ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 2461/14
DATE: 2015/08/21
BETWEEN:
Rock Developments Inc.
Rocco DiPucchio and James Renihan, for the plaintiff
Plaintiff
- and -
Khalid Alenazi Real Estate Limited
Junior Sirivar and Dina Awad, for the defendant
Defendant
HEARD: May 13, 14, and May 27, 2015
B.W. MILLER J.:
REASONS FOR JUDGMENT
[1] This action arises out of a failed commercial real estate transaction in London, Ontario. The plaintiff, Rock Developments Inc. (“Rock Developments”), is the owner of a three-story commercial building at 431 Richmond Street, constructed in 2011 (the “Property”). It entered into negotiations for the sale of the building to the defendant Khalid Alenazi Real Estate Limited (“KARE”) in 2013. The parties disagree as to whether the agreement for purchase and sale that they executed constitutes a binding agreement.
[2] Rock Developments takes the position that there is a binding contract, that KARE is in breach of it, and that it is entitled to the remedy of specific performance to compel KARE to complete the purchase of the Property.
[3] KARE’s position is that the contract is null and void, and that it is entitled to the return of a deposit in the amount of $50,000. In the alternative, it argues that specific performance is not warranted as a remedy, and that Rock Developments has not suffered any loss as a result of its failure to close the transaction.
I. FACTS
[4] The main floor of the Property is leased by Shoppers Drug Mart (“Shoppers”). The third floor is leased by Robertson Hall Insurance. The majority of the second floor is unleased and has been unleased since the Property was constructed. Because the Property is not fully leased it operates at a monthly shortfall of $1,268.41.
[5] In November 2012, KARE, through Iyman Meddoui, approached Tim Schnurr, a commercial real estate broker with CBRE Limited, to help KARE in acquiring a commercial property in London. Both Mr. Meddoui and Mr. Schnurr testified at trial.
[6] KARE did not have a specific property in mind, and Mr. Meddoui asked Mr. Schnurr to recommend a building for acquisition. Mr. Schnurr suggested the Property to Mr. Meddoui.
[7] On Mr. Meddoui’s instructions, Mr. Schnurr approached Rocco Tullio, the president of Rock Developments, in August 2013 to advise that Mr. Schnurr represented a client that wished to present an offer to purchase the Property. At that time, the Property was not listed for sale and Mr. Tullio did not have any plans to sell it.
[8] There is a dispute as to Mr. Schnurr’s role. Mr. Tullio and Mr. Schnurr both testified that Mr. Schnurr was acting as an agent for KARE and not for Rock Developments. KARE argued that Mr. Schnurr was acting as a joint broker, simply to facilitate the transaction. I find that with respect to the purchase and sale of the Property, Mr. Schnurr was acting exclusively as agent for KARE, receiving his instructions from Mr. Meddoui. Significantly, Mr. Tullio had no direct dealings with anyone at KARE, and was unaware of Mr. Meddoui’s involvement.
1. The Initial Agreement of Purchase and Sale
[9] Mr. Tullio provided Mr. Schnurr with a confidential information memorandum for the Property, which Mr. Schnurr provided to Mr. Meddoui. After negotiations between Mr. Tullio and Mr. Schnurr, the parties finalized the first of two agreements of purchase and sale for the Property (the “Initial APS”), which was accepted on September 20, 2013.
[10] The key terms of the Initial APS can be summarized as follows:
a) purchase price of $10.5 million, with credits of $500,000 for an effective purchase price of $10 million;
b) Clause 3: Rock Developments to ‘make available to the Buyer within Five (5) business days from the date of the acceptance of this Offer the following:
a) all leases, offers to lease, tenancy agreements and renewal letters, (“Leases”) tenant correspondence files;
c) Clause 4: KARE entitled to a 30-day conditional period to satisfy itself ‘in its sole and absolute discretion, with the results of its reviews, inspections, considerations and assessments of the Property and matters related thereto’, including an examination of the leases (the “Buyer’s Condition”).
d) a deposit of $50,000 payable on signing, with an additional deposit of $250,000 payable on the fulfilment of the Buyer’s Condition;
e) Clause 10: ‘This agreement conditional upon Shoppers waiving its rent reduction clause in lease within 10 business (days) of acceptance of this agreement. Failing this, offer shall be null and void and deposit returned in full’ (the ‘Shoppers Condition’).
[11] The initial deposit of $50,000 was paid to CBRE in trust on the execution of the Initial APS.
2. Clause 3 – the Shoppers lease
[12] Rock Developments had secured Shoppers as a tenant prior to the completion of the Property. The terms of that lease were set out in an offer to lease that was signed by Rock Developments and Shoppers (the ‘Offer to Lease’).
[13] Mr.Tullio’s evidence, which was uncontradicted on this point, explained that Shoppers’ standard procedure was to operate under an offer to lease, which was a 15-17 page document, and then draft the formal lease (the “Long-Form Lease”) several months later. There is no dispute that Rock Developments provided KARE with the Offer to Lease as required by Clause 3.
[14] On October 2, 2013, within the conditional period, Mr. Meddoui had an email exchange with Mr. Schnurr, in which Mr. Meddoui requested the Long-Form Lease. Mr. Schnurr replied, ‘Shoppers never signed the lease. Just the offer’.
[15] Both Mr. Schnurr and Mr. Tullio testified that there was no Long-Form lease at that time. The evidence is equivocal as to whether a Long-Form Lease was signed at some point subsequently, after dealings between the parties were at an end. Clause 3 defines ‘Leases’ as including both ‘leases’ and ‘offers to lease’ and when witnesses referred to the Shoppers lease, it was not always clear whether they were referring to the Offer to Lease, to the Long-Form Lease, or the juridical relationship itself. There may well be a Long-Form Lease now in existence, and it may have been provided to a prospective purchaser after KARE’s failure to close. However, I find that at all times relevant to this action, there was no Long-Form Lease in existence, and that Rock Developments and Shoppers were operating under the Offer to Lease.
[16] Mr. Meddoui testified that KARE wanted to review the Long-Form Lease, and that he asked Mr. Schnurr to obtain it on several occasions. Mr. Schnurr disputes this. KARE has not produced any correspondence that would support Mr. Meddoui’s claims, and I accept the evidence of Mr. Schnurr that Mr. Meddoui was satisfied on October 2, 2013, that there was no Long-Form Lease, and that Mr. Meddoui made no further enquiries about it.
[17] I find that all of the documents that Rock Developments was obligated to make available under Clause 3 were made available to KARE during the conditional period.
3. The Shoppers Condition
[18] One feature of the Offer to Lease was that it contained a rent reduction clause, whereby if the Property was sold within six years, the rent payable by Shoppers would be reduced by 25%. According to Mr. Schnurr, it was to discourage a change in building ownership, as this would trigger an increase in the property tax that Shoppers would pay.
[19] Rent reduction would clearly be problematic for any purchaser of the Property, given that the Property had already been consistently operating at a loss from its construction in 2011. Accordingly, KARE inserted Clause 10 (the “Shoppers Condition”), which made the Initial APS:
- Conditional upon Shoppers waiving its rent reduction clause in [the] lease within 10 business days of acceptance of this agreement failing this offer shall be null and void and deposit returned in full.
[20] The 10 business days begin to run on the acceptance of the Initial APS on September 20, 2013, requiring the condition to be fulfilled by October 4, 2013.
[21] Shoppers advised Mr. Tullio on September 27, 2013 that it would waive its rent reduction clause for payment of $100,000.
[22] On receiving this information from Mr. Tullio, Mr. Schnurr prepared a document for Rock Developments to sign, to indicate that the Shoppers Condition had been ‘waived’. Mr. Tullio executed the form, which Mr. Schnurr forwarded to Mr. Meddoui.
[23] Mr. Schnurr realized after the fact that he had provided Mr. Tullio with the wrong form, as the vendor could not waive the condition. What he should have prepared was a document indicating that the Shoppers Condition had been satisfied.
[24] Nevertheless, Mr. Schnurr was not concerned about this error because he was advised by Mr. Meddoui contemporaneously to seek a reduction in the purchase price to $9.3 million. Mr. Schnurr knew then that KARE was walking away from the Initial APS – as it was entitled to do during the conditional period – and that he would need to prepare a new agreement of purchase and sale.
[25] Mr. Schnurr advised Mr. Meddoui that likely the only way to get Rock Developments to agree to this reduction in purchase price would be for KARE to waive all of the conditions and go firm with its offer.
[26] October 18, 2013, Mr. Schnurr advised Mr. Tullio that KARE was seeking a reduction in purchase price to $9.3 million. Mr. Tullio balked at this, but ultimately agreed.
4. The Amended Agreement of Purchase and Sale
[27] Both parties understood the Initial APS to now be void. They began negotiating a new deal. The new purchase price of $9.3 million was already established, but negotiations carried on as to whether to structure the transaction as a share sale or an asset sale.
[28] An asset sale, which was contemplated in the Initial APS, would require that Rock Developments pay Shoppers $100,000 to waive the rent reduction clause. If there was a share sale, however, Shoppers had advised that the rent reduction clause would not be triggered. Rock Developments offered KARE the option of proceeding by way of a share purchase at $9.3 million, or an asset purchase with the purchase price increased by $75,000 to partially compensate Rock Developments for the funds it would pay to Shoppers.
[29] On November 29, 2013, the parties executed an Amended Agreement of Purchase and Sale (the ‘Amended APS’). Although the parties understood the Initial APS to be at an end, they used the text of the Initial APS as the foundation on which to build the Amended APS. Accordingly, the Amended APS is constituted by the text of the Initial APS, which terms are modified by the following:
The Buyer and Seller hereby ratify and confirm the Agreement of Purchase and Sale dated September 12, 2013 and Waiver signed by Seller on October 1, 2013, and attached hereto subject to the following changes:
The Seller and Buyer mutually agree that the Buyer shall have the right to purchase the shares of the Corporation or purchase the asset in an existing Corporation held by the Seller or a newly incorporated company. The Buyer shall give the Seller 60 days’ notice before the scheduled closing date of its intent. In the event that the Buyer purchases the assets of the corporation the purchase price shall be increased by $75,000 and the Seller agrees to obtain an amendment from Shoppers Drug Mart such that the rent is not reduced in the event of a sale of the property.
In the event the Purchaser elects to purchase the shares there shall be indemnification from the Seller in a form satisfactory to the Buyer’s lawyer acting reasonably to the Buyer, and/or its Chartered Accountant. The Seller agrees to provide all required information within five business days of acceptance for the Buyer to conduct a financial review of the company from date of incorporation to YTD along with reviewing CRA returns/Notice of Assessments filed and received to date.
The Buyer’s conditions outlined in Paragraph four, and Seller’s condition in paragraph 10 of Schedule A of the Agreement of Purchase and Sale are hereby deleted.
The Seller agrees that the Purchase price is established at $10,500,000.00 Canadian Dollars. The Seller agrees to irrevocably authorize and direct the Buyer’s Solicitor (McKenzie Lake LLP) on closing to withhold and pay from the closing proceeds $1,200,000.00 Canadian dollars. The Buyer shall provide to the Seller the name/number of the corporation and Invoice for the amount along with a valid HST number on or before closing. The Invoice will represent it but not limited to… Consulting, Due Diligence environmental, BCA and Financial fees for the file. Seller Leaseback and Credit on closing are hereby deleted from Schedule A of the Agreement of Purchase and Sale.
The additional deposit shall be payable to the Seller’s lawyer in trust “Kirwin Partners, LLP”
The Buyer shall have the right to market the vacant space for lease prior to the completion date. The Seller agrees to permit the Buyer or its agent to install For Lease signage and allow access to the premises to show the space to prospective tenants during reasonable business hours.
The Seller and Buyer agree that the closing date established is November 1st 2014 and both Seller and Buyer agree that as long as the Buyer gives 60 days prior written notice before September 1st to the Vendor, the closing date can be amended to September 1st 2014.
[30] Significantly, the Amended APS was not subject to the Buyer’s Condition or the Shoppers Condition. The additional deposit of $250,000 (the ‘Additional Deposit’) was due on the execution of the Amended APS. The Amended APS was not subject to any conditions precedent.
[31] KARE retained an option as to how it wished to structure the transaction, asset purchase or share purchase.
5. Failure to complete
[32] Mr. Meddoui conceded on cross-examination that the Additional Deposit was due on the execution of the Amended APS. The Additional Deposit was never paid.
[33] What followed instead was a series of emails between Mr. Schnurr and Mr. Meddoui, whereby Mr. Schnurr relayed Mr. Tullio’s mounting frustration with not having received the deposit, and Mr. Meddoui responding with various excuses from KARE relating to difficulties and delays in transferring the necessary funds from Egypt.
[34] In Mr. Schnurr’s December 23, 2013 email to Mr. Meddoui, he states:
OK. But when is it coming? I find it hard to believe that KARE does not have 250 000 in its Canadian accounts.
This is getting ridiculous. You told me when the paperwork took a long time that the money was the easy part. You later said it takes 5-7 days then 7-10 days. Then a note nearly 2 weeks ago saying 24 to 48 hours. We are nearly at a month. You also said you would buy the building if Kare did not come through.
[35] In Mr. Meddoui’s reply on the same date, he acknowledged the delay, regretted his lack of control over the situation, and stated:
This deal I recommended to KARE and more or less forced it to them, which is why it is a sensitive situation. The intent to close is there, however, these guys work in an “unorthodox” fashion and I need to be patient with this.
[36] None of the assurances given by Mr. Meddoui or the timelines for payment of the Additional Deposit held up. At some point prior to the closing date, KARE was in receipt of the funds needed to close the transaction. Mr. Schnurr testified that Mr. Meddoui showed him a transfer document evidencing the receipt of funds, but still the Additional Deposit was not paid.
[37] On January 7, 2014, Mr. Schnurr emailed Rock Developments, relaying a message that KARE was seeking a further price reduction of $300,000 and refused to complete the transaction otherwise:
I talked to the buyer. No great progress. At the 9M they will advance the $250,000 immediately and revise the agreement such that if they don’t close on the date it is automatically forfeit to you with need for you to litigate at that time. They won’t stay at the 9.3M and prepare to hear from your lawyer if that is your choice.
[38] Rock Developments refused to reopen the Amended APS. KARE followed through and failed to pay the Additional Deposit and tender funds to complete the purchase.
[39] Significantly, there was no documentary evidence before me that would support the argument that at this time KARE had any concerns about Rock Developments’ documentary productions in general, or with the Long-Form lease in particular. I reject Mr. Meddoui’s evidence at trial that KARE’s refusal to close the transaction was out of concern about the non-delivery of the Long-Form lease, and accept Mr. Schnurr’s evidence to the contrary, which is consistent with the email correspondence between the two at that time. The refusal to close the transaction was entirely a negotiation strategy intended to secure a sale price more favourable to KARE. All of the arguments advanced in this litigation about non-production of the Long-Form Lease were ad hoc rationalizations for refusing to close the transaction.
6. Mitigation
[40] Having been advised that KARE would not be completing the transaction, Rock Developments retained CBRE (and specifically Mr. Schnurr) to list the Property for sale on MLS and to market it to prospective purchasers. Rock Developments also instructed CBRE to locate a tenant for the vacant portion of the second floor, in order to enhance the marketability of the Property. CBRE listed the property for sale on January 10, 2014.
[41] Since that time, there have been 59 enquiries about the Property, with seven potential purchasers touring the Property, two expressions of interest in purchase, only one of which proceeded to a formal, written offer.
[42] Farhi Holdings Corporation expressed interest on March 26, 2014, and suggested that the Property was worth $7.7 million, given the vacant second floor. Rock Developments rejected this as too low.
[43] A formal, written offer was made in April 2014 by McCrory Associates Ltd. (“McCrory”) for $9 million. After negotiation, the parties entered into an agreement of purchase and sale for $9.075 million on June 4, 2014 (the “McCrory APS”).
[44] The McCrory APS was conditional and the deal fell through during the period of conditionality due to McCrory’s discomfort with the Shoppers lease.
[45] There have been no further offers on the Property, although CBRE continues to market it. Mr. Schnurr explained that he has marketed the property more intensively than he normally would, being mindful of Rock Developments duty to mitigate.
II. ISSUES
[46] This action raises two questions:
(a) did KARE breach the Amended APS; and
(b) what is the appropriate remedy for that breach.
III. ANALYSIS
1. Did KARE breach the Amended APS
(a) The Initial APS and the Shoppers Condition
[47] KARE’s position is that both the Initial APS and the Amended APS were void due to the operation of the Shoppers Condition, making the agreement “conditional upon Shoppers waiving its rent reduction clause within 10 business days of acceptance of the agreement failing this, offer shall be null and void and deposit returned in full.”
[48] KARE argues that the waiving of the rent reduction clause by Shoppers is a true condition precedent, which depends on the actions of a third party and cannot be waived by either party to the agreement. Until it is fulfilled there are no contractual obligations.
[49] KARE further argues that Shoppers did not waive the rent reduction clause during the conditional period, and that the Initial APS was therefore null and void. KARE argues that the correspondence from Shoppers to Rock Developments in which Shoppers indicated that it could agree to waive the rent reduction clause for payment of $100,000 did not constitute a waiver of the rent reduction clause.
[50] There was no evidence from Shoppers at trial. Certainly Rock Developments proceeded through the subsequent negotiations with KARE as though it had obtained an agreement from Shoppers that Shoppers would waive the rent reduction clause for $100,000, and there is no documentation from KARE that would suggest that KARE was dissatisfied with this arrangement.
[51] KARE’s position seems to be that in order to satisfy the Shoppers Condition, Rock Developments would have to have paid the $100,000 to Shoppers during the conditional period. This does not seem to make sense commercially, and there was no evidence to suggest that either party expected Rock Developments to proceed in this fashion in order to satisfy the Shoppers Condition.
[52] In any event, however, the Initial APS was on all accounts null and void when KARE walked away from the deal as it was entitled to do, and the Initial Deposit was returnable to KARE, although Rock Developments wrongly refused to consent to it being returned to KARE at that time.
(b) The relationship between the Initial APS and the Amended APS
[53] KARE argues that because the Initial APS was void for Rock Developments’ failure to provide the Long-Form Lease, the Amended APS must also be void because of its preamble which states that ‘The Buyer and Seller hereby ratify and confirm the Agreement of Purchase and Sale dated September 12, 2013 and Waiver signed by Seller on October 1, 2013, and attached hereto subject to the following changes:’.
[54] I reject this argument for the following reasons. First, the Initial APS did not create an obligation for Rock Developments to produce that which did not exist.
[55] Second, there is no legal impediment to drafting a contract in the manner in which the parties did with the Amended APS. They were not required to draft the agreement from scratch. The Amended APS was not drafted by lawyers. They were entitled to incorporate the terms of the Initial APS by reference, which they did. By ‘ratify and confirm’ the parties meant nothing other than, ‘we adopt the terms of the old agreement for the new agreement, except as follows …’.
(c) The Amended APS
[56] The Amended APS expressly deleted the removal of the Buyer’s Condition. However, KARE argues that the Amended APS incorporated the Shoppers Condition through the following covenant to obtain an amendment to the Shoppers lease in the event of an asset sale:
The Seller and Buyer mutually agree that the Buyer shall have the right to purchase the shares of the Corporation or purchase the asset in an existing Corporation held by the Seller or a newly incorporated company. The Buyer shall give the Seller 60 days’ notice before the scheduled closing date of its intent. In the event that the Buyer purchases the assets of the corporation the purchase price shall be increased by $75,000 and the Seller agrees to obtain an amendment from Shoppers Drug Mart such that the rent is not reduced in the event of a sale of the property.
[57] The covenant to obtain an amendment to the Shoppers lease is not a condition precedent.
[58] There were no conditions attaching to the Amended APS, which was a firm deal. KARE had the option of completing the transaction in one of two ways - asset purchase or share purchase. If KARE elected an asset purchase, Rock Developments was obligated to obtain an amendment to the Shoppers lease that removed the rent reduction clause. This did not make the contract conditional.
[59] KARE argues that the transaction was to have closed on November 1, 2014 and that it is significant that an amendment to the Shoppers lease still has not been provided to KARE. This submission is odd in that Rock Developments had no obligation to obtain an amendment to the Shoppers lease unless KARE elected to proceed by way of asset purchase. KARE made no election and refused to complete the transaction. The fact that Rock Developments did not obtain an amendment to the Shoppers lease is therefore of no significance.
[60] I reject Mr. Meddoui’s evidence that KARE understood the Amended APS to be conditional on Rock Developments obtaining an amendment to the Shoppers lease. That proposition is not supported by any documentary evidence, is inconsistent with the evidence of Mr. Schnurr, and is inconsistent with the email exchanges between Mr. Schnurr and Mr. Meddoui from December 2013 to January 2014.
[61] KARE, in its written closing submissions, argues in the alternative that the Amended APS confirmed Clause 3 in Schedule A of the Initial APS, and that this clause required the delivery of a copy of the Long-Form Lease to KARE within five business days of the acceptance of the Amended APS.
[62] I have found that there was no Long-Form Lease in existence at that time.
[63] What was Rock Developments’ obligation in this circumstance?
[64] KARE argued that Clause 3 required Rock Developments to ‘deliver’ ‘(a)ll leases, offers to lease, tenancy agreements and renewal letters, (“Leases”) tenant correspondence files’. Clause 3 actually states that Rock Developments was to ‘make available’ these documents, with the clear implication that the obligation is therefore dependent on the documents actually existing. There was no obligation to create these documents if they did not exist. It would be absurd, for example, to interpret Clause 3 as requiring Rock Developments to deliver tenancy renewal letters if there had been no tenancy renewals, and then to treat non-delivery of them as a fundamental breach.
[65] Mr. Meddoui testified that Rock Developments’ failure to deliver the Long-Form Lease was central to KARE’s decision not to close the deal. I reject this testimony as an after-the-fact rationalization for KARE’s decision not to close the deal. I accept the testimony of Mr. Schnurr, which is supported by the correspondence between Mr. Schnurr and Mr. Meddoui, that the purchase price was the factor behind KARE’s attempt to reopen the Amended APS. I reject Mr. Meddoui’s claim that he repeatedly asked for the Long-form Lease document after he had been told that there wasn’t one. There is no documentary evidence to support this claim.
[66] I reject KARE’s submission that the failure of Rock Developments to provide the Long-Form Lease constituted a fundamental breach of the Amended APS. The Offer to Lease was a binding agreement and Shoppers was in possession of its premises pursuant to it and paying rent.
[67] In summary, KARE breached the Amended APS both by failing to provide the Additional Deposit, and by failing to close the transaction.
2. Duty to Mitigate
[68] Rock Developments’ efforts at marketing the Property have been reasonable. KARE has not been able to identify any steps that Rock Developments ought to have taken but did not, other than to argue that Rock Developments ought to significantly reduce the sale price of the Property. The fact that Rock Developments obtained a conditional offer from McCrory for $9.075 million suggests that it has been marketed in a reasonable manner.
3. Remedy
[69] Rock Developments submits that specific performance is the only remedy.
(a) Specific Performance
[70] Specific performance is not commonly awarded to vendors of commercial real estate. Usually, damages are considered to be the appropriate award when a buyer of commercial real estate refuses to close.
[71] Recently, the Court of Appeal for Ontario confirmed that although specific performance is by no means to be granted in the ordinary course, there is ‘no absolute rule, one way or the other’ as to whether vendors can obtain specific performance, Matthew Brady Self Storage Corporation v. InStorage Limited Partnership, 2014 ONCA 858, para. 36 (leave to appeal to SCC dismissed June 25, 2015) (‘Matthew Brady’).
[72] Matthew Brady held that there are three factors to be considered in determining whether to award specific performance:
(a) whether damages will afford the vendor or an adequate remedy, or whether a monetary award will be sufficient to purchase substitute performance;
(b) whether the vendor has established some fair, real, and substantial justification for the granting of specific performance;
(c) and whether the equities as between the parties favour the granting of specific performance, (Matthew Brady, para. 40)
(i) Whether damages an adequate remedy
[73] KARE relies on Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 SCR 415 at para. 14 (‘Semelhago’), for the proposition that the party seeking specific performance in real estate transactions must demonstrate that the property is unique in order to establish that damages are inadequate. In Semelhago, the Court reasoned that:
While at one time the common law regarded every piece of real estate to be unique, with the progress of modern real estate development this is no longer the case. Residential, business and industrial properties are all mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available. (para. 21)
[74] As KARE argues, specific performance is a difficult remedy for vendors of commercial or investment property to obtain, as monetary damages will usually be an adequate remedy (Shapiro v. 1086891 Inc., 2006 2050 (ON SC); John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd., 2001 28012 (ON SC), appeal dismissed 2003 52131 (ON CA)).
[75] As the Court of Appeal recently set out in Matthew Brady, the focus is not on whether the property itself is unique, but whether the transaction is unique:
[36] In our view, in the context of vendor claims – consistent with the approach taken in Semelhago – there is no absolute rule, one way or the other. The following passage from the Sharpe text, at paras. 7.210 and 7.220 is instructive:
Where the subject-matter of the contract is “unique”, a strong case can be made for specific performance. The more unusual the subject-matter of the contract, the more difficult it becomes to assess the plaintiff’s loss.
An award of damages presumes that the plaintiff’s expectation can be protected by a money award which will purchase substitute performance. If the item bargained for is unique, then there is no exact substitute.
[76] So Matthew Brady requires an assessment of the transaction as a whole.
[77] Rock Developments argues that the special character of this transaction is that the Property is much more valuable to KARE than it is to most other purchasers.
[78] Rock Developments argued that KARE had intended to occupy the vacant space itself, and that the Property is therefore more valuable to KARE than to other purchasers. KARE denies that it intended to use the vacant space for its corporate offices, which I accept. But even if KARE had intended to use the vacant space for its corporate offices, this would not make the transaction unique in the sense articulated in Matthew Brady.
[79] In Matthew Brady, the vendor had acquired and renovated the subject premises (a self-storage facility in Windsor) to the specifications and design criteria of the purchaser.
[80] The subject premises in Matthew Brady was uniquely valuable to the purchaser because the purchaser was in the business of managing self-storage facilities.
[81] The subject matter of the Matthew Brady transaction is different from the current transaction.
[82] If specific performance were available in this instance, it would be available in every instance in which a purchaser that walked away from a transaction had, for its own reasons, valued a property more highly than other prospective purchasers.
(ii) whether the vendor has established some fair, real, and substantial justification for the granting of specific performance
[83] Rock Developments argues that because of its difficulty in selling the Property to date, there is a risk that it cannot be sold for the price that KARE was willing to pay, and that risk should be borne by KARE.
[84] But Rock Developments has not taken any steps in reliance on KARE or changed its business in any way to its own detriment.
(iii) The balance of equities
[85] KARE walked away from a binding agreement with the intention of negotiating a more favourable agreement.
[86] All of the defences advanced by KARE in this suit were unsupported by evidence and contrived by KARE after the fact.
[87] Nevertheless, none of KARE’s shortcomings can, in the larger circumstances, tilt the balance in favour of specific performance.
[88] Specific performance is not an appropriate remedy in the circumstances of this transaction.
(b) Damages
[89] Assessing the quantum of damages is a difficult task.
[90] KARE takes the position that Rock Developments has in fact suffered no damage.
[91] The best measure of value that is available to me is the purchase price that KARE was willing to pay as of the date that it walked away from the deal - $9 million. I assess damages at $300,000, calculated as the purchase price from the Amended APS of $9.3 million less $9 million.
[92] As it happens, this is also the amount represented by the Initial Deposit of $50,000 plus the unpaid Additional Deposit of $250,000.
IV. DISPOSITION
[93] For the reasons given, judgment is awarded against KARE for breach of contract. Damages are assessed in the amount of $300,000, in addition to prejudgment interest, and post-judgment interest.
[94] The Initial Deposit, which is currently held in trust by CRBE is to be released to Rock Developments’ solicitor.
V. COSTS
[95] Rock Developments is entitled to its costs of this action. If the parties are unable to agree on costs, I will receive brief written submissions (not more than 5 pages) from the plaintiff within 4 weeks of the date of release of this judgment, and from the defendant within 2 weeks thereafter.
“Justice B. W. Miller”
Justice B. W. Miller
Released: August 21, 2015
COURT FILE NO.: 2461/14
DATE: 2015/08/21
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Rock Developments Inc.
Plaintiff
- and -
Khalid Alenazi Real Estate Limited
Defendant
REASONS FOR JUDGMENT
B.W. MILLER J.
Released: August 21, 2015