CITATION: Silverberg v. 1054384 Ontario Limited, 2009 ONCA 698
DATE: 20091006
DOCKET: C49766
COURT OF APPEAL FOR ONTARIO
Weiler, MacPherson and MacFarland JJ.A.
BETWEEN
Philip Silverberg
Plaintiff (Respondent)
and
1054384 Ontario Limited and Constantine Bassis
Defendants (Appellant)
Ronald Birken, for the appellant
Martin Sclisizzi, for the respondent
Heard and released orally: September 25, 2009
On appeal from the judgment of Justice George R. Strathy of the Superior Court of Justice dated November 17, 2008.
ENDORSEMENT
Nature of Appeal
[1] The appellant, 1054384 Ontario Limited, a company wholly owned by Constantine (Gus) Bassis, sold the property located at 1520 Danforth Ave. in the City of Toronto (the Property) to the respondent. The closing did not take place and the respondent successfully sued the appellant for specific performance.
[2] The two issues raised in this appeal are whether the respondent was disentitled to the equitable remedy of specific performance because he had “unclean hands” and whether the Property meets the two pronged test for specific performance.
Relevant Background and Purchase Agreement
[3] Mr. Bassis (Gus) bought the Property in 1994 with help from his girlfriend at the time, Liane Samuels, who contributed to the purchase price, and it was subsequently transferred to the appellant numbered company. The Property includes two bedrooms above the main floor and a basement. The Property had been a bank, so there is a vault on the main floor and in the basement.
[4] Carlos and Christina Caramanda have jointly owned and operated a bicycle store, Cyclepath, since 1988 in leased premises two doors down from the property in question. Their lease includes only the main floor of the store, so all aspects of their operation are located on one floor. They have been interested in purchasing the Property because of its size and layout, allowing them to use the basement for storage and bike repairs. The proximity of the Property to their existing location was another highly desirable feature of the Property. As the trial judge noted, the cycle shop has built up a “strong and loyal clientele in the area” and “has become somewhat of a fixture in the neighbourhood.”
[5] In early 2005, Gus instructed a real estate agent, Gruber, to list the Property for sale. After researching comparable properties, Gruber recommended that the Property be listed for $600,000 and told Gus that it would probably sell for something in the range of $550,000 to $575,000. Gus told Gruber to list the property for $699,000. Or nearly $100,000 more than the agent’s recommendation.
[6] The Cyclepath owners, who had been interested in the Property for some time, recruited the respondent, Christina’s father Philip, to be a nominee on their behalf in order to conceal their interest for the sake of their negotiating stance. The respondent was happy to help and was also interested in using the vault in the basement in which to store paintings from the art gallery he runs in Montreal as well as the apartment above as a “pied a terre” when he visited Toronto. The respondent made two offers to purchase the Property at less than the asking price which were both signed back at $698,000.
[7] To “smoke out” the vendors’ best price, Gruber was asked to have the vendors make a written offer to sell the Property to the respondent. That offer to sell was for $698,000, irrevocable until 6:00 p.m. on March 21, 2005. The respondent signed and accepted the offer on March 18 and provided the required $30,000 deposit. The transaction was to be closed on September 1, 2005.
[8] The trial judge dismissed the claim against Gus personally and granted judgment against the numbered company. The trial judge found that as of March 21, Gus had no intention of causing his company to close the deal, and that the Cyclepath owners badly wanted to close. That finding is not contested on this appeal.
The Respondent’s Alleged Misconduct
[9] The respondent brought an application for a certificate of pending litigation on October 19, 2005. In his affidavit filed in support of the application, the respondent referred to himself as the purchaser of the Property, noting that it was “ideally suited to my proposed business,” and explaining that he did not want to be specific about the type of retail business as this could be economically disadvantageous.
[10] In an affidavit in support of a motion for summary judgment for specific performance on October 13, 2006, however, the respondent explained that the premises would be occupied by Cyclepath, but he did not explain that he was purchasing the Property as a nominee. There was no cross-examination on either affidavit. The motion was dismissed and trial of the issues ordered.
[11] At trial, a number of issues were raised but, as we have indicated, only two of them concern us here and we turn to them now. Before doing so, we note that the claim against Gus personally was dismissed leaving the numbered company as the sole appellant.
Issues
1) Does the respondent’s conduct constitute “unclean hands” such that he is disentitled from the equitable remedy of specific performance?
[12] The trial judge found that the respondent, Silverberg, had no legal obligation to disclose that he was acting as a nominee prior to the closing date. That finding is not challenged on appeal.
[13] At paras. 116-128 of his reasons, the trial judge discussed the complaint that the respondent swore a false affidavit in support of an application for a certificate of pending litigation and the appellant’s position that because the respondent had “unclean hands” he could not seek the equitable remedy of specific performance.
[14] The trial judge dismissed this argument for three reasons. First, he held that the misconduct alleged must be directly related to the contract sought to be enforced and not merely to the general morals or conduct of the person seeking relief. The affidavit and motion for the certificate of pending litigation did not relate directly to the contract of purchase and sale in issue having occurred long after the contract had been made and breached. Second, the respondent’s conduct was devoid of any intention to mislead the court. The respondent was concerned that the appellant would use the knowledge of the true purchasers’ identity to their advantage in any potential settlement discussions. Third, the trial judge found that the respondent’s conduct in trying to get out of the deal and as to why they had not closed was deceitful and egregious. Weighing the appellant’s conduct against that of the respondent, it would not be just and equitable to deny the respondent the relief he sought.
[15] The appellant submits that the trial judge erred. It argues that the respondent’s conduct is directly related to the agreement, that there is no evidence to support the trial judge’s finding that the respondent had a valid reason for not disclosing that he was acting as a nominee after the transaction failed to close and that the doctrine of unclean hands is only based on the conduct of the party with unclean hands. While the trial judge found that Gus and his father also engaged in misrepresentation to the respondent and to the court concerning the transaction, the appellant submits that the doctrine of “unclean hands” is not a comparative measurement. Because the respondent misrepresented the facts in affidavits, he has unclean hands and specific performance is therefore unavailable.
[16] In our opinion, the trial judge’s conclusion was correct. None of the jurisprudence to which our attention was drawn involves a situation where the person with “unclean hands” ultimately confesses. By the commencement of trial, the appellant knew the identity of the purchasers and the characteristics that would make the Property unique for the purchasers’ intended use so it was in a position to assess the extent of its jeopardy. The appellant knew the case it had to meet and the trial was therefore not an unfair process.
[17] Even assuming that the alleged misconduct was sufficiently directly related to the contract sought to be enforced, the defendants suffered no prejudice. The only prejudice suggested by the defendants was that the certificate of pending litigation was maintained up until trial when it otherwise might have been removed. Insofar as the administration of justice is concerned, and as the trial judge held, disclosure of the true state of affairs would probably have strengthened the case for a certificate of pending litigation. Even if there was no direct evidence as to why the respondent maintained his subterfuge at the time he applied for a certificate of pending litigation, the trial judge was entitled to draw the inference he did that disclosure that the Cyclepath owners would occupy the property would weaken any settlement negotiations. Furthermore, the defendants adduced no evidence that they could have sold the Property to another purchaser had the certificate of pending litigation been removed or that anyone else would have been willing to overpay for the property to the extent the respondent had. The trial judge was entitled to exercise his discretion in the manner he did.
2) Is the Property “unique” so as to support an order for specific performance?
[18] In his reasons, at paras. 130-134, the trial judge correctly summarized the jurisprudence relating to the requirement that a property must be unique in order for specific performance to be granted. He then determined that the Property satisfied the requirement of “uniqueness” for granting specific performance because it was sufficiently suitable for the bike shop, particularly because of its proximity to the existing shop, but also because of the size and layout features. Furthermore, he noted that an award of damages would be a wholly inadequate result, given his conclusion that the purchase price was substantially in excess of market value. He decided that “an award for damages would not be fair and just.” As a result, he ordered specific performance.
[19] Uniqueness has both a subjective and objective aspect. The appellant accepts that the Property was uniquely suited for the use of the owners of the Cyclepath so that the subjective aspect is satisfied. It argues, however, that the objective aspect of the uniqueness test has not been satisfied on the basis that there was insufficient evidence that the Property could be not duplicated elsewhere. Because the Cyclepath owners were interested in a particular area of Toronto, they should have had to provide “tangible evidence that there were no alternative stores available in this very precise geographic location,” in order to meet their burden of proof on uniqueness.
[20] We disagree that the objective aspect of the uniqueness test was not met. The Cyclepath owners had been looking for a suitable property in the area for eleven years and had found none. Among the trial judge’s findings of fact regarding the uniqueness of the Property and the appropriateness of specific performance, is his finding that the Cyclepath owners were willing to offer an amount substantially in excess of market value. The jurisprudence supports the finding that the Cyclepath owners’ willingness to pay a premium for the Property is evidence of its uniqueness and damages are therefore inadequate. The trial judge did not err in holding that the Property was unique.
[21] Accordingly, for the reasons given the appeal is dismissed.
Costs
[22] The respondent is entitled to his costs relating to the appeal on a partial indemnity basis, which we fix in the amount of $29,000, all inclusive. These costs are to be deducted from the money paid for the purchase of the property.
Disposition
[23] For the reasons given, the appeal is dismissed. A writ of possession will issue forthwith but on consent shall not be enforced for 30 days from September 25, 2009.
“Karen M. Weiler J.A.”
“J.C. MacPherson J.A.”
“J. MacFarland J.A.”