Court of Appeal for Ontario

Date: 20230706 Docket: COA-22-CV-0246

Judges: Huscroft, Miller and Paciocco JJ.A.

Between:

Aidong Gu and Liping Zhou Plaintiffs (Respondents)

And:

Connie Nothdurft, Andrew Adam Ferri and 1238915 Ontario Limited Defendants (Appellants)

Counsel:

Amanda McBride and Daniel Michaud-Shields, for the appellants Fabian Otto, for the respondents

Heard: June 29, 2023

On appeal from the judgment of Justice Robert J. Nightingale of the Superior Court of Justice, dated September 19, 2022, with reasons reported at 2022 ONSC 5256.

Reasons for Decision

[1] This appeal is centred on the issue of whether paragraph 10 of the Ontario Real Estate Association (“OREA”) standard form Agreement of Purchase and Sale (“APS”) entitled the appellants to treat their contract with the respondents as at an end. The motion judge concluded that it did not, and that the appellants breached the contract. He ordered specific performance. In our view, the motion judge made no reviewable error and after oral argument we dismissed the appeal with reasons to follow. Our reasons are provided below.

Background

[2] The respondents entered into an APS with the appellants to purchase a vacant building lot in Niagara Falls. The initial closing date was February 25, 2021 and the motion judge found the respondents were ready, willing, and able to complete the transaction on that date.

[3] Prior to closing, the respondents’ solicitor discovered there were writs of execution registered against title. The standard form APS contained a clause requiring the vendor “to discharge any mortgages or liens or other encumbrances registered against the property on or before closing at his own expense either from the proceeds of the sale or by solicitor’s undertaking.”

[4] The respondents’ solicitor wrote to the appellants’ solicitor to requisition the removal of the writs of execution on or before the closing of the transaction.

[5] The appellants sought an extension of time to March 30, 2021 to remove the writs. The respondents advised they would agree to the extension, but on condition that the appellants cover certain financing costs they would incur as a result. The appellants did not agree with this condition and proposed, via solicitor’s letter dated March 5, 2021, that the transaction be cancelled, and the deposit returned to the respondents.

[6] The respondents did not reply to this proposal. However, over the weeks and months that followed, the two solicitors continued to correspond about the status of the appellants’ efforts to remove the writs of execution. Abruptly, on June 2, 2021 the appellants’ solicitor unexpectedly advised that the appellants were unable to remove the writs and were treating the transaction as “dead”. The appellants never explained why the writs of execution, which secured amounts less than the sale proceeds, could not have been satisfied from the sale proceeds.

[7] The respondents sued for specific performance and brought a motion for summary judgment.

[8] The motion judge found that the parties had agreed to extend the closing date, and that the respondents were ready, willing, and able to close the transaction at all relevant times. He granted judgment in favour of the respondents and ordered specific performance.

[9] On the summary judgment motion, the appellants relied on paragraph 10 of the OREA standard form APS, commonly referred to as the “annulment clause”. That paragraph provides, in part, that where a written objection is made to title and which “Seller is unable or unwilling to remove … and which Buyer will not waive … [the] Agreement … shall be at an end” and the deposit returned.

[10] The motion was apparently argued on the assumption that paragraph 10 applied. The motion judge found that the appellants were not entitled to rely on it to end the contract because the appellants had not exercised that power reasonably. The motion judged relied on Mason v. Freedman, [1958] S.C.R. 483, which held that a vendor who seeks to avoid a contract under a clause of this type is required to exercise her right reasonably, make a genuine effort to satisfy the requisition, and have a good reason for not being able to do so. The motion judge found it significant, in this respect, that there was no evidence from the appellants as to why they could not have availed themselves of any of the standard means of clearing title on closing such as giving an undertaking to pay out the writs from the sale proceeds, or paying the equivalent amount into court pending resolution of any underlying dispute.

Analysis

[11] On appeal, the appellants took issue with several of the motion judge’s findings of fact, particularly the finding that there was agreement to extend the closing date of the APS. The appellants argue that the motion judge overlooked or misunderstood crucial evidence from the appellants’ solicitor. We do not agree that the motion judge made any such error or that he erred in preferring the evidence of the respondents’ solicitor. The motion judge’s finding regarding the agreement to extend the APS was open to him, was supported by the record, and is entitled to deference: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[12] The appellant also argued that the motion judge erred in finding that paragraph 10 of the OREA standard form APS did not entitle the appellants to treat the APS as at an end because there was no credible evidence that the appellants had made reasonable efforts to remove the writs of execution.

[13] The motion judge made no error in so holding. The motion judge did not err in principle in finding that the appellants were obligated to exercise the power of annulment conferred by paragraph 10 reasonably. Neither did he err in finding there was no credible evidence to explain why the writs of execution could not have been satisfied from the sale proceeds and removed from title. The motion judge’s finding that the appellants had made no effort to achieve this was amply supported by the record before him.

[14] The motion judge’s analysis displayed careful attention to both the evidential record and the governing authorities and there is no basis on which to interfere with the finding that the appellants were in breach of the APS.

[15] It should be noted that the motion appears to have been argued on the assumption that the writs of execution were either matters of title or matters of conveyance coming within the contemplation of paragraph 10: on the distinction between matters of title and matters of conveyance, and the application of paragraph 10 to each, see the discussion in Chan v. Mangal, 2022 ONSC 2068, at paras. 20-25; 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, 80 C.L.R. (4th) 297, at paras. 113-41; and Anne Warner La Forest, Anger & Honsberger Law of Real Property, 3rd ed. (Toronto: Thomson Reuters Canada, 2021) (loose-leaf updated 2022, release 1), s. 22.12. It is not obvious that paragraph 10 governs this particular requisition, given the vendor’s distinct obligation under the APS to discharge all registered encumbrances (see La Forest, s. 22.8), and the motion judge’s finding that it was within the unilateral power of the vendor to satisfy the writs using the sale proceeds and have the writs discharged from title. However, given how the appeal was argued before us and before the court below, and given our ultimate disposition of the appeal, it is neither necessary nor advisable that we resolve this question. But nothing in these reasons should be taken as an endorsement of the proposition that paragraph 10 governed the respondents’ requisition that the appellants discharge the writs of execution.

[16] Finally, with respect to the remedy of specific performance, the appellants have not identified any error in the motion judge’s analysis.

Disposition

[17] The appeal is dismissed. The respondents are entitled to costs in the agreed amount of $10,000, inclusive of HST and disbursements.

“Grant Huscroft J.A.”

“B.W. Miller J.A.”

“David M. Paciocco J.A.”