Court File and Parties

Court File No.: CV-18-590310 Date: 2018/12/21 Ontario Superior Court of Justice

Between: Xiao Qing Lin, Applicant – and – Brookfield Homes (Ontario) Limited, Respondent

Counsel: Rebecca Huang, for the Applicant Richard Macklin and Neil G. Wilson, for the Respondent

Heard: November 16, 2018

Before: H. Sachs J.

Overview

[1] This is one of two applications that I heard together. Both applications arise out of a condominium purchase and sale that did not close. In the first application, the Purchaser, Ms. Lin, seeks a refund of her deposit. According to her, she is entitled to the return of her deposit because she validly rescinded the agreement. The Vendor defends the Purchaser’s application on the basis that the Purchaser purported to rescind the agreement only after the closing date had passed and after she had breached the agreement, resulting in the termination of that agreement. According to the Vendor, a purchaser cannot rescind an agreement that has already been terminated.

[2] On the second application, the Vendor applies pursuant to Rule 14.05(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for a determination of its rights under the agreement of purchase and sale. Specifically, it seeks to have the court declare that the contract was breached by the Purchaser when she failed to close, that as a result the Purchaser is not entitled to the return of her deposit and that the Vendor is entitled to claim further damages for that breach, which it asks this court to award on the application.

[3] Since the issues in both applications overlap, I am issuing one set of reasons that will apply to both applications.

Factual Background

[4] The property at issue in these proceedings is a detached four-bedroom home located at 57 Match Point Court, Aurora, Ontario. The home is located in a condominium development that was designed as a gated community and that included a parkette as one of its amenities.

[5] Pursuant to the Agreement of Purchase and Sale (dated November 2, 2016), the parties agreed as follows:

(a) The purchase price was $1,657,107.86; (b) The Purchaser provided a deposit of $133,031.09; (c) The closing would occur on December 13, 2017 (or a later date in accordance with the Tarion addendum regarding delayed closing, if applicable); and (d) The Purchaser agreed to pay the balance of the purchase price on closing.

[6] As part of the Agreement of Purchase and Sale the Purchaser was provided with a disclosure statement in accordance with s. 72 of the Condominium Act, 1998, S.O. 1998, c.19, which included the following statements about a parkette and gates:

Section 4 – Description of Recreational and Other Amenities

The amenities to be constructed within the Condominium consist of a parkette.

The proposed commencement date for construction of the parkette is June 2017. As of the date hereof, the Declarant is unable to determine whether the parkette will be available to the occupants of the Units during the period of interim occupancy. The Declarant estimates that the parkette will be completed no later than December 2017, subject to conditions beyond the Declarant’s control.

Section 5 – Entrance/Exit Gates

It is currently intended that the Condominium will be a gated community, and will be served by one entrance gate (the “Entrance Gate”) and two exit gates (the “Exit Gates”). The Entrance Gate and Exit Gates will comprise automated entry/exit systems and related gate components. All ingress and egress to and from the Condominium will be through the Entrance Gate and Exit Gates.

[7] On November 17, 2017, the Vendor’s lawyer wrote to the Purchaser’s lawyer advising that the condominium Declaration had been registered and that, pursuant to the Agreement of Purchase and Sale, the unit transfer date would occur on December 13, 2017.

[8] On November 23, 2017, the Purchaser’s lawyer requested an extension of the closing date to January 12, 2018. The Vendor’s lawyer replied, advising that the Vendor was only prepared to grant an extension to December 20, 2017. The Purchaser’s lawyer again requested an extension until January 12, 2017 on the basis that the Purchaser had been unable to arrange a mortgage. The Vendor denied this request and reiterated its position that the only extension the Vendor would grant was until December 20, 2017.

[9] On December 4, 2017, the Purchaser’s lawyer confirmed that the Purchaser agreed with the extension to December 20, 2017. The letter confirmed that time was to remain of the essence.

[10] On December 20, 2017 the Purchaser’s lawyer faxed the Vendor’s lawyer as follows:

My client would like to investigate an issue related to the property. As a result, my client seek an extension of closing. I hereby request one day grace period to tomorrow December 21, 2017. Please advise if the vendor is prepared to grant such a request. My apologies for making the request on closing; however, I have just been made aware of a problem which requires further action. Thank you for your understanding.

[11] The Vendor’s lawyer replied as follows:

We confirm that the Vendor is ready, willing and able to close this transaction today in accordance with the provisions of the Agreement of Purchase and Sale.

Further to your fax of today’s date at 4:29 pm, we confirm that the Vendor is willing to grant a one day extension of the Closing Date to tomorrow, December 21, 2017, with adjustments to remain as of today’s date and time to remain of the essence.

[12] On December 21, 2017, instead of closing the transaction, the Purchaser’s lawyer wrote to the Vendor’s lawyer to advise that her client had discovered that, contrary to the Disclosure Statement, construction had not yet begun on the parkette or the gates, and that her client wished the closing to be extended until both the “common elements” were complete. She concluded her letter with the following:

In the event that the Vendor no longer intends to construct the parkette or entrance/exit gates, my client reserves the right (pursuant to s. 5(a) of the Agreement of Purchase and Sale as well as s. 74 of the Condominium Act) to rescind the agreement as a result of the material change to the disclosure documentation, of which the Vendor has failed to give my client notice.

Notwithstanding the foregoing, my client remains ready, willing and able to close; I attach a copy of our closing funds in support of same.

[13] On December 22, 2017 the Vendor’s lawyer faxed the following reply:

Receipt is acknowledged of your letter of December 21, 2017.

We advise that there has been no material change to the Disclosure Statement. The dwelling is complete and a registrable transfer of the Unit is available. The parkette and entrance/exit gates do not need to be installed in order to complete this transaction. The Vendor was ready, willing and able to complete this transaction in accordance with the provision of the Agreement of Purchase and Sale on the Final Closing Date, as extended.

We confirm that your client has failed to complete the Final Closing in accordance with the terms of the Agreement of Purchase and Sale.

As a result of the foregoing default, our client is terminating the Agreement of Purchase and Sale, taking forfeiture of your client’s deposits, together with all amounts paid with respect to extras and reserves its right to exercise such other remedies available to it in order to recover its losses sustained by reason of your client’s default.

[14] On January 2, 2018 the Purchaser’s lawyer sent the following response to the Vendor’s lawyer:

We are in receipt of your letter dated December 22, 2017.

My client maintains that failure to complete the parkette and entrance/exit gates before final closing constitutes a fundamental breach of the Agreement of Purchase and Sale, and the Agreement is therefore terminated by reason of your client’s default. In the alternative, your client materially changed the Disclosure Agreement without notifying my client, entitling my client to rescind the Agreement, which right my client hereby reserves.

Kindly return all deposits paid by my client forthwith as the Agreement is now at an end.

[15] On January 3, 2018 the Purchaser wrote to the Vendor’s lawyer stating:

You should have received the notice of rescission from my lawyer yesterday. As indicated in my lawyer’s letter dated December 21, 2017, I consider the lack of common element as material changes. Therefore my lawyer sent you a notice of rescission on behalf of me yesterday. The agreement is now rescind (sic). Please kindly refund all money that Brookfield has received from me immediately

[16] The next day the Vendor’s lawyer replied, confirming that the agreement had already been terminated and, as a result, the Purchaser’s deposits had been forfeited. The letter also confirmed that the Vendor was reserving its rights to exercise any other remedies with respect to any losses it incurred.

[17] On August 20, 2018 the Vendor sold the property to another purchaser for $1,300,000.00.

[18] The parkette was completed at the end of August 2018 and the gates were installed as of September 12, 2018.

Analysis

[19] There is no issue that the Purchaser failed to close on the date fixed for closing. The Purchaser maintains that she was entitled to do so because the Vendor had not completed two of the common elements – the parkette and the gates, both of which she maintained constituted a fundamental breach of the Agreement of Purchase and Sale.

[20] In my view, the Purchaser’s position on this issue must fail based on s. 2 of Schedule “G” of the Agreement of Purchase and Sale. That section provides as follows:

2. COMPLETION OF UNIT

The Unit shall be deemed to be completed for the purposes of Occupancy on the Occupancy Date or any extension thereof when the requirements of Section 9 of the Tarion Addendum and Statement of Critical Dates have been met, and the Purchaser agrees that he shall take occupancy of the Unit on the Occupancy Date and the Vendor shall complete any outstanding details of construction required by this Agreement within a reasonable time thereafter having regard to weather conditions and the availability of supplies or tradesmen. In any event, the Purchaser acknowledges that failure to complete other units within the Condominium in which the Unit is located, or the common elements on or before the Occupancy Date shall not be deemed to be a failure to complete the Unit. The Purchaser agrees to complete this transaction notwithstanding any claims submitted to the Vendor and/or the Ontario New Home Warranties Plan Act (the “Warranty Act”) or otherwise in respect of apparent deficiencies or incomplete work. (Emphasis added).

[21] This clause is clear. The Purchaser cannot take the position that her Unit is not complete for the purposes of closing because of a failure to complete the common elements.

[22] The Purchaser’s position that the failure to complete the parkette and gates by closing was a fundamental breach of the Agreement of Purchase and Sale is also undermined by the provisions of s. 74(1) of the Condominium Act, which grants the Purchaser the right to rescind an Agreement of Purchase and Sale if there are material changes to the information contained in the Disclosure Statement. A “material change” is defined in s. 74(2) as:

a change or series of changes that a reasonable purchaser, on an objective basis, would have regarded collectively as sufficiently important to the decision to purchase a unit or proposed unit in the corporation that it is likely that the purchaser would not have entered into the agreement of purchase and sale for the unit or the proposed unit or would have exercised the right to rescind such an agreement of purchase and sale under section s. 73, if the disclosure statement had contained the change or series of changes, but does not include,

(d) a change in the schedule of the proposed commencement and completion dates for the amenities of which construction had not been completed as of the date on which the disclosure statement was made.

[23] The test for what is a “material change” provides some guidance as to what the legislature considered to be fundamental to an agreement of purchase and sale of a condominium such that if that change occurred, the Purchaser was entitled to end the agreement. The legislature did not consider a change in the construction schedule for amenities to be a material change. Under the Agreement of Purchase and Sale, the only amenity where a construction schedule was set in the Disclosure Statement was the parkette, which was December of 2017. There was no date set for the completion of the Gates. All that the Agreement said was that “it was currently intended that the Condominium will be a gated community,” which remained true as of the closing date.

[24] Therefore, the Purchaser had no right not to close on the date fixed for closing. Given that the Purchaser failed to close, the Vendor was entitled to terminate the Agreement of Purchase and Sale, which it did on December 22, 2017. The Vendor was also entitled to retain the Purchaser’s deposit, as is provided in the Agreement:

21. DEFAULT

If any (a) monetary default by the Purchaser occurs under this Agreement; or (b) any non-monetary default by the Purchaser occurs under this Agreement and such non-monetary default continues for 5 days after written notice thereof is given to the Purchaser or his solicitor, then the Vendor may retain all monies paid as liquidated damages without prejudice to any other rights of the Vendor and the Vendor may thereupon cancel this Agreement….

[25] After the Vendor had terminated the Agreement, on January 2, 2018, the Purchaser gave notice that she was “reserving” her right to rescind the Agreement on the basis of the fact that the Vendor had materially changed the Disclosure Agreement. There are issues as to whether that notice was in fact a notice that the Purchaser was exercising her right to rescind, whether it was given in a timely manner and whether the Vendor had materially changed the Disclosure Agreement. However, more fundamental is the question of whether a party to an Agreement of Purchase and Sale can exercise a right to rescind that agreement once the agreement has been terminated.

[26] At common law, it is axiomatic that once an agreement has been validly terminated, there is no longer an agreement and, thus, any rights to rescind that agreement no longer exist. Simply put, one cannot rescind an agreement when there is no agreement to rescind.

[27] The Purchaser submits that the wording of s. 73(1) of the Condominium Act is clear. It provides that “[a] purchaser who receives a disclosure statement under subsection 72(1) may, in accordance with this section, rescind the agreement of purchase and sale before accepting a deed to the unit being purchased that is in registrable form.” According to the Purchaser, since she did not accept a deed to the unit, she is entitled to rescind.

[28] As the Supreme Court of Canada stated in Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52, [2016] 2 S.C.R. 521 at para. 56:

This Court has held that it must be presumed that a legislature does not intend to change existing common law rules in the absence of a clear provision to that effect.

[29] There is no clear provision in the Condominium Act that a purchaser may exercise their right to rescind the contract once the vendor has validly terminated the contract. Without such a clear provision I do not accept that the Condominium Act intended to make such a fundamental change to the common law of contracts.

[30] The last issue to be dealt with is the Vendor’s claim for damages in excess of the forfeited deposit. In my view, this is not a matter that is properly the subject of an application, as opposed to an action. The damages issue does not turn on the interpretation of the contract and there are material facts in dispute. Specifically, the Purchaser disputes whether the Vendor took all reasonable steps to mitigate its damages. The Vendor submits that without evidence that the Vendor got less than market value when it sold the property, the Purchaser cannot make this argument. There is no such evidence, and, according to the Vendor, the Purchaser had an obligation to put her best foot forward at the hearing of the application.

[31] The application is not a summary judgment motion. Rule 20 and all that follows from it (including the obligation to put one’s best foot forward) does not apply to applications. In order to apply for summary judgment, the matter must be converted to an action. To apply the summary judgment rules to an application could work an unfairness on the Purchaser, who focused her material on demonstrating that there were material facts in dispute, not on defending what was, in effect, a motion for summary judgment. Thus, I am ordering a trial of the issue with respect to the issue of damages. If the parties need further directions from me as to how the application should be converted to an action, I may be spoken to. This ruling is without prejudice to the Vendor’s right to bring a motion for summary judgment once the matter has been converted to an action.

Conclusion

[32] For these reasons, I am dismissing the Purchaser’s application for a return of her deposit. I am allowing the Vendor’s application to the extent that based on an interpretation of the Agreement of Purchase and Sale between the parties, the Purchaser breached that Agreement, entitling the Vendor to terminate the Agreement, keep the Purchaser’s deposit and sue for damages. I am ordering a trial of an issue with respect to the issue of the quantum of damages over and above the forfeited deposit suffered by the Vendor as a result of the Purchaser’s breach.

[33] The parties agreed on an amount for costs ($30,000) for both applications based on entire success. Given my order that there be a trial of the issue on the question of damages I invite both parties to make any further submissions on the question of costs. The Vendor shall make its submissions in writing on or before January 10, 2019 and the Purchaser shall respond within 10 days of receipt of the Vendor’s submissions.

H. Sachs J. Released: December 21, 2018