COURT FILE NO.: CV-10-398705
DATE: 20120209
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL BENZIE and NORMAN BENZIE
Applicants
– and –
MITCHELL KUNIN and BARBARA HANIA
Respondents
Michael Meredith and Clarke Tedesco, Counsel for the Applicants
Allan S. Halpert, Counsel for the Respondents
HEARD: August 15, 2011
Mccombs j.:
Overview and Relief Sought
[1] A long-simmering dispute among three siblings has led to this application. Michael Benzie and her spouse Norman Benzie (“Michael” and “Norman”) have applied for, among other things, an order striking an agreement from the land registry that has been registered on the title of their residential property for nearly twenty-five years.
[2] They seek the following relief:
a) A Declaration that the agreement is not binding on anyone who is not a party to it.
b) A Declaration that the addendum to the agreement is void for failure of consideration.
c) An Order striking the agreement from the land registry, as it does not touch and concern the land.
[3] For the reasons set out below, the application is dismissed.
Background
[4] Michael Benzie, Barbara Hania and Mitchell Kunin are siblings. Norman Benzie is Michael’s husband.
[5] In 1981, Reuben Kunin, father of Michael, Barbara and Mitchell, purchased a 66-acre farm property on the Oak Ridges Moraine for $425,000 (the “Property”). The father registered the Property in Barbara’s name, apparently for financial planning and taxation reasons.
[6] Michael bought the Property in 1987 with the encouragement of her father, who wanted to dissuade her from moving to the United States. Michael and Norman moved onto the property before the purchase, and spent about $250,000 on renovations and improvements. They have lived there ever since.
[7] Barbara had opposed the purchase of the Property by Michael, because she and Mitchell wanted it to remain a “family property”.
[8] In order to appease Barbara and Mitchell and to persuade Barbara to agree to Michael’s purchase of the Property, the father proposed an agreement (the “Agreement”) which contained a right of first refusal upon mandatory 30-days notice by Michael of an intent to sell the Property, and provided for equal distribution among the three siblings of the net proceeds[^1] of any future sale of the Property.
[9] Barbara agreed to the sale of the Property to Michael only because Michael agreed to the terms of the Agreement which was intended to protect her and her brother Mitchell’s interests in the Property[^2].
[10] The relevant terms of the Agreement are summarized below:
(a) Distribution of proceeds (paragraph 4 of the Agreement)
• If Michael sells the Property, the proceeds of the sale shall be divided amongst the parties in this way:
a) After the deduction of all expenses relating to the sale, Michael shall be paid from the proceeds of the sale the first $425,000.00 plus simple interest at the rate of 6% per annum.
b) Michael shall then be repaid any money spent on renovations or improvements to the Property, including the $250,000 that had already been spent by her prior to the purchase.
c) The monies remaining from the sale proceeds shall then be divided equally among the parties hereto on completion of the sale.
(b) Right of first refusal (paragraphs 5 & 6 of the Agreement)
• If Michael decides to sell the Property, she shall first make an offer in writing to sell the Property to Barbara and Mitchell. The offer shall be good for 30 days, after which Michael may sell the Property to any third party provided she again offers to sell the Property to Barbara and Mitchell on the same terms as to the third party.
(c) Enurement (paragraph 9 of the Agreement)
• The Agreement shall “enure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators, executors, successors and assigns but the benefit thereof shall not be assignable.”
(d) Registration on title (paragraph 10 of the Agreement)
• The parties agree that the notice of the Agreement may be registered on title.
[11] Michael, Barbara and Mitchell executed the Agreement on August 25, 1987. On November 30, 1987, Norman signed a document directed to Mitchell and Barbara, in which he covenanted and agreed to be bound by the same terms and conditions as Michael[^3]. That same day, Michael conveyed an undivided half-interest in the property to Norman[^4]. In consideration for Norman’s signed covenant to be bound by the terms of the Agreement, the conveyance to Norman was not objected to by Barbara or Mitchell[^5]. On December 23 1987, the Agreement and Norman’s covenant were registered on title pursuant to the provisions of the Registry Act, R.S.O. 1990, c.R.20 then in effect.
[12] In 2001, the Oak Ridges Moraine Conservation Act came into force. Its effect is to prevent any residential or commercial development on the Property.
Michael and Norman assert that if the Property were to be sold, they would be entitled to keep over $2.5 million from the proceeds[^6], an amount they say is over $1 million more than the fair market value of the property[^7]. In their view, it is both pointless and an unnecessary source of worry that the Agreement remain registered on title.
Issues
[13] This application raises three issues:
Is the Agreement binding on non-parties?
Is the addendum to the Agreement void for failure of consideration?
Is the Agreement properly registered on title?
Discussion
Issue 1 – Is the Agreement binding on the Cousins, as Non-Parties?
[14] The siblings are now in their sixties and there are a number of adult children (the “Cousins”). This application has been brought because of disagreement among the siblings and the Cousins as to the entitlement of the Cousins upon the death of Michael and Norman.
[15] The language of the Agreement evidences the clear intention of the parties who executed it. Both the Agreement and the record before me on this application demonstrate that the parties intended to share equally in any profits obtained from a sale of the Property.
[16] The applicants argue that their heirs are not subject to the burdens of the Agreement unless the Agreement can be said to “run with the land”.
[17] I accept the respondents’ argument that the terms of the Agreement terms show a clear intention that it is to survive the death of the parties. Paragraph 9 provides that the “respective heirs, administrators, executors, successors and assigns” of the parties will be bound by the Agreement’s terms. While paragraph 9 could have been more carefully crafted, its intention is clear: upon a sale of the Property, the provisions of the contract that require an equal division of the property will come into effect.
[18] At common law, a contract will survive the death of a party to it, unless the contract is personal in nature, that is based on “personal consideration, skill or confidence”: (G.H.L.Fridman, The Law of Contract, 4th ed. (Toronto: Thomson Carswell, 2006) at p.731. The Agreement in question is not in the nature of a personal contract.
[19] The applicants claim that the Agreement does not “touch and concern” the Property and does not run with the land. Whether or not this is so, it is clear that the Agreement creates an interest in the Property that is protected from encroachment by virtue of the Agreement. That protection continues after the death of Michael and Norman, and the interests of anyone inheriting the Property remain subject to the terms of the Agreement. As a result, although the children of Michael and Norman are not parties to the Agreement, any inheritance of the Property remains subject to its terms.
Issue 2 – Is the addendum to the Agreement void for failure of consideration?
[20] The addendum to the Agreement provided Norman with a 50% interest in the Property as a joint tenant with Michael. On the record before me, it seems clear that Norman signed this undertaking to be bound by the terms of the Agreement in consideration for the forebearance of Barbara and Mitchell in not seeking to enforce their rights under the Agreement.
[21] As G.H. L. Fridman explained in The Law of Contract at p.92: “[t]here must be something which is being given in exchange for the act or promise that is alleged for there to be contractual obligation.” Consideration can be forbearance to enforce an agreement or to sue: see Kocken v. Stewart (2000), 1999 ABQB 331, 241 A.R. 382 (Alta. Master) cited in Fridman, The Law of Contract, at 95.
[22] The provisions of the Agreement which would come into effect if Michael chose to sell the Property would similarly have been triggered upon a disposition of half of her interest in the Property to Norman. Forbearance from attempting to enforce the Agreement in this respect can be valid consideration for Norman’s undertaking.
[23] In this case, the parties intended to bind Norman to the Agreement and consideration was exchanged between the parties to this undertaking. Thus, the addendum to the Agreement is not void for failure of consideration.
Issue 3 – Is the Agreement properly registered on title?
[24] The Agreement has been registered on title for almost 25 years. It was registered in accordance with s.22 of the Registry Act, the relevant statutory authority in 1987. The provision expressly permitted a “contract in writing” to be registered under the Act.
[25] In 1999, the Property was moved onto the Land Titles system of registration under the Land Titles Act, R.S.O. 1990, c. L.5. Section 71(1) of the Act permits the registration of “notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles.” The Agreement was registered under this new regime under the authority of the Director of Titles.
[26] The Agreement is properly registered on title and there is no reason to interfere with it.
Conclusion
[27] In the result, the application is dismissed with costs. If the parties are unable to agree on costs, the respondents shall serve and file written costs submissions with my office, including a Costs Outline, within 15 days. The applicants shall serve and file their responding costs submissions within 15 days thereafter.
McCombs J.
Released: February 9, 2012
COURT FILE NO.: CV-10-398705
DATE: 20120209
ONTARIO
SUPERIOR COURT OF JUSTICE
MICHAEL BENZIE and NORMAN BENZIE
Applicants
– and –
MITCHELL KUNIN and BARBARA HANIA
Respondents
McCombs J.
Released: February 9, 2012
[^1]: The “net” proceeds are to be determined in accordance with paragraph 4 of the Agreement as summarized in paragraph 10 of these reasons. [^2]: Affidavit of Barbara Hania, Respondents Application Record, Tab 1, paragraph 19. [^3]: Applicants’ Application Record, p. 295. [^4]: Land Transfer Tax Act Affidavit, Respondents’ Supplementary Application Record, Tab A. [^5]: Affidavit of Barbara Hania, Respondents Application Record, Tab 1, para 20, and affidavit of Mitchell Kunin, respondents’ Application Record, Tab 2. [^6]: As of the time of this motion, the breakdown of expenditures, renovations, and interest was as follows: Repayment of initial value: $425,000.00 Interest on Payment Price: $612,000.00 Cost of Renovations: $698,303.37 Interest on Expenditures: $649,208.24 Cost of Necessary Equipment: $137,272.32 Total: $2,521,783.93 [^7]: In 2009, the Property was appraised at between $1,322,000.00 and $1,520,000.00 by a valuator retained by the applicants.