Court File and Parties

COURT FILE NO.: CV-12-450979
DATE: 20130930

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: MARIA SOTIROPOULOU and APOSTOLOS PAPATOLIKAS, Plaintiffs

AND:
GILLES BEAUDIN and MARIE HERSA PIERRE-LOUIS, Defendants

BEFORE: Stinson J.

COUNSEL:
William Ribeiro, for the plaintiffs
Karey Anne Dhirani, for the defendants

HEARD: September 10, 2013

ENDORSEMENT

[1] This case concerns a real estate transaction that did not come to fruition. The plaintiffs are the unsuccessful would-be purchasers. The defendants are the owners/vendors. The property in question is a vacant lot in a residential area in east Toronto. The plaintiffs’ intention was to purchase the lot, construct a house and resell it at a profit.

[2] The basic dispute between the parties concerns the question whether they had an enforceable agreement of purchase and sale. The plaintiffs/purchasers assert that they did and that the defendants/vendors wrongfully refused to complete the transaction. The plaintiffs have therefore commenced this action seeking specific performance. The defendants deny that the parties ever agreed upon terms and thus no concluded agreement of purchase and sale came into being. They resist the plaintiffs’ claim on this basis.

[3] Both sides have brought motions for summary judgment. The defendants ask the court to find that no enforceable agreement came into being and thus the plaintiffs’ action should be dismissed. The plaintiffs ask the court to declare that the parties are bound by an enforceable agreement, which the defendants are obliged to perform. The plaintiffs also seek damages arising from the defendants’ non-performance of the agreement according to its terms.

[4] It was common ground that there are no material facts in dispute and that this case is suitable for adjudication by way of summary judgment. In particular, there is no material dispute concerning the sequence of events described below. I agree that this case is one that is suitable for resolution by way of summary judgment: based on the evidence and the limited record, I believe I am able to arrive at a sufficient appreciation of the facts to make the necessary factual and legal findings upon which the case turns.

Factual background

[5] The defendants Gilles Beaudin and Marie Pierre-Louis are spouses who own a vacant residential lot located on Midburn Avenue in Toronto. The plaintiffs are spouses who operate a construction company which is in the business of renovation and construction. Maria Sotiropoulou is the owner and her husband Apostolos Papatolikas is an employee of the company.

[6] In February 2012, the plaintiffs and defendants met to discuss the plaintiffs' interest in purchasing the vacant lot. According to the evidence of the defendant Marie Pierre-Louis, the parties came up with numbers and terms that were satisfactory to both sides and she prepared notes of the discussion to help the plaintiffs' lawyer prepare a formal offer. The evidence of Ms. Sotiropoulou on cross-examination was that the meeting ended on the basis that the plaintiffs wanted to think about the transaction that they were proposing. As she put it "verbally we’re talking and say what ' let’s talk first and then we put it in paper.'" She agreed that the defendants asked her to present a written offer. She further understood that "to have an agreement it would have to be signed by both parties”.

[7] On March 8, 2012, the plaintiffs provided the defendants with a typed they had prepared themselves, offer using the Ontario Real Estate Association form of agreement of purchase and sale (the "Plaintiffs' Offer"). This document was signed by the plaintiffs. It contained a pre-printed (but incomplete) irrevocability clause which stated "This offer shall be irrevocable by the buyer [the plaintiffs] until 8 p.m. on the _____ day of March 2012, after which time, if not accepted, this offer shall be null and void and the deposit shall be returned to the buyer in full without interest."

[8] Although the purchase price that had been discussed at the meeting was $200,000, the Plaintiffs' Offer specified a purchase price of $185,000. The reduction in price was due to the realization by the plaintiffs that they would incur development charges if they proceeded with their plan to construct and resell a house on the site. The Plaintiffs' Offer also reduced the down payment from $75,000 as discussed at the meeting to $70,000. Instead of the closing date discussed at the meeting of within three weeks or less, the Plaintiffs' Offer provided for a completion date on April 13, 2012, some five weeks later. The notes prepared by Ms. Pierre-Louis reflect a discussion that the balance of $125,000 of the purchase price was to be paid in six months, with interest of $1,000 monthly to be paid in advance at the closing; the Plaintiffs' Offer provided instead for payment of interest only at the rate of $1,000 on the first day of each month on a vendor take back mortgage.

[9] Given that the Plaintiffs' Offer was at variance with the parties' prior discussions, Ms. Pierre-Louis negotiated various handwritten amendments to the document with Ms. Sotiropoulou. These included increasing the purchase price from $185,000 to $187,000; increasing the down payment from $70,000 to $75,000; and decreasing the vendor take back mortgage amount from $115,000 to $112,000. The plaintiffs incorporated these changes on the original form of offer, and submitted an amended offer to the defendants with these changes initialled (the "Plaintiffs' Amended Offer”).

[10] The defendants reviewed the Plaintiffs' Amended Offer with their real estate lawyer. As a result, they made specific changes in handwriting, on the face of the document. These changes included the following:

(a) in connection with the deposit provision on page 1, they added words to require that it be in the form of a "bank draft or certified cheque" and "payable to Mendo Petrovski in trust";

(b) they amended the irrevocability clause to provide that their offer (i.e. the defendants' offer) would be irrevocable by the "seller" until 8 p.m. on the "15" day of March 2012 after which it would become null and void if not accepted;

(c) they amended the closing date from April 13, 2012 to March 28, 2012;

(d) they amended paragraph 7 on page 2 of the document to clarify that any HST that might be payable was for the account of the purchasers and not for the account of the vendors;

(e) they amended Schedule A to the document to provide that the seller would take back a first mortgage in the amount of $112,000 "at a rate of interest of 10.7% per annum";

(f) they further amended Schedule A by deleting the provision that the mortgage would be fully open any time and substituting the provision that the mortgage was to be a closed mortgage that could not be paid prior to the maturity date;

(g) also on Schedule A they crossed out the words that the interest was to be paid at the rate of $1,000 per month and inserted a provision requiring the buyer to prepay the entire interest on the mortgage for the six-month period in the amount of $5,992 on closing.

The defendants initialled the various changes they had made, and signed the document on the execution page, on March 12, 2012, (the "Defendants' Offer").

[11] The evidence of Ms. Pierre-Louis is that, on March 12, she delivered the Defendants' Offer to the plaintiffs' residence. She met Mr. Papatolikas and asked to speak to Ms. Sotiropoulou. Ms. Sotiropoulou was not home. According to the evidence of Ms. Pierre-Louis, she asked Mr. Papatolikas to give the envelope containing the Defendants' Offer to Ms. Sotiropoulou and to have her call her when she is done.

[12] During the course of submissions before me, there was some suggestion by counsel for the plaintiffs that Ms. Pierre-Louis told Mr. Papatolikas that the deal was firm. This is not supported by any direct evidence in the record. Mr. Papatolikas did not file an affidavit. Ms. Sotiropoulou purported to testify to this point on her cross-examination, but her testimony is inadmissible hearsay evidence: the requirement of necessity is not met, because the evidence could have been given by Mr. Papatolikas. In any event, the testimony given by Ms. Sotiropoulou on this point is equivocal, at best. The only direct and admissible evidence was that of Ms. Pierre-Louis, which makes no mention of any such statement being made by Ms. Pierre-Louis to Mr. Papatolikas.

[13] Although the Defendants' Offer provided that it was irrevocable until March 15, 2012 and that it expired if not accepted by the deadline, there was no contact between the parties prior to the expiration of the deadline. The evidence of Ms. Pierre-Louis was that, when she heard nothing in response to the Defendants' Offer, she attempted without success to contact Ms. Sotiropoulou. Ms. Sotiropoulou denies this. In any event, it is common ground that there was no contact or communication and the March 15, 2012 date came and went.

[14] The document that Ms. Pierre-Louis delivered to the plaintiffs' house on March 12, 2012 was ultimately delivered by the plaintiffs to their real estate lawyer, Peter Weatherhead. On March 23, 2012, Mr. Weatherhead sent the defendants' real estate lawyer, Mr. Petrovski, a requisition letter concerning the real estate transaction. Mr. Weatherhead’s letter of March 23 was the first communication on behalf of the plaintiffs to the defendants or their lawyer following March 12, and the March 15 expiry date of the Defendants' Offer. After 5:00 p.m., on March 23, the plaintiffs delivered a bank draft for the deposit recited in the Defendants' Offer ($5,000) to Mr. Petrovski's office. The bank draft was dated March 23, 2012.

[15] On March 26, 2012, Mr. Petrovski responded to Mr. Weatherhead’s letter. He advised that the Defendant's Offer was irrevocable to March 15, 2012, that the plaintiffs did not accept the Defendants' Offer by such date, and that as a result there was no agreement to sell the property. He further advised that the defendants were no longer interested in selling the property. He invited Mr. Weatherhead’s clients to pick up the bank draft they had dropped off.

[16] Further exchanges of correspondence between the lawyers focused on the issue whether there was or was not a binding agreement of purchase and sale. Needless to say, that disagreement was not resolved and the plaintiffs commenced this action. By way of a motion brought without notice, they applied for and obtained leave to register a certificate of pending litigation.

issues and analysis

[17] Against the foregoing factual backdrop, both sides have moved for summary judgment. The plaintiffs contend that the parties had agreed on all essential terms to arrive at a binding agreement for the purchase of the property. Relying on such cases as the Supreme Court of Canada decisions in MacKenzie v. Walsh (1920), 1920 72 (SCC), 61 S.C.R. 312 and Peterson v. Bitzer (1921), 1921 7 (SCC), 62 S.C.R. 384, they argue that a memorandum in writing of an agreement to purchase land is sufficient as long as it contains the essential terms of the contract, namely the parties, the property, and the price, and demonstrates that the parties have agreed to those essential terms. The plaintiffs point to the original notes prepared by Ms. Pierre-Louis as well as the Defendants' Offer (and the defendants' signatures on it) as documents that contain evidence of the defendants' agreement to these essential terms.

[18] The plaintiffs also rely on the trial and appellate decisions in Erie Sand and Gravel Ltd. v. Seres' Farms Ltd., 2008 CarswellOnt 5159 affirmed (2009), 2009 ONCA 709, 97 O.R. (3d) 241 (C.A.). In that case the court ordered specific performance of an agreement that was never signed by the defendant vendor.

[19] For their part, the defendants argue that the plaintiffs failed to accept their counter offer within the time specified in the document itself. The terms upon which they were prepared to sell the land were spelled out in detail in their written offer. Since there was no communication of acceptance by the purchasers prior to the deadline set out in the counter offer, it lapsed. As a result, there was no binding contract.

[20] In my view, the evidence in this case distinguishes its facts from the authorities relied upon by the plaintiffs. Based on the plaintiffs’ own evidence, there was no contract at the end of the meeting: the purchasers wanted to think about it. As well, the vendors wanted something in writing. That written document came in the form of the Plaintiffs' Offer, which set out in detail the terms upon which the plaintiffs were prepared to purchase the property. Following additional discussion, the Plaintiffs' Amended Offer was forthcoming, and once again specified with considerable detail the terms upon which the plaintiffs were prepared to purchase. Ultimately, the Defendants Offer was proffered by the defendants, in response.

[21] Based upon the foregoing facts, I have no hesitation in concluding that the parties were dealing with each other "subject to contract". That is, they anticipated the execution of a formal document incorporating the terms of their agreement, before they would be legally bound to one another. This conclusion is supported by the plaintiffs’ concession that there was no contract by the end of the meeting, by the defendants’ expressed desire for a written document, and by the fact that each side proceeded to review, alter and refine the terms of the proposed deal by means of the exchange of formal documents. Indeed, the formal documents that were prepared and exchanged expressly recite that they "constitute the entire agreement between buyer and seller"and that there is no "representation, warranty, collateral agreement or condition" other than as expressed in the written document. This further negates the suggestion that the parties' relationship was somehow governed by another written or oral agreement.

[22] The plaintiffs also submitted that the defendants’ signatures and initials on the Defendants' Offer confirmed their agreement to the essential terms of the deal: the parties, the property and the price. The plaintiffs argue that the Defendants' Offer also evidences their agreement to other material terms relating to financing and so forth. On this basis, they contend, all the key elements of the deal were confirmed by each side.

[23] I do not accept that submission. In effect, the plaintiffs are trying to select portions of the deal that were acceptable to the defendants and to insist on that basis that they are entitled to enforce those terms. This ignores the fact that, as part of the Defendants' Offer, the defendants sought to impose other terms, including an amended closing date and more specific terms relating to the mortgage financing and interest payments. Additionally, the defendants specifically provided that their offer was valid and irrevocable only until 8 p.m. on March 15, 2012 whereupon it expired. In other words, they expressly stated that they were amenable to all of the terms set out in their offer, irrevocably, but only until that deadline. It is undisputed that there was no communication of acceptance of the Defendants' Offer prior to the expiry of the deadline.

[24] In my view, the defendants’ submission, based on the basic contract principles of offer and acceptance, is the correct legal analysis applicable to this dispute. The defendants received the Amended Offer from the plaintiffs. They were not prepared to and did not sign it in the form it was received. Instead, they amended it, initialed the changes, signed it and delivered it to the plaintiffs. By doing so, they made a counter offer. A counter offer constitutes a rejection of the offer that preceded it: Triple D Publishing Inc. v. Barr, [1998] O.J. No. 3545 (Ont. (Gen. Div.)) at para. 18). Among the amended terms was the express proviso that the counter offer was irrevocable until the specified date and time. As such, it was an offer to sell on the indicated terms that was open for acceptance until the expiry date. The plaintiffs failed to communicate their acceptance of the defendants' offer before it lapsed. As such, there was no longer any offer by the defendants that was open for acceptance. There being an absence of acceptance, there was no meeting of the minds and no binding agreement.

[25] I therefore conclude that no enforceable agreement in law ever came into existence. As such, the defendants were never obliged to sell the lot to the plaintiffs. It follows that the plaintiffs' action must be dismissed.

Disposition

[26] For these reasons, the plaintiffs' action is dismissed and the certificate of pending litigation shall be discharged.

[27] In relation to costs, if the parties cannot agree, they may make written submissions within 30 days as follows:

(a) The defendants shall serve their bill of costs on the plaintiffs, accompanied by written submissions within fifteen days of the release of these reasons.

(b) The plaintiffs shall serve their response on the defendants' within fifteen days thereafter. The plaintiffs are expressly insisted to submit the bill of costs they would have presented, had they been successful.

(c) The defendants shall serve their reply, if any, within ten days thereafter.

(d) In all cases, the written submissions shall be limited to three pages, plus bills of costs.

(e) I direct that counsel for the defendants shall collect copies of all parties' submissions and arrange to have that package delivered to me in care of Judges' Administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no materials should be filed individually: rather, counsel for the defendants will assemble a single package for delivery as described above.

Stinson J.

Date: September 30, 2013