Court of Appeal for Ontario
Date: November 4, 2019 Docket: C66769 Judges: MacPherson, Pepall and Lauwers JJ.A.
Between
Fortress Carlyle Peter St. Inc. Plaintiff (Respondent/Responding Party)
and
Ricki's Construction and Painting Inc. Defendant (Appellant/Moving Party)
Counsel
Daniel Schwartz and Scott McGrath, for the appellant
Maureen L. Whelton and Neil G. Wilson, for the respondent
Heard: October 25, 2019
On appeal from: The judgment of Justice Paul M. Perell of the Superior Court of Justice, dated March 6, 2019, with reasons reported at 2019 ONSC 1507.
Reasons for Decision
I. Introduction
[1] In 2017, the respondent, Fortress Carlyle Peter St. Inc. ("Fortress"), signed an agreement of purchase and sale ("APS") with the appellant, Ricki's Construction and Painting Inc. ("Ricki's"), to purchase property in Toronto. The transaction did not close and Fortress sued Ricki's for specific performance. The parties brought duelling motions for summary judgment. The motions judge dismissed Ricki's motion for summary judgment, but granted summary judgment in favour of Fortress, and ordered specific performance of the APS. Ricki's appeals from that order and seeks leave to admit fresh evidence.
II. Background Facts
[2] Beginning in 2013, Fortress began to assemble properties for a condominium project in Toronto. One of the properties it sought to acquire was 120 Peter St. (the "Property"). This Property was owned by Ricki's. Fortress and Ricki's had made numerous attempts to buy and sell the Property, but none of these efforts materialized.
[3] In the summer of 2017, the parties signed a letter of intent ("LOI") for the sale of the Property for $4.5 million, subject to Fortress reviewing and being satisfied with the leases encumbering the Property. The Property was encumbered by four leases. One of the tenants was 1730474 Ontario Inc., whose principal was Kole Ndreka, the brother of the principal of Ricki's, Rick Ndreka. A review of that lease revealed that it could be terminated on 90 days' notice. Having reviewed the four leases, Fortress waived the conditions in the LOI and proceeded to sign the APS. Fortress provided a total of $1 million as a deposit and the closing date was set for August 13, 2018, at 6:00 p.m.
[4] The APS provided that estoppel certificates for the tenancies were to be provided to Fortress five days prior to closing. Ricki's solicitor, Peggy Spadafora, advised Fortress' solicitor, Emily Lau, that three of the four tenants had vacated the property and only 1730474 Ontario Inc. would be providing an estoppel certificate.
[5] On July 30, 2018, Ms. Lau sent Ms. Spadafora a letter enclosing the template of the estoppel certificate required. On August 1, 2018, Ms. Spadafora sent Ricki's, Fortress' template. On August 2, 2018, Ms. Lau sent a letter of title requisitions for the pending closing. It was sent without prejudice to Fortress' rights and requested the estoppel certificate on or before closing. Up until August 13, 2018, Fortress, through its counsel, made numerous unsuccessful requests for the estoppel certificate.
[6] In the morning of August 13, 2018, Rick Ndreka attended Ms. Spadafora's office to sign the vendor's closing documents. He returned the estoppel certificate to Ms. Spadafora. However, the certificate's contents had been altered. The 90 day notice to vacate provision had been replaced with a provision stating that the termination of the lease was "to be negotiated between the parties". Rick Ndreka did not advise of this change nor was Ms. Spadafora aware of it.
[7] Naram Mansour, Fortress' principal, called Rick Ndreka that morning seeking the estoppel certificate. Mr. Mansour also sought to extend the closing date to August 15, 2018 until the certificates were received and reviewed. Mr. Ndreka said he would get back to Mr. Mansour later in the day.
[8] At approximately noon, Ms. Spadafora's office sent Ms. Lau the signed copy of the altered estoppel certificate. Ms. Lau reviewed it and wrote to Ms. Spadafora advising that the alterations were unsatisfactory. Ms. Lau also advised Mr. Mansour of the problem. Mr. Mansour then repeatedly attempted to contact Mr. Ndreka about the altered estoppel certificate. Mr. Ndreka said that he would contact Mr. Mansour but failed to do so. In the meantime, Mr. Mansour also pressed his bank to ensure that the closing funds were deposited into his lawyer's trust account.
[9] Close to 5:00 p.m., Ms. Spadafora sent Ms. Lau the correct estoppel certificate. At around 5:15 p.m., Ms. Lau contacted Ms. Spadafora requesting an extension of the closing until the next morning. Mr. Mansour also attempted to contact Mr. Ndreka and later texted him advising him that confirmation of the funds being transferred from the bank was imminent.
[10] At 6:00 p.m., Ms. Spadafora wrote to Ms. Lau stating that Ricki's had delivered all necessary closing documents and keys, was ready, willing, and able to close the transaction that day, and if closing funds were not received by 6:00 p.m., Ricki's would note Fortress in default and the APS would be terminated. Ms. Spadafora stated that Ricki's was not willing to grant any extensions for the transaction.
[11] At 6:16 p.m., the bank confirmed that the closing funds had been transferred to the trust account, and Ms. Lau forwarded this confirmation to Ms. Spadafora at 6:19 p.m. Mr. Mansour called Mr. Ndreka at 6:20 p.m. to advise him the funds had been wired. Mr. Ndreka stated that the transaction was dead.
[12] On August 21, 2018, Fortress issued a statement of claim against Ricki's claiming specific performance. As mentioned, it brought a motion for summary judgment for such relief on October 31, 2018, and Ricki's bought a cross-motion for summary judgment seeking an order dismissing Fortress' action.
III. Decision of the Motions Judge
[13] In his reasons, the motions judge confirmed that both parties had taken the position that the case was appropriate for summary judgment. He agreed with their position. He recognized that there were genuine issues of credibility, fact and law, but they did not require a trial, and it was in the interests of justice to decide the matter by summary judgment.
[14] The motions judge wrote comprehensive reasons and described the relevant real estate legal principles engaged by the case. Before this court, no one takes issue with the motions judge's description of the applicable legal principles.
[15] The motions judge granted Fortress' request for specific performance. He found that the Property was critical to Fortress' development plans, and as such, Fortress had established the uniqueness of the Property, a precondition to an order for specific performance.
[16] The motions judge found that Ricki's had breached the APS and had failed to act in good faith. It had not delivered the estoppel certificate as provided by the APS, it had delivered an altered estoppel certificate which also amounted to a breach of the APS, and only delivered the suitable estoppel certificate close to 5 p.m. on the day of closing. As a result, in these circumstances, Ricki's was no longer in a position to insist on time being of the essence. As such, Ricki's was not entitled to terminate the APS and forfeit the deposit even if Fortress was offside in meeting the 6:00 p.m. deadline. For Ricki's to insist on time being of the essence: (i) it had to have shown itself to be ready, desirous, prompt, and eager to carry out the APS; and (ii) it could not have been the cause of the delay or default in performing the APS. Neither of these preconditions was satisfied.
[17] For Fortress' part, the motions judge concluded that it had acted in good faith and had satisfied the preconditions for a claim for specific performance. Applying Justice Catzman's dicta in Morgan v. Lucky Dog Ltd. (1987), 45 R.P.R. 263 (Ont. H.C.J.), the motions judge held that Fortress would have been ready, willing, and able to close on August 13, 2018 but for the misconduct of Ricki's which more than discomfited Fortress. The estoppel certificate was a critical factor in Fortress' development plans, and the delivery of a proper certificate approximately one hour before the scheduled 6:00 p.m. closing precluded Ricki's from relying on the provision in the APS making time of the essence.
[18] Alternatively, even accepting that both parties were at fault, Ricki's still would not have a defence to Fortress' claim for specific performance. As the motions judge said, at para. 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.
[19] Even if both parties were at fault, it was reasonable for Fortress to fix August 14, 2018 for the closing of the transaction. Ricki's refused to close, and thus, Fortress was entitled to a decree of specific performance.
IV. Grounds of Appeal
[20] The appellant raises four grounds of appeal. It also seeks to admit fresh evidence to establish that Fortress was and is in financial difficulties, and hence was and is not ready, willing, and able to close the transaction.
(1) Legal Theory Relied on by Motions Judge
[21] Ricki's submits that the motions judge decided the case on a legal theory that was not pleaded or argued. In particular, it argues that the motions judge made findings of deceit and fraudulent misrepresentation, and that these causes of action were not pleaded or argued. It submits that the appellant was prejudiced because it did not know the case it had to meet.
[22] We do not agree with this submission.
[23] At para. 76(c) of his reasons, the motions judge found that Ricki's delay, deceit, and breach of contract in providing an altered estoppel certificate at noon, and its late delivery of the correct estoppel certificate on the day of closing meant it could no longer rely on time being of the essence. Its misconduct precluded that reliance.
[24] Dealing first with the argument relating to deceit, the statement of claim clearly pleaded an absence of good faith and lack of honesty. The cross-examinations made it abundantly clear that Fortress was relying on Ricki's misconduct to argue that time was no longer of the essence. Moreover, Fortress' factum also made it clear that it was relying on the doctored estoppel certificate as the basis for its claim that Ricki's had breached the APS and acted in bad faith. Indeed, Fortress asserted that providing the doctored estoppel certificate "was an act of bad faith tantamount to fraud". The theory behind the time not being of the essence was fully explored. There was no surprise and no prejudice to Ricki's.
[25] In any event, to the extent the motions judge's analysis referred to deceit, his conclusion was not dependent on any such finding. As already discussed, he also relied on the alternative scenario where both parties were at fault for breaching the APS, and arrived at the same conclusion that Fortress was entitled to a decree of specific performance.
[26] As for fraudulent misrepresentation, the only reference to that claim was in para. 18 of the motions judge's reasons. There he listed the six applicable legal principles with which neither party takes issue on appeal. No reliance was placed on that cause of action.
[27] We would not give effect to this ground of appeal.
(2) Summary Judgment Procedure
[28] Second, Ricki's submits that it was incumbent on the motions judge to expressly consider whether the expanded summary judgment powers should have been used to resolve conflicts in the evidence. In addition, the motions judge failed to address all of the inconsistencies in the parties' evidence.
[29] The motions judge was clearly alive to the state of the evidentiary record before him. From the outset, the motions judge expressly identified the presence of issues of credibility, fact and law, and went on to conclude that a trial was unnecessary. He proceeded to provide a detailed analysis of his credibility and factual findings, together with his legal reasoning. In these circumstances, it was unnecessary to advert to the summary judgment expanded powers rule. He implicitly considered that rule and was satisfied that the interests of justice were served without resort to the expanded powers. Both parties agreed that the case was appropriate for summary judgment and neither counsel asked the motions judge to have recourse to the expanded summary judgment powers.
[30] As for the appellant's argument that the motions judge failed to resolve all of the inconsistencies in the evidence, he was not required to do so. He did explain why he accepted the respondent's evidence and rejected that of the appellant. He dismissed the appellant's assertions that the doctored estoppel certificate was provided by mistake and that it was based on one of the parties' earlier transactions. This made no sense given that no estoppel certificates existed in the earlier transactions. Moreover, Ricki's provided no explanation on why the estoppel certificate prepared by Ms. Spadafora using Fortress' template and which she had emailed to Ricki's, had been altered. The motions judge also legitimately drew an adverse inference from Ricki's failure to call his brother, the principal of the tenant, as a witness. Lastly, there were no other witnesses or documents that supported Ricki's mistake theory.
[31] As for the respondent's evidence, the motions judge did wrestle with the issue of the availability of funds to close and found in favour of the respondent. He concluded that on the morning of August 13, 2018, there was no reason for Mr. Mansour to say that money was tight because the respondent had the funds available to be wired to close the transaction.
[32] We would not give effect to the appellant's submissions with respect to this ground of appeal.
(3) No Palpable and Overriding Errors
[33] Third, the appellant submits that the motions judge ignored or failed to consider key evidence and made palpable and overriding errors with respect to the timeline of events.
[34] We disagree with these propositions. The errors were minor in nature and had no impact on the outcome of the parties' dispute.
The fact that Ms. Lau suggested in cross-examination that Fortress be in funds ahead of time was not a material omission by the motions judge. Nothing turned on this fact.
The requisition letter was quoted by the motions judge. There was no need for him to pursue this line of inquiry given that by its terms, it did not amount to waiver. In addition, there must be an unequivocal and conscious intention to abandon a right for waiver to be effective. See Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, 296 O.A.C. 218, at para. 63. There was none.
The motions judge referred to the previous failed transactions. He was not obliged to draw any inferences or conclusions from those failures. While they provided background detail, nothing turned on them.
The motions judge found at para. 62 that: "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." This finding was available to the motions judge on the record.
While we accept that the motions judge misstated the precise time of the bank's transmission of funds, it is evident from his reasons read as a whole that he understood that the money arrived 16 minutes after 6 p.m.
The other timing oversights identified by the appellant were minor in nature and of no moment in the ultimate result.
[35] We are not persuaded of the merit of this ground of appeal.
(4) Nexus Between Bad Faith and Inability to Close
[36] Fourth, the appellant submits that even if Ricki's acted in bad faith and was deceitful, specific performance was not justified. Counsel argues that for Fortress to successfully obtain an order for specific performance, Fortress had to show that: (i) it was ready, willing, and able to close on August 13, 2018; (ii) the default was in no way attributable to it; and (iii) it continued to be ready, willing, and able to perform the contract. The appellant submits that Fortress was not ready, willing, and able to close on the date fixed for closing because it needed to have the closing funds by 6:00 p.m. which it did not have.
[37] Again, we disagree.
[38] As in Lucky Dog, the motions judge concluded that Ricki's delay was a deliberate tactical decision to discomfit the purchaser, Fortress. The motions judge found, at para. 105: "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."
[39] The motions judge went on to conclude that alternatively, if the legal situation was that both parties were at fault, Ricki's still did not have a defence to Fortress' claim for specific performance. This is because when both contracting parties breach a contract, the contract remains alive with time no longer being of the essence. As the motions judge explained, either party may restore time of the essence by giving reasonable notice to the other party of the new date for performance. This is precisely what occurred when Ms. Lau suggested that the transaction close on August 14, 2018.
[40] We would not give effect to this ground of appeal.
(5) Fresh Evidence
[41] Lastly, we would not admit the fresh evidence.
[42] The fresh evidence does not meet the test articulated in Palmer v. The Queen, [1980] 1 S.C.R. 759, at p. 775, and Sengmueller v. Sengmueller (1994), 17 O.R. (3d) 208 (C.A.).
[43] In our view, the fresh evidence, even if believed, could not reasonably, when taken with the other evidence adduced, be expected to have affected the result.
V. Disposition
[44] For these reasons, the motion to admit the fresh evidence is dismissed, as is the appeal. If any directions are required to implement the judgment for specific performance, they may be sought from the motions judge. The appellant shall pay the respondent costs fixed in the amount of $40,000, inclusive of disbursements and applicable tax.
"J.C. MacPherson J.A."
"S.E. Pepall J.A."
"P. Lauwers J.A."