Court File and Parties

COURT OF APPEAL FOR ONTARIO

DATE: 20241205 DOCKET: COA-24-CV-0073

Rouleau, Roberts and Favreau JJ.A.

BETWEEN

James Elgin Gill Plaintiff (Respondent)

and

James Wallace Gill, also known as Jim Gill and Xuehui Gill Defendants (Appellants)

Counsel: Craig O’Brien and Hamish Mills-McEwan, for the appellants Jonathan Collings, for the respondent

Heard: October 31, 2024

On appeal from the judgment of Justice Gary W. Tranmer, dated December 18, 2023, with reasons reported at 2023 ONSC 6333, and the costs order dated January 17, 2024, with reasons reported at 2024 ONSC 362.

Roberts J.A.:

Overview

[1] This appeal arises out of a dispute between a son, and his father and stepmother over title to a residential property in Brockville (“the property”). It turns on whether the trial judge erred in failing to require the transfer of the property to the appellants in specific performance of the parties’ April 15, 2018 agreement that the trial judge declared was valid and enforceable.

[2] For the reasons that follow, I would allow the appeal and order specific performance of the April 15, 2018 agreement and the transfer of the property to the appellants in exchange for them paying out the respondent’s mortgage, as well as an accounting of expenses between the parties in accordance with their agreement. I would also set aside the trial judge’s award of costs and order that the respondent pay to the appellants the all-inclusive amount of $65,000.

Factual Background

[3] In 2011, the respondent son purchased the property for $218,000, with financial assistance from the appellants, including a $15,000 gift and a $5,000 loan. To assist with the purchase, the respondent took out a mortgage in the amount of $174,400.

[4] The respondent subsequently ran into financial challenges because he lost his job. The respondent concluded two agreements with the appellants, respectively in January and April 2018, which provided that the appellants would move into the property and take over the property’s expenses, including the mortgage payments, and the respondent would transfer the property to the appellants once the mortgage came due for the consideration of the appellants paying out the mortgage. Both agreements stated that they were concluded in part in response to the respondent’s financial challenges.

[5] The essential terms of the January 28, 2018 agreement provided as follows:

It is understood and agreed that [the appellants] will relocate to [the property] March 1st, 2018 or sooner.

In exchange for the early occupancy of [the property], [the appellants] agree [to] pay [the respondent’s] biweekly mortgage payments in the amount of $711.59 effective March 1st 2018[.] [The appellants] will be responsible and pay property taxes (excluding any prior arrear amounts and interest owing), electricity costs, natural gas costs and insurance costs beginning March 1st 2018 excluding any and all arrear amounts prior to March 1st 2018.

It is also understood that [the respondent] will sell [the property] to [the appellants] for the agreed mortgage payout amount of the mortgage balance when the mortgage becomes due ... It is estimated the mortgage amount will be a high $180,000.00 and a low $175,000 approximately.

It is also understood that [the respondent] will commence loan payment amounts of $350 [m]onthly to return loan amounts to [the appellants]. April 1st 2018, with payments due on the 1st of each following month until the total balance of the $13,017.89 is paid in full. Loan amounts will be calculated monthly using principal amounts loaned including an annual interest rate of 10 (ten) percent with interest beginning after March 1st, 2018.

This agreement has been drafted in part due to the financial challenges [the respondent] has been experiencing due to a recent job loss.

[The respondent] further acknowledges that [the] property’s current value due to its current state of repair has decreased dramatically since time of purchase price of approximately $217,000.00. [The respondent] has had tenants and pets which have caused significant wear, tear and damage to the property.

[6] The appellants relocated and moved into the property on March 1, 2018, and took over the property’s expenses as provided for in the January 2018 agreement.

[7] The terms of the April 15, 2018 agreement were virtually identical to those of the January 28, 2018 agreement – on March 1, 2018, or sooner, the appellants would relocate and move into the property and pay its related expenses, including the mortgage, and the respondent would transfer the property to the appellants upon the mortgage coming due and the appellants paying out the mortgage. It also contained the following additional terms: “It is understood [the respondent] will temporarily occupy the lower house level and pay $700.00 month[ly] rental rate and be responsible and pay fifty percent of all utility costs until [the respondent] relocates to another address.”

[8] In August 2018, the respondent moved out of the property and stopped paying rent, his share of the utilities, and the loan payments provided for in the agreements. In 2019, the respondent commenced the underlying action against the appellants.

[9] In his statement of claim, the respondent claimed the following remedies: a writ of possession for the property; a declaration that the purported agreements between the parties were of no force and effect; damages for unjust enrichment and breach of contract and damages for trespass. In their statement of defence and counterclaim to the respondent’s action, the appellants claimed specific performance of the property transfer provided for in the agreement upon payment out of the respondent’s mortgage; a declaration that the April 15, 2018 agreement is valid and enforceable; and repayment of a loan made to the respondent and property expenses. In the alternative to specific performance, they claimed damages for breach of contract.

[10] The respondent did not transfer the property to the appellants when it came due in November 2022. Instead, he renewed the mortgage under his name in January 2023 and made the mortgage payments from December 1, 2022 onwards [1]. The respondent now lives in Acton and works in Guelph, Ontario. The property remains the appellants’ home to which they have made improvements and for which they continue to pay all expenses, except for the mortgage and insurance that the respondent took over in December 2022.

[11] The trial judge dismissed the respondent’s claim in its entirety. He made no declaration with respect to the enforceability of the January 28, 2018 agreement, other than finding that the respondent did not enter it under duress. He declared that the April 15, 2018 agreement was valid and enforceable. He dismissed the appellants’ claim for specific performance and ordered that the appellants vacate the property and deliver up vacant possession to the respondent. He found that the appellants had delayed in seeking specific performance. He ordered the respondent to pay to the appellants damages in the amount of $48,384.72 for loan amounts, rent, property tax arrears, home improvement and landscaping expenses incurred by the appellants in relation to the property. He ordered no damages in lieu of specific performance because “[t]he increase in the value of the house has not been claimed as a head of damage by either party”. The trial judge awarded costs to the appellants on a partial indemnity basis in the amount of $37,857.74.

Issues and the Parties’ Positions

[12] The appellants submit that the trial judge erred in failing to order specific performance of the April 15, 2018 agreement and failing to require the transfer of the property in exchange for payment of the respondent’s mortgage. In the alternative, they say the trial judge erred in his assessment of the appellants’ damages, including by failing to award the appellants the difference in the purchase price under the agreement and the value of the property at the date of trial.

[13] Even if unsuccessful on this appeal, the appellants seek leave to appeal the trial judge’s costs award.

[14] The respondent argues that the trial judge considered all the relevant factors, made no reversible errors, and that his decision, particularly as it relates to damages and costs, is owed appellate deference. The respondent maintains that specific enforcement of the agreement would be punitive and result in a windfall to the appellants that was not part of their bargain.

Analysis

(a) Specific performance

(i) General principles

[15] Specific performance of an agreement is an equitable remedy granted where damages cannot afford an adequate and just remedy in the circumstances: Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858, 125 O.R. (3d) 121, at para. 29, leave to appeal refused, [2015] S.C.C.A. No. 50; Paterson Veterinary Professional Corporation v. Stilton Corp. Ltd., 2019 ONCA 746, 438 D.L.R. (4th) 374, at para. 22, leave to appeal refused, [2019] S.C.C.A. No. 420. As the Supreme Court instructed in Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, at para. 22, specific performance should not be ordered automatically as the default remedy for breach of a contract for the sale of lands, “absent evidence that the property is unique to the extent that its substitute would not be readily available” or absent “a fair, real and substantial justification” for the claim to specific performance.

[16] The overarching question is whether the land rather than its monetary equivalent better serves justice between the parties: Lucas v. 1858793 Ontario Inc. (Howard Park), 2021 ONCA 52, 25 R.P.R. (6th) 177, at paras. 69-71; Dhatt v. Beer, 2021 ONCA 137, 68 C.P.C. (8th) 128, at para. 42. The governing factors that typically inform the determination of that question include: the nature of the agreement and the property, the objective uniqueness of the agreement and the property, and their subjective uniqueness to the purchaser at the time of purchase; the adequacy of damages as a remedy; and the behaviour of the parties having regard to the equitable nature of the remedy: Matthew Brady, at para. 32; Lucas, at para. 71. This discretionary determination is a fact-specific inquiry that requires a consideration of all the particular circumstances and the equities of the case: Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 67, leave to appeal refused, [2019] S.C.C.A. No. 55; Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd., 2021 ONCA 201, 32 R.P.R. (6th) 1, at para. 288.

(ii) Principles applied

[17] The trial judge correctly referenced the governing factors to be considered when determining whether specific performance should be awarded. However, he erred in applying them.

Are the property and the transaction unique?

[18] The trial judge lost sight of the subjective uniqueness of both the property, as the appellants’ home, and of the transaction as provided for in the April 15, 2018 agreement. He stated that the appellants “did not seek [the property] out or buy it because of any unique quality or features. Rather [the appellants] entered into the agreement, on their evidence, solely to help [the respondent] financially”; the appellants “had no ‘wish list’ of features”; there was no evidence that “the house had qualities that made it especially suitable for [the appellants] and that those qualities are not readily available elsewhere”; there is no evidence of “limited housing supply, or bidding wars, or of [the appellants] being blocked from purchasing a comparable house.” The trial judge stated: “There is no evidence that this house is unique within the meaning of the authorities.”

[19] The trial judge’s analysis was flawed. As this court instructed in Lucas, at para. 73: “In assessing whether a property is unique, courts may have regard to: (a) a property's physical attributes; (b) the purchaser's subjective interests, or (c) the circumstances of the underlying transaction.” The trial judge erred by focussing solely on the property’s physical attributes.

[20] The trial judge’s findings ignore the appellants’ uncontested evidence that the property was their home, to which they had relocated, and in which they had lived for over five years. During this time, they paid all expenses in performance of the parties’ bargain and made improvements to the property. This represents palpable and overriding error.

[21] The objective and subjective uniqueness of the appellants’ established home is obvious. Few purchases are as important as the family home, especially one in which the purchasers have lived and which they have maintained and improved for several years: Maraschiello v. Shellrock Developments Ltd., 2013 ONCA 167, at paras. 14, 15; 0994660 B.C. Ltd. v. Vanier, 2023 BCCA 483, at paras. 22, 23, 37; Lalani v. Chow, 2011 BCCA 499, 345 D.L.R. (4th) 310, at para. 19; Ali v. 656527 B.C. Ltd., 2004 BCCA 350, 29 B.C.L.R. (4th) 206, at para. 29; Raymond v. Anderson, 2011 SKCA 58, 6 R.P.R. (5th) 58, at para. 18; Chan v. Tu, 2006 BCSC 934, 45 R.P.R. (4th) 65, at para. 23.

[22] Moreover, the parties’ transaction, as provided for in the April 15, 2018 agreement, was subjectively and objectively unique. Unlike most agreements of purchase and sale, the appellants were to relocate and start living at the property before title was transferred to them. It was by performing their obligations under the agreement, including paying all expenses and discharging the respondent’s mortgage when it came due, that they would acquire the property from the respondent.

[23] The trial judge’s analysis was flawed because he failed to analyze the appellants’ own relationship with the property and focussed instead on the appellants’ financial assistance to the respondent as the motive for purchasing the property: Raymond, at paras. 22, 23. This was an error in principle. The fact that the appellants assisted the respondent by taking over the property was of marginal relevance to the nature and authenticity or cogency of the subjective and objective factors that made the property and the transaction unique. The trial judge found that the appellants did not purchase the property as investors. The property was intended to become the appellants’ home, and it did. The transfer of the property was in exchange for the valuable consideration of the appellants’ taking over the property from the respondent who was experiencing serious financial difficulties. The trial judge erred by failing to look at the transaction as a whole in his consideration of objective and subjective uniqueness.

Are the equities in favour of specific performance?

[24] As I noted in the beginning of this analysis, specific performance is a discretionary, equitable remedy. Accordingly, it is necessary to step back and consider whether it would be equitable in all the circumstances to enforce the agreement in issue. Typical factors encompassed in this consideration include: the behaviour of the parties; delay; prejudice; unconscionability; or unfairness.

[25] I repeat here the trial judge’s findings about the nature of the April 15, 2018 agreement because they are relevant to the issue of whether it would be unfair to specifically enforce the bargain made by the parties. The trial judge rejected the respondent’s claim that he entered into the agreement under duress. I see no basis to interfere with that finding. The trial judge also noted that the respondent did not allege that the agreement was unconscionable. There is, therefore, no support for the suggestion that specific enforcement of the agreement would be punitive.

[26] In the present case, the trial judge’s consideration of the equities was too narrow. He rejected the respondent’s claim of duress, noted there was no allegation of unconscionability, and found the agreement to be valid and enforceable. However, he failed to give effect to those findings in his consideration of the equities of the case. Specifically, he did not take into account that the appellants had performed their obligations under the agreement that he found was valid and enforceable and that the respondent breached the agreement without excuse. As earlier noted, he failed to consider that the property had become the appellants’ settled home. The respondent, however, has not lived in or maintained the property since he left in 2018; there is no suggestion that he wishes to return to reside at the property. Rather, it is the monetary or investment value of the property that is meaningful to the respondent.

[27] Further, the trial judge erred in his consideration of the issue of delay. It was the respondent, not the appellants, who failed to perform and then repudiated the agreement. The trial judge’s finding that the appellants had somehow delayed in seeking specific performance is unreasonable and not supported by the evidence.

[28] The respondent commenced an action in 2019, repudiating the agreement; in response to that action the appellants did not accept the respondent’s repudiation but claimed entitlement to specific performance of the April 15, 2018 agreement in their counterclaim. Where the respondent had clearly repudiated the agreement and demonstrated that he had no intention of transferring the property when the mortgage came due, it was not necessary for the appellants to do anything further: Kloepfer Wholesale Hardware v. Roy, [1952] 2 S.C.R. 465, at p. 476, per Locke J.; Di Millo, at paras. 45, 46; Bark-Fong v. Cooper (1913), 49 S.C.R. 14, at pp. 31-32, per Anglin J.

[29] Moreover, there was no delay of such a character as to justify the inference that the appellants intended to abandon their rights under the April 15, 2018 agreement or otherwise make it unjust to grant specific performance and require the respondent to carry out his obligations under the agreement: Bark-Fong, at p. 23, per Duff J.; and at p. 31, per Anglin J. Mere delay is not enough: Fram Elgin Mills, at para. 289.

[30] There is no unfairness in awarding specific performance in this case. Indeed, the equities of the case support it. I would order specific performance of the parties’ April 15, 2018 agreement.

(iii) Accounting between the parties

[31] The April 15, 2018 agreement provided for certain payments to be made by the parties. The respondent has been making all mortgage payments since December 1, 2022. [2] The trial judge’s reasons address some but not all of these amounts but do not provide for an adjustment as between the parties in the event specific performance were ordered.

[32] As a result, we requested further submissions from the parties on this issue. In response, the parties delivered a joint submission dated November 8, 2024, setting out their agreement respecting the adjustments for amounts paid and owing that would be required between the parties in the event that specific performance were granted.

[33] They agree that if specific performance were ordered, the appellants would pay to the respondent the net adjustment of $22,993.03 ($47,405.34 - $24,412.31), calculated as follows:

i. The respondent would owe to the appellants loan payments plus interest of $20,212.31 and unpaid rent of $4,200, totalling $24,412.31.

ii. The appellants would owe to the respondent the following amounts paid by the respondent: mortgage payments from December 1, 2022 to the present in the amount of $40,268.35; the insurance premiums from December 2022 to the present in the amount of $4,636.99; a property tax payment in the amount of $2,500. These amounts total: $47,405.34.

[34] Accordingly, I would order the appellants to pay the respondent the net amount of $22,993.03.

(b) Trial judge’s January 17, 2024 award of costs

[35] The trial judge’s award of costs of $37,857.74 was primarily premised on his view that the appellants had achieved only modest success at trial. In light of my proposed disposition of the appeal, the appellant was entirely successful at trial. The trial judge’s award of costs must therefore be set aside and the appellants’ costs of their action reassessed.

[36] The appellants say that their October 12, 2023 offer to settle entitles them to partial indemnity fees of $40,256.93 for costs prior to trial and $60,317.76 in substantial indemnity fees for the trial. The appellants’ partial indemnity costs total $80,468.77. Their disbursements total $3,957.74.

[37] The appellants served an offer to settle on October 12, 2023, eleven days prior to the commencement of trial, which was not withdrawn before trial and was not accepted by the respondent. The appellants’ offer potentially triggers the costs consequences prescribed under r. 49.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The relevant portions of r. 49.10 are as follows:

(1) Where an offer to settle, (a) is made by a plaintiff at least seven days before the commencement of the hearing; (b) is not withdrawn and does not expire before the commencement of the hearing; and (c) is not accepted by the defendant, and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.

(3) The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of subrule (1) …

[38] The appellants’ offer meets the criteria set out in r. 49.10(1)(a) to (c). The burden on the appellants remains to prove that the judgment as obtained on appeal is as favourable as or more favourable than the terms of their October 12, 2023 offer to settle.

[39] In summary, the relevant terms of the appellants’ October 12, 2023 offer for the purpose of comparison are:

i. The respondent would transfer the property to the appellants; ii. The appellants would discharge the mortgage on the date of transfer; iii. The appellants would pay the respondent $40,000; and iv. The appellants would forgive the respondent’s debts consisting of the rental, loan and utility amounts owing to the appellants. v. The respondent would pay the appellants their partial indemnity costs to the date of the offer and substantial indemnity costs thereafter if the offer were not accepted.

[40] Under my proposed disposition of the appeal, the appellants would obtain a judgment as favourable as and arguably more favourable than the terms of their October 12, 2023 offer. The terms respecting the transfer of the property and the discharge of the mortgage are the same under the offer and the proposed disposition of the appeal. However, in the proposed disposition of the appeal, the respondent receives a net payment from the appellants of $22,993.03. This is less than the proposed benefit of the $40,000 payment to him and the forgiveness of his debts of $24,412.31, which amount to a notional benefit to him of $64,412.31 under the appellants’ offer.

[41] The appellants are therefore prima facie entitled to their partial indemnity costs up to and their substantial indemnity costs following the service of their offer.

[42] While not automatic, to fulfill the objective of the rule and ensure its predictability, the prima facie costs consequences of r. 49.10 should be applied in the vast majority of cases in order to encourage early settlement and avoid trials: Jarbeau v. McLean, 2017 ONCA 115, 410 D.L.R. (4th) 246, at para. 82; Jacuzzi Can. Ltd. v. A. Mantella & Sons Ltd. (1988), 31 C.P.C. (2d) 195 (Ont.H.C.), at para. 7; Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 58 O.R. (2d) 773 (C.A.), at p. 777. The court’s discretion to “order otherwise” under r. 49.10 should be narrowly construed. The court should only depart from the general rule where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure: Niagara, at p. 777; Barresi v. Jones Lang Lasalle Real Estate Services Inc., 2019 ONCA 884, 58 C.P.C. (8th) 318, at para. 17; 2651171 Ontario Inc. v. Brey, 2022 ONCA 205, at para. 7.

[43] The rules do not purport to delineate particular circumstances in which the court should exercise its discretion to “order otherwise”. As this court indicated in Niagara, at p. 777:

As far as the occasions for resort to the exception are concerned, if the framers of the rules could have expressed the relevant bases or factors with any degree of comprehensive detail it may be assumed that this would have been done. Accordingly, it would be wrong, for several reasons, to attempt to do so by judicial declaration.

[44] While not dispositive, factors that have informed the court’s discretion to “order otherwise” in past cases include, for example: the absence of any real compromise: Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 6 O.R. (3d) 409 (C.A.), at p. 414; where the successful claimant’s claim was not really in dispute and took very little time at trial: Cimmaster Inc. v. Piccione (Manufacturing Technologies Company), 2011 ONCA 486, 336 D.L.R. (4th) 506, at para. 33; and where the plaintiff’s claim was successful but the plaintiff was shown to have acted dishonestly in many respects, which made his every assertion and claim suspect and worthy of challenge: Mete v. Guardian Insurance Co. of Canada, 165 D.L.R. (4th) 457, at paras. 19, 21. None of these factors are in play in this case.

[45] I see no reason to depart from the cost consequences of r. 49.10 and to order otherwise than grant the appellants’ partial indemnity costs up to and their substantial indemnity costs following the service of their offer to settle. The appellants’ offer was clear, its terms were fixed, and it represented a genuine and fair compromise. There is nothing about the appellants’ conduct that would disentitle them to costs. The issues of the enforceability of the parties’ agreement and the appropriate remedy were among the main issues at trial. The acceptance of the appellants’ offer would have avoided an expensive trial. It therefore satisfies the objectives of r. 49 settlement offers.

[46] The amount claimed by the appellants must nevertheless be fair and proportionate in the circumstances and within the reasonable contemplation of the respondent if he were unsuccessful. I would therefore fix and grant the appellants’ costs of their action in the all-inclusive amount of $65,000.

Disposition

[47] For these reasons, I would allow the appeal.

[48] I would amend paragraph 3 of the December 18, 2023 judgment to read “April 15, 2018” (the correct date of the parties’ agreement) and set aside paragraphs 2, 4, 5 and 7 of the judgment.

[49] I would order specific performance of the April 15, 2018 agreement and order that the respondent shall transfer the property to the appellants at the same time as the appellants pay out and discharge the respondent’s mortgage. As agreed by the parties, I would order the appellants to pay the respondent the amount of $22,993.03. The appellants, at their option, may deduct this amount payable to the respondent from the amounts owing to them by the respondent for costs of the action and the appeal.

[50] I would set aside the amounts awarded for costs in paragraph 1 of the trial judge’s January 17, 2024 costs order and replace that award with the all inclusive amount of $65,000 payable to the appellants by the respondent.

[51] As agreed, the appellants are entitled to their costs of the appeal from the respondent in the all-inclusive amount of $20,000.

Released: December 5, 2024 “P.R.” “L.B. Roberts J.A.” “I agree. Paul Rouleau J.A.” “I agree. L. Favreau J.A.”

[1] The parties have agreed this is the correct date. [2] The parties have agreed this is the correct date.