ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-136
DATE: 2013/07/10
BETWEEN:
MULTANI CUSTOM HOMES LTD.
Dennis Touesnard, for the Plaintiff
Plaintiff
- and -
1426435 ONTARIO LTD.
Andrew Murray, for the Defendant
Defendant
HEARD: June 27, 2013
The Hon. Mr. Justice Arrell
INTRODUCTION:
[1] The plaintiff agreed to purchase property owned by the defendant. They entered into an agreement of purchase and sale where clearly time was of the essence. The closing date was extended. For a number of reasons, none of which were the fault of either party, the deal was unable to close on that date. It was able to close the next afternoon, however, the defendant had by that time taken the position that the deal was off and refused to close.
[2] The plaintiff commenced an action for specific performance and damages. The plaintiff also obtained an ex parte order allowing for the registration of a certificate of pending litigation.
[3] The defendant brings this summary judgment application seeking a dismissal of the claim or in the alternative the discharge of the certificate of pending litigation.
FACTS:
[4] The plaintiff is a developer of land in the City of Brantford. The evidence before me would indicate that the plaintiff specializes in developing and building homes on brown fields in the inner city.
[5] The defendant owns industrial property in the core of Brantford close to the Grand River, schools and shopping areas. The property is zoned industrial. The defendant has an on-going industrial business operating on the property. It was this property that it agreed to sell to the plaintiffs for $500,000.
[6] The agreement of purchase of sale was subject to several conditions which were waived over time by the plaintiff. The initial agreement of purchase and sale was entered into on January 10, 2011. On consent the closing dates were extended several times with the parties finally agreeing to a closing date of February 29, 2012.
[7] There is no issue in the evidence before me, nor did plaintiff’s counsel argue otherwise, but that time remained of the essence throughout as per paragraph 19 of the agreement of purchase and sale.
[8] The plaintiff’s ran into significant difficulties in securing the mortgage funds for February 29, 2012. The defendant’s counsel in his submissions conceded that these difficulties were not through any fault of the plaintiff’s. These difficulties included an error in the documentation filed by the engineer regarding the record of site condition. This became a last minute issue regarding the loan agreement with the lender. As a result, new and revised closing documents were required by the lenders lawyer. This was not provided until late on February 27, 2012. This documentation had to be signed by the plaintiffs and a new package of documentation and instructions had to be prepared for the lawyer providing the I.L.A. on the transaction. The lenders then required additional title insurance policies. The documents had to be signed by power of attorney as the principal of the plaintiff was in India. The additional documentation could not get to the title insurer until 9:15 a.m. on March 1st, with the policy being received at 2:33 p.m. on March 1st. The mortgage funds were then advanced. In addition to the above, because of the new documents that had to be prepared, by the time they got to the courier’s office that office was closed. Documentation was scanned for the lender’s lawyer; however, the purchasers office experienced technical difficulties with all electronic correspondence on the day of closing through its server. This technical difficulty was not discovered until the end of the business day of February 29, 2012.
[9] I conclude that the failure to close this transaction was a result of a series of events beyond the control of the plaintiff. I conclude that no single event would have prevented the closing but the combination of all of the problems made closing on the date set impossible. I further conclude, based upon all of the evidence, that there is no doubt that the plaintiff had every intention of closing this transaction. It is alleged that it had expended considerable time and money prior to the closing date in doing preparatory work regarding re-zoning and environmental assessments.
[10] I also find as a fact that the defendant was willing and able to close this transaction on the date set for closing but refused to do so once that date expired. No evidence has been led as to why it would not close the following day.
[11] There is no evidence before me that the defendants would have suffered any prejudice in closing the transaction the next day.
ANALYSIS:
[12] The defendants take the position that as time was of the essence it had every right in law to consider the contract at an end when the plaintiffs were unable to close on the date set for closing in the agreement of purchase and sale. It further argues that equity plays no role in my analysis nor does any lack of prejudice. It relies on Union Eagle Ltd. v. Golden Achievement [1997] 2 All ER 215 (PC) and 1473587 Ontario Inc. v. Jackson [2005] O.J. 210 (O.S.C.)
[13] The plaintiff argues those two cases are not on all fours with the case at bar. It further argues that a party seeking to rely on a time of the essence clause must be acting in good faith. It suggests the trend of recent case law is to apply standards of reasonableness and good faith in determining these issues. The plaintiff further argues that it’s client has made allegations of bad faith in its affidavit by indicating that the defendant had realized that the value of the property may have been much higher than the amount that it had negotiated with the plaintiffs and further that the plaintiffs had enhanced the value of the property through its preliminary work regarding re-zoning and environmental assessments. The defendant has not filed any affidavit to dispute those allegations.
[14] The plaintiff also alleges bad faith resulting from its meeting with a representative of the defendant, subsequent to the failed closing, where that person insisted on the plaintiff acknowledging the deal was “dead” before entering into any negotiations to revive the purchase and sale.
[15] The plaintiff does make a further argument of a lack of good faith in that there were undertakings that still had to be fulfilled and also that the defendant did not categorically repudiate the contract if there was a failure to close but only indicated that the deposit was forfeited. Plaintiffs’ counsel did not really push either of those arguments before me and I find both without merit. The undertakings in question could only be fulfilled once the defendant was in funds such as paying off mortgages and readjusting for taxes etc. It was clear that by indicating the deposit was forfeited that no other intention could be taken but that the contract was at an end.
[16] A vender is under a duty to act in good faith and to take all reasonable steps to complete the contract. Where a vendor acts contrary to good faith in its performance of the contract, the law precludes the vendor from relying on the “time of the essence” provision to terminate the contract. Leung v. Leung 1990 6866 (ON SC), [1990] 75 O.R. (2nd) 786 at para. 43
[17] The power of rescission by a vendor of land must not be arbitrary, capricious or unreasonable. Much less can he act in bad faith. Ockey Developments Ltd. V. Suncoast Projects (2004) Ltd. [2007] CarswellBC 310 at para. 31
[18] No requirement of precision should be imposed on a party whose tendered performance includes minor but easily corrected errors, and earlier strict statements to the contrary can no longer be relied upon as having significant authority. The trend of recent cases is to apply standards of reasonableness and good faith in determining what remedies are available, and when, to an innocent party. Leung v. Leung supra at para. 45
[19] The Court of Appeal has indicated quite clearly that the test for the judge before granting summary judgment is to ask the question”…can the full appreciation of the evidence and the issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial.” Combined Air Mechanical Services Inc. v. Flesch, [2011] ONCA 764, at paras. 50 and 51, (Ont.C.A.)
[20] The plaintiff argues that it was only through the benefit of seeing the conduct of the defendant on February 29, 2012 through its counsel and from March 1, 2012 forward in hindsight that it has understood that at some point during the course of the agreement of purchase and sale that the defendant’s desire to close the deal changed and its preference became to re-sell the property at a higher price based on the significant expenditure of out-of-pocket money and internal resources by the plaintiff and the perceived increased value of the property. The plaintiff argues these are triable facts that go to the issue of good faith and therefore the essence of this case. I agree. If the allegations made by the plaintiff are accepted by the trier of fact, and they have not been denied, then the plaintiff has a good cause of action. I do not feel that I have a full appreciation of the evidence on this issue to enable me to make dispositive findings on this central issue. The court, in my view, must hear evidence on this issue in order that a finding of fact and credibility can be made on the issue of good faith.
CERTIFICATE OF PENDING LITIGATION:
[21] The defendant takes the position that the certificate of pending litigation should be removed from the property forthwith. It argues that as the plaintiff has claimed in excess of two million dollars for damages, along with specific performance, in its statement of claim that damages are the appropriate remedy. It further argues that the case law supports the proposition that where the property in question is for investment and ultimate profit to the purchaser damages are the appropriate remedy not a certificate of pending litigation.
[22] There is no doubt that the plaintiff is in the business of buying land, building on it and then selling the homes for profit. This was clearly an investment by the plaintiff in the hopes of securing a profit once it had developed the land.
[23] The plaintiff argues, however, that this property was unique and that there were no other such properties in the Brantford area. As well, the property was to be acquired by the plaintiff to build homes on it which would have kept its employees and trades people employed for approximately 2 years. It is further argued that the keeping of its employees employed is an intangible damage that cannot be readily calculated and this also makes the property and development unique.
[24] The plaintiff argues that there is case law to establish that if the property is unique then maintaining it until a full hearing can be held is indeed an appropriate remedy.
[25] I have reviewed s.103(6)(a) and s. 116(6) of the Courts of Justice Act, R.S.O. 1990 C. 43 which sets out the factors allowing for the discharge of the certificate, one of which is where in the alternative the claimant claims money instead of an interest in the land.
[26] The remedy of specific performance is one that is peculiar to real estate transactions and is based on the fact that real estate is regarded as unique and of particular importance to the purchaser. That reasoning does not apply when land is purchased merely as an investment. Any loss of profits can be compensated for in damages. Heron Bay Investments Ltd. V. Peel-Elder Developments Ltd. [1976] O.J. No. 1403 (OSC) at para 4; Mutual Apartments Inc. v. Lam [2009] O.J. No. 2695 (OSC) at para 68; Hunter’s Square Developments Inc. v. 351658 Ontario Ltd. 2002 49491 (ON SC), [2002] O.J. 2800 (OSC) and [2202 O.J. No. 4694 (C.A.)
[27] The onus is on the purchaser to persuade the court that the property is unique, of particular importance to it and there is no readily available substitute. Uniqueness requires proof. North American Construction (1993) Ltd. V. Deem Management Services Ltd. [2008] O.J. No. 3351 (OSC) at para 56
[28] The only evidence that this property is unique is what is stated by the plaintiff. It is a self-serving statement and I give it little weight. The plaintiff could have easily provided independent evidence of the uniqueness of this property if such evidence exists. The plaintiff has failed to persuade this court of any uniqueness to this property or that a substitute is not available.
[29] I conclude that based upon all the evidence before me that this property should not be tied up any longer. The defendants are an on-going business with real assets and real property. Indeed the plaintiff concedes that there is no evidence before me that the defendants cannot pay any damages that may be awarded should the plaintiff be successful in its lawsuit. Courts quantify difficult types of damages regularly and there is no reason such cannot be done in this case if the plaintiff is successful.
CONCLUSION:
[30] I therefore conclude that the certificate of pending litigation be lifted forthwith and the summary judgment motion to dismiss this action is dismissed.
[31] If the parties are unable to agree on costs they may make brief written submissions to me doubled spaced of no more than 3 or 4 pages in addition to any draft bills of costs and relevant offers to settle.
ARRELL, J.
Released: July 10, 2013
COURT FILE NO.: CV-12-136
DATE: 2013/07/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MULTANI CUSTOM HOMES LTD.
Plaintiff
- and -
1426435 ONTARIO LTD.
Defendant
REASONS FOR JUDGMENT
ARRELL, J.
Released: July 10, 2013