Court File and Parties

Court of Appeal for Ontario Date: 2024-05-15 Docket: COA-23-CV-0844

Between: Gerald Sternberg Plaintiff/ Defendant to the Counterclaim (Appellant)

And: Cresford Capital Corporation Defendant/ Plaintiff by Counterclaim (Respondent)

Counsel: Sheila Block and Jonathan Silver, for the appellant Gavin J. Tighe and Allison Farley, for the respondent

Heard: April 29, 2024

On appeal from the judgment of Justice Jasmine T. Akbarali of the Superior Court of Justice, dated June 21, 2023.

Reasons for Decision

[1] This appeal arises out of the appellant’s sale of a parcel of land to the respondent as part of the respondent’s development project. The stated consideration for the sale in the agreement of purchase and sale was $5 million: $1 million to be paid on closing and a vendor take back mortgage in the amount of $4 million. It is common ground that the respondent paid a premium on the property. The respondent assigned the agreement of purchase and sale and vendor take back mortgage to a single purpose corporation, 66 Charles Street Limited. 66 Charles Street Limited defaulted on the mortgage before the entire $4 million was paid to the appellant. The respondent was named as guarantor of the vendor take back mortgage in the electronic registration of the mortgage.

[2] The appellant retook possession of the property and sold it for about $3.3 million, leaving a deficit of about $1 million owing under the vendor take back mortgage, which continued to accrue interest. He commenced an action against the respondent as guarantor for payment of the monies owing under the vendor take back mortgage, including interest and costs. The respondent defended the action on the basis that it never agreed to guarantee the vendor take back mortgage and that its name appears in error on the electronic registration. In its counterclaim, it requested rectification of the electronic registration to remove its name as guarantor.

[3] The parties brought competing motions for summary judgment. The motion judge determined that no guarantee agreement between the appellant and the respondent ever existed and that the inclusion of the respondent as guarantor on the registered vendor take back charge was an error. She therefore granted the respondent’s motion for summary judgment, dismissed the appellant’s cross-motion, and dismissed the appellant’s action with costs.

[4] The appellant appeals the dismissal of his action. His grounds of appeal can be summarized as follows: 1) the motion judge failed to consider the relevant agreements cohesively as part of a larger transaction, misinterpreted the relevant agreements, came to unreasonable and incorrect conclusions about them, relied on irrelevant and subjective evidence, and ignored the relevant factual matrix; and 2) the motion judge erred by failing to hold the respondent liable for the guarantee on the electronic registration.

[5] We are not persuaded that the motion judge made any reversible error.

[6] We start with the well-established standard of review – the motion judge’s interpretation of the parties’ non-standard agreements is entitled to significant deference on appeal, absent an extricable error of law or palpable or overriding error of fact: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-55. We also note this court’s observation in Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592, at para. 64, that cases where a question of law can be extricated from the interpretation process are rare or uncommon. The appellant has not met this high bar for appellate intervention.

[7] The motion judge reviewed all the agreements in the context of the relevant factual matrix and applied the correct legal principles of contractual interpretation. She determined, correctly in our view, that there was no guarantee agreement between the appellant and the respondent. She disagreed with the appellant’s interpretation of s. 5 of Schedule A to the agreement of purchase and sale, repeated on appeal, that the respondent agreed to remain liable until the vendor take back mortgage had been repaid. We agree with the motion judge’s interpretation, borne out by the plain language of the agreement of purchase and sale, that the definition of the completion of the transaction is the closing date, and not when the full amounts owing under the mortgage had been repaid, that the respondent agreed to remain liable under the agreement of purchase and sale only until the closing date of the transaction, and that the respondent’s liability under the agreement of purchase and sale consisted of the payment of $1 million and the granting of the vendor take back mortgage. We also agree with her conclusion that the assignment agreement between the respondent and 66 Charles Street Limited (to which the appellant was not a party) contained no provision that the respondent remained liable on the vendor take back mortgage after closing. Given the motion judge’s finding, upheld on appeal, that the respondent is not a guarantor in this case, the standard charge terms, which outline the obligations of a guarantor and are incorporated by reference in s. 1(i) to Schedule A of the agreement of purchase and sale, do not apply.

[8] We turn finally to the motion judge’s conclusion that the inclusion of the respondent on the electronic registration of the vendor take back mortgage was an error. The appellant does not argue that this finding was not open to the motion judge on the record. He submits that she erred by: 1) accepting the respondent’s evidence that its inclusion as guarantor was an error; and 2) failing to give effect to the alleged representation made by the respondent’s legal representative to the appellant’s legal representative that the respondent would be a guarantor of the vendor take back mortgage, on which the appellant submits he relied to close the transaction.

[9] We do not accept these submissions. In our view, they ignore the motion judge’s correct conclusion that there was no guarantee agreement. Given that there was no guarantee agreement, it logically followed that the inclusion of the respondent’s guarantee in the electronically registered vendor take back agreement was an error as it was inconsistent with the parties’ agreement as reflected in their agreement of purchase and sale. To hold otherwise would rewrite the bargain between the parties and bestow a windfall on the appellant. There is no question that, other than the brief email exchange between the appellant’s lawyer and the law clerk of the respondent’s lawyers, there was no evidence of discussions or communications between the appellant and the respondent that a guarantee agreement was required as part of the consideration for the purchase. We also agree with the motion judge’s finding that the respondent was not a party to the document registration agreement, and her conclusion that the fact that the mortgage was registered does not signify the respondent’s agreement to the alleged guarantee. The email exchange was not sufficient in the circumstances of this case to give rise to a guarantee obligation on the part of the respondent that had never formed part of the consideration for the transaction and could not reasonably be relied upon by the appellant. As the motion judge found, the appellant was not left vulnerable and received security over the property and a premium for the property. The appellant was obligated to close the transaction on the closing date upon the purchaser’s payment of $1 million in cash and the granting of the vendor take back mortgage in accordance with the agreement of purchase and sale.

[10] For these reasons, the appeal is dismissed.

[11] In accordance with the parties’ agreement, the respondent, as the successful party on the appeal, is entitled to its costs in the all-inclusive amount of $15,000 from the appellant.

“L.B. Roberts J.A.”

“Gary Trotter J.A.”

“J. George J.A.”