COURT OF APPEAL FOR ONTARIO

DATE: 20000406

DOCKET: C32517

RE: BRIAN WARSH, DAVID GREENBERG LIMITED, DAVID
GREENBERG and REBECCA GREENBERG (Applicants/
Appellants) and INTERNATIONAL FREEHOLD
FINANCIAL SERVICES LTD. (Respondent)

BEFORE: CATZMAN, BORINS AND FELDMAN JJ.A.

COUNSEL: Inga B. Andriessen,
for the appellant A. Farber & Partners Inc.
David M. McNevin,
for the respondent 1118851 Ontario Ltd.

HEARD: April 3, 2000

On appeal from the Order of Mr. Justice Stach dated June 9, 1999

E N D O R S E M E N T

[1] We are satisfied that Stach J. was in error in finding that
the purchaser, 1118851 Ontario Ltd., was entitled to a return of
its deposit of $47,500, and directing that this sum, which was
paid into court pursuant to the order of McCombs J., be paid out
of court to the purchaser.

[2] Before Stach J., the purchaser took the position that it was
entitled to a return of its deposit because on the date of
closing the receiver, A. Farber & Partners Inc., was “unable to
close” the transaction due to several alleged deficiencies in the
closing documentation presented by the receiver. In accepting
the purchaser’s position, the motions judge stated:

In my opinion one or more of the deficiencies goes to the
very heart of the ability of the receiver to convey good
title on the closing date. The failure on the part of the
receiver to deliver appropriate closing documents in
registrable form on the closing date establishes on a
balance of probabilities that the receiver was unable to
close on August 10, 1998. Nor were the deficiencies
trivial ..... . The purchaser was otherwise able and,
ostensibly willing to close. In short, I am of the opinion
that a prudent purchaser would be justified as “Ontario”
[the purchaser] did, confronted as it was, with the serious
shortcomings.

[3] We are of the opinion that none of the deficiencies
considered by the motions judge went to the ability of the
receiver to convey good title to the purchaser. None of these
concerns went to the root of title in the sense that the receiver
was unable to convey to the purchaser what it had contracted to
purchase. Indeed, during argument counsel for the purchaser
agreed that if this agreement had been completed on the date of
closing, the purchaser would have received good title to the
property.

[4] In our view, the concerns raised by the purchaser overlook
the fact that on July 8, 1998 Roberts J. ordered “that the
agreement of purchase and sale dated June 15, 1998 be approved
for the sale of the Windsor property at a purchase price of
$475,000.” This is the agreement of purchase and sale which the
purchaser refused to close.

[5] It is to be assumed that in approving the agreement of
purchase and sale, Roberts J. was satisfied that the receiver had
the power to complete the sale, and to convey good title to the
Windsor property to the purchaser. As well, it is to be assumed
that he would not have approved the sale if the receiver did not
have the power to sell the Windsor property under the power of
sale in the mortgage.

[6] A provision of the agreement of purchase and sale states:

The vendor shall seek court approval of the agreement of
purchase and sale and shall deliver a letter certifying
that such court approval has been obtained prior to the
20th day next following acceptance of this agreement.

Pursuant to that provision, the solicitor for the receiver,
almost a month before closing, certified to the purchaser that
the court had approved the sale.

[7] As we are satisfied that none of the deficiencies relied on
by the purchaser went to the ability of the receiver to convey
title to the property, the purchaser was not justified in
refusing to close the transaction and to obtain a return of its
deposit. In the context of this transaction, there was no need
for the receiver to deliver “appropriate documents in registrable
form” other than a deed or transfer of the Windsor property.

[8] As well, it is apparent from the record that the concerns
raised by the purchaser were minor and could easily have been
resolved if the purchaser had acted reasonably and given the
receiver two or three days in which to respond to them. For
example, the error in the order of Lissaman J. in respect to the
name of the receiver had been rectified by Himel J.’s order made
more than three months before the closing date.

[9] Therefore, we would allow the appeal and set aside the order
of Stach J.

[10] Counsel for the purchaser has submitted that in the event
the appeal is allowed, as it has been, we should not order that
the receiver be permitted to keep the deposit as it did not
request this relief before Stach J. We do not agree. It is clear
from paragraph 15 of Mr. Goldberg’s affidavit that the parties
agreed that the motion taken before Stach J. was intended to
serve as a substitute for proceeding with the action commenced by
the purchaser against the receiver for a return of the deposit.
It was in the context of this action that McCombs J. made the
order for payment of the deposit into court. The parties further
agreed that it was only if the court was “unable to determine the
rights of the parties in respect to the agreement of purchase and
sale” that the action was to continue. The court has been able
to determine the rights of the parties. If the purchaser
intended to raise additional issues in respect to its right to
recover its deposit, the time to do so was in the motion.

[11] Accordingly, having decided that the purchaser was not
entitled to a return of its deposit, it follows that the receiver
is entitled to retain it and to an order that the amount of
$47,500 currently in court be paid out of court to it.

[12] In the result, the appeal is allowed and the order of Stach
J. is set aside and the motion is dismissed. There will be an
order that the receiver is entitled to retain the deposit and
that the sum of $47,500 currently in court pursuant to the order
of McCombs J. be paid out of court, together with accrued
interest, to the receiver. The receiver is entitled to its costs
of the motion and the appeal.