Court of Appeal for Ontario

Date: 2022-05-05 Docket: C67632

Judges: MacPherson, Paciocco and George JJ.A.

Between:

M & M Homes Inc. Plaintiff (Respondent)

And

2088556 Ontario Inc., Royal LePage Real Estate Services Ltd., John Redvers, 697350 Ontario Limited, 1375051 Ontario Ltd., Dorothy Kushner, Sam Goldman, Frank Goodman, Lillian Goodman, Dinapet Holdings Limited, 614921 Ontario Limited, Maria Traina, Howard Brian Goldman, Joseph Burdi, Doris Miller, Carole Greenspan, Community Trust Company, 2178875 Ontario Inc., Jong Suk Im, Sung Ran Lee, Yeon Hee Huh, and In Hee Woo Respondents (Appellant)

Counsel: Robert S. Choi and Gina P. Rhodes, for the appellant Elliot Birnboim and Michael Crampton, for the respondent

Heard: April 7, 2022

On appeal from the judgment of Justice Susan E. Healey of the Superior Court of Justice, dated September 27, 2019.

Reasons for Decision

[1] The respondent, M & M Homes, agreed to purchase land for commercial development from the appellant, 2088556 Ontario Inc. (“208”). The Agreement of Purchase and Sale (the “APS”) required 208 to provide water, storm and sanitary services to the property line of the purchased property by a specified deadline, failing which the agreement “shall become null and void” and the deposit shall be returned. That deadline was not met but was extended repeatedly by agreement. After the last agreed deadline had expired without 208 having supplied the services, 208 attempted to return the deposit. M & M Homes refused and sued for specific performance. The matter proceeded to trial.

[2] The trial judge found that M & M Homes was entitled to specific performance and an abatement arising from 208’s breach of a fundamental term of the APS. She granted a vesting order but invited 208 to reapply for an adjustment of the abatement if within 30 days it delivered written confirmation that the services had been completed, as well as an undertaking to fully cooperate in providing M & M Homes with access to those services. 208 did not reapply for an adjustment of the abatement. Instead, it appealed the judgment. After the oral appeal hearing, we dismissed 208’s appeal with reasons to follow. These are our reasons.

[3] First, we reject the multiple challenges 208 makes to the trial judge’s decision to order specific performance.

[4] In its Statement of Defence, 208 resisted the abatement claim, but agreed that the APS should be enforced by specific performance. Specifically, it pleaded that M & M Homes was the party in breach because M & M Homes was obliged “to grant all necessary extensions to the construction milestone dates” but had exercised bad faith by not agreeing to a new extension of the services term. 208 also pleaded that it is “ready, willing and able to close on the terms of the APS on a new projected closing date” and pleaded that specific performance “should be granted”. On the first day of trial, new counsel for 208 sought to argue the opposite of what 208 had signalled in its Statement of Defence, namely, that the APS was null and void, and that specific performance should not be ordered.

[5] After it became clear that its pleadings were an impediment to advancing these new and inconsistent litigation positions, 208 sought to amend its pleadings to reflect its current position. We see no difficulty with the trial judge’s discretionary dismissal of 208’s motion to amend its pleadings. The trial judge found 208 to have been “spectacularly inattentive” to the litigation pending the trial. Moreover, the non-compensable prejudice of permitting 208 to reverse its litigation position on the fundamental issues after the trial was underway is obvious. To have allowed the requested amendment would have been profoundly unfair to M & M Homes.

[6] Nor would we interfere with the trial judge’s conclusion that 208 was prevented by its pleadings from arguing that the APS was null and void, or that specific performance should not be ordered. Obviously, pleadings are intended to frame the live issues in an action. The trial judge’s decision to enforce the pleadings was appropriate.

[7] We also reject 208’s related argument that the trial judge erred by failing to recognize that it had pleaded in the alternative that specific performance should not be granted, and by not permitting 208 to elect at trial the remedy it would pursue. In coming to this conclusion, we need not address 208’s submissions about the legal effect of alternative pleading because we agree with the trial judge’s conclusion that it is “unsustainable” for 208 even to claim that it advanced an effective alternative plea. The Statement of Defence is unequivocal in requesting specific performance. The Counterclaim expressly “repeats and relies upon” the Statement of Defence and repeats the request for specific performance as a remedy for the Counterclaim. The fact that the Counterclaim ultimately purports to go on “in the further alternative” to request a declaration that M & M was not entitled to specific performance of the APS is not an alternative plea. It is instead an inconsistent plea. To permit a pleading to both ask for and resist the same outcome would defeat the purposes of pleading.

[8] Nor did the trial judge err by failing to exercise discretion before imposing the remedy of specific performance. She clearly exercised discretion before doing so. She expressly noted in her judgment that “this relief should be granted for two reasons”. The second of those reasons, which the trial judge explained by reference to the record before her, was that “the evidence does establish that specific performance is a remedy that should be granted in this case.” There is no merit in this ground of appeal.

[9] We also reject 208’s arguments that it was unfair of the trial judge to order specific performance given that at the time of the trial the property was owned by CRC Sutton Inc. (“CRC”), which had registered charges against the property. The trial judge was entitled to find that CRC is not “an innocent arm’s length purchaser” and had actual knowledge of the claim, given that its directing mind is the principal of 208.

[10] Finally, the fact that M & M Homes intended to direct, on closing, that title be placed in the name of a related corporation is immaterial. This arrangement is not a “land flip” that would make specific performance inappropriate or unequitable. The manner in which title would be taken was contemplated by the APS, and without specific performance, M & M Homes would be deprived of the benefits of the APS.

[11] We therefore reject 208’s appeal of the trial judge’s decision to grant specific performance.

[12] Nor would we interfere with the abatement ordered by the trial judge. She was entitled to receive and act upon the expert testimony offered by M & M Homes. She was also entitled to reject the testimony offered by 208 to prove that the services were completed. She was left unpersuaded by it.

[13] Moreover, the trial judge was entitled to quantify the amount of the abatement based on the costs of independent servicing of the property, notwithstanding the evidence before her that the municipality may not permit M & M Homes to service the lands independently. The task of the trial judge in quantifying the abatement was to determine the diminution in value of the property to M & M Homes arising from 208’s breach of the APS. Her decision to base the abatement on the costs of independent servicing is appropriate given that 208 was in position to frustrate connection to city services. The trial judge was entitled to find that M & M Homes needed 208’s cooperation to accomplish this and “there is no reason to believe that [208] will be cooperative”. In the circumstances, an abatement based on the costs of connecting to 208’s service line could not be relied upon to compensate M & M Homes for 208’s breach.

[14] Finally, there is no merit in the reasonable apprehension of bias ground of appeal, or in the appeal of the award of full indemnity costs. We reject both submissions.

[15] We therefore deny the appeal and deny 208 leave to appeal costs.

[16] Costs in the appeal are payable by 208 to M & M Homes in the amount of $35,000 inclusive of HST and disbursements.

“J.C. MacPherson J.A.”

“David M. Paciocco J.A.”

“J. George J.A.”