COURT OF APPEAL FOR ONTARIO

CITATION: 719083 Ontario Limited v. 2174112 Ontario Inc., 2013 ONCA 11

DATE: 20130114

DOCKET: C55785

MacPherson, Cronk and Lauwers JJ.A.

BETWEEN

719083 Ontario Limited

Applicant

(Respondent in Appeal)

and

2174112 Ontario Inc.

Respondent

(Appellant in Appeal)

Bernard B. Gasee, for the appellant

Jane E. Sirdevan, for the respondent

Heard: January 8, 2013

On appeal from the judgment of Justice P. Moore of the Superior Court of Justice, dated June 28, 2012.

By the Court:

I. Background

[1] This appeal concerns competing claims to ownership of a condominium unit in Scarborough. The background facts are unusual.

[2] On August 5, 2008, the appellant, 2174112 Ontario Inc. (“217”), purchased numerous condominium units in Scarborough from L. Chung Development Co. Ltd. (“Chung Ltd.”), a condominium developer, for a global purchase price of $12 million. On closing, at 217’s request, separate transfers of the relevant units were registered on title under the Land Titles Act, R.S.O. 1990, c.L.5 (the “Act”). One of the registered transfers pertained to the unit in contention – Unit 95.

[3] It later emerged that approximately 21 years earlier, in February 1987, a predecessor corporation in interest to the respondent, 719083 Ontario Limited (“719”)[^1], had entered into an agreement of purchase and sale with Chung Ltd. for the purchase of several condominium units in the same condominium complex, including Unit 95. However, because the condominium units were then under construction and the condominium corporation had yet to be registered in accordance with the Condominium Act, R.S.O. 1980, c. 84, the sale agreement between 719 and Chung Ltd. provided for possession or occupancy of the relevant units by 719, effective June 1, 1987.

[4] It is undisputed that 719 took occupancy of the relevant units, including Unit 95, in June 1987 for the purpose of operating a medical clinic on some of the premises, including Unit 95. It has operated the clinic at that location to date.

[5] The necessary declaration and condominium plan for the condominium development were not registered until December 1993. The closing of the sale agreement between 719 and Chung Ltd. took place on May 16, 1994, after registration of the condominium plan. However, through solicitor inadvertence or negligence, the conveyance registered on closing in favour of 719 failed to include Unit 95.

[6] The parties disagree as to when 719 first learned of the registration defect regarding Unit 95 and of 217’s ownership claim regarding the unit. 719 maintains that it was unaware of 217’s ownership claim until November 2011, when 217 contacted it, alleging that it owned Unit 95 and seeking rent from 719 for its use of the unit.

[7] In contrast, 217 alleges that it sought rent from 719 for its use of Unit 95 several years earlier. 217 acknowledges that it took no steps at any time to enforce a rent claim against 719. Thus, on 217’s version of events, it allowed 719 to occupy and use Unit 95, rent free, for several years.

[8] In January 2012, 719 applied to the Superior Court of Justice for title rectification under the Act concerning Unit 95. The relief sought included a declaration that it is the legal and sole owner of Unit 95 and an order directing the necessary title adjustments to reflect its ownership interest.

[9] By judgment dated June 28, 2012, the application judge granted the relief sought by 719, including a declaration that it is the legal and sole owner of Unit 95 and vesting title to Unit 95 in 719.

[10] 217 appeals. Its main ground of appeal is that the application judge erred in finding that 217 was not a bona fide purchaser for value without notice of Unit 95. The legal result of this finding, if sustained, is that 217 cannot rely on any priority of interest in Unit 95 acquired by the 2008 registration of the transfer of Unit 95 from Chung Ltd. to 217.

[11] For the following reasons, we conclude that the appeal must be dismissed.

II. Discussion

[12] The parties accept that indefeasibility of title is an essential feature of the land titles system established by the Act. However, as the application judge recognized, the statutory protection of indefeasibility of title is available only to bona fide purchasers for value without notice: see for example, Durrani v. Augier (2000), 2000 CanLII 22410 (ON SC), 50 O.R. (3d) 353 (S.C.), at para. 49. The application judge put it this way, at para. 34:

[T]he rights of a bona fide purchaser trump those of an innocent party deprived of an interest in the property by registration in the land titles system where there is a meeting of the minds between buyer and seller and an agreement supporting the registration of title at issue.

[13] And it is on this well-established principle that 217’s appeal founders. The application judge held, at para. 35, that there was no agreement between Chung Ltd. and 217 regarding the purchase and sale of Unit 95 and that there was no consideration for the conveyance of Unit 95 to 217. He elaborated, at para. 38:

There was no meeting of the minds to include the subject unit in [the sale agreement between Chung Ltd. and 217] or the 2008 sale, no intention on the part of Chung to sell the subject unit again (having already sold its interest in the unit to 719 in 1994), no written agreement, no consideration and therefore no sale transaction supporting the transfer of the subject unit recorded in land title records on 5 August 2008.

[14] These key findings were open to the application judge on the evidentiary record. For example, there was evidence before the application judge that: (1) the 1987 sale agreement between 719 and Chung Ltd. specifically referenced the property that eventually became known as Unit 95; (2) in contrast, the 2008 sale agreement between Chung Ltd. and 217 made no mention of Unit 95 and contained no reference to it in those parts of the sale agreement that identified the units to be purchased by 217; and (3) although 217 paid a global purchase price of $12 million for the units it purchased, the sale agreement provided no allocation of the purchase price as among the units purchased. We also note that there was no evidence before the application judge of any negotiations, discussions or agreements between 217 and the principals of Chung Ltd. regarding a sale of Unit 95 to 217.

[15] We see no basis for appellate interference with the application judge’s findings, quoted above. They provide ample support for his impugned holding that 217 was not a bona fide purchaser for value without notice of Unit 95.

[16] 217 argues that the 2008 registration of a transfer to it of Unit 95 was neither accidental nor inadvertent. It points out that Chung Ltd.’s solicitors acknowledged that Unit 95 was in issue, prepared and registered a transfer in favour of 217 regarding Unit 95, and also registered a vendor-take-back mortgage on the property, which was later discharged. These acts by Chung Ltd.’s solicitors, 217 says, bind Chung Ltd. and evidence an intention by Chung Ltd. to convey Unit 95 to 217.

[17] We reject this argument. The acts of Chung Ltd.’s solicitors relied on by 217 confirm only that these solicitors proceeded on the basis that Unit 95 was to be transferred to 217 under the sale agreement between Chung Ltd. and 217. They are not determinative of whether Chung Ltd. agreed or intended to sell Unit 95 to 217. Nor do they establish that Chung Ltd. authorized its solicitors to transfer Unit 95 to 217. We do not accept that Chung Ltd.’s solicitors could bind Chung Ltd. to sell Unit 95 to 217 in the absence of any evidence that Chung Ltd. intended and agreed to do so. In any event, the simple fact is that when Chung Ltd. concluded the 2008 sale agreement with 217, it had no proprietary interest in Unit 95 capable of being transferred to 217. The sale of its interest in the property had been concluded by, at the latest, 1994, when it sold Unit 95 to 719.

[18] In all these circumstances, we see no reversible error in the application judge’s discretionary ruling to grant rectification of the title to Unit 95 in favour of 719.

[19] It is appropriate to briefly address two additional matters raised by 217.

[20] First, 217 contends that it should not be deprived of the ownership of Unit 95 without compensation. As 719 is the only other party to this litigation, that compensation, 217 says, should be paid by 719. 217 maintains that it paid both a purchase price and land transfer tax in respect of Unit 95 and it should be compensated by 719 at least for these expenditures.

[21] We do not agree. On the application judge’s findings, which we have concluded were firmly anchored in the evidentiary record, Chung Ltd. was not entitled to purport to convey Unit 95 to 217, having earlier sold its interest in the property to 719. If 217 sustained losses as the result of the improper or negligent registration under the Act of a transfer of Unit 95 in its favour, it is free to pursue its remedies in damages against those responsible for its losses, if so advised. The fact of those losses and 217’s potential recourse against third parties provides no basis in law for recognizing in 217’s favour a proprietary interest in Unit 95 to which it is not otherwise legally entitled.

[22] Second, 217 argues that since it was an innocent party without prior notice of 719’s interest in Unit 95, the application judge’s award of costs against it was unjust and should be set aside.

[23] Again, we disagree. The application judge enjoyed a wide discretion under s. 24(2) of the Act to determine an appropriate costs disposition. His award reflects no error in principle, nor is it plainly wrong. We see no basis on which to interfere with his discretionary costs ruling.

III. Disposition

[24] For the reasons given, the appeal is dismissed. 719 is entitled to its costs of the appeal, fixed in the amount of $6,700, inclusive of disbursements and all applicable taxes.

Released:

“JCM” “J.C. MacPherson J.A.”

“JAN 14 2013” “E.A. Cronk J.A.”

“P. Lauwers J.A.”

[^1]: 719 and its predecessor in interest are referred to in these reasons as 719.