Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20240103 DOCKET: COA-23-CV-0355

Roberts, Sossin and Dawe JJ.A.

BETWEEN

3 Gill Homes Inc. Applicant (Appellant)

and

5009796 Ontario Inc. cob as Kassar Homes Respondent (Respondent)

Counsel: Daniel Camenzuli and Julia A. Cecchetto, for the appellant Cole Vegso, for the respondent

Heard: December 21, 2023

On appeal from the order of Justice A. Duncan Grace of the Superior Court of Justice, dated February 23, 2023.

Reasons for Decision

[1] This appeal concerns a dispute over a real estate transaction where the purchasing party missed the time stipulated for paying the funds to close the transaction by 35 minutes. On the basis of this breach, the vendor treated the contract between the parties as terminated. The application judge found in favour of the respondent vendor, 5009796 Ontario Inc. carrying on business as Kassar Homes (“Kassar Homes”). The unsuccessful purchaser, 3 Gill Homes Inc., now appeals that decision.

[2] At the hearing, the appeal was dismissed for reasons to follow. These are our reasons.

Background

[3] On July 4, 2020, the appellant entered into three agreements of purchase and sale (“APS”) for residential homes that would be newly constructed by the respondent. The appellant was purchasing the homes as an investment and intended to rent them out. Two of those agreements fully closed; the appeal relates to the third APS, which was terminated. The third transaction was originally scheduled to close on August 31, 2021. Construction delays caused this deadline to be missed. Though there was a “time is of the essence” clause in the APS, neither party terminated the contract.

[4] The APS was amended on November 15, 2021. The amendments changed the closing date to January 28, 2022 and included a “time is of the essence” provision in article 17.02 that was similarly worded to the original APS.

[5] The application judge made a number of findings in relation to conduct of the parties as the closing date approached, including that Mr. Kassar (the principal of the respondent) reminded Mr. Gill (the principal for the appellant) during January 2022 that the funds for the impugned transaction had to be paid on the closing date by 3:00 p.m. or the deal would be terminated. On Tuesday, January 25, 2022, the lawyer for Kassar Homes emailed the lawyer for 3 Gill Homes Inc. to remind them that the funds were due at 3:00 p.m. on the closing day. The day before closing, Mr. Gill requested an extension of the closing to Monday, January 31, 2022. This request was denied. Later that day, Mr. Kassar again reminded Mr. Gill that the purchase price must be paid by 3:00 p.m. the next day or the deal would be terminated.

[6] At 2:47 p.m. on closing day, the lawyer for 3 Gill Homes Inc. sent the lawyer for Kassar Homes an email stating that the funds had been attained, and the banking was being dealt with. At 3:10 p.m., the lawyer for Kassar Homes responded that they had instructions not to close because the deadline was missed. The funds were delivered and received by the respondent 35 minutes late. Kassar Homes did not accept the funds and treated the APS as terminated.

[7] The key provisions of the APS include the following:

14.02(c) If the Purchaser’s lawyer is unwilling or unable to complete this transaction via TERS [“Teraview Electronic Registration System”], in accordance with the provisions contemplated under the Document Registration Agreement, then said lawyer (or the authorized agent thereof) shall be obliged to personally attend at the office of the Vendor’s Solicitor, at such time on the scheduled Closing Date as may be directed by the Vendor’s Solicitor or as mutually agreed upon (and in the absence of any such mutual agreement, by no later than 3:00 P.M. (London, Ontario time) on the scheduled Closing Date), in order to complete this transaction via TERS utilizing the computer facilities in the Vendor’s Solicitor’s office.

14.02(d) The Purchaser expressly acknowledges and agrees that the Vendor shall not be requested nor required to release the transfer/deed to the Property for registration electronically unless and until the balance of all funds due on Closing, in accordance with the Vendor’s statement of adjustments, are remitted by certified cheque to the Vendor’s Solicitor (or in such other manner as the Vendor’s Solicitor may authorize or direct), and correspondingly received by the Vendor’s Solicitor by no later than 3:00 P.M. on the scheduled Closing Date.

16.02 Upon default by the Purchaser, in addition to any other rights or remedies which the Vendor may have, the Vendor, at its option, shall have the right to declare this Agreement null and void and in such event, all monies paid hereunder and monies paid or payable for extras and/or upgrades ordered by the Purchaser, whether or not installed in the Property, shall be forfeited to the Vendor, without prejudice to the Vendor’s rights to bring such further or other action as may be available to it as a result of such breach. It is understood and agreed that the rights contained herein on the part of the Vendor are in addition to any other rights which the Vendor may have at law, in equity or under any other provisions of this Agreement, and the Vendor expressly has the right to exercise all or any one or more of the rights contained in this Agreement, at law or in equity, without prejudice to the subsequent right of the Vendor to exercise any remaining right or rights at law, in equity or in this Agreement. Any monies owing by the Purchaser not paid when due, shall accrue interest at the rate of 10.00% per annum compounded monthly until paid. If the Purchaser fails to close when required hereunder, the Vendor shall at its option have the right to charge the sum of $150.00 per day for each day that the closing is extended as liquidated damages and not as penalty. The Vendor maintains a Vendor's lien for any unpaid monies which the Purchaser fails to pay whether before or after closing, and shall have the right to register and enforce the said lien, which shall not be discharged until payment of the amount owing, interest thereon at the rate aforesaid, and the Vendor’s legal costs on a substantial indemnity basis. The Purchaser shall not have the right of setoff of any claim by him, her or it as against any amounts owing by him, her or it to the Vendor.

17.04 Time shall be of the essence of this Agreement in all respects, and any waiver, extension, abridgement or other modification of any time provisions shall not be effective unless made in writing and signed by the parties hereto or by their respective solicitors who are hereby expressly authorized in that regard.

The Application Judge’s Decision

[8] The appellant sought a declaration that Kassar Homes breached the APS, that the contract was unconscionable, and, because the property has been resold by the time of litigation, the appellant also sought damages. The application judge found that the appellant was subject to the strict requirement of closing before 3:00 p.m. on January 28, 2022.

[9] Because the property was in the land titles system, the application judge found that the use of the electronic registration system was mandatory, and therefore that article 14.02(d) was engaged. He found that the article could only “be construed as imposing an obligation on [the appellant] to make the payment by that time and on that day.”

[10] The application judge held that the respondent was entitled to terminate the APS because of the late payment. The application judge added that, while the result seemed harsh, it was not unfair for the respondent to enforce the payment deadline in light of the “time is of the essence” clause.

[11] The application judge relied on case law supporting a rigid use of the timelines in a contract if there is a “time is of the essence” clause, in particular where, as here, the parties were sophisticated and in the business of real estate: see, for example, 1473587 Ontario Inc. v. Jackson (2005), 2005 ONSC 4578, 74 O.R. (3d) 539 (S.C.), aff’d 2005 ONCA 26121, 75 O.R. (3d) 484 (C.A.); Deangelis v. Weldan Properties (Haig) Inc., 2017 ONSC 4155.

[12] The application judge also found support for this result in the amendment to the APS, which provided a departure from the previous conduct of the parties that treated deadlines as informal.

[13] The application judge further found that the contract was not unconscionable, noting that the other two APSs between the parties closed without incident, which suggested that there was no issue with unequal bargaining power or circumstances of unconscionability.

[14] The application judge referenced the court’s residual equitable jurisdiction to relieve against the breach of a “time is of the essence” clause, but concluded that doing so would require some basis, such as unfair or unjust conduct by the party seeking to enforce the clause, citing Bowlen v. Digger Excavating (1983) Ltd., 2001 ABCA 214, 97 Alta. L.R. (3d) 41, at para. 24. The application judge concluded:

If the Court were to excuse the default in this case, when would a person in the position of Kassar Homes be permitted to terminate the agreement? One hour after the stipulated time? Two hours? One day? Intervention by the court in the face of contractual language agreed to by capable contracting parties is the beginning of a slippery and precarious slope.

I decline to rewrite the parties’ bargain. They could have contractually agreed to a period within which a monetary or other default could have been cured. They did not do so. [Footnote omitted.]

[15] Finally, the application judge concluded that even if the appellant had succeeded in their application, the issue of damages could not be addressed on the written record as the property originally sought to be conveyed to the appellant had since been sold. The value of the property was the subject of competing expert reports with a number of facts in dispute and therefore would have required a trial on that issue.

Issues on Appeal

[16] The appellant raises approximately 22 grounds of appeal. These can be grouped into the following questions:

1. Did the application judge err in finding that 3:00 p.m. was the payment deadline under the APS?
2. Did the application judge err in finding that, in respect of the closing payment, time was of the essence?
3. Did the application judge err in finding that the payment deadline was not unconscionable?
4. Are the reasons of the application judge sufficient to permit appellant review?
5. Did the application judge err in finding that damages could not be fairly and justly determined on a written record?

Analysis

[17] While the outcome for the respondent was indeed harsh, it was not unconscionable or unfair. The wording of the contract and the warnings provided by the respondent beforehand were clear. Contrary to the appellant’s submission, in our view, there was no extricable error of law that warrants a review on the correctness standard. Instead, the standard of review here is palpable and overriding error: Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, 135 O.R. (3d) 241, at para. 49, leave to appeal refused, [2016] S.C.C.A. No. 249.

[18] No such error was made by the application judge.

[19] The appellant argues that the application judge misinterpreted the APS, in particular by finding that the requirement of completing the closing through the electronic registration system as set out in article 14.02(d) of the APS was “clear and unambiguous.” If interpreted in the context of the entire APS document, the appellant contends, payment was not required by 3:00 p.m. on January 28, 2022 but rather, by the end of business at 5:00 p.m. on that calendar day. Further, if payment was due by 3:00 p.m., the appellant submits the only consequence of failing to convey the funds in time was the right of the respondent to refuse to release the deed for electronic registration, not the termination of the APS.

[20] We are not persuaded by these submissions. The same arguments were put to, and rejected by, the application judge.

[21] In our view, the wording of article 14.02(d) of the APS was clear and meant that where, as here, electronic registration was mandatory, the funds due on closing had to be received by 3:00 p.m. on the closing date. It would be an unwarranted intervention into the freedom of contract for a court to alter the APS and its closing time.

[22] We also do not accept the appellant’s related argument that the application judge erred by citing and relying on the regulation that made electronic registration mandatory in the absence of any evidence that Mr. Gill was aware of this regulation when he signed the contract for the appellant. Contrary to this argument, the parties had put their minds to the possibility of mandatory electronic registration and the contract clearly stated that if electronic registration was mandatory – as it in fact was on the scheduled closing date – the parties were agreeing to follow the process for effecting the transfer of the property that was set out in the contract.

[23] This ground of appeal fails.

[24] As this court stated in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 31: “A ‘time is of the essence’ clause is engaged where a time limit is stipulated in a contract. The phrase ‘time is of the essence’ means that a time limit in an agreement is essential such that breach of the time limit will permit the innocent party to terminate the contract.”

[25] The appellant submits that the “time is of the essence” clause was not strictly enforced in a series of transactions between the parties, including with respect to prior missed deadlines under the APS at issue in this appeal. While the prior conduct of the parties treated deadlines as flexible (and the respondent previously missed a number of deadlines for the completion of the project without the consequence of the APS being terminated), the application judge found that the amending agreement to the APS dated November 15, 2021 changed this state of affairs. It was open to the application judge to treat the amendment as a starting point from which the closing deadline of 3:00 p.m. on January 28, 2022 was to be treated as firm.

[26] The exchanges between the parties in the days prior to January 28, 2022, which included reminders by the respondent of the closing time, and an extension sought by the appellant and refused by the respondent, all reflect what the application judge found to be a shared understanding that the closing date and time was to be enforced. Further, article 16.02 of the APS made clear that the default by the appellant in failing to deliver the funds owing by the closing time justified the respondent in treating the APS as terminated.

[27] The application judge’s reliance on the “time is of the essence” clause in the APS reveals no error, and this ground of appeal fails as well.

[28] The application judge’s conclusion with respect to the absence of unconscionability, in light of the previous transactions between the parties and their sophistication with respect to real estate transactions and APSs, is entitled to deference. We see no basis to interfere with the application judge’s conclusions.

[29] The appellant did not press the argument that the application judge’s reasons did not permit appellate review, and we see no basis for this assertion. The application judge explained his findings by virtue of the governing case law, the APS, and the surrounding factual circumstances.

[30] In light of our conclusion that the application judge did not err in finding in favour of the respondent on the merits of the application, it is not necessary to consider the appellant’s ground of appeal in relation to the application judge’s decision to refer the question of damages to a trial.

[31] Finally, while not specifically raised by the appellant as a separate ground of appeal, we note that the application judge acknowledged the possibility of a residual equitable jurisdiction of the court to relieve against the breach of a time provision but found the “necessary evidentiary foundation” to warrant the exercise of this discretion lacking. While the application judge did not elaborate on what such an evidentiary foundation would need to show, it is implied from the earlier reference to Bowler that some unfair or unjust action on the part of the respondent would have to be apparent on the record. In this case, the correspondence between the parties revealed clear and repeated reminders about the closing date and time, which were acknowledged by the appellant. It is also noteworthy that the respondent is not seeking to keep the appellant’s deposit and has returned the funds to the appellant’s counsel.

Disposition

[32] For these reasons, the appeal is dismissed.

[33] The respondent is entitled to costs of the appeal, in the agreed upon amount of $26,000 all-inclusive.

“L.B. Roberts J.A.”

“L. Sossin J.A.”

“J. Dawe J.A.”