2651171 Ontario Inc. v. Brey, 2022 ONCA 148
COURT OF APPEAL FOR ONTARIO
DATE: 20220217 DOCKET: C69185
Rouleau, van Rensburg and Roberts JJ.A.
BETWEEN
2651171 Ontario Inc. Plaintiff (Appellant)
and
Patrick Brey and Grapevine Realty Inc. Defendants (Respondents)
Counsel: J.F. Lalonde and Lauren Benoit, for the appellant Miriam Vale Peters and Matthew Miklaucic, for the respondent, Patrick Brey Michael Swindley, for the respondent, Grapevine Realty Inc.
Heard: January 7, 2022 by video conference
On appeal from the judgment of Justice Sally A. Gomery of the Superior Court of Justice dated March 1, 2021, with reasons reported at 2021 ONSC 1492.
Roberts J.A.:
Overview
[1] This appeal concerns the appellant’s failed real estate purchase from the respondent, Patrick Brey, and its claim for damages and the return of its $25,000 deposit held by the listing agent, the respondent, Grapevine Realty Inc., who took no position on the appeal.
[2] The narrow issue on appeal is whether the motion judge erred in her interpretation of the deadline provisions for raising off title objections, which were contained in paragraph 8 of the agreement of purchase and sale between the appellant and the respondent Brey, and by determining that the deadline for the requisitions at issue was August 26, 2019.
[3] The appellant submits that the motion judge erred by failing to consider paragraph 8 in its entirety. The appellant argues that a proper reading of paragraph 8 places the ultimate deadline as five days prior to the October 1, 2019 closing date, namely, September 26, 2019. As such, the appellant’s objections were timely and the respondent Brey’s refusal to respond to them allowed the appellant to terminate their agreement. The appellant asks that the motion judge’s judgment be set aside and that the appellant be granted judgment with costs.
[4] The respondent Brey submits that the motion judge made no error in her interpretation of the agreement and the factual matrix. In the alternative, if the appellant is successful on its one ground of appeal, the respondent Brey argues that this court must also decide the following: (1) was the appellant’s objection on present use invalid; (2) is the appellant estopped or otherwise barred from claiming relief with respect to the present use of the property; and (3) does the appellant’s post-closing conduct affect this appeal?
[5] For the reasons that follow, I would allow the appeal.
Background
[6] The appellant’s offer to purchase the respondent Brey’s property was accepted in July 2019. The listing described the property as a fourplex. The closing date was scheduled for October 1, 2019.
[7] Paragraph 8 sets out the deadline for raising objections, as follows:
- TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the 16 day of September, 2019 (Requisition Date) to examine the title to the property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date on which the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion, to satisfy Buyer that there are no outstanding work orders or deficiency notices affecting the property, and that its present use (Residential Fourplex) may be lawfully continued and that the principal building may be insured against risk of fire.
[8] On July 26, 2019, the appellant waived conditions pursuant to Schedule A of the agreement of purchase and sale. On September 26, 2019, the appellant’s real estate solicitor received a compliance report from the City of Ottawa that could not confirm the lawful use of the property as a fourplex. The report noted that “[t]here are no building permit records to establish a four-unit apartment dwelling, low-rise unit at this location. Our building permit records indicate a three-unit dwelling.” The report also noted that a previous owner had not arranged for all required inspections relating to a building permit issued for construction of a rear addition. On September 26, 2019, the appellant’s solicitor wrote to the respondent Brey’s solicitor requisitioning a copy of permits and final inspections from the City to confirm that the property’s use could lawfully be continued as a fourplex, as well as inspection reports relating to the rear addition. The respondent Brey’s real estate solicitor declined to respond, taking the position that the objections were made beyond the deadline provided for in paragraph 8 of the agreement of purchase and sale.
[9] The transaction did not close on the scheduled October 1, 2019 date. The respondent Brey resold the property to another buyer at a lower purchase price. The appellant brought a claim for the return of its deposit and damages. The respondent Brey counterclaimed for damages incurred because of the failed transaction with the appellant. The appellant and the respondent Brey brought competing motions for summary judgment before the motion judge.
Summary Judgment
[10] The motion judge examined paragraph 8 of the agreement of purchase and sale that provided for a formula to determine the deadline date for making title and off title objections. She determined that the deadline for the appellant to make any objections regarding the legal use of the property as a fourplex and any outstanding inspections under paragraph 8 was August 26, 2019. She arrived at this date by rejecting the first date provided for under part (i) of the formula, namely, October 16, 2019, to avoid a commercial absurdity. She explained in para. 59 of her reasons that: “It would be absurd to interpret para. 8 as setting a deadline for [the appellant] to raise objections that was later than the closing date [October 1, 2019]. By that time, the sale would be complete, and title would be transferred.”
[11] Accordingly, the motion judge determined that “on a plain reading of the section”, August 26, 2019, which was 30 days from the date that conditions were waived, was the deadline date because it was “earlier than September 26, the date derived from the formula in (ii).” The motion judge found that, in accordance with the provisions of paragraph 10 of the agreement of purchase and sale, the appellant was deemed to have accepted the respondent Brey’s title because the objections were not raised in time. As a result, the motion judge found that the appellant “did not have the option of refusing to close the purchase without breaching the contract”.
[12] The motion judge concluded that her finding of the August 26, 2019 deadline resolved all contractual claims between the parties. She dismissed the appellant’s motion for summary judgment and granted judgment to the respondent Brey in the amount of $52,216.65, including the appellant’s $25,000 deposit, plus costs of $50,000, inclusive of fees and applicable taxes.
Analysis
(a) Did the motion judge err in interpretating a standard form agreement?
[13] It is common ground that the standard of review of the motion judge’s interpretation of the parties’ standard form agreement is correctness: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 24.
[14] For ease of reference, I reproduce paragraph 8 of the agreement of purchase and sale, with the relevant requisition deadline provisions underlined:
- TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the 16 day of September, 2019 (Requisition Date) to examine the title to the property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date on which the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion , to satisfy Buyer that there are no outstanding works orders or deficiency notices affecting the property, and that its present use (Residential Fourplex) may be lawfully continued and that the principal building may be insured against risk of fire. [Emphasis added.]
[15] The deadline for making the paragraph 8 objections was crucial because of the serious consequences that would flow from either meeting or failing to meet the deadline, as provided for in paragraph 10 of the agreement of purchase and sale. Paragraph 10 provided that if the respondent Brey failed to “remove, remedy or satisfy” “any valid objection to title or to any outstanding work order or deficiency notice, or to the fact the said present use may not lawfully be continued”, which was made within the deadline provided for in paragraph 8, the agreement of purchase and sale would be at an end and the deposit would be returned to the appellant. However, it also stipulated that, “[s]ave as to any valid objection so made by such day and except for any objection going to the root of the title, [the appellant] shall be conclusively deemed to have accepted [the respondent Brey’s] title to the property.”
[16] The motion judge properly instructed herself that, as this court directed in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, a commercial contract should be interpreted “as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective”.
[17] Unfortunately, the motion judge failed to follow these directives. By rejecting the October 16, 2019 date in part (i) of paragraph 8 as commercially absurd, the motion judge failed to consider and give effect to the entirety of the paragraph, as she was required to do. When the paragraph is viewed in its entirety, there is nothing commercially absurd about the October 16th date. It is merely one factor to consider in the entirety of the formula set out in paragraph 8 to determine the requisition deadline.
[18] Paragraph 8 provides for a choice between the earlier of two dates under parts (i) and (ii). In properly interpreting the entirety of the paragraph, it is necessary first to ascertain “the later” of the two dates provided for in part (i), namely, October 16th (30 days from the requisition date of September 16th) and August 26th (30 days from the appellant’s waiver on July 26th). The later date is October 16th. Moving next to part (ii), the date is “five days prior to completion” (October 1st closing date), that is, September 26th. The earlier of October 16th and September 26th, is September 26th. September 26th is prior to the October 1st closing date. When read in its entirety, paragraph 8 does not yield any commercial absurdity.
[19] September 26, 2019 was the correct deadline for the appellant to make the off-title requisitions specified in paragraph 8 of the agreement of purchase and sale, including with respect to the lawful use of the property as a residential fourplex. The appellant therefore made its objections within the deadline provided for under paragraph 8 of the agreement of purchase and sale.
(b) Did the appellant raise a valid objection to the legal use of the property?
[20] As the motion judge indicated in her reasons, given her determination of the untimeliness of the appellant’s requisition, it was unnecessary for her to go on and address whether the appellant’s objection was valid and therefore triggered paragraph 10 of the agreement of purchase and sale, allowing for the termination of the agreement of purchase and sale.
[21] I agree with the respondent Brey’s submission that it is necessary for this court to determine this question. This is an appropriate case for this court to exercise its fact-finding powers and make a decision that the motion judge could have made, pursuant to ss. 134(1) and (4) (a) of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[22] This court can draw inferences and make findings of fact as long as they do not contradict findings that stand in the court below: 306440 Ontario Ltd. v. 782127 Ontario Ltd. (Alrange Container Services), 2014 ONCA 548, 384 D.L.R. (4th) 278, at para. 36. As this court recently explained in Carmichael v. GlaxoSmithKline Inc., 2020 ONCA 447, 151 O.R. (3d) 609, at para. 130, leave to appeal refused, [2020] S.C.C.A. No. 409, appellate courts are cautious about exercising fact-finding powers and “will not make findings of fact if this requires the court to assess credibility or if the evidentiary basis needed to draw the necessary inferences is inadequately developed in the record at first instance” (citation omitted). Those concerns are not present here.
[23] Although the motion judge did not make any findings on this issue, the record is sufficient to permit us to address and determine the question. It does not require the resolution of credibility issues. In keeping with the Supreme Court’s direction in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49, this court’s determination of this issue would be “a proportionate, more expeditious and less expensive means to achieve a just result” without working any unfairness to the parties. See also Carmichael, at paras. 131-133; Pucci v. The Wawanesa Mutual Insurance Company, 2020 ONCA 265, at paras. 61-62; Cook v. Joyce, 2017 ONCA 49, at paras. 78-81.
[24] The appellant’s timely requisition raised a legitimate objection as to whether the property could be legally used as a fourplex. Whether the continued use of the property as a fourplex was legal was a valid concern properly raised by requisition as specifically provided for in paragraph 8 of the agreement of purchase and sale: Brar v. Smith, 2014 ONSC 5030, at para. 47; 1418885 Ontario Ltd. v. 2193139, 2017 ONSC 3632, at paras. 31-37, rev’d on other grounds, 2018 ONCA 54, at paras. 8-9.
[25] This was not a peripheral issue. The appellant wished to rent out the property as a commercial investment. The respondent Brey described the property in the listing as a fourplex. The importance of the legal use of the property is reflected in the provisions of paragraphs 8 and 10 that permitted the appellant to raise a valid objection concerning the legal use of the property as a residential fourplex and terminate the agreement if the objection was not satisfied.
[26] The uncontroverted evidence from the City of Ottawa supports the validity of the appellant’s objection regarding the lawful use of the property as a fourplex. Among other information, the City of Ottawa’s September 26, 2019 Compliance Report advised that conformity of the present use of the property as a fourplex could not be verified and noted: “There are no building permit records to establish a four unit apartment dwelling, low-rise use at this location. Our building permit records indicate a three-unit dwelling.” Moreover, the evidence given by Patrick Edward Kennedy, a City of Ottawa Program Manager of Building Inspections for Central East Division, was that the present use of the property as a fourplex is not permitted. During the cross-examination on his affidavit, Mr. Kennedy confirmed his understanding that the permitted use of the property was a three-unit apartment dwelling and that he was unaware that the property had been sold as a fourplex. He confirmed that a building permit would be required to add a fourth apartment. In his second affidavit filed following his cross-examination, Mr. Kennedy deposed that he ascertained on a visit to the property with a building inspector that there is a fourth apartment and that he advised the current owner that the property would have to be returned to a three‑unit apartment building or she would have to obtain a building permit for the fourth unit. He also stated that an Order to Comply has been issued instructing the owner to submit an application and plans and take all steps necessary to obtain a building permit, or submit an application and plans and take all steps necessary to return the building back to its last known permitted use.
[27] This evidence was sufficient to give rise to a valid objection as to whether the present use of the property as a fourplex could be continued. There is no controverting evidence that the property can be lawfully used as a fourplex in its present state.
[28] Paragraph 10 of the agreement clearly provides that once a valid objection was raised, the respondent Brey had to “remove, remedy or satisfy” the appellant’s valid objection. The respondent Brey did not do this; rather, he declined to address the appellant’s objection.
[29] The respondent Brey having failed to “remove, remedy or satisfy” the appellant’s valid objection, the appellant was entitled to treat the agreement of purchase and sale as at an end and did not breach the agreement by failing to close the transaction on October 1, 2019.
(c) Estoppel by convention or conduct
[30] It is not necessary to address in detail the other issues raised by the respondent Brey because they do not affect the outcome of this appeal.
[31] First, estoppel by convention or conduct has no application here. There is no evidence that the appellant at any time waived its rights under paragraphs 8 and 10 of the agreement of purchase and sale. On the contrary, the appellant insisted on them, treated the agreement as at an end, and refused to close the transaction.
[32] Second, the respondent Brey submits that the appellant’s conduct in raising the question of the legality of the property’s use as a fourplex with Mr. Kennedy during the cross-examination on his affidavits was improper and should result in the denial of any remedy. I disagree. There was no impropriety in the appellant’s cross-examination of Mr. Kennedy. It was the respondent Brey who filed Mr. Kennedy’s affidavit evidence. It was entirely legitimate for the appellant to cross-examine Mr. Kennedy on the relevant issue of the property’s legal use.
[33] As I explained, once the conditions in paragraphs 8 and 10 were triggered, the appellant was entitled to terminate the agreement.
Disposition
[34] I would allow the appeal, set aside the judgment of the motion judge, and order the return of the $25,000 deposit plus accumulated interest to the appellant. As agreed by the parties in the event of success on this appeal, the appellant is entitled to damages for its expenses incurred in relation to the failed transaction in the amount of $4,632.10.
Costs
[35] I would allow the appellant its partial indemnity costs from the respondent Brey in the all-inclusive amount of $15,000.
[36] I would also grant the appellant its partial indemnity costs of the motions for summary judgment and the action from the respondent Brey. If the parties are unable to agree on the amount, I would allow them to make brief written submissions of no more than three pages, plus a costs outline and any pertinent offers to settle, within seven days of the release of these reasons.
Released: February 17, 2022 “P.R.”
“L.B. Roberts J.A.”
“I agree. Paul Rouleau J.A.”
“I agree. K. van Rensburg J.A.”
