Court File and Parties

COURT FILE NO.: CV-18-603709-0000 DATE: 2019/03/06

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

FORTRESS CARLYLE PETER ST. INC. Plaintiff

• and - RICKI’S CONSTRUCTION AND PAINTING INC. Defendant

COUNSEL: Ed Hiutin and Neil G. Wilson for the Plaintiff Daniel A. Schwartz and Scott McGrath for the Defendant

HEARD: February 26, 2019

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Plaintiff, Fortress Carlyle Peter St. Inc. brings a summary judgment motion for specific performance of an Agreement of Purchase and Sale of a property in Toronto municipally known as 120 Peter St. In the alternative, Fortress seeks relief from the forfeiture of the $1.0 million deposit.

[2] The Defendant, Ricki’s Construction and Painting Inc. brings a cross-motion for a summary judgment dismissing Fortress’s action.

[3] Both parties submit that the case is appropriate for a summary judgment, and I agree. The evidentiary record is adequate, and in accordance with the summary judgment case law, the court is entitled to assume that the parties have put their best evidentiary foot forward. While there are genuine issues of credibility, fact, or law, these issues do not require a trial, and it is in the interests of justice to decide this matter by a summary judgment.

[4] For the reasons that follow, I grant Fortress a judgment for specific performance.

B. Dramatis Personae

[5] The Plaintiff, Fortress Carlyle Peter Street Inc. is a single purpose corporation for the purpose of developing a condominium project in Toronto. Its principal is Naram Mansour.

[6] Fortress’s conveyancing lawyer was Harriet Lau of Brattys LLP. Ms. Lau’s conveyancing clerk was Stella Ding.

[7] Fortress’s municipal land use planning lawyer was Daniel B. Artenosi of Overland LLP. He was counsel for Fortress for a zoning by-law amendment to permit a proposed condominium development on an assembled development parcel located at the southwest corner of Richmond Street West and Peter Street in downtown Toronto.

[8] The Defendant, Ricki’s Construction and Painting Inc., is a corporation that owns 120 Peter St., a mixed commercial and residential-use building in downtown Toronto. Its principal is Ndreke (Rick) Ndreka.

[9] Ricki’s Construction’s conveyancing lawyer was Peggy Spadafora of Spadafora & Murphy LLP. Ms. Spadafora’s law clerk was Norine Uyeno.

[10] Pursuant to a written Offer to Lease, 1730474 Ontario Inc. was a tenant at 120 Peter St. Its principal is Kole (“Nick”) Ndreka, Rick Ndreka’s brother. In its leased premises, 1730474 Ontario Inc. operated a restaurant known as Burrito Gordito.

C. Procedural Background

[11] On August 21, 2018, Fortress issued its Statement of Claim.

[12] On September 4, 2018, Ricki’s Construction delivered its Statement of Defence.

[13] On September 17, 2018, Master Graham granted a certificate of pending litigation with respect to the 120 Peter St. property.

[14] On October 31, 2018, Fortress brought a motion for summary judgment seeking specific performance. The motion was supported by affidavits from Mr. Mansour sworn on October 31, 2018 and November 30, 2018, affidavits from Ms. Lau, sworn on October 31, 2018 and November 30, 2018, and an affidavit from Mr. Artenosi sworn on October 31, 2018. Mr. Mansour, Ms. Lau, and Mr. Artenosi were cross-examined on their affidavits.

[15] On October 31, 2018, Ricki’s Construction brought a cross-motion for summary judgment seeking an order, among other things, dismissing Fortress’s action. The motion was supported by affidavits from Mr. Rick Ndreka dated October 30, 2018 and December 4, 2018 and by an affidavit from Ms. Spadafora dated October 31, 2018 both of whom were cross-examined on their affidavits.

D. Facts and Legal Analysis

1. Introduction

[16] Rather than the conventional approach of Reasons for Decision of setting out the legal analysis and the parties’ positions separately from the description of the facts, in these Reasons for Decision I shall combine the facts with the law, and, metaphorically speaking, I shall provide a play-by-play commentary of the factual and legal events that shall lead to my conclusion that Fortress is entitled to a decree of specific performance.

[17] Before beginning the step-by-step analysis, I shall set out six major legal principles associated with the remedies for the breach of a contract for the sale of land and the position of the parties.

[18] As will be seen, the six legal principles are engaged in the factual narrative. The six legal principles are:

a. First, the elements of a claim of deceit or fraudulent misrepresentation that will support a claim for rescission are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and, (5) the plaintiff suffering damages. [1]

b. Second, in a contract for the sale of land where: (a) time is of the essence; and, (b) a party repudiates or fundamentally breaches the contract, the innocent party must sooner or later elect between treating the contract: (1) as at an end, which requires that the innocent party accept the guilty party’s breach as the termination of the contract; or (b) as still existing, which may be indicated by the innocent party’s conduct or by his or her suing for specific performance. [2]

c. Third, in a contract where time is of the essence, where a plaintiff sues for specific performance, the plaintiff must show that he or she was ready, willing and able to close on the date fixed for closing, that the default of the defendant was in no way attributable to the plaintiff’s fault, and that he or she continues to be ready, willing and able to perform the contract. [3]

d. Fourth, provided that time is of the essence, the breach of a fundamental term of the contract; that is, a term classified as a condition as opposed to a warranty, is a repudiation of the contract that the innocent party may accept to treat the contract as at an end. [4] (In contrast, a breach of a warranty does not discharge the innocent party from its obligations to perform the contract. [5])

e. Fifth, for the innocent party to treat the agreement at an end for a repudiation or fundamental breach, time must be of the essence. The commonly recited rule for time of the essence is that time may be insisted upon as of the essence only by a litigant: (a) who has shown himself or herself ready, desirous, prompt, and eager to carry out the agreement; (b) who has not been the cause of the delay or default; and, (c) who has not subsequently recognized the agreement as still existing. [6]

f. Sixth, when both contracting parties breach the contract, the contract remains alive with time no longer of the essence but either party may restore time of the essence by giving reasonable notice to the other party of a new date for performance. [7]

[19] As for the position of the parties, it should be noted that the fundamental dispute between the parties is that Ricki’s Construction submits that Fortress did not perform its obligation of paying the balance of the purchase price by 6:00 p.m. on August 13, 2018, the scheduled closing date, and, thus, Ricki’s Construction submits that Fortress breached the Agreement of Purchase entitling Ricki’s Construction to terminate the contract and to forfeit the $1.0 million deposit.

[20] For its part, Fortress submits that: (a) Ricki’s Construction was the defaulting party; (b) Ricki’s Construction was not performing the Agreement of Purchase and Sale in good faith; and, (c) Ricki’s Construction was the cause of the contract not being completed by 6:00 p.m. Thus, Fortress submits that by 6:16 p.m., time not being of the essence, it was ready willing and able to close and, therefore, it is entitled to a decree of specific performance.

[21] The decree of specific performance shall make it unnecessary for me to address Fortress’s alternative plea of relief from forfeiture.

[22] It is also unnecessary for me to say much about the evidence of Mr. Artenosi. His evidence was relevant to the issue of the availability of specific performance. The purpose of his evidence was to establish that because of the uniqueness of the 120 Peter St. property, damages would not be an adequate remedy. In Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, the Supreme Court of Canada established the contemporary principle that specific performance should not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available. As the description below of the facts will reveal, the 120 Peter St. property was critical to Fortress’s development plans, and I conclude that specific performance should be awarded in lieu of a damages award.

2. The Agreement of Purchase and Sale

[23] Beginning in 2013, Fortress began to assemble properties for a condominium project in Toronto. In 2014, it acquired 122-124 Peter St. and 128 Peter St. In 2015, it acquired 357 Richmond St. West and 126 Peter St. In 2017, it acquired 359 Richmond St. West.

[24] One of the properties it sought to acquire was 120 Peter St., a property owned by Ricki’s Construction. Below is a sketch of the assembled properties, including 120 Peter Street.

[25] Between 2013 and 2017, Fortress and Ricki’s Construction made five attempts to transfer the ownership of 120 Peter St., but all five agreements did not close; the agreements were conditional agreements, and the conditions were not satisfied.

[26] In the summer of 2017, the parties tried again to transfer ownership of the property. They signed a Letter of Intent (“LOI”). The LOI provided for a purchase price of $4.5 million. Under the LOI, Fortress had a right to review the leases encumbering the 120 Peter St. property, and under the LOI any agreement was conditional on Fortress being satisfied with the leases.

[27] The lease review condition was important to Fortress, because it would need to demolish the existing buildings to proceed with the condominium project. Moreover, the 120 Peter St. property was a critical ingredient in complying with Fortress’s land planning and zoning agreements with the City of Toronto.

[28] The 120 Peter St. property was encumbered by four leases. One of the tenants was 1730474 Ontario Inc. Pursuant to the LOI, Ms. Lau, Fortress’s lawyer, asked Ms. Spadafora, Ricki’s Construction’s lawyer, about the 1730474 Ontario Inc. lease, and by an email message on August 16, 2017, Ms. Spadafora told Ms. Lau that a formal lease was never signed for the premises, only an offer to lease, which had already been provided with all the lease documents relating to 120 Peter St.

[29] Fortress reviewed the Offer to Lease for 1730474 Ontario Inc. It contained the following demolition clause, which was suitable for Fortress’s development plans:

Demolition

If the Landlord (or its agent or a new owner), undertakes to proceed with the full demolition of the building at 120 Peter Street, Toronto, then upon 90 days written notice from the Landlord to the Tenant, of the Landlord's undertaking to demolish, the Tenant agrees to vacate the premises, and surrender the unexpired portion of the Term at the expiry of the above-mentioned 90 day period. The Landlord covenants to alert the Tenant of its intention to exercise this demolition notice clause at its earliest opportunity, acting reasonably.

[30] On August 17, 2017, Fortress waived the conditions in the LOI and proceeded to sign an Agreement of Purchase and Sale to complete the sale of 120 Peter St. The draft of the Agreement was prepared by Ms. Lau.

[31] Thus, on September 1, 2017, Fortress, as Buyer, and Ricki’s Construction, as Seller, entered into a standard form Ontario Real Estate Board (“OREA”) Agreement of Purchase and Sale of 120 Peter St. The purchase price was $4.5 million. Fortress eventually paid a deposit of $1.0 million.

[32] To Ricki Construction’s knowledge, Fortress was acquiring the 120 Peter St. property for the purpose of developing it for its condominium project.

[33] Pursuant to an amending agreement, the Agreement of Purchase and Sale provided for a closing date of August 13, 2018.

[34] For present purposes, the relevant provisions of the Agreement of Purchase and Sale are set out below.

2. COMPLETION DATE: This Agreement shall be completed by no later than 6:00 p.m. on the – see Schedule A – day of – 20…. Upon completion vacant possession of the property shall be given to the buyer unless otherwise provided in this Agreement.

SCHEDULE A

1. […] If the transaction contemplated by this Agreement is not completed on the Completion Date by reason of the default by the Buyer under this Agreement, the Seller shall be entitled to retain the Deposit (together with any interest thereon) in full satisfaction of such default and shall not be permitted to make any further claims whatsoever against the Buyer. If the transaction contemplated by this Agreement is not completed on the Completion Date by reason of the default of the Seller under this Agreement, the Deposit, together with all interest accrued thereon, shall be forthwith paid and returned to the Buyer without any deduction or set off, in addition to any and all rights and remedies the Buyer may have against the Seller under this Agreement or at law as a result of such default. If, for any reason, the transaction is not completed through no fault of the Buyer, the Deposit together with interest accrued thereon without deduction shall be forthwith returned to the Buyer.

2. This transaction shall be completed [August 13, 2018] (the “Completion Date”). In the event the Completion Date falls on a day which is a statutory holiday or a day on which the land registry office is not open or operational, then the Completion Date shall be the next day on which the registry office is open or operational.

3. The Seller represents and warrants to and with the Buyer that: (b) the property is occupied only by those tenants listed on a rent roll (the "Tenants") to be provided by the Seller to the Buyer on or before August 10, 2017 and there are no documents, agreements or correspondence with respect to such tenancies other than the leases, tenancies and other agreements and/or documents related to and/or affecting such leases and tenancies (the "Leases") and the materials provided to the Buyer by the Seller on or before August 10, 2017. (c) the Seller will operate the property from the date of execution of this Agreement to the Completion Date as a prudent owner would do, provided that the Seller will not terminate, accept a surrender or, amend, renew nor execute any leases or agreements to lease or release or reduce the agreements or obligations of any tenant or subtenant without the prior written consent of the buyer, which may not be unreasonably withheld or delayed. The forgoing representations and warranties shall survive the closing of the transaction.

4. The Seller shall provide to the Buyer at least 5 days prior to the Completion Date estoppel certificates (“Estoppel Certificates") from each tenant of the property in a form to be provided by the Buyer. In the event the Seller does not deliver the Estoppel Certificates as required herein, the Buyer shall accept the Seller's statutory declaration for any tenants in a form provided by the Buyer or the Buyer may terminate this Agreement in which event the Deposit shall be returned to the Buyer forthwith. The Estoppel Certificates shall be in form and content satisfactory to the Buyer and shall contain, inter alia, the following statements: (a) confirm the term of the Lease and any options to renew or extend same and rights of first refusal for vacant space; (b) that the Tenants are in possession of the demised premises and paying rent in accordance with the terms of their leases; (c) rents; (d) that neither the Seller nor the tenants are in default of the Leases and that any rent-free periods have expired; (e) list the Leases and amendments of same and all other agreements relating to the tenancy and confirm that same are the entire agreements between the Seller and the tenant; and (f) prepaid rent, if any, paid to the Vendor.

[35] It should be noted that under the Agreement of Purchase and Sale, Ricki’ Construction promised that there were no documents or agreements with respect to the leased premises other than the materials provided by Ricki’s Construction to Fortress on or before August 10, 2017.

[36] It should be noted that the Agreement of Purchase and Sale further provided that the Tenant’s estoppel certificates, which were to be provided by Ricki’s Construction, would list the leases on the property and confirm that the lease documents were the entire agreements between Ricki’s Construction and the Tenant.

3. The Time of the Day for Closing

[37] With the Agreement of Purchase and Sale signed, Fortress was engaged for most of the next year with the City of Toronto about the planning for the condominium project.

[38] On February 1, 2018, Fortress exercised its right to extend the closing to August 13, 2018, and it paid an additional $500,000 deposit, making the total deposit $1.0 million.

[39] During the run up to the abortive closing described below, the conduct of the parties reveals that they understood that the deadline for closing on August 13, 2018 was 6:00 p.m. I find as a matter of contract interpretation that this was the correct understanding. The parties had agreed that the deadline for closing was 6:00 p.m. on August 13, 2018.

[40] As the narrative described below will reveal, this potentially presents a 16-minute’s-late problem for Fortress, which it tries to circumvent by arguing that the Agreement of Purchase and Sale actually is silent about the time of day for the closing. It submits that since the time of day is not expressly mentioned in Schedule A, therefore, the time for closing was midnight of August 13, 2018. [9]

[41] As it will turns out in the legal analysis below, Fortress need not be concerned about the 16-minute’s-late problem; however, it is wrong in its submission that the time for closing was midnight. As I have already found, as a matter of contract interpretation, the time for closing was 6:00 p.m., and as I have also already noted, the correspondence and the conversations between the parties reveals that the common understanding of the parties was that 6:00 p.m. was the closing deadline.

4. The Problem of the Incorrect Estoppel Certificates

[42] With the scheduled closing of the sale approaching, on July 30, 2018, Ms. Lau sent Ms. Spadafora a letter enclosing the template of the estoppel certificate that was required under the Agreement of Purchase and Sale.

[43] The following day, Ms. Spadafora advised Ms. Lau that three of the four tenants had vacated the property, and that only 1730474 Ontario Inc. would be providing an estoppel certificate. Fortress was satisfied with this approach.

[44] On August 1, 2018, Ms. Spadafora sent Ricki’s Construction the one estoppel certificate that was required to close the transaction. She asked Ricki’s Construction to arrange for the signing of the certificate by 1730474 Ontario Inc.

[45] In preparing the estoppel certificate for signature, Ms. Spadafora had used the template provided by Ms. Lau, and she inserted the correct information to complete the text of the certificate. All that was required was the signature of 1730474 Ontario Inc. As completed, the estoppel certificate stated that 1730474 Ontario Inc. was the tenant under a lease dated November 1, 2015 and the certificate stated that termination of the tenancy was: “5 years or 90 days after written receipt of demolition.” Ms. Spadafora emailed the estoppel certificate to Ricki’s Construction to arrange for its signing by the tenant.

[46] On August 2, 2018, Ms. Lau sent Fortress’s letter of title requisitions for the pending closing. One of the requisitions in Ms. Lau’s letter was with respect to the estoppel certificate. The requisition stated:

REQUIRED: On or before closing, delivery of the original executed leases affecting the Lands, any amendments to the leases if applicable, and Estoppel Certificates between the Owner and the Tenants for the Lands confirming the leases are in good standing.

[47] On August 8, 2018, Ms. Lau sent Ms. Spadafora an email message that stated: “Will you be sending us the tenant estoppel from the burrito restaurant shortly per terms of APS?”

[48] Under the terms of the Agreement of Purchase and Sale, August 8, 2018 was the date that the estoppel certificate was actually due, and so rather than making a polite interrogatory, Ms. Lau might have demanded the delivery of the estoppel certificate. It may be noted that this was Ms. Lau’s third request about the estoppel certificate.

[49] Pausing here to foreshadow the discussion below, it should be noted that it is part of Ricki’s Construction case that a timely delivery of the estoppel certificate was ultimately without legal significance. To be more precise, Ricki’s Construction submits that because Fortress did not insist on prompt performance of the contractual promises associated with the delivery of the estoppel certificate, therefore, the late delivery of the estoppel certificate is legally insignificant. Further, Ricki’s Construction’s submission is that all the problems about the estoppel certificate, which are described in detail below, were resolved before 6:00 p.m. on August 13, 2018. Ricki’s Construction submits that Fortress did not then and cannot now rely on the problems with the estoppel certificate as an excuse for not closing the transaction before the 6:00 p.m. deadline. As I shall explain below, I disagree with Ricki Construction’s argument.

[50] Returning to the narrative, on August 10, 2018, Ms. Ding (Ms. Lau’s assistant) sent Ms. Spadafora the vendor’s closing documents and asked for comments. Ms. Ding also asked for a response to the requisition letter of August 2, 2018. This request is the fourth time that a polite request was made for the delivery of the estoppel certificate.

[51] Ms. Spadafora responded by email that her comments would be forthcoming, and she attached Ricki’s Constructions response to the requisitions. The response stated:

3. As previously advised, we can provide you with a copy of the Lease and Estoppel Certificate from only 1730475 Ontario Inc.

[52] August 13, 2018, the date for completion of the transaction arrived.

[53] On the date of closing, an associated company of Fortress’s had the funds available to close the transaction. The money was in an account at the CIBC, which was the associated company’s and Fortress’s bank for business transactions.

[54] On the morning of the date of closing, the funds, however, had not yet been transferred from the bank account into Ms. Lau’s firm’s trust account. Once again, to foreshadow the discussion below, Ricki’s Construction submits that there is evidence that Fortress was not ready, willing and able to close by 6:00 p.m. and, accordingly, Ricki’s Construction submits that Fortress is not entitled to a decree of specific performance and that it forfeited the $1.0 million deposit.

[55] At around 11:00 a.m. on August 13, 2018, Mr. Rick Ndreka attended at Ms. Spadafora’s office to sign the vendor’s closing documents. Mr. Ndreka also returned the estoppel certificate that Ms. Spadafora had sent him on August 1, 2018 to be signed by 1730474 Ontario Inc.

[56] Ms. Spadafora did not know and was not told by Mr. Ndreka that the estoppel certificate that she had prepared had been altered. She did not know that the altered certificate did not conform with the disclosures and representations that she had made in the summer of 2017 to Ms. Lau about the lease documents for 120 Peter Street.

[57] Why the estoppel certificate had been changed and who changed it was never disclosed by Ricki’s Construction. The explanation that Mr. Ndreka could come up with was that somebody made a mistake perhaps by matching the estoppel certificate with certificates from other transactions. This explanation, however, makes no sense because no other transactions reached the stage of the delivery of estoppel certificates. But more to the point, the changed estoppel certificate was false and did not conform to the certificate prepared by Ms. Spadafora, which certificate conformed to the representations that Ms. Spadafora had made in her email message to Ms. Lau on August 16, 2017. Thus, there was no explanation why the estoppel certificate prepared by Ms. Spadafora was altered. I will have more to say about the significance of the altered estoppel certificate below.

[58] Returning again to the narrative, also, around 11:00 a.m. on August 13, 2018, there was a telephone conversation between Mr. Ndreka and Mr. Mansour. There are both similarities and also differences in their respective testimony about what was said in this conversation.

[59] Mr. Mansour’s account is that he phoned Mr. Ndreka because the estoppel certificate was outstanding. He says that he was told that the estoppel certificates had been signed and that Mr. Ndreka said that he had left them with Ms. Spadafora. Mr. Mansour then wished to extend the closing for two days, until August 15, 2018, until the certificates were received and reviewed. Mr. Mansour said that Mr. Ndreka said that he was not prepared to give an immediate answer and promised to get back to Mr. Mansour later in the day.

[60] Mr. Ndreka’s account of the late morning conversation is that Mr. Mansour was requesting an extension because Fortress needed more time to arrange for the closing funds. Mr. Ndreka said that he told Mr. Mansour that he was not prepared to grant any extension and that any discussions about the transaction must take place between the lawyers.

[61] I find as fact that Mr. Mansour’s version is the correct account and that Mr. Ndreka’s account is mistaken. The truth of the matter is that the estoppel certificate was outstanding, the estoppel certificates were critically important, and it was quite proper and quite understandable that Fortress would wish the transaction’s closing to be postponed until the status of the certificates was resolved.

[62] Perhaps at some other time, Mr. Mansour may have said something about tight money, but there was no reason for him to do so on the morning of August 13, 2018. While it would have been prudent for Fortress to have already put Brattys LLP in funds, it had the money available to be wired to the law firm. The only reason that Fortress wished a delay in closing was to confirm that a proper estoppel certificate had been delivered. Money was not the issue.

[63] In any event, at the same time as Messrs. Mansour and Ndreka were speaking, the lawyers were having their own discussions including Fortress’s lawyers making the fifth request about the estoppel certificate. At 11:23 a.m., Ms. Lau sent an email message to Ms. Spadafora and to Ms. Uyeno. The email stated:

Hi Norine and Peggy, just tried to call Peggy regarding the closing. Do you have comments on our documents …? As well, do you have the tenant estoppel and stat dec [statutory declaration] re rents signed?

[64] At 12:03 p.m. on August 13, 2018, Ms. Uyeno sent Ms. Lau the following email message with attachments:

Harriet,

Please find attached your form of closing documents … A signed copy of the Estoppel Certificate from 1730474 is also attached.

[65] Ms. Spadafora’s evidence was that she had assumed that the estoppel certificate that Mr. Ndreka had delivered earlier in the morning was in the form that she prepared. She did not review the estoppel certificate and thus she did not know that the enclosed estoppel certificate in Ms. Uyenso’s email to Ms. Lau had been altered. The altered certificate identified the tenant as 1730474 Ontario Inc. under a lease dated November 1, 2015 and under a lease amendment dated: “May 20, 2016 for additional 3 years option provided satisfactory to be a good tenant”. The estoppel certificate stated that the termination was: “to be negotiated between the parties”. The altered certificate did not refer to the demolition clause.

[66] Ms. Lau reviewed the estoppel certificate received from Ricki Construction’s lawyers and she did notice that there was a problem. At 12:18 p.m., she sent Ms. Uyeno the following email message:

Hi Norine regarding the tenant estoppel, there seems to be some inconsistency with the offer to lease we/our client received. It mentions a lease amendment dated 2016 — do you have a copy of this? As well, the demolition clause in the offer says that tenant is to vacate upon 90 days notice however the estoppel says that the terms are to be negotiated. Could you please clarify?

[67] Around the same time, Mr. Mansour, who it seems had been advised about the new problem with the estoppel certificate was unsuccessfully trying to reach Mr. Ndreka. Unable to get Mr. Ndreka to pick up the call, Mr. Ndreka sent him the following email message:

Ricky. We have a small issue with your tenant estoppel. It doesn’t line up with the lease documentation we were provided with when we entered into the agreement to buy the property. Please call me.

[68] As part of its argument that the matter of the estoppel certificate is ultimately irrelevant Ricki’s Construction relies on Mr. Mansour description of the problem as a “small issue.” It was, in truth, no small problem, and Mr. Mansour was just being diplomatic or overly polite. He was attempting to remove what was a very serious impediment to closing the transaction. The situation with the estoppel certificate had transformed from a genuinely small problem of the late-delivery of the proper certificate to the delivery of a certificate that might delay the condominium project for three or four years or scupper it altogether. No small problem.

[69] At 12:28 p.m., Mr. Mansour attempted again to call Mr. Ndreka who did not pick up the call. Instead, Mr. Ndreka sent Mr. Mansour a text message stating: “I will call you soon.”

[70] When the promised call from Mr. Ndreka did not come, Mr. Mansour phoned Mr. Ndreka at 2:01 p.m. but again the telephone call was not answered. Mr. Ndreka’s explanation for not picking up the call was that his brother had signed the estoppel certificate, and he thought that Ms. Spadafora had addressed the issue.

[71] At 2:04 p.m., Ms. Lau sent the following email message to Mesdames Spadafora and Uyeno:

Hi Norine and Peggy, just following up regarding below [referring to Ms. Lau’s 12:18 p.m. email message] as our client is not satisfied with the estoppel since it does not match the lease that they were provided with.

[72] Meanwhile, at 2:24 p.m., Mr. Mansour called the CIBC to make arrangements to have the bank put his lawyers in funds to close the transaction. A flurry of email and phone calls followed as Mr. Mansour tried to energize the Bank to respond to the urgency of the situation.

[73] While Mr. Mansour was engaged in his struggles with the CIBC, Ms. Spadafora was making arrangements to obtain another estoppel certificate from 1730474 Ontario Inc. Mr. Ndreka’s evidence was that his brother signed the certificate around 2:00 p.m. Accepting this evidence as true, which I do, then there is no explanation why it took until 4:52 p.m. for Ricki’s Construction to deliver the certificate to Ms. Spadafora. In any event, it was not until 4:52 p.m. that Ms. Lau sent the estoppel certificate to Ms. Lau under cover of the following email message:

Harriet,

Our client went back to the tenant. They have signed the original estoppel which matches the lease (attached). Please advise when we will expect your closing package and funds as 6 p.m. is approaching. Thanks,

[74] This time, the enclosed estoppel certificate identified the tenant as 1730474 Ontario Inc. under a lease dated November 1, 2015 without reference to an amending lease agreement. The certificate stated that termination was: “5 years or 90 days after written receipt of demolition.”

[75] I pause the narrative to note that the Land Titles registry office closes at 5:00 p.m.

[76] I also pause to comment about the legal situation during the morning and afternoon of August 13, 2018 up until 4.52 p.m. I analyze the situation as follows:

a. In the morning, Ricki’s Construction had not delivered the estoppel certificate. This was a breach of the agreement that would have entitled Fortress to rescind or terminate the Agreement of Purchase and Sale. However, Fortress did not accept the breach, and rather it wished to keep the agreement alive and it was persisting in its request for the delivery of the estoppel certificate.

b. At noon, when Ricki’s Construction delivered the altered estoppel certificate this was a deceitful act that would have entitled Fortress to rescind the agreement. It was also a fundamental breach of the Agreement of Purchase and Sale and a far more egregious breach of contract than the late delivery of the estoppel certificate. I do not believe Mr. Ndreka’s evidence that the altered estoppel Certificate was just a mistake. In the absence of any testimony from his brother or anyone else from 1730474 Ontario Inc., I draw an adverse inference that there was an intent to deceive. However, once again, Fortress did not treat the breach of contract or the deceit as grounds to terminate or rescind the Agreement of Purchase and Sale. Fortress still wished to keep the agreement alive and it was persisting in its request for the delivery of a proper estoppel certificate.

c. The suitable estoppel certificate arrived at 4:42 p.m. The time fixed for closing remained at 6:00 p.m., but as a result of (a) Ricki Construction’s delay in providing the estoppel certificate until the morning of August 13, 2018, (b) its deceit and breach of contract in providing an altered estoppel certificate at noon, and (c) its late-in-the-date delivery of a suitable estoppel certificate, I conclude that Ricki Construction could no longer insist on time of the essence. Thus, Ricki’s Construction’s argument that the matter of the late and of the improper delivery of the estoppel certificate ultimately had no legal significance is incorrect. Ricki’s Construction’s conduct with respect to the estoppel certificate had significant legal consequences; its misconduct disentitled it to treat time as of the essence with concordant legal significance to Ricki’s Construction’s ability to terminate the contract for alleged untimely performance.

5. The Abortive Closing

[77] At around 5:15 pm., Ms. Lau left a phone mail message for Ms. Spadafora. A transcription of the recording of the message is as follows:

Hi. Peggy. It’s Harriett, from Brattys. If you could give me a call back, that’d be great. Just wanted to talk to you about this 120 Peter Street closing. I am expecting the wire, still to come in, for the funds. And, its just – it’s somewhere in the banking system. It has been initiated a couple of hours ago. I was just waiting to receive the funds. And, given that it’s 5 o’clock already, I won’t be able to sent you funds, today. So, I’m wondering if we could extend until tomorrow morning. Let me know; 905-760-2600, extension 353. Thanks Peggy, bye.

[78] At 5:16 p.m. Ms. Lau responded to Ms. Spadafora's email that had forwarded the estoppel certificate. Her email message stated:

Hi Peggy, just left you a voicemail on this – we are waiting for our funds via wire to come through. Seeing as I can’t send you the funds today because banks are closed, can we extend until tomorrow? Here are the documents are [sic] client has signed in the meantime. Thanks

[79] Ms. Lau and Ms. Spadafora then spoke by phone. Ms. Lau testified that it was agreed that if Ms. Lau provided confirmation of the deposit of closing funds to her firm’s trust account by 6:00 pm, the transaction would close. Ms. Spadafora testified that she only agreed to seek instructions if the funds were deposited. At 5:31 p.m., Ms. Lau sent Ms. Spadafora the following email message:

Peggy, per our conversation, just trying to get something in writing from the bank regarding the wiring details.

[80] At 5:49 p.m. Mr. Mansour again attempted to phone Mr. Ndreke without success. A few minutes later, Mr. Mansour sent a text message advising that confirmation of the funds being transferred was imminent. The text message stated:

Hi Ricky. Just wanted to let you know that I’ll be getting you confirmation of the wire shortly. I apologize CIBC has been very slow and difficult but I assure you that you will get confirmation.

[81] Although the parties did not know it, at 5:52 p.m., the CIBC had transferred the closing funds into Brattys LLP’s trust account.

[82] In any event, Ms. Lau was proceeding as if she believed that Fortress must tender its closing funds by 6:00 p.m. and Ms. Spadafora did not disabuse her of this belief.

[83] I do not believe Ms. Lau’s evidence that Ms. Spadafora agreed to extend the closing to the next day. I believe that she misunderstood what Ms. Spadafora was saying. I believe Ms. Spadafora’s evidence that she did not agree to extend the time for closing until the next day, but rather that she would seek instructions if Ms. Lau’s law firm was put in funds.

[84] However, while Ms. Spadafora was under no obligation to disabuse Ms. Lau in her belief that 6:00 p.m. was the hard deadline for the closing of the transaction, this apparently shared belief was wrong.

[85] As already noted above, the legal reality was that because of its own breaches of contract and its failure to act in good faith, Ricki’s Construction was no longer in a position to insist on time of the essence. It was right and proper for Fortress to attempt to close by 6:00 p.m., but time was no longer of the essence.

[86] It was in order for Ms. Lau to request an extension, but the legal reality was that provided her client was proceeding to act in good faith to close the transaction, Ms. Lau could have demanded that the closing occur the next day, which would have a been a reasonable restoration of time of the essence. This essentially was the position that Fortress eventually took as the lawyer’s began to exchange accusatory lawyer’s letters.

6. Ricki Construction’s Termination and Fortress Carlyle’s Claim of Specific Performance

[87] Precisely at 6:00 p.m. Ms. Spadafora sent an email message to Ms. Lau. The email message stated:

Harriet,

Further to the above transaction, we confirm that we have delivered all necessary closing documents and the keys to your office on behalf of the Vendor. The Vendor is ready, willing and able to close the transaction today. Closing is scheduled to occur on or before 6pm today August 13, 2018. We confirm we have received the purchasers closing documents but not the purchaser funds required to close the transaction. If we do not receive the closing funds by 6pm today, your client is in default and the aps will be terminated. My client is not prepared to grant any extensions of the transaction. Thanks,

[88] It is difficult to characterize this lawyer’s letter. If it was a warning, it was already too late at the moment it was sent. More to the point, as already mentioned above, and as elucidated further below, Ricki’s Construction was not in a legal position to terminate the Agreement of Purchase and Sale when this threatening letter was sent. If Ricki’s Construction was trying to restore time of the essence, it failed because restoring it by requiring a closing at 6:00 p.m. was not reasonable in the circumstances.

[89] At 6:16 p.m., the CIBC confirmed that the closing funds had been transferred to Brattys LLP’s account at 5:52 p.m. Ms. Lau forwarded the confirmation to Ms. Spadafora at 6:19 p.m. by an email that stated:

Hi Peggy, please see attached for confirmation of wire. Thanks.

[90] At 6:20 p.m., Mr. Mansour called Mr. Ndreka and advised him that the funds had been wired. Mr. Mansour testified that Mr. Ndeka then said that the transaction was "dead", but Mr. Mansour stated that the transaction should close the next morning. Mr. Mansour testified that Mr. Ndeka stated that he would speak to his father-in-law and get back to Mr. Mansour about closing the transaction. Mr. Ndreka’s evidence was that Mr. Mansour had said the purchase price was coming slowly and that money was tight. I believe Mr. Mansour’s account and not Mr. Ndreka’s. In any event, nothing turns on this conversation between Mr. Mansour and Mr. Ndreka.

[91] At 7:05 p.m. Ms. Lau emailed Ms. Spadafora the following message:

Hi Peggy,

Further to your email below, pursuant to the terms of the agreement of purchase and sale the purchaser was supposed to [have] received the tenant estoppel/statutory declaration re rents 5 days prior to closing. We received such documents today, and the tenant estoppel did not correspond with the lease our client was provided with. We received the correct tenant estoppel at 4:55 pm, and therefore your client is in breach of the agreement of purchase and sale.

Pursuant to our telephone conversation regarding funds, we confirm that you advised that if we could provide confirmation of wire deposit to our account by 6pm, the deal could be extended. We provided you with this confirmation at 6:19 pm, only 19 minutes afterwards. You client is acting in bad faith by terminating the deal in such manner.

As we are in funds and are ready, willing and able to close now, please confirm we are closing the transaction tomorrow morning, failing which our client will be retaining litigation counsel and commencing appropriate actions. Thanks

[92] There were no more communications on August 13, 2018, and at 9:41 a.m. the next day, Ms. Lau sent an email message to Ms. Spadafora asking for a reply to her email message of the prior evening.

[93] Meanwhile on August 14, 2018, pursuant to s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5, Fortress registered a caution against the title of 120 Peter St. It paid the land transfer tax of $86,475.

[94] Still not having heard from Ricki’s Construction, at 3:20 p.m., Ms. Lau sent the following email message to Ms. Spadafora:

Hi Peggy,

Further to my email to you below which was sent this morning, your client continues to act in bad faith and is unresponsive, our client continues to be ready, willing and able to close and you have a law society obligation to respond to our email. As we have not received any correspondence today from your office regarding the closing, we have registered a caution of agreement of purchase and sale on the property and our client has paid land transfer tax. Furthermore, our client has retained litigation counsel to take such further action as is necessary. Please advise on your client's position as soon as possible. Thanks,

[95] At 4:48 p.m., Ms. Spadafora sent the following email message to Ms. Lau:

Hi Harriet,

I write in response to your August 13, 2018 email sent at 7:05 pm, your email sent today at 3:20 pm, and with respect to your client's failure to complete the sale of 120 Peter Street in accordance with the Agreement of Purchase of Sale dated September l, 2017 (the "APS").

As set out in the APS as amended on February l, 2018, the Completion Date was August 13, 2018 before 6:00 pm. As I confirmed to you yesterday by email, the Vendor delivered the keys and all closing documents, had satisfied all of its obligations under the APS, and was ready, willing and able to close the transaction in accordance with the APS. Your client was not. Your client defaulted under the APS by failing to deliver the closing funds before 6:00 pm as required. The deal is now dead. The transaction is at an end. As contemplated by the APS, the Vendor is entitled to retain the Deposit as a result of your client's default.

Apart from the extension that the parties agreed to by written amendment to the APS on February 1, 2018, there was no extension to the Completion Date. I note that the APS requires that any amendments be in writing and signed by the parties.

Contrary to your email from last night, I did not advise you that an extension of the Completion Date would be granted if you provided confirmation of a wire deposit to your firm's account by 6:00 pm. I advised you that I did not have any instructions to agree to any amendment to the APS, including extending the Completion Date.

As a courtesy, I advised you that if you were able to provide confirmation prior to 6:00 pm that your firm had received in its trust account all funds necessary to close and instructions to send those funds to our trust account immediately, then I would seek instructions from our Client with respect to an extension. I received no such confirmation from you prior to 6:00 pm and therefore did not seek any instructions with respect to an extension.

Your bald accusation that the Vendor has acted in bad faith is unwarranted and contradicted by the facts.

With respect to the estoppel documents referenced in your email, your client took no issue with those documents being delivered on the Completion Date, and in any event the "small issue" with the tenant estoppel were remedied to your client's satisfaction prior to closing. Your client is improperly attempting to rely on this inconsequential clerical error to mask its own default.

The truth of the matter was made clear by Naram Mansour's phone call to the Vendor yesterday at approximately 6:20 pm. During that call, Mr. Mansour confirmed to the Vendor that your client did not have the closing funds and was unable to close in accordance with the terms of the APS. Mr. Mansour asked for a further extension, which was refused.

Your client's registration of a caution on title was done with no legal or equitable basis. If the caution is not immediately removed from title, then our client will take all necessary steps to do so and seek his costs regarding same. In addition, I note that it was not proper for your firm to register a caution without giving us any notice. Going forward, we insist that you give notice of any steps, including litigation, and will rely on this correspondence should you continue to take any steps ex parte.

Thanks, Peggy

[96] In this battle of lawyer’s letters, Ms. Spadafora’s analysis is wrong and Ms. Lau’s, while not perfect, is correct in its ultimate conclusions.

[97] Ms. Spadafora’s analysis is wrong because: (a) Ricki’s Construction did act in bad faith, and the facts known to Ms. Spadafora confirmed this to be the case; (b) the matter of the estoppel certificate was not a “small issue;” (c) the change to the estoppel certificate was not an inconsequential clerical error; and (d) Mr. Mansour did not confirm that Fortress did not have the closing funds. Indeed, it is bizarre for Ms. Spadafora to make this allegation given that she had received the confirmation from the CIBC that Brattys LLP was in funds to close. Further, Ms. Spadafora was wrong that her client was entitled to terminate the transaction. Ricki’s Construction was not entitled to treat time of the essence, and, therefore, it was not entitled to terminate the agreement and forfeit the deposit even if Fortress was offside in meeting the 6:00 p.m. deadline.

[98] In accordance with the rule about time of the essence, noted above, for Ricki’s Construction to insist on time of the essence, it must have shown itself to be ready, desirous, prompt, and eager to carry out the agreement and to have not been the cause of the delay or default in performing the contract. Neither of these preconditions were satisfied in the case at bar.

[99] In the case at bar, Fortress relied on, among other cases about good faith in the performance of contracts, on Justice Catzman’s judgment in Morgan v. Lucky Dog Ltd. (1987), 45 R.P.R. 263 (Ont. H.C.J.). The reliance on that case was apt.

[100] The facts of this case were that Lucky Dog owned a warehouse where the Eatons was the tenant. In May 1981, Lucky Dog agreed to sell the warehouse for $1.5 million. It was a condition of the agreement that Lucky Dog provide an estoppel certificate from Eatons that neither party to the lease was in default. If this estoppel certificate was not available, then Lucky Dog had the alternative of providing a statutory declaration verifying that lease was in good standing and that neither party to the lease was in default.

[101] The transaction was scheduled to close on July 31, 1981, and on July 17th, Lucky Dog’s lawyers learned that Eatons was not prepared to sign the estoppel certificate and indeed was taking the position that Lucky Dog was in breach of its repair obligations under the lease. This information was not immediately passed on to the purchaser, and rather Lucky Dog’s lawyers waited until the day before the closing to advise the purchasers’ lawyers of Eaton’s position. On that day, Lucky Dog’s lawyers send the statutory declaration, and contrary to Eaton’s position that there was no breach of the lease, the statutory declaration stated that there was no default.

[102] The decision to delay informing the purchaser of Eaton’s position was a deliberate tactical decision to discomfort the purchaser. Under the time pressure of an imminent closing, the purchaser inspected the warehouse on the morning of the scheduled closing. Its expert advised them that it might cost $40,000 to address Eaton’s complaints. The purchaser requested an abatement. This request was refused. The purchaser requested an extension of the closing. This request was refused. The purchaser then asserted that it would close and assert a claim after closing. Lucky Dog’s position was that the transaction must close that day with a release of the purchaser’s claim for an abatement. Alternatively, the purchaser could cancel the agreement and obtain a refund of the deposit. The purchaser’s lawyer rejected these choices, and the lawyers agreed to meet at the registry office in Hamilton at 4:00 p.m. to tender one on the other.

[103] The parties’ lawyers were all in Toronto, and each side sent a representative to drive to the registry office in Hamilton, where the warehouse was located. Lucky Dog’s lawyer arrived first at 4:15 p.m., waited until 4:30 p.m., and then left. The purchaser’s lawyer arrived at about 4:40 p.m. to learn that Lucky Dog’s lawyer had already departed. The purchasers’ lawyer then drove back to Toronto to the more-or-less deserted offices of Lucky Dog’s lawyers, where at around 6:15 p.m. on a Friday afternoon, the purchasers’ lawyer made a tender on several lawyers who knew nothing about the transaction. The transaction did not close, and on the morning of August 4, 1981, the purchaser’s lawyer telephoned Lucky Dog’s lawyers and asked if they were ready to close that morning. The answer was that they had no instructions to close. A few more days passed, and the purchaser sued for specific performance.

[104] Lucky Dog’s argument was that for specific performance, a purchaser must show itself to be ready, desirous, prompt and eager to complete the agreement and to show that it was not the cause of the delay or default. It submitted that the purchaser had failed to show clear instructions and a readiness and preparation to close on July 31, 1981. The purchaser countered that it was Lucky Dog that had repudiated the agreement. Justice Catzman agreed with the purchaser. His assessment of the situation is found in paragraph 64 of his judgment. He stated:

[I]n my opinion, the evidence and the proper characterization of the evidence strongly support [the purchasers’] alternative submission that the vendor, by the conduct of its representatives, was disentitled from relying on the failure to close on July 31, 1981 and, in refusing to close on August 4, 1981, wrongfully repudiated its obligations under the agreement. It is my assessment on all of the evidence that the failure to close the transaction on July 31, 1981 was the effectuation of the very result which the vendor's representatives deliberately orchestrated and strove to accomplish following receipt of Eatons' letter, and was the successful implementation of a stratagem which they intended and expected would throw the purchaser into disarray and -- to use Mr. Yarmon's phrase (Ex. 86) -- would make it "quite likely" that the purchaser would either wish to delay closing beyond July 31 (a request which they were expressly instructed to refuse) or to ask for its deposit back and terminate the sale (a request which would accomplish the objective they knew their principal desired). In these circumstances, the law precludes the vendor from relying on the provision making time of the essence of the agreement (Lucifora v. Walfish, [1955] O.W.N. 898 (Ont. C.A.), at p. 899) and from taking advantage of the existence of a state of affairs which it itself produced (New Zealand Shipping Co. v. Société des Ateliers et Chantiers de France, [1919] A.C. 1 (H.L.); Syed v. McArthur (1984), 46 O.R. (2d) 593 (Ont. H.C.), at p. 600; Koffman v. Fischtein (1984), 49 O.R. (2d) 124 (H.C.) at pp. 129-130 affd. on this point (1986), 53 O.R. (2d) 671 (C.A.)) particularly where, as here, it is acting contrary to good faith in its performance of the contract (LeMesurier v. Andrus (1986), 54 O.R. (2d) 1 (C.A.) at p. 7, leave to appeal to the S.C.C. refused [1986] 2 S.C.R. v). [16]

[105] In the immediate case, Fortress acted in good faith and it satisfied the preconditions for a claim for specific performance. In the case at bar, Fortress would have been ready, willing and able to close on August 13, 2018 but for the misconduct of Ricki’s Construction which more than discomfited Fortress. The estoppel certificate was a critical factor in Fortress’s development plans, and after the delayed delivery of any certificate, the late delivery of a certificate with serious issues, and the late delivery of a proper certificate, one hour before the scheduled 6:00 p.m. closing, Ricki’s Construction was precluded from relying on the provision in the Agreement of Purchase and Sale making time of the essence.

[106] Alternatively, if the legal situation in the case at bar was that both parties were at fault, then Ricki’s Construction still does not have a defence to Fortress’s claim for specific performance.

[107] In accordance with the major legal principles set out above, when both contracting parties breach the contract, the contract remains alive with time no longer of the essence but either party may restore time of the essence by giving reasonable notice to the other party of a new date for performance, which is what occurred in the immediate case when Ms. Lau suggested that the transaction close on August 14, 2018.

[108] In this last regard, from a legal analysis perspective, the case at bar is similar to the leading case of King v. Urban & Country Transport Ltd. (1973), 1 O.R. (2d) 449 (C.A.). In this case, Urban & Country Transport (“Urban”) agreed to sell a property to King with a closing scheduled for July 2, 1968. The agreement required King to give a mortgage back to Urban. After signing, King assigned the agreement to Goldberg.

[109] On July 2, 1968, the date of the scheduled closing, time being of the essence, neither party was ready, able, and willing to close. Goldberg was able to close because he was not in a position to provide a mortgage back signed by King. (The law is that a purchaser may assign his or her agreement of purchase; but if there is to be a mortgage back, it must be signed by both the ultimate purchaser—as mortgagor—and also by the original purchaser under the contract—as guarantor.) Urban also was not in a position to close, because its principal simply did not want to convey to Goldberg and Urban’s lawyer deliberately made himself unavailable to close on July 2, 1968.

[110] By July 4, Goldberg’s lawyer had tracked down Urban’s lawyer and he tendered a mortgage back signed by Goldberg and by King. The tender was refused, and Goldberg sued for specific performance. Justice Arnup developed the rule from King v. Urban & Country Transport Ltd. (1973), 1 O.R. (2d) 449 at pp. 455–56 (C.A.). He stated:

It has been found as a fact that the defendants [the vendors] were neither ready nor willing to close on July 2nd. Therefore, the argument based upon time being of the essence fails. Normally, in this situation, when both parties let the time go by, and one of the parties wishes to reinstate time as of the essence, it is necessary to serve a notice upon the other party, fixing a new date for closing, which must be reasonable, and stating that time is to be of the essence with respect to the new date for closing. Neither side did this in this case. However, the findings of the trial judge as to the efforts of B [Goldberg’s solicitor] to close on July 2, July 3 and 4th lead inevitably to the conclusion that it was entirely reasonable to insist upon a closing on July 4th and that there was no reason in law for the vendor to refuse to close on the basis of the documents which B then had and which he tendered to D.

[111] Returning to the immediate case, if the legal situation in the immediate case was that both parties were at fault, then it was reasonable for Fortress to fix August 14, 2018 for the closing of the transaction. However, Ricki’s Construction refused to close and Fortress is entitled to a decree of specific performance just as the purchaser in King v. Urban & Country Transport was entitled to specific performance in the circumstances of that case.

[112] Ricki’s Construction submits that there is no failure to perform a contract in good faith by insisting that the other contracting party perform its promises. This is true, but that is not what occurred in the immediate case. In the immediate case, Ricki’s Construction breached the contract and did not act in good faith and in those circumstances, time was not longer of the essence and it was a further breach of contract by Ricki’s Construction repudiating the Agreement of Purchase and Sale by refusing to close the transaction on August 14, 2018.

E. Conclusion

[113] For the above reasons, I grant Fortress a judgment for specific performance of the Agreement of Purchase and sale for 120 Peter St.

[114] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Fortress’s submissions within twenty days of the release of these Reasons for Decision followed by Ricki’s Construction’s submissions within a further twenty days.

Perell, J.

Released: March 6, 2019