DATE: 2001-12-18
DOCKET: C34098

COURT OF APPEAL FOR ONTARIO

RE:

GORDON BARON (Plaintiff(Appellant)) - and - FAUSTO PALOMBO and PAL-BAC DEVELOPMENTS (RIVER RIDGE) LIMITED (Defendants (Respondent))

BEFORE:

WEILER, FELDMAN and SHARPE JJ.A.

COUNSEL:

Sean E. Cumming
For the appellant

Michael E. Caruso
For the respondent

HEARD:

November 14, 2001

On appeal from the judgment of Justice Terrance P. O’Connor dated March 28, 2000 made at Brampton, Ontario

E N D O R S E M E N T

[1] The appellant sued the respondent for specific performance of an agreement of purchase and sale of a home to be built. During the trial he abandoned his claim for specific performance and amended his claim to one of damages for breach. The respondent counterclaimed in respect of damages suffered as a result of the registration of a certificate of pending litigation. The trial judge dismissed both the action and the counterclaim.

[2] The appellant and the respondent entered into two contracts for the purchase and sale of a custom home to be built on a particular lot with a view of the Credit River. The first contract was frustrated by conservation authority regulations which did not permit a walk-out at the rear of the home. The parties agreed to release each other from that contract and entered into a new agreement dated July 28, 1997. The agreement provided for a home to be built on the same lot for an agreed price of $329,000. The transaction was to close on March 28, 1998.

[3] The trial judge found that the plans for the second house were based on sketches prepared by the appellant, which contained some features which did not comply with the Building Code or other requirements of the municipality. The plans were drafted by an architectural firm retained by the respondent contractor. The trial judge accepted that the respondent instructed the architectural firm to prepare the plans in accordance with the appellant’s wishes in order to try to accommodate him, even though they would not be approved. In particular, the offending features were an extra kitchen in the basement, the house footprint exceeded the lot coverage limits, the building violated set-back allowances and the windows on several facings were too large.

[4] Although most of these difficulties were resolvable with some reworking of the plans or by obtaining Committee of Adjustments minor variance approval, the trial judge concluded that the set-back problem would have been difficult to correct or overcome.

[5] The respondent made the application for the building permit on February 2, 1998. The City responded on March 6, 1998 listing items that had to be satisfied in order to obtain the building permit. The parties met, and the respondent made three proposals to the appellant: 1) release from the contract and return of deposit; 2) purchase the lot at the respondent’s cost of $110,000 for the appellant to build his own house; 3) build a house with a walk-out feature but on a less attractive lot. The appellant rejected all three proposals, taking the position that the type of house he wanted could be designed for the lot he wanted. With the agreement of the respondent, he retained his own architect, had new plans drawn, and received a building permit for them. Unfortunately, this house was considerably larger than the second house and with extra features, and was going to cost approximately $110,000 more for the respondent to construct. The respondent took the position that the contract was at an end and returned the deposit of $20,000, which the appellant did not accept, as he was seeking specific performance of the agreement.

[6] The trial judge relied on three legal bases for denying the appellant’s claim:

1. The contract provides that the plans and specifications of the dwelling may be subject to approval by the developer or the municipality and were not approved by either.

2. The contract gives the vendor the right to approve final design drawings in accordance with the agreement and this was never done. He reached this conclusion on the basis that the architectural firm retained by the respondent was not in its employ and therefore the fact that the firm drew the plans does not constitute approval.

3. The contract provides that the agreement is subject to a building permit being issued. The respondent never received the permit and before it could negotiate a resolution of outstanding issues with the City, the appellant retained his own architect to draw new plans. The vendor was entitled to terminate the contract if the approval of the municipality for the sittings and plans was not obtained. The respondent was entitled to take advantage of this clause, which it did.

Analysis

[7] The appellant focused on the third basis which he had to overcome in order to succeed on the appeal, as it depends on the lack of approval by a third party. The appellant submits that the trial judge erred by failing to deal with the evidence that the appellant was prepared to go to the Committee of Adjustments to obtain a minor variance for the non-conforming plans submitted for the second home, but the respondent, who owned the land and therefore had to make the application, refused to proceed with it.

[8] The appellant relies on the law articulated in Mason v. Freedman, [1958] S.C.R. 438, that where one party to a contract controls compliance with a condition, that party must take all reasonable steps to ensure that the condition is complied with, and cannot sit back, take no steps, then rely on non-compliance to terminate the agreement. The appellant points to the fact that the trial judge made no finding in respect of the appellant’s evidence that the respondent refused to co-operate with the application for a variance.

[9] In our view, the trial judge did not fail to address this issue. He made a finding that:

Before it [the respondent] could satisfy or negotiate a resolution of the outstanding items in the City’s letter of March 6, 1998, Mr. Baron retained his own architect and proceeded independently of Pal-Bac to have his own plans drawn and submitted to the City. (para. 17)

This finding negates the suggestion that the respondent had the opportunity to take steps to satisfy the building permit condition. The trial judge also made the finding that the set back and coverage problems would have been “difficult to correct or overcome.” (para. 7.) We are satisfied that the trial judge therefore considered any failure of the respondent to co‑operate with a variance application as having no practical effect. Read as a whole, the reasons of the trial judge reflect his view that because it was the appellant who was insisting on the non-conforming features of the plans, the appellant must accept the consequences of his position. We cannot conclude that the trial judge made a palpable or overriding error which would warrant the intervention of this court.

[10] However, we do agree that because the agreement was terminated by the vendor and the deposit returned in accordance with the agreement, the appellant is entitled to retain the deposit. As indicated, he did not initially cash the cheque because he was insisting on specific performance of the agreement. Now that that issue has been determined against him, it follows that he is entitled to return of the deposit.

Result

[11] The appeal on the issue of damages for breach of contract is dismissed. The appeal with respect to return of the deposit is allowed. Judgment will therefore go to the appellant in the amount of $20,000 together with pre-judgment and post-judgment interest.

[12] The disposition of the trial judge with respect to costs is confirmed. As success was divided on the appeal, there shall be no costs of the appeal.

Signed: “K.M. Weiler J.A.”

“K. Feldman J.A.”

“Robert J. Sharpe J.A.”