Caledon Mayfield Estates Inc., 2015 ONSC 1978
COURT FILE NO.: CV-14-552-00
DATE: 2015 03 27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BUSINESS DEVELOPMENT INSURANCE LTD.
Todd C. Hein, for the Plaintiff
Plaintiff
- and -
CALEDON MAYFIELD ESTATES INC. AND THE ESTATE OF PALMYRA KUCINSKAITE, BY THE ESTATE TRUSTEES CONSTANCE DELTUVAITE AND DANA DARGIS
William S.M. Cord and Gerry Miller, for the Defendants
Defendant
HEARD: December 17, 2014 in Brampton, Ontario
REASONS FOR DECISION
EMERY J
[1] The defendants are the owners of approximately 46 acres of land at 3728 Mayfield Road in Caledon (“the property”). The Plaintiff is the purchaser named in an agreement of purchase and sale dated October 25, 2013 to purchase the property. The plaintiff commenced this action against the defendants as vendors of the property under an agreement of purchase and sale when the transaction did not close on December 16, 2013 under the agreement. The defendants bring this motion for summary judgment to dismiss the plaintiff’s claim for specific performance or damages.
[2] An essential component of the motion concerns the defendants’ alleged failure to remove a certificate of pending litigation from title that had been registered three days before the completion date by a previous purchaser under an earlier agreement of purchase and sale that was never completed. The motion requires a close examination of the defendants’ contractual obligations in the context of the transaction. This in turn will require me to consider the interplay between those obligations and a provision in the agreement of purchase and sale known as the “annulment clause” to determine if there is no genuine issue requiring a trial.
[3] The purchaser under the earlier agreement of purchase and sale, 2079664 Ontario Inc. (“207”) is not a party to this action and did not appear on the motion. I am told that 207 and the defendants are parties to another action in which 207 obtained the certificate of pending litigation at issue. That certificate of pending litigation was registered against title to the property on or about December 13, 2013.
Background
[4] Caledon and the Estate are the registered owners as tenants in common of 3728 Mayfield Road in Caledon, Ontario. Since the death of the late Palmyra Kucinskaite on January 18, 2010, Caledon and the Estate have been trying to sell the property.
[5] On May 22, 2013, Caledon and the Estate as the sellers entered into an agreement of purchase and sale with 207 to sell the property for $1,850,000. This agreement of purchase and sale was scheduled to close on August 22, 2013.
[6] On August 16, 2013, Caledon and the Estate executed an amendment to the 207 agreement of purchase and sale to insert a new Development Condition, and to change the completion date to October 15, 2013. The new Development Condition gave 207 absolute discretion to satisfy itself as to the zoning, soil, environmental status and/or feasibility of development of the property prior to 6:00 p.m. on September 25, 2013. The new paragraph in the amendment to the 207 agreement of purchase and sale provided that only 207 as the buyer would have the option of terminating the transaction, and had the right to waive this condition.
[7] 207 did not notify Caledon or the Estate that it was satisfied with those aspects of the property relevant to the Development Condition, and did not waive the Development Condition prior to 6:00 p.m. on September 25, 2013. Instead, 207 purposed two amendments to the agreement of purchase and sale with Caledon and the Estate. On September 25, 2013, 207 proposed an amendment to extend the Development Condition date and the closing date. On September 27, 2013, 207 proposed a second amendment to reduce the purchase price for the property by $400,000.
[8] Caledon and the Estate relied on a term in the 207 agreement of purchase and sale that required 207 to deliver to the lawyer for the sellers an additional deposit in the amount of $50,000 within 48 hours of satisfying or waiving the Development Condition. This additional deposit would be held in trust by the sellers’ solicitor pending completion or termination of the agreement of purchase and sale.
[9] Neither Caledon or the Estate as sellers accepted the amendments to the agreement of purchase and sale proposed by 207 on September 25 and September 27, 2013. Accordingly, the broker for Caledon and the Estate was instructed to notify 207 and to prepare a form of mutual release to be signed by the parties as Caledon and the Estate considered the 207 agreement of purchase and sale to be at an end.
[10] There is evidence before the court that Caledon understood from their real estate lawyer that no additional deposit was ever received from 207 within 48 hours after September 25, 2013.
[11] No steps were taken by 207 to close its purchase of the property by October 15, 2013.
[12] On or about October 17, 2013, Caledon was advised that 207 was proposing new and different terms to Caledon and the Estate as sellers. These proposed terms included the deletion of the Development Condition, title search date and completion date, to be replaced with November 5, 2013 as the title search date and November 15, 2013 for the completion date, among other terms.
[13] Caledon and the Estate never communicated any acceptance of those proposed terms to 207 or anyone on its behalf.
[14] On October 25, 2013, Caledon and the Estate instructed their real estate agent to advise 207’s sales representative that they had received a new offer to purchase the property. The real estate agent was instructed to advise 207 that unless it was prepared to make an offer that was higher by at least $100,000, Caledon and the Estate would likely accept the offer they had received.
[15] On October 25, 2013, Caledon and the Estate entered into a new agreement of purchase and sale to sell the property to the plaintiff, Business Development Insurance Ltd. (“BDIL”) for $1,900,000. This agreement of purchase and sale provided that BDIL would be allowed until 6:00 p.m. on November 25, 2013 to examine title and to make requisitions, and that the transaction would be completed on December 16, 2013.
[16] Upon searching title, the lawyer for BDIL discovered a caution that had been registered on title by 207 on November 15, 2013. That caution contained the following statement:
The applicant is entitled to register a caution against the land under an agreement of purchase and sale dated 2013/05/22. The sale is to be completed by 2013/10/15.
The applicant is prepared to produce the agreement for inspection within fourteen (14) days of request of any person and consents to the cancellation of the caution on presentation of proof satisfactory to the Land Registrar that the agreement was not produced on request.
The Land Registrar is authorized to delete this caution 60 days from the date of closing, which is 2013/12/15.
[17] Upon learning of this caution, Mr. Cord on behalf of Caledon sent a letter dated November 19, 2013 to Mr. Paul Mand, the lawyer for 207 to request production of the documents 207 relied upon in support of the caution it had registered.
[18] Mr. Cord subsequently received the letter from Mr. Mand dated December 2, 2013 enclosing the initial agreement of purchase and sale between 207 and the sellers and the amendment to that agreement dated August 16, 2013. Mr. Mand also provided the proposed amendment to that agreement of purchase and sale that had been executed on behalf of 207 on September 25, 2013. Again, this proposed amendment was never executed or accepted by Caledon or the Estate.
[19] Despite efforts by one or both solicitors for the sellers, the Registrar of Land Titles was not prepared to delete the registration of the caution. However, as the caution was to expire on December 15, 2013, which was the day before the transaction to sell the property to BDIL was to close, the Land Registrar indicated that he would make arrangements for the caution to be deleted as soon as possible on Monday, December 16, 2013.
[20] The agreement of purchase and sale between Caledon and the Estate as sellers and BDIL as the buyer was prepared using the standard Toronto Real Estate Board (“TREB”) form. The agreement of purchase and sale contained the standard paragraph 10 on this form which reads as follows:
- TITLE: Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this agreement…..If within the specified times referred to in paragraph 8 any valid objection to title…..is made in writing to Seller and which Seller is unable or unwilling to remove, remedy or satisfy…..and which the Buyer will not waive, this Agreement, notwithstanding any intermediate acts or negotiations in respect of such obligations, shall be at an end and all monies paid shall be returned without interest or deduction and Seller, Listing Brokerage and Co-Operating Brokerage shall not be liable for any costs or damages. Save as to any valid objection so made by such day and except for any obligation going to the root of title, Buyer shall be conclusively deemed to have accepted the Seller’s title to the property.
[21] It was agreed between Caledon and the Estate that Mr. Cord would correspond on their behalf as the sellers with BDIL’s lawyer in matters relating to the closing of the transaction.
[22] On Friday, December 13, 2013 the lawyers for Caledon and the Estate received notice that 207 had registered a certificate of pending litigation against title to the property. The order granting leave for 207 to obtain the certificate of pending litigation had been obtained on December 12, 2013 from Master Brott in Toronto without notice to either Caledon or the Estate.
[23] On December 16, 2013, Mr. Cord wrote to Mr. Garvie, the lawyer for BDIL on the transaction to advise that the sellers have been served with notice of the certificate of pending litigation that 207 registered against title to the property. Mr. Cord asked Mr. Garvie to confirm in writing what BDIL required with respect to the certificate of pending.
[24] Later that day, Mr. Garvie advised Mr. Cord in a letter faxed on December 16, 2013 that BDIL was ready, willing and able to close the transaction. He further advised Mr. Cord that his clients did not propose to tender on the sellers in connection with the transaction as Mr. Cord had indicated to him in an earlier telephone conversation that he would not be able to remove the certificate of pending litigation by 5:00 p.m. that day. In this letter, Mr. Garvie confirmed his oral advice that his client would not be closing the transaction subject to the interest of 207. He stated BDIL required the certificate to be vacated and discharged from title. Mr. Garvie then advised Mr. Cord that his clients would be looking to Mr. Cord’s clients for damages as a result of the sellers’ inability to provide clear title and to complete this transaction on the closing date.
[25] Mr. Cord faxed a letter dated December 16, 2013 to Mr. Garvie at 5:31 p.m. acknowledging Mr. Garvie’s letter. He advised Mr. Garvie that the sellers relied on the provisions of paragraph 10 of the agreement of purchase and sale and declared the agreement to be at an end. He also indicated that he would instruct the listing broker to arrange for the return of the deposit.
[26] On December 17, 2013, Mr. Garvie wrote to Mr. Cord taking issue with the letter he had faxed at 5:31 the day before. Mr. Garvie proposed that the parties agree to formally extend the closing of the transaction between the sellers and BDIL from December 16, 2013 to January 31, 2014 to give the sellers an opportunity to bring a motion to vacate the certificate of pending litigation registered against title by 207. If further extensions were required after January 31, he suggested that they could be addressed at the appropriate time.
[27] Mr. Cord wrote to Mr. Garvie on December 18, 2013 to express his disagreement with Mr. Garvie’s letter dated December 17, 2013. He referred to Mr. Garvie’s letter dated December 16, 2013 requiring the removal of the certificate of pending litigation by 5:00 p.m. that day. Mr. Cord ended the letter with a statement that the sellers maintained their position that the agreement had been terminated pursuant to the annulment clause. Mr. Cord also observed in that letter that BDIL did not request an extension of the closing date, or waive its requisition to remove the certificate of pending litigation registered by 207.
[28] On December 19, 2013, BDIL’s lawyer wrote to the lawyer for the defendants stating that since the caution had been registered more than a month before the closing date, the defendants’ lawyers would have instructions to deal with the 207 certificate of pending litigation. Mr. Garvie confirmed in this letter that again his client was willing to extend time to complete the purchase.
[29] The defendants gave instructions to their lawyers to send correspondence to Sandra Williams, at Home Life Realty One, the broker holding the deposit money to advise that broker to release the deposit monies to the plaintiff immediately. Mr. McDaniel for the defendant Caledon Mayfield Estates states in his affidavit that he has been advised by his lawyers and verily believes that the broker was not prepared to release the deposit without first obtaining a mutual release signed by the plaintiff and the defendants.
[30] BDIL subsequently commenced its action against Caledon and the Estate BDIL obtained an order from Justice Barnes on February 6, 2014 granting leave to have a certificate of pending litigation issued against the property located at 3728 Mayfield Road in Caledon, Ontario. That certificate of pending litigation was registered against title on February 6, 2014 as Instrument Number PR2497004.
[31] In its action, BDIL seeks specific performance of the agreement of purchase and sale dated October 25, 2013, and an order granting leave to issue a certificate of pending litigation. In the alternative, BDIL seeks compensatory and punitive damages, as well as interest and costs against Caledon and the Estate.
[32] The plaintiff is interested in purchasing the property to build and operate a seniors’ residence and assisted living facility for members of the East Indian community. Mr. Sukhdev Singh Pandher swore an affidavit in response to the plaintiffs’ motion in which he states that the plaintiff has invested significant time in developing plans for the use of the property. In his affidavit, he describes the property as having a number of unique and ideal features suited for the intended use and construction of a seniors’ residence and assisted living facility. He describes the property as having roughly 46 acres. It is easily accessible from Highway 410, which runs nearby. He says it would be the first seniors’ residence focusing on the East Indian community in Brampton, which is located close by.
[33] Mr. Pandher attached a copy of the motion materials filed by 207 to obtain its certificate of pending litigation as an exhibit to his affidavit. The material filed by 207 to obtain the order for a certificate of pending litigation includes the affidavit of Harbhajan Singh Dhillon sworn on December 11, 2013.
[34] Mr. Pandher concedes that he does not know exactly what transpired between 207 and the defendants. However, he deposes that in the course of “this matter,” he found out the 207 had also submitted an offer to purchase the property.
[35] Much of what Mr. Pandher sets out in his affidavit about the transaction between 207 and the defendants is taken from Mr. Dhillon’s affidavit. Mr. Pandher summarizes various paragraphs from the affidavit of Mr. Dhillon at paragraphs 10,11 and 12 this way:
At paragraphs 11-15 of his Affidavit, Dhillon swears that McDaniel proposed extending the closing date to November 15, 2013, with an additional deposit of $50,000 and the conditions waived. Dhillon then sent a Second Amending Agreement to McDaniel and to the Defendants’ real estate agent, Bob Lackey and Irina Lackey. Dhillon swears that he was advised by telephone by the Defendants’ agent or representative that the Defendants had agreed to the document, and that they had collected two signatures and were expecting the third signature. The Defendants subsequently failed to provide all three signatures as had been promised.
At paragraphs 16-17 of his Affidavit, Dhillon swears that 207’s lawyer wrote to the lawyer for the Estate on October 29, 2013 indicating that the second deposit of $50,000 would be forwarded with the completion date amended to November 15, 2013 and the final condition removed, which was consistent with what had been requested by McDaniel. However, on October 31, 2013, when the deposit and documents were sent to the lawyer for the Estate, the package was refused.
At paragraphs 18-19 of his Affidavit, Dhillon swears that the Defendants claimed that they considered their agreement with 207 to be terminated, despite the fact that the [sic] their agreement allowed only the purchaser the option of terminating the transaction.
[36] Mr. Pandher expressly admits that “I cannot attest to the veracity of the statements made by Dhillon.” He concedes that he was not a party to the transaction between 207 and the defendants, or to any of the surrounding negotiations. He observed Master Brott found the motion materials to be sufficiently compelling to grant the order permitting the certificate of pending litigation. Mr. Pandher states as far as he is aware, 207’s claim has not been resolved in court. He then states: “as a result, I do not know if 207 has a sustainable claim.”
[37] Mr. Pandher states at paragraph 15 of his affidavit:
- If what Dhillon says is correct, and 207’s claim is upheld, then it appears that the Defendant created the situation that lead to the registration of the Certificate of Pending Litigation by 207, and the aborted purchase by BDIL.
[38] Mr. Pandher acknowledges that 207 registered a caution against title to the property on November 15, 2013. He also acknowledges that 207 registered certificate of pending litigation against title to the property on December 13, 2013.
[39] Mr. Pandher agrees that on December 16, 2013, the defendant’s lawyer asked the lawyer for BDIL what was required from the defendants with respect to the certificate of pending litigation.
[40] Mr. Pandher agrees that on December 16, 2013, the lawyer for BDIL wrote to the defendants’ lawyer to advise that BDIL wanted the certificate of pending litigation discharged from title “prior to completing the transaction”. He also states that BDIL gave notice that BDIL would seek damages resulting from the defendants’ inability to deliver on closing.
[41] Mr. Pandher acknowledges that the lawyer for the vendors wrote back to BDIL’s lawyer on December 16, 2013 to state that the agreement was at an end because the defendants weren’t able to remove the certificate of pending litigation.
[42] Mr. Pandher expresses his belief in the affidavit that the defendants should not be allowed to terminate the agreement of purchase and sale. He believes the defendants were able to remedy defects in title, or they were unwilling to remedy that defect they created themselves if it is ultimately found in the action with 207 that the defendants remain bound to that agreement of purchase and sale.
[43] Mr. McDaniel responded to various allegations contained in Mr. Pandher’s affidavit with respect to attachments from the 207 action marked as exhibits to his affidavit, and in particular the affidavit of Mr. Dhillon. He states generally that Mr. Dhillon’s affidavit misstates or fails to properly or candidly address relevant facts in respect of matters relating to the dealings between the defendants and 207.
[44] Mr. McDaniel states in his supplementary affidavit that the Development Condition set out in the agreement of purchase and sale allowed 207 to satisfy itself that the property could be developed it was to be satisfied or waived by 207 on or before September 25, 2013.
[45] Mr. McDaniel expressly states that Mr. Dhillon’s affidavit omits the important word “not” from the Development Condition that is purported set out in paragraph 7 of the affidavit. In the first full sentence at the top of page 3 of his affidavit, Mr. Dhillon swears that:
Failure of the buyer to notify sellers that the development condition has been satisfied and/or waived by 6 p.m. on the development condition date shall mean that the development condition has been waived and/or satisfied.
[46] Mr. McDaniel states that Mr. Dhillon’s evidence in this regard contains an omission or misstatement that reverses entirely the meaning and operation of the conditional provision within which the sentence appears. In both the agreement of purchase and sale between the defendants and 207 as well as the amendment to that agreement of purchase and sale, the pivotal sentence actually reads:
Failure of the buyer to notify sellers that the development condition has been satisfied and/or waived by 6 p.m. on the development condition date shall mean that the development condition has NOT been waived and/or satisfied [emphasis added].
[47] The pivotal sentence appears in the agreement of purchase and sale with 207, and in the paragraph inserted in its place under the amendment to agreement of purchase and sale. These documents are found on pages 24 and 31 respectively of the contractual documents marked as Exhibit B to the affidavit of Mr. Pandher.
[48] Mr. McDaniel explains that 207 did not waive the Development Condition prior to the expiry of the Development Condition date, nor did it notify the defendants that the condition was satisfied by September 25, 2013. To the best of Mr. McDaniel’s knowledge, information and belief, it is clear that the agreement provided that only if the Development Condition was satisfied or waived did the agreement become firm and require completion on the specified date. Otherwise, the agreement came to an end by its own terms, and any deposits would be returned to the buyer.
[49] Mr. McDaniel deposes that instead of waiving the Development Condition or expressing satisfaction with the development of the property, 207 made two further proposed amendments to the agreement. The first was provided to him on September 25, 2013 seeking to extend the development condition period and closing date. The second was it forwarded to him on September 27, 2013 seeking to amend the agreement purchase and sale by reducing the purchase price by $400,000. These proposed amendments were not included in Mr. Dhillon’s affidavit.
[50] Mr. McDaniel deposes that he has been advised by Caledon’s real estate lawyer and verily believes that the additional deposit of $50,000 was never received from 207 within 48 hours of September 25, 2013. Mr. Dhillon makes no reference and provides no explanation in his affidavit as to why 207 did not pay the additional deposit within the time required by the agreement.
[51] The agreement of purchase and sale between the defendants in 207 was to close on October 15, 2013. In addition to the absence of any waiver of condition or notice of satisfaction of the Development Condition by September 25, 2013, 207 took no steps to close the transaction on October 15, 2013.
[52] I find it significant that paragraph 19 of the agreement of purchase and sale between the defendants and 207 provides that time shall in all respects give the essence unless the time for doing and completing any matter provided in the agreement was extended or abridged by an agreement in writing.
[53] Mr. McDaniel states that the caution registered by 207 was removed because of the efforts of the defendants at the earliest possible date, being December 16, 2013 by causing the registrar to delete that caution from title. In fact, the caution was deleted by the registrar from title to the property on December 16, 2013.
Analysis
[54] The defendants move for summary judgment under Rule 20 of the Rules of Civil Procedure to dismiss the plaintiff’s action.
[55] Under Rule 20.04(2), the court shall grant summary judgment if it is satisfied there is no genuine issue requiring a trial with respect to a claim or defence. The court may also exercise expanded powers to determine whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial. This would include weighing the evidence, evaluating the credibility of a deponent or drawing any reasonable inference from the evidence.
[56] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada refined the approach to summary judgment based on the amendments to Rule 20 of the (Ontario) Rules of Civil Procedure that came into effect on January 1, 2010. The cardinal objective for the civil justice system remains intact: to provide a process that results in just adjudication of civil disputes. However, the interpretation of the amendments to Rule 20 are directed to improving access to justice for litigants by making a motion for summary judgment a viable alternative to the traditional trial process for the adjudication of cases in a manner that is proportionate, timely and affordable in suitable cases.
[57] In Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 33, Justice Corbett interprets the procedure mandated by the Supreme Court of Canada in Hryniak by charting the following critical path:
33 As I read Hryniak, the court on a motion for summary judgment should undertake the following analysis:
The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;
On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;
If the court cannot grant judgment on the motion, the court should:
a. Decide those issues that can be decided in accordance with the principles described in 2), above;
b. Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;
c. In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.
[58] The central issue on the defendants’ motion for summary judgment is this: can this court on the evidentiary record or by using the expanded fact finding powers under Rule 20.04(2.1) determine if there is no genuine issue requiring a trial to answer the question whether the agreement of purchase and sale came to an end on December 16, 2013 when the plaintiffs required that the certificate of pending litigation registered by 207 be removed on or before closing?
[59] The parties took different approaches to arguing this motion. The plaintiffs argued that they required an affidavit of documents from the defendants before the motion for summary judgment should be considered. The plaintiffs are essentially arguing that they need disclosure from the defendants to put their best foot forward in response to the defendants’ motion for summary judgment. The plaintiff’s state that the onus rests on the party resisting the request for an affidavit of documents to show why exception to the rule should be made. The plaintiffs rely upon the Laurentian Bank of Canada v. Herzog, [1999] O.J. No. 3272, 42 C.P.C. (4th)269, Cole v. Hamilton (City) (1989), 1999 CanLII 14820 (ON SC), 45 O.R. (3d) 235, and the decision of the Ontario Court of Appeal in Bank of Montréal v. Negin (1996), 1996 CanLII 1548 (ON CA), 31 O.R. (3d) 321 as authority for this argument.
[60] The defendants rely on Fehr v. Sun Life Assurance Co. of Canada, 2014 ONSC 2183 as authority for their position that there is no legal basis for the court to order that they serve an affidavit of documents before the motion for summary judgment is heard.
[61] I read Fehr as saying that there is no entitlement under the Rules of Civil Procedure for one party to seek an affidavit of documents from another in the face of a pending motion for summary judgment and in the absence of a discovery plan.
[62] There is no evidence before me that the parties ever discussed, let alone agreed-upon discovery plan for the court action. The fact they have not done so is legally significant.
[63] The decision in Fehr was a motion for directions in the context of a class-action proceeding. Justice Perell recognized in Fehr that the requirement for the automatic delivery of an affidavit of documents within ten days after the close of pleadings is no longer the case under the amendments to the Rules of Civil Procedure that took effect on January 1, 2010. Now, the parties and the court decide when an affidavit of documents is to be served by one or both parties. Cases such as Bank of Montréal v. Negin (1996), 1996 CanLII 1548 (ON CA), 95 O.A.C. 230, 31 O.R. (3d) 321 (Ont. C.A.) decided under the former rule must also be read as distinguishable because of the rule change.
[64] The plaintiff takes the secondary position that the defendants have caused the defect in title, or allowed the previously known defect in title to impede closing the transaction. The plaintiff relies upon 777829 Ontario LTD v. 616070 Ontario Inc., 1988 CarswellOnt 513 (Ontario Master) (reversed on other grounds at 1988 CarswellOnt 512) as the test to determine whether the defendants as vendors made bona fide efforts to complete the transaction, or if they were “unable” or “unwilling” to do so. The plaintiff argues that the factual record raises triable issues about the interpretation of those words and concepts, and how those words and concepts relate to the defendants conduct with respect to their agreement of purchase and sale with 207. Pending disposition of those questions, the certificate of pending litigation of 207 remains registered against title to the property and remains a genuine issue requiring a trial as between the plaintiff and the defendants in this action.
[65] There are two questions central to the position the defendants took on December 16, 2013 upon which this motion for summary judgment may hinge. First, is it necessary on the motion to determine if the defendants are in any way bound to the agreement of purchase and sale of 207, or if that agreement is at an end?
[66] Second, given the circumstances of the contractual language between the plaintiffs and the defendants in the agreement of purchase and sale between them, was the certificate of pending litigation registered by 207 against title to the property a defect in title that the defendants were unable or unwilling to remove? This will be important to determine if the certificate of pending litigation of 207 was a defect in title to which paragraph 10 of the agreement of purchase and sale relates for the agreement of purchase and sale to come to an end.
[67] For a vendor to rely upon the annulment clause in an agreement of purchase and sale, the vendor must exercise his rights reasonably and in good faith. This means that those rights must not be exercised in a capricious or an arbitrary manner: Mason v. Freedman, 1958 CanLII 7 (SCC), [1958] S.C.R. 483, at page 437.
[68] It was held in Skariah v. Praxi, [1990] O.J. No. 472, at para. 62 that rescission is not readily available to a vendor who entered into the agreement recklessly and with full knowledge of his or her inability to remove a defect in title.
[69] Even if the vendor exercises his rights to terminate an agreement of purchase and sale reasonably and in good faith, there are limitations on the vendor’s conduct that impose separate and distinct duties on the vendor at different times in the transaction. The first duty arises at the time the agreement of purchase and sale is entered. The second is the duty that the vendor owes after an objection is made to title. In 11 Suntract Holdings Ltd. v. Chassis Service and Hydraulics Ltd., (1997) 1997 CanLII 12181 (ON SC), 36 O.R. (3d) 328, Justice Lax set out the following two step analysis for the court to follow:
It seems to me that an examination of the cases which have considered rescission clauses reveals this. If the vendor has no knowledge of the title defect, or the purchaser does have knowledge of the title defect, whether actual or imputed, a court is more likely to find that the first limitation does not apply. It will then go on to consider the second limitation in order to decide whether the vendor did all that it could to make good the title before it permits the vendor to repudiate the contract: Selkirk supra; J.C. Bakker & Sons Ltd. v. House (1979), 8 R.P.R. 24 (Ont. S.C.); Bullen, supra.
[70] In 1473587 Ontario Inc. v. Jackson, 2005 CanLII 4578 (ON SC), [2005] O.J. No. 710, at paras. 23 and 24 (affirmed at 2005 CanLII 26121 (ON CA), [2005] O.J. No. 3145 (Ont.C.A.) the court held that where a purchaser fails to pay the deposit within a specified time, that purchaser breaches a term of the agreement that the parties agreed was essential to the contract. When the purchaser breaches an Agreement of Purchase and Sale, and the vendor does not waive that breach, the vendor is entitled to treat the breach as discharging the agreement and ending all obligations of each party.
[71] On the evidence before me, 207 had not provided a waiver of the Development Condition or notice of satisfaction by the Development Condition date, nor had 207 paid the additional deposit or taken steps to complete the purchase pursuant to the agreement of purchase and sale by October 15, 2013. I find as a fact that the vendors were therefore acting reasonably and in good faith when they treated the agreement of purchase and sale with 207 at an end and entered into a new agreement of purchase and sale on October 25, 2013 with the plaintiffs.
[72] It was not unreasonable for the vendors to assume that 207 considered the agreement of purchase and sale on its previous terms at an end. 207 was asking the vendors to re-negotiate new terms, including new dates to search title and a new closing date of November 15, 2013.
[73] The defendants met the duty imposed upon them as vendors under the first stage of the analysis. I find that they acted reasonably and in good faith when they entered into the agreement of purchase and sale with the plaintiffs. They had reasonable grounds to believe that the first agreement of purchase and sale with 207 had come to an end by its own terms.
[74] On the second stage of the analysis, a vendor is obligated to act in good faith and to make efforts to rectify the defect in title that has been raised by the purchaser. However, the law does not require the vendor to engage in litigation to remove an objection to title: Mitz v. Wiseman, 1971 CanLII 668 (ON SC), [1971] O.J. No. 1754, [1972] 1 O.R. 189.
[75] The distinction between a matter of conveyance and an objection to title was closely examined by this court in Toth v. Ho, (1998) 26 R.P.R. (3d) 76. In Toth v. Ho, a matter of conveyance was defined as an encumbrance which the vendor can compel and has a right to discharge. A matter of conveyance involves an element of control in the hands of the vendor to address the matter or thing to which the requisition applies, and to compel or to insist on the performance of a legal right to discharge that matter or thing. If a vendor is not entitled as a right to discharge an encumbrance, it is an objection to title. It is an objection to title that allows a vendor to rely on the annulment clause or right of rescission in an agreement of purchase and sale.
[76] When the vendors entered into the new agreement of purchase and sale on October 25, 2013 with the plaintiffs, the caution registered against title to the property by 207 had not yet been registered. 207 registered its caution as notice of an agreement of purchase and sale on November 15, 2013. The vendors had every reason to expect that the caution would expire before December 16, 2013 after discussions with the Land Registrar to delete that caution from title. This would have enabled the defendants as sellers to give clear title to the plaintiffs on closing.
[77] It is clear that the vendors made sincere efforts to remove the caution by the closing date under the agreement of purchase and sale with the plaintiffs. The vendors had written to Mr. Mand to obtain the documents his clients were relying upon to register the caution, and had found them wanting. The vendors had communicated with the registrar of Land Titles and had been assured that the caution would be deleted from title as soon as possible on December 16, 2013 to clear title for the closing of the sale of the property to the plaintiffs.
[78] The Certificate of Pending Litigation was registered against title by 207 late on the Friday afternoon before the vendor’s agreement of purchase and sale was scheduled to close with the plaintiffs the following Monday, December 16, 2013. The Certificate of Pending Litigation was obtained without notice to the vendors. The motion materials filed by 207 and relied upon to obtain the order to obtain the Certificate of Pending Litigation was not served until shortly thereafter.
[79] The plaintiff requisitioned the vendors on the eve of closing to remove the Certificate of Pending Litigation from title by the closing date. Mr. Garvey informed Mr. Cord that the plaintiffs would not be closing the transaction, subject to the interest of 207, and that BDIL required the Certificate of Pending Litigation to be vacated and discharged from title. If the vendors could not clear title to complete the sale, Mr. Garvie gave notice that the plaintiff would be looking to the vendors for damages as a result of their inability to provide clear title to complete the transaction on December 16, 2013.
[80] It is important to note that the agreement of purchase and sale between the plaintiff and the defendants contained a term that time was of the essence.
[81] In order to seek an order to either set aside the order of Master Brott or the registration of the certificate of pending litigation, the defendants would have been required to bring a motion on notice to 207 under Section 103(6) of the Courts of Justice Act. On that motion, the court would invariably have been asked to consider questions about the veracity of the affidavit materials filed by Mr. Dhillon to obtain the order, and to exercise discretion under section 103(6) of the Courts of Justice Act and the factors generally considered on such motion set out in cases including and following 572383 Ontario Inc. v. Dhunna, (1987), 24 C.P.C. (2d) 287 (Ontario Master).
[82] Section 103(6) reads as follows:
Order discharging certificate
(6) The court may make an order discharging a certificate,
(a) where the party at whose instance it was issued,
(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,
(ii) does not have a reasonable claim to the interest in the land claimed, or
(iii) does not prosecute the proceeding with reasonable diligence;
(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or
(c) on any other ground that is considered just,
and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.
[83] Section 103(7) of the Courts of Justice Act provides that if the defendants had been successful on that motion, they would have been at liberty to deal with the land is fully as if the certificate had not been registered.
[84] Between December 13 and December 16, 2013, the vendors had no practical ability to discharge the Certificate of Pending Litigation registered against title by 207 to satisfy the requisition made by the plaintiffs because of the intervening weekend. The defendants had no control over the motion made by 207 to obtain the order permitting the Certificate of Pending Litigation. They had no knowledge of the registration of the Certificate of Pending Litigation against title to the property as they had no notice that 207 was obtaining a Certificate of Pending Litigation.
[85] The specific wording of paragraph 10 of the agreement of purchase and sale specifically provides that, if within the specified times referred to in paragraph 8, any valid objection to title is made in writing which the seller is unable or unwilling to remove, remedy or satisfy and which the buyer will not waive, the agreement shall be at an end. The clause provides that all monies shall be returned without interest or deduction and the seller, listing broker and cooperating broker shall not be liable for any costs or damages. I consider it logical to treat an objection to title arising after the requisition date but before closing in the same fashion as an objection to title made under paragraph 8 within the specified time. Despite the fact that the certificate of pending litigation was not an objection to title made under paragraph 8, if it was a valid objection to title that the seller was unable or unwilling to remove, remedy or satisfy and that the buyer would not waive by the time specified for closing, the agreement came to an end.
[86] I find that the basis for deciding this motion rests not with the validity of the Certificate of Pending Litigation registered by 207, but with the position taken by the plaintiffs with respect to it between December 13 and December 16, 2013. The evidence is clear that the Certificate of Pending Litigation registered by 207 against title to the property was the sole reason for the plaintiff’s refusal to close the transaction with the vendors on December 16, 2013. The defendants have been successful in establishing that they acted reasonably and in good faith as sellers. The Certificate of Pending Litigation was registered against title to the property outside of their control. This registration was something they could not voluntarily discharge without the necessity, time and expense of litigation. This inability was even more pronounced where the objection to title was caused by an outside party making a claim in a separate action and under a previous agreement of purchase and sale.
[87] The agreement of purchase and sale terminated because of an objection to title that the vendor was unable or unwilling to remove, remedy or satisfy by the contractual closing date. The agreement came to an end by operation of its own terms pursuant to the agreement reached between the parties. It did not come to an end because of the unilateral conduct of the vendors that could be construed as a breach of contract, giving rise to specific performance or damages.
[88] The plaintiffs owed a duty of good faith to the defendants that included an element of reasonable accommodation that was proportionate in nature and duration to what may have been reasonably required to complete the transaction. The duty of good faith was imposed on the parties when performing their duties and obligations under a contract with each other to do so honestly and reasonably: Bhasin v. Hrynew, 2014 SCC 71. This duty should have guided the parties when taking positions towards or away from their mutual goal to complete the sale of the property within the contractual framework of the agreement of purchase and sale.
[89] The plaintiffs did not give the vendors any or adequate time in the form of an extension on or before December 16, 2013 to deal with 207’s Certificate of Pending Litigation to clear title. An extension would have been necessary in order to complete the sale to the plaintiffs as time remained of the essence. Therefore, the agreement of purchase and sale between the vendors and the plaintiff came to an end by operation of its own terms when the transaction did not complete on December 16, 2013.
[90] I must not be taken as making any decision as to the validity of the claims made by 207 against the vendors, or the sufficiency of the basis for the order that 207 obtained from Master Brott. 207 is not a party to this action and neither 207 or counsel on its behalf appeared before me to make submissions on this motion.
[91] I am confident on the evidence filed on the defendants’ motion for summary judgment that I can find the necessary facts and apply the relevant legal principles to dismiss the plaintiff’s claim. There is no need for the action to go to trial, or to involve a conceptual analysis of the 207 claim in its action behind the Certificate of Pending Litigation 207 registered against title to the property on December 13, 2013.
[92] Accordingly, I find that the Certificate of Pending Litigation registered by 207 on the eve of closing was a valid objection to title that the vendors were unable to remove. The agreement of purchase and sale with the plaintiffs came to an end on December 16, 2013 by operation of paragraph 10 of that agreement.
[93] The defendants have satisfied me that there is no genuine issue requiring a trial with respect to the plaintiffs claim. The motion for summary judgment is granted, and the action is dismissed.
[94] The parties are encouraged to settle costs of this motion and of the larger action as between them. If they are unable to do so, I invite written submissions on costs from the Defendants by April 15, 2015, consisting of no more than three pages not including a costs outline or Bill of Costs, and written submissions in response from the Plaintiffs, subject to the same limitation by April 30, 2015. All cost submissions may be submitted to my judicial assistant, Sherry McHady at 905-456-4835 at Judge’s chambers in Brampton.
EMERY J
Released: March 27, 2015
Caledon Mayfield Estates Inc., 2015 ONSC 1978
COURT FILE NO.: CV-14-552-00
DATE: 2015 03 27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BUSINESS DEVELOPMENT INSURANCE LTD.
Plaintiff
- and -
CALEDON MAYFIELD ESTATES INC. AND THE ESTATE OF PALMYRA KUCINSKAITE, BY THE ESTATE TRUSTEES CONSTANCE DELTUVAITE AND DANA DARGIS
Defendant
REASONS FOR DECISION
EMERY J
Released: March 27, 2015