Weldan Properties Inc. v. Deangelis, 2017 ONSC 4155

COURT FILE NO.: CV-16-3919; CV-17-1606 DATE: 20170704

SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN:

CV-16-3919

CHRISTOPHER DEANGELIS AND PASQUALE DEANGELIS Applicants

AND

WELDAN PROPERTIES (HAIG) INC. Respondent

AND BETWEEN:

CV-17-1606

WELDAN PROPERTIES (HAIG) INC. Applicant

AND

CHRISTOPHER DEANGELIS AND PASQUALE DEANGELIS Respondents

BEFORE: Ricchetti, J.

COUNSEL: R. Hanna for Weldan Properties (Haig) Inc. B. Roberston and N. Sangrar for Christopher Deangelis and Pasquale Deangelis

HEARD: June 26, 2017

ENDORSEMENT

The Applications

[1] There are two proceedings being heard together.

[2] The first application is by Christopher Deangelis and Pasquale Deangelis (together referred to as "Deangelis") seeking specific performance of an Agreement of Purchase and Sale for 115 Haig Blvd. Unit 3, Mississauga, Ontario (the "Agreement" and the "Property").

[3] The second application is by Weldan Properties (Haig) Inc. ("Weldan") seeking a declaration that the Agreement was validly terminated, forfeiture of the deposit, discharge of the Certificate of Pending Litigation and a claim for damages.

[4] At this time, the parties agreed the only issue to be decided today was whether the Agreement continues to be valid and binding or has been properly terminated. Depending on this court's decision, various ancillary matters, such as adjustments may have to be determined by this court if the parties cannot agree on such matters.

The Facts

[5] The facts are largely undisputed.

[6] The Property is a townhouse in a condominium development.

[7] On November 23, 2012, the parties entered into the Agreement. Weldan was the builder/vendor. Deangelis were the purchasers. The purchase price was $359,900. The townhome was to be built.

[8] The Agreement provided the following:

23. TIME OF THE ESSENCE

Time shall in all respects be strictly of the essence of this Agreement and no extension of time for any payment by the Purchaser or rectification of any breach of any agreement, stipulation, condition or restriction shall operate as a waiver of this provision with respect to any other payment or rectification of any other breach, except as specifically agreed upon in writing by the Vendor or the Purchaser, as the case may be.

[9] Deangelis provided a $20,000 deposit.

[10] The unit was built over the next few years. On July 31, 2016, Deangelis took possession of the Property by way of an interim occupancy as the unit is a condominium unit. This is specifically provided for in the Agreement.

[11] After the interim occupancy, there was to be a “closing” of the Agreement, where title and the balance of the purchase price were to be exchanged in accordance with the terms of the Agreement. This was to occur on the “Closing Date”.

[12] Deangelis required mortgage financing to complete the purchase of the Property.

[13] There is no dispute that the Closing Date under the Agreement was properly scheduled for and agreed to be August 23, 2016.

[14] As required under the Agreement, Weldan provided a proposed Statement of Adjustments for the closing.

[15] Deangelis' mortgage for the purchase was approved at approximately 4:50 p.m. on August 22, 2016. Why this approval came late in the day before closing was not fully explained.

[16] On August 22, 2016, Deangelis' counsel questioned three items in the Statement of Adjustments, which in total relate to matters in the hundreds of dollars.

[17] At approximately 1:23 p.m. on August 23, 2016, Deangelis' counsel advised that it would not have the necessary funds to complete the purchase of the Property that day. Deangelis’ counsel advised that it expected the funds would be received within the next "few days". Deangelis’ counsel sought an amendment to the Agreement amending the Closing Date to "Friday August 26, 2016, with all other terms and conditions to remain the same and time of the essence."

[18] It is not disputed that Deangelis was not in a position to close the purchase of the Property in accordance with the Agreement or tender on August 23, 2016 because of their lack of funds. There is no suggestion that Weldan caused or contributed to the reason for the Deangelis’ lack of funds on the Closing Date.

[19] Deangelis’ counsel’s communication of the inability to complete the purchase Weldan's counsel was considered by Weldan to be an anticipatory breach as it evidenced the clear intention not to close the Agreement on the Closing Date.

[20] Later that same day, Weldan responded, in writing, terminating the Agreement and forfeiting the deposit.

[21] The litigation ensued.

[22] Deangelis has refused to vacate the Property and has failed to pay the "interim occupancy" fees since July 31, 2016.

[23] Weldman did not respond to the inquiry regarding the Statement of Adjustments because of Deangelis' anticipatory breach of the Agreement and the subsequent termination of the Agreement. Simply put, the proposed Statement of Adjustments no longer became an issue to be dealt with on closing.

[24] The value of the Property has significantly increased since the purchase in 2012.

[25] It should be noted that Christopher Deangelis also purchased a unit next door to the Property. This purchase was completed without incident. This was raised because it supported the alleged "uniqueness" of the Property. For the reasons set out below, “uniqueness” of the Property is not relevant to the decision herein.

Reason for Unavailable Funds

[26] The exact reason why the closing funds were not available to Deangelis for the closing is not clear on the record.

[27] Initially, Christopher Deangelis stated, in his September 2016 affidavit, that "We are advised by Ann [a law clerk at his counsel's office] and verily believe that the lack of funds on Final Closing day was the result of an error by our lender and not as a result of any fault of our own". The specific error was not described.

[28] When the lack of funds was explored in the litigation, in his December 2016 affidavit, Christopher Deangelis stated that the error was caused by the bank inserting the wrong closing date in its instructions to the title insurance company to advance the funds.

[29] It is to be noted that there is no direct evidence from the bank manager, bank clerk or from the title insurance company supporting Christopher Deangelis’ statements regarding the “error”. Much of what is contained in Christopher Deangelis’ affidavit on this issue is supposition, hearsay and belief. As this is an application and these facts are contentious, Rule 39.01(5) has not been complied with.

[30] In support of the “error”, Deangelis produced a mortgage loan direction from the bank to counsel dated August 24, 2016 - two days after the closing was to take place - which direction shows that the closing date is August 25, 2016. There is no loan direction or other document dated August 22 or 23, 2016 from the bank or the title company showing the alleged erroneous closing date.

[31] This issue of the “error” was canvassed during cross-examination. Christopher Deangelis, a person experienced in construction, admitted he had not been told by the bank that they had made an error - he stated he "believed" it was a bank mistake and could not explain why the bank's mortgage instructions were dated August 24, 2016. When asked why the bank advised the Deangelis' counsel on the morning of August 23, 2016 that the bank would not be in a position to fund the mortgage advance that day - counsel explained that the process of funding fell apart without providing any more detail.

[32] For the reasons set out below, the reason for the unavailable funds becomes irrelevant because it is clear that Weldan neither caused nor contributed to the unavailability of the funds.

The Position of Deangelis

[33] Deangelis point to an obligation of good faith that compels Weldan to honestly conclude a bargain that has been honestly made and suggest that Weldan arbitrarily exercised the "time of the essence" clause despite knowing that the closing would take place no more than three days later. Deangelis submits that "the reason the Agreement did not close was due to the Respondent's exercise of a discretionary term was taken in bad faith".

Analysis

[34] Deangelis relies on 801Assets Inc. v 605446 Ontario Limited, 2016 ONSC 2772 in support of the obligation that Walden act in good faith to extend the closing date and not rely on the "time of the essence" clause to terminate the Agreement.

[35] In my view, 801 Assets does not assist Deangelis. It is clear that, where a party has not acted in good faith in the performance of his obligations under the contract, he cannot rely on the "time of the essence" provision:

[63].... Where a vendor has acted contrary to good faith in his performance of the contract, the law precludes him from relying on the ‘time of the essence’ provision to terminate the contract, Walker v. Jones, supra, at para. 145; see also Morgan v. Lucky Dog Ltd., [1987] O.J. No 647 (Ont. H.C.).

[36] In 801 Assets, the court determined that the vendor had not acted in good faith leading up to the closing date for a number of reasons (see paras 64-67). In addition, the court found that the vendor was not in a position to close the transaction because it had failed to comply with a significant term of the purchase agreement:

[76] The vendors had a clear obligation to deliver a valid directors’ resolution authorizing the transfer of their shares to the purchaser. They failed to do so. This, by itself, was a clear breach of their obligations under the APS.

[37] The difficulty in this case is that there is no evidence of bad faith on the part of Weldan in the “performance” of its obligations under the Agreement. Weldan was ready to close. Weldan provided a Statement of Adjustment. Weldan was ready to provide title to Deangelis. The failure to close the purchase was entirely the fault of Deangelis in not having sufficient funds to complete the Agreement.

[38] The case of Bhasin v. Hrynew, 2014 SCC 71 does not assist Deangelis. The obligation to act in good faith described by the Supreme Court does not go so far as to re-write the agreement for the parties. Insisting on compliance with the agreed upon terms of the Agreement is not acting in bad faith.

[39] The consequences of a parties inability to complete an agreement where there is a “time of the essence” provision was described in 2260695 Ontario Ltd. v. Invecom Associates Ltd, 2016 ONSC 3327. In 2260695 Ont., the purchaser alleged that the vendor acted in bad faith in failing to extend the closing.

[5] The contract made time of the essence save and except where the parties agreed to a time limit being abridged or extended. Such agreement was to be in writing (clause 14.3). It is generally understood that, when time is made to be of the essence, it means that the limits set are to be strictly adhered to. It is an indication the contract is to be one of specific terms and greater certainty:

How more clearly could contacting parties make conditions as to the timing of performance essential than by simply saying, time in all respects shall be of the essence of this agreement? In my opinion, the provisions in clauses 21 and 22 of this agreement, drawn as it was by a professional agent of Loblaw and entered into by sophisticated people of business acumen, clearly [page 548] signaled that any breach of any of the obligations in the agreement calling for performance at a specified time amounted to the breach of an essential element of the contract. That being the case, the law is clear that such breach may be treated by the other party as discharging the agreement and relieving against performance by that other party.

(1473587 Ontario Inc. v. Jackson, 74 OR (3d) 539, at para. 19)

and:

At common law the courts rigidly enforced agreements where time was of the essence.

(1376273 Ontario Inc. v. Knob Hill Farms Limited, 34 BLR (3d) 95, at para. 89, referring to Coslake v. Till (1826), 1 Russ. 376, 38 E.R. 146)

[16] Finally, it was submitted on behalf of the purchaser that the vendors breached the obligation of good faith in the performance of contracts as stipulated in Bhasin v. Hrynew 2014 SCC 71, [2014] 3 S.C.R. 494. I do not agree. In an effort to place good faith properly in the framework available to interpret contracts and contractual obligations, the Supreme Court of Canada identified it as a “general organizing principle”:

…[A]n organizing principle states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free-standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines and may be given different weight in different situations... It is a standard that helps to understand and develop the law in a coherent and principled way.

(Bhasin v. Hrynew, supra, at para. 64, referring to R. v. Jones, [1994] 2 S.C.R. 229, at p. 249; R. v. Hart, 2014 SCC 52, [2014] 2 S.C.R. 544, at para. 124; R. M. Dworkin, “Is Law a System of Rules?”, in R. M. Dworkin, ed., The Philosophy of Law (1977), 38, at p. 47)

[17] As a standard rather than a rule, the obligation to act in good faith does not place specific obligations on a contracting party. In Bhasin v. Hrynew, the court was careful to draw this distinction between the obligation to act in good faith from the duty of loyalty and trust owed to a fiduciary:

The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While ‘appropriate regard’ for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary. Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.

[Emphasis added]

(Bhasin v. Hrynew, supra, at para. 65)

[18] The case goes on to define a new common law duty arising out of the obligation of good faith:

It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

[Emphasis added]

(Bhasin v. Hrynew, supra, at para. 93)

[40] The court went on to dismiss the lack of good faith argument. The issue was again raised on appeal. See 2260695 Ontario Inc. v. Invecom Associates Limited, 2017 ONCA 70. On appeal, the Court of Appeal stated:

[17] As its second ground of appeal, Invecom submits the applications judge erred in failing to find the Vendors breached their good faith obligations described in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494. They argue such a breach arose from the Vendors’ failure to respond to the Draft Extension Agreement until after 5:00 p.m. on April 15, 2014.

[18] The applications judge examined this argument in the context of the Agreement’s language and the parties’ specific conduct. He concluded, correctly in our view, the Agreement placed on Invecom the obligation to act as the time for waiving the conditions in its favour ran out: para. 19. We see no error in his conclusion that “[t]here is no failure of good faith and nothing dishonest in leaving it to the purchasers to look after their own interests when the terms of the agreement are known to all.” As Invecom’s counsel fairly acknowledged, these were sophisticated parties who entered into a sophisticated agreement with the assistance of counsel.

[41] It would be tempting to let principles of fairness and equity direct a finding that a three day delay in the closing in the four year history of the Agreement, is a minor breach resulting in a financial windfall to the builder and, therefore, the Agreement should be upheld.

[42] However, in my view, it would be wrong in law to find that insisting on compliance with a term of the agreement, agreed to by both parties with the assistance of counsel, amounts to bad faith depriving a party of the ability to strictly enforce an agreement where time is of the essence. Such a determination would mean that no party could insist on strict compliance of the term of an agreement because to do so would or might amount to bad faith. This would throw the law of contract into chaos by creating uncertainty in the enforcement of contracts.

[43] Such a decision would also be contrary to numerous authorities which provide that, when a party fails to comply with its obligation to complete the transaction at a specified time and there is a time of the essence clause, the other party has the right to terminate the agreement. See 1473587 Ontario Inc. v. Jackson, [2005] O.J. No. 710 (S.C.J.)

[20] The holding of parties to their bargain in this respect perhaps met its zenith in Union Eagle Ltd. v. Golden Achievement Ltd., [1997] A.C. 514, [1997] 2 All E.R. 215 (P.C.) in which completion of the purchase of a $4.2 million flat was to take place on or before September 30, 1991 and before 5:00 p.m. that day. The purchaser's agent arrived at 5:10 pm. and the vendor rescinded the contract at 5:11 pm. Citing the practicalities of business as the reason for restraining equity from relieving against clear contractual terms, Lord Hoffman wrote at para. 9:

... in many forms of transaction it is of great importance that if something happens for which the contract has made express provision, the parties should know with certainty that the terms of the contract will be enforced. The existence of an undefined discretion to refuse to enforce the contract on the ground that this would be "unconscionable" is sufficient to create uncertainty. Even if it is most unlikely that a discretion to grant relief will be exercised, its mere existence enables litigation to be employed as a negotiating tactic. The realities of commercial life are that this may cause injustice which cannot be fully compensated by the ultimate decision in the case.

He concluded his opinion with this advice at para. 18, which I think entirely applicable to the case before me:

The fact is that the purchaser was late. Any suggestion that relief can be obtained on the ground that he was only slightly late is bound to lead to arguments over how late is too late, which can be resolved only by litigation. For five years the vendor has not known whether he is entitled to resell the flat or not. It has been sterilised by a caution pending a final decision in this case. In his dissenting judgment, Godfrey J.A. said that the case "cries out for the intervention of equity". Their Lordships think that, on the contrary, it shows the need for a firm restatement of the principle that in cases of rescission of an ordinary contract of sale of land for failure to comply with an essential condition as to time, equity will not intervene.

[44] The appeal from 1473587 was dismissed by the Court of Appeal. See 1473587 Ontario Inc. v. Jackson.

[45] It does not assist Deangelis to suggest the fault of the failure to complete the Agreement was that of the bank and not themselves as purchasers. Weldan has no agreement with the bank. The bank owes no duty to Weldan. If the failure to advance the funds lay with the bank, Deangelis' remedy may likewise lay with the bank.

[46] Let me deal with the issue of the Statement of Adjustment. A complete answer to this issue is that Deangelis anticipatorily breached the Agreement by advising Weldan that it could not close on August 23, 2016. Any discussion or issue regarding the Statement of Adjustments was superseded by this breach. Whether there was a legitimate basis for the questions asked of the items in the Statement of Adjustments and potentially a variation in those amounts is not clear. However, any suggestion that Weldan was not prepared to close the Agreement on August 23, 2016 because of the Statement of Adjustment issue is simply not credible or factually correct. In any event, Deangelis’ counsel simply raising questions about several minor items in a Statement of Adjustment just prior to closing cannot possibly be a basis in law not to complete the purchase on the scheduled Closing Date.

[47] I am satisfied that Weldan was entitled to and did properly terminate the Agreement on August 23, 2016. A declaration that the Agreement was validly terminated and is at an end is hereby granted. A declaration that the deposit has been forfeited as indicated in the termination letter shall issue.

[48] The Certificate of Pending Litigation is hereby vacated. An order directing the Registrar in Land Titles to this effect shall issue.

[49] Deangelis shall vacate the Property.

[50] In light of this court’s decision on the termination of the Agreement, it is not necessary to go on to deal with the claim for specific performance.

[51] Any remaining issues such as adjustments to interim occupancy and utilities will, if not agreed to by the parties, be dealt with at a later date by this court.

[52] Cost Outlines have already been provided by counsel. Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to three pages, and any authorities. Any responding party shall have one week thereafter to serve and file responding submissions. Written submissions shall be limited to three pages with any authorities relied on attached. There shall be no reply submissions without leave.

Ricchetti, J.

Date: July 4, 2017

Weldan Properties Inc. v. Deangelis, 2017 ONSC 4155

COURT FILE NO.: CV-16-3919; CV-17-1606 DATE: 20170704

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: CHRISTOPHER DEANGELIS AND PASQUALE DEANGELIS V. WELDAN PROPERTIES (HAIG) INC. AND WELDAN PROPERTIES (HAIG) INC. V. CHRISTOPHER DEANGELIS AND PASQUALE DEANGELIS

BEFORE: Ricchetti, J.

COUNSEL: R. Hanna for Weldan Properties (Haig) Inc. B. Roberston and N. Sangrar for Christopher Deangelis and Pasquale Deangelis

ENDORSEMENT

Ricchetti, J.

DATE: July 4, 2017