the appellant to provide vacant possession of a substantially completed house on the scheduled closing date of November 8, 2018; (3) on the date of closing, the house was not substantially completed; and (4) the appellant was not in a position to close on November 8, 2018.

[18] The appellant maintains that neither party was ready, willing and able to close the transaction on November 8, 2018 because the respondents had entered into a sham mortgage. But the motion judge found otherwise. This conclusion was amply supported by the record.

[19] The respondents’ uncontested evidence was that in the late afternoon of November 7, 2018, they finally managed to obtain financing from a family friend that enabled them to close the transaction. The mortgage was not a sham. The respondents had to enter into mortgage commitment documents and the mortgage would have been registered on title if the purchase had closed. The closing funds were deposited into the trust account of the respondents’ real estate lawyer, from which a certified cheque was drawn for the entire amount of the closing funds. Importantly, the respondents were required to pay a $25,000 penalty to the mortgagee in order to obtain an early discharge of the mortgage when the transaction did not close. The appellant does not contest that the respondents were required to pay this fee and has not taken issue with the motion judge’s assessment of damages on this basis.

[20] The appellant submits that the motion judge should have found that the respondents acted in bad faith by concealing their ability to close the transaction and deliberately orchestrating a circumstance “through their dishonest and bad faith conduct” that prevented the appellant from exercising its right to schedule a delayed closing. The appellant further argues that the motion judge erred by effectively using his finding of the appellant’s misrepresentation that the property was substantially complete to exonerate the respondents’ bad faith conduct.

[21] The difficulty with the appellant’s submissions is that they depend on our overturning the motion judge’s findings. We find no error in the motion judge’s findings that would permit us to do so.

[22] First, as the motion judge rightly noted, there was no obligation on the respondents in the circumstances of this case to advise the appellant that they had succeeded in obtaining mortgage funds. It would, of course, be quite a different situation if the respondents had told the appellant that they did not have the closing funds after they had obtained them, but that did not occur. After October 30, 2018, when the respondents last requested that the appellant reconsider, the appellant made no further inquiries concerning the respondents’ ability to close and simply assumed that the respondents’ situation had not changed. This mistaken assumption was not created or encouraged by the respondents’ real estate lawyer, who did not repeat the respondents’ earlier assertions that they could not close. We see no basis to interfere with the motion judge’s conclusion that there was no bad faith by the respondents.

[23] The appellant is the author of its own misfortune. The appellant proceeded as if it could close on the scheduled closing date even though the house was not substantially completed. The appellant could have exercised its right to extend the closing date prior to November 8, 2018. It failed to do so. As the motion judge concluded, the parties were both playing their cards closely. The appellant took a calculated risk and cannot now complain that it miscalculated the situation. We agree with the motion judge’s assessment.

Disposition

[24] Accordingly, we dismiss the appeal. The appellant shall pay the respondents their partial indemnity costs of the appeal in the amount of $15,000, inclusive of disbursements and applicable taxes.

“P. Lauwers J.A.”

“L.B. Roberts J.A.”

“B. Zarnett J.A.”

[1] The agreement of purchase and sale initially provided for a purchase price of $859,990, but by amendment dated January 3, 2018, the parties agreed to a purchase price of $869,445.64.