Court of Appeal for Ontario

Date: 2018-01-24 Docket: C64034

Judges: Simmons, Roberts and Nordheimer JJ.A.

Between

1418885 Ontario Ltd. Plaintiff (Appellant)

and

2193139 Ontario Limited Defendant (Respondent)

Counsel

David Goodman, for the appellant

Charles Chang, for the respondent

Heard: January 19, 2018

On appeal from the judgment of Justice Mario Faieta of the Superior Court of Justice sitting without a jury, dated June 12, 2017.

Reasons for Decision

[1] The plaintiff appeals from the judgment of the motion judge that dismissed the appellant's motion for summary judgment against the respondent and also dismissed the appellant's action.

[2] The background facts are as follows. The respondent was the owner of property municipally described as 9196 Sixth Line, Milton, Ontario (the "Property"). On or about April 19, 2016, the appellant entered into an agreement of purchase and sale (the "APS") to buy the Property from the respondent.

[3] The closing date was scheduled to be June 15, 2016. Two deposits were paid, the first in the sum of $50,000.00, and the second in the sum of $100,000.00.

[4] The Property had been advertised for sale as containing a pub-style restaurant with patios, a nine hole golf course, 12 residential apartments, a two-storey home, and a banquet hall. By the terms of the APS, the appellant was allowed until May 30, 2016 to make requisitions on title and until five days prior to completion to satisfy itself that the use of the property could be lawfully continued.

[5] An issue arose respecting the residential apartments and whether they were a permitted use under the existing zoning by-law applicable to the Property. On May 30, 2016, the lawyer for the appellant submitted a requisition that required the respondent to provide "on or before closing an amendment to the local zoning by-laws to permit the current use to continue legally after closing". The lawyer for the respondent rejected this requisition and advised that the residential apartments were "a legal non-conforming use".

[6] Subsequent to this reply to the requisition, the lawyer for the appellant made certain inquiries of the Niagara Escarpment Commission which has jurisdiction over the zoning applicable to the Property. The Commission's response to these inquiries suggested that there might indeed be a problem regarding the residential apartments. On June 9, 2016, the lawyer for the appellant sent a letter to the lawyer for the respondent that, among other things, referred to the advice that he had received from the Niagara Escarpment Commission and expressed the view that the residential apartments were "clearly non-conforming". The lawyer for the appellant then suggested that if a resolution could not be reached, the deposits had to be returned.

[7] Nonetheless, the parties moved towards the closing date by exchanging draft documentation and related material. However, on the day set for closing, the lawyer for the appellant advised the lawyer for the respondent that the appellant would not be closing the purchase because of the issue over the residential apartments.

[8] This claim was then commenced by the appellant for the return of the deposits. After pleadings were exchanged, the appellant brought a motion for summary judgment for the amount of the deposits. The motions judge dismissed that motion. The motion judge also dismissed the appellant's action. In doing so, the motion judge made the following findings:

(i) that the issues raised by the motion were appropriate to be determined by way of summary judgment;

(ii) that the respondent had failed to establish that the residential apartments were a legal non-conforming use;

(iii) that the fact that the residential apartments were not a legal non-conforming use was a legitimate objection raised by the appellant to the use of the Property and, if the respondent could not remedy that objection, the terms of the APS would bring the APS to an end unless the appellant waived the objection;

(iv) that the appellant had, by its conduct, waived the objection.

[9] No real issue is taken with respect to the first three findings made by the motions judge. In any event, the evidence in the record would clearly substantiate the second and third findings. The central issue is whether the finding that the appellant had waived the objection is a proper one based on the evidence.

[10] The motion judge cited this court's decision in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597 respecting the requirements to establish that a party has waived a right under a contract. More specifically, the motion judge referred to the following observation of Gillese J.A., at para. 63:

Waiver occurs when one party to a contract (or proceeding) takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party. It will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it. The intention to relinquish the right must be communicated. Communication can be formal or informal and it may be inferred from conduct. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party.

[11] There is no doubt in this case that the appellant had full knowledge of the deficiency, that is, that the residential apartments were not a legal non-conforming use under the zoning by-law applicable to the Property. The issue was whether the appellant had communicated an unequivocal and conscious intention to abandon that deficiency. The motion judge held that it had. With respect, we find that the motion judge erred in so holding.

[12] The motion judge relied on three facts in support of his finding that the appellant had waived the deficiency. Those three facts are:

(i) on May 18, 2016 the appellant agreed to amend the APS to provide that it would assume all existing tenants on closing;

(ii) the appellant asked the respondent to obtain an amendment to the local zoning by-law, prior to closing, to permit the current use (i.e. the residential apartments) to continue legally after closing;

(iii) the appellant advised, in its lawyer's June 9, 2016 letter, that it was prepared to continue with the purchase, despite its concerns related to the current use, if the respondent provided satisfactory rental and golf course documentation.

[13] With respect, none of those facts, either individually or collectively, establish an "an unequivocal and conscious intention" to abandon the deficiency. The first fact is entirely consistent with completing the purchase if the deficiency can be overcome. The second fact would have cured the deficiency but the respondent never obtained the amendment nor did it ever say that it would do so. The third fact suggests that the appellant might have been prepared to waive the deficiency, if it received another benefit or advantage, but that never happened.

[14] The respondent places considerable reliance on the fact that the appellant proceeded right up to the date of closing as if it would close the transaction. Correspondence was exchanged between the lawyers for the parties finalizing various matters necessary for the closing. Further, on the day set for closing, the appellant's lawyer communicated that the appellant would be signing the closing documents and delivering the closing funds.

[15] None of this conduct amounts to an unequivocal act constituting waiver. It is consistent with the appellant placing itself in a position to close the transaction if, in the end result, it decided to waive the deficiency or some other solution came about. That never happened.

[16] There was a deficiency arising from the APS. It was never waived by the appellant. In accordance with the express terms of the APS, given that deficiency, the APS came to an end and the deposits had to be returned. That is the conclusion to which the motion judge ought to have come. The appellant was entitled to summary judgment as claimed.

[17] The appeal is therefore allowed, the judgment below is set aside, and in its place judgment should issue in favour of the appellant for the amount of the deposits, namely, $150,000 plus pre-judgment interest. The appellant is entitled to its costs of the motion in the amount of $15,000 inclusive of disbursements and HST and its costs of the appeal which we fix in the agreed amount of $10,000 inclusive of disbursements and HST.

"Janet Simmons J.A."

"Lois Roberts J.A."

"I.V.B. Nordheimer J.A."