Court File and Parties

COURT FILE NO.: CV-16-562318 DATE: 20170720 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N : XU Plaintiff – and – 2412367 ONTARIO LIMITED Defendants

COUNSEL: P. David McCutcheon and Soloman Lam for the Plaintiff Judy Hamilton for the Defendants

HEARD: June 27, 2017

FAVREAU j. :

Introduction

[1] The plaintiffs, Kai Xu and Win Lam Benjamin Kong (the “Purchasers”), and the defendant, 2412367 Ontario Limited (the “Vendor”), entered into an agreement of purchase of sale on July 22, 2016 (the “Agreement”). The Purchasers agreed to a purchase price of $43,980,000 and intended to develop the property as a mixed residential-commercial complex for Chinese senior citizens. The Purchasers failed to meet a deadline for the payment of part of the deposit on the purchase price, after which the Vendor immediately terminated the agreement. The Purchasers claim that the Vendor subsequently agreed verbally at a meeting to revive the agreement and to extend the closing date. The Vendor claims that it properly terminated the Agreement and that modifications to the Agreement can only be made in writing.

[2] The parties brought the two following motions:

a. A motion by the Vendor for summary judgment, seeking an order dismissing the action, and confirming that the Agreement is terminated and that the Vendor is entitled to retain the deposits paid up to the time of the termination. In response, the Purchasers request that summary judgment be granted in their favour, with an order for specific performance. Alternatively, the Purchasers argue that the matter should proceed to trial and, in the further alternative, that they should be relieved from forfeiture of their deposit.

b. The Purchasers have brought a motion for a certificate of pending litigation (a “CPL”) in the event that summary judgment is not granted to either party and the matter is to proceed to trial.

[3] For the reasons set out below, the Vendor’s motion for summary judgment is granted. The terms of the Agreement allowed the Vendor to terminate the Agreement and the verbal agreement relied on by the Purchasers did not serve to revive the Agreement. In addition, this is not a case in which relief from forfeiture is warranted, and accordingly the Vendor is entitled to keep the $1,000,000 deposit paid by the Purchasers up to the date of termination. Given the result on the motion for summary judgment, the motion for a CPL is dismissed.

Facts giving rise to the action

[4] The plaintiffs are both real estate developers. Their projects cater to Chinese communities in the Greater Toronto Area.

[5] On July 22, 2016, the Purchasers and the Vendor entered into the Agreement with the Vendors for the purchase of a property at 4077 and 4101 Highway 7 East in Markham, Ontario. The Purchasers’ intention was to develop the property as a mixed residential-commercial complex for Chinese senior citizens. The Purchasers entered into the Agreement in trust for a company that they intended to incorporate that was to own and develop the project.

[6] The purchase price for the property was $43,980,000, and the closing date was to be November 30, 2016. Originally, the Agreement provided that the Purchasers were to pay an 8% deposit on the following schedule:

a. $500,000 within seven days of the Agreement;

b. $3,018,400, representing 8% of the purchase price less $500,000, on the date on which the Purchasers waived their due diligence rights under the Agreement.

[7] The Purchasers paid the first deposit of $500,000 by the July 29, 2016 deadline.

[8] However, the Purchasers requested and obtained consent to an extension for the payment of the second portion of the deposit. On September 14, 2016, the parties signed a written amendment to the Agreement. The amendment divided the second deposit into two payments, namely $500,000 to be paid within two days and the $2,518,400 balance on September 30, 2016. As part of the amendment, the Purchasers waived their due diligence rights, and the Agreement thereby became binding.

Request to extend date for payment of second portion of deposit

[9] As provided for in the amendment to the Agreement, on September 15, 2016, the Purchasers paid $500,000 to the Vendor.

[10] However, the Purchasers did not meet the September 30, 2016 deadline for the balance of the deposit. Rather, at around 11:00 am on the morning of September 30, 2016, through their lawyer the Purchasers requested an extension of the deadline. The Purchasers proposed to immediately pay $750,000 towards the balance of the deposit, with $1,000,000 within two business days and $768,400 by the end of October. The closing date of November 30, 2016 was to remain the same.

[11] The Purchasers’ explanation for the delay is that they had intended to use the proceeds of sale from another real estate project to fund the second portion of the deposit but that by late September the sale on that property had not yet closed. They therefore started looking for other sources of funding. By September 30, 2016, they had $750,000 available and Mr. Xu’s parents had agreed to provide the balance of the funds for the deposit, but the funds were not immediately available to be transferred to Mr. Xu’s bank account.

[12] The Vendor’s lawyer responded to the request for an extension at 3:49 pm on September 30, 2016, advising that the Vendor would not agree to the proposed extension and that the full payment of the final installment of the deposit was to be made by 5:00 pm that day.

[13] The Purchasers did not make any payment prior to 5:00 pm on September 30, 2016, and at 5:40 the Vendor’s lawyer wrote to the Purchasers’ lawyer to advise that it was immediately terminating the Agreement due to the Purchasers’ failure to pay the final portion of the deposit and that the $1,000,000 deposit already paid would be forfeited to the Vendor.

October 3, 2016 meeting

[14] Up to this point, there is no discrepancy between the parties’ evidence. However, there is a dispute about what occurred at a meeting on Monday, October 3, 2017. The parties disagree over what happened at the meeting and the significance of that meeting.

[15] Mr. Xu’s evidence is that on October 3, 2017, he had received $1,000,000 from his father and that he was waiting for $768.400 from his mother. At 11:48 am that day, the Purchasers’ solicitor wrote to the Vendor’s solicitor advising that the Purchasers now had the funds to pay $1,750,000 immediately and that they could pay the balance of $768,400 by the end of that week.

[16] Mr. Xu’s evidence is that the parties met that day and that the Vendor’s representative agreed to sell the property to the Purchasers, but with a later closing date. The plaintiffs refer to this as the “Good-as-Gold Agreement”. In his affidavit, Mr. Xu’s evidence of the meeting and agreement is as follows:

29 In the afternoon on Monday October 3rd, my father and I went to the Vendor’s offices in Markham with a bank draft for $1,750,000 payable to the Vendor’s solicitor in trust. Our goal of the meeting was to persuade the Vendor to honour its Purchase Agreement with us, and not to terminate it.

30. The meeting was attended by my father and me; the parties’ real estate agents, Wing-Fu Hui and Lili Bai; the Vendor’s assistant, Merry Zhao; and the defendant Wei Xiang Wang. Mr. Wang is the chairman, director and shareholder of the Vendor, and he ostensibly represented and controlled the Vendor.

31. The meeting was conducted in Mandarin and the Shao Xing Chinese dialect. During the meeting, Mr. Wang told us he was under a lot of pressure. He told us that some of his friends and investors in China had found out about the Purchase Agreement and approached him with a higher offer for the Property. A representative from Cushman Wakefield had even approached Mr. Wang that very morning with an offer to buy the Property for $2 million more than our purchase price.

32. The meeting lasted about an hour. By the end of the meeting, Mr. Wang agreed to honour the Purchase Agreement with us, but he asked to extend the closing date to March 31, 2017. The parties orally agreed to amend the Purchase Agreement as follows (the “Good-As-Gold Agreement”):

(a) The Purchase Agreement would remain in force but the closing date, which was originally November 30, 2016, would be pushed back to March 31, 2017 as Mr. Wang requested; and

(b) Benjamin and I would also pay interest to the Vendor equal to 5% per annum on $22,000,000 calculated over six months (the estimated remaining time until closing). Mr. Wang told us that the $22,000,000 represented the balance of the Vendor’s existing mortgage on the Property from Industrial and Commercial Bank of China.

33. I specifically asked Mr. Wang to put the Good-As-Gold Agreement in writing. However, Mr. Wang refused, and assured my father and me that his words were “as good as gold” (as translated from the Shao Xing dialect). Mr. Wang told us that because he, my father, and I were from the same place in China – the city of Shao Xing, in the Province of Zhe Jiang – Mr. Wang would personally make the Vendor sell the Property to Benjamin and me.

34. My father and I left our bank draft of $1,750,000 on Mr. Wang’s table. Mr. Wang said he did not want our $1,750,000 bank draft at that time, so he returned it to us. Mr. Wang and my father shook hands to confirm the agreement, and the meeting ended.

[17] Mr. Xu was cross-examined on his affidavit, and in that context his evidence on what transpired at the meeting was as follows:

He [Mr. Wang] came back and he says, “I can’t close the property with you now. There is too much promotion and too much”, you know, “small talks on the street now”. As you know, the Chinese development community is not big. So if something happens to it everyone knows about it. He says, “I will sell you the property in March… by the end of March, and I have a land loan with ICBC Bank right now, $22,000,000 of loan at 5 percent”. He says, “I’m not greedy, I’m not trying to jack up the price, but in March, I’m going to sell you that property”, you know, “You have to pay that interest…you have to carry that interest plus, if you were to close on November 30th, you will have to carry that interest anyways”. I said, “Fine. That’s good”.

I said, “Mr. Wang, can we put this on paper?” He says, “No, I can’t sign anything because of personal reasons, not because I don’t like you”. But he says, “But to rest assure I will be selling you this property, if you look at where we are”…because he also owns a property a few properties down from the Sheraton, where there is an older house he’s using as his own office, but he’s building a presentation centre, which got approved for along Highway 7, in front of his existing office, at the time. He says, you know, “You can use this as your sales office, and to further reassure you, I’m going to sell you the property. I’m going to…when you pay to have that built and you talk the terms with Merry”, and he says, “If I don’t want to sell you the property, why am I entertaining the idea of letting you build the sales office on this property”, right, he owns. It’s a few properties over.

So, at this point…and then he says, “Trust me. My word is as good as gold. You will know in the future as you get to know me more”. And we shook hands and he asked my father when he was going back to Shaoxing and go back to China, and then my father says, “We go back about once a year to pray to the ancestors”, because that’s where we have our ancestors grave. So, he says, “Yes. When we go to China, we will have dinner sometime if we meet”. And then we said, “Okay”, and we shook hands. We left.

We left the draft on the table. We walked outside, and we were in the parking lot getting in our car, Sammy chased out…chased us down, gave us the draft. He said, “Don’t worry, Mr. Wang say she doesn’t need the deposit, plus he can’t use that money anyway, but he’s a good guy”. You know he said he will sell you the property in March.

[18] The only other evidence from the plaintiffs about the “Good-as-Gold Agreement” is a statutory declaration attached to Mr. Xu’s affidavit dated October 5, 2016, signed by one of the plaintiffs’ real estate agents. In her declaration, Ms. Hui states that she attended the October 3, 2016, meeting, and that Merry Zhao translated the meeting for her. She states that during the meeting “the Vendor agreed to sell the Property to the Purchasers for closing on or about March 2017 subject to the Purchasers agreeing to pay 5% interest per annum on $22,000,000 being what is understood to be the current balance of the existing mortgage on the property”.

[19] For its part, the Vendor has not put forward any direct affidavit evidence of its own about the meeting. No one present at the meeting on the Vendor’s behalf has provided evidence, although counsel for the Vendor indicated that an offer was made to the plaintiffs to make Mr. Wang available as a witness on a pending motion. Rather, the Vendor relies on the exchange of subsequent correspondence attached to a lawyer’s affidavit as evidence that no agreement was reached at the meeting.

Subsequent correspondence

[20] On October 3, 2016, following the meeting between the parties, the Purchaser’s counsel wrote to the Vendor’s counsel for the purpose of seeking to confirm the agreement the Vendors claimed to have reached at the meeting:

Further to the meetings between our clients, both the Vendor and Purchaser have mutually agreed to close the transaction on March 30, 2016 and our client will pay six (6) month’s interest on $22,000,000.00 CAD at the rate of 5% per annum (approximately $550,000.00). We will leave the $1,000,000.00 CAD deposit in your office’s trust account with the express understanding that said funds will not be released to the Vendor. Kindly confirm in writing by the end of the day tomorrow that you have confirmed same with your client.

[21] The Vendor’s lawyer responded that day denying that any agreement had been reached at the October 3, 2016 meeting, and confirming the Agreement was terminated:

Please be advised that the Agreement was terminated on September 30, 2016, as confirmed in writing by our office in our second letter to your office dated September 30, 2016 (“Our Letter”).

The Vendor did meet with your clients today, however the Vendor did not agree to reinstate the terminated Agreement. Furthermore, the Vendor refused to accept a further deposit of $1,750,000.00 from your client. The Vendor does not agree to any of the proposed terms as set out in your letter and the Vendor has instructed us to advise you that the Agreement remains terminated. As we have previously advised in Our Letter, the Vendor is entitled to retain the full amount of all deposits paid by the Purchaser to the Vendor, and reserves the right to exercise any other remedies that the Vendor may have, at law or in equity.

[22] On October 4, 2016, the Vendors registered a caution against the Property. That day, there was a further exchange of correspondence between the parties’ lawyers. The Purchasers’ lawyer expressed surprised that the Vendor denied the existence of an agreement reached on October 3rd whereas the Vendor’s lawyer confirmed once again the termination of the Agreement.

[23] On October 11, 2016, the Purchasers’ lawyer sent another letter to the Vendor’s lawyer advising that “our clients have now provided us the deposit in the amount of $2,518,400.00”. The Purchasers’ lawyer asked that the Vendor’s lawyer seek instructions from his client, further stating “[u]pon your client’s acceptance, we will immediately forward the bank drafts to your office”.

[24] On October 12, 2016, the Vendor’s lawyer responded that “We have been instructed by the Vendor to inform you that the Agreement was terminated on September 30, 2016 due to the default of the Purchaser under the Agreement and remains terminated.”

[25] The Vendors commenced this action on October 17, 2016. They also brought a motion for a certificate of pending litigation that was originally scheduled to be heard on November 10, 2016. However, the motion was adjourned and the parties consented to an order that the property would not be dealt with until the motion was decided or some other order of the Court disposed of the matter.

[26] The action originally named both the Vendor and Mr. Wang personally. The claim against Mr. Wang has since been discontinued on consent.

Agreement of Purchase and Sale

[27] The Agreement contains a number of provisions relevant to the issues between the parties.

[28] Article 3.1 of the Agreement sets out the schedule for the payment of the deposit and contemplates that the Vendor was entitled to retain the deposit in the event the Purchaser was in default:

If the transactions contemplated by this Agreement are not completed for any reason other than the default of the Purchaser or if the Agreement is terminated in accordance with its terms, the Deposit(s) together with interest thereon shall be immediately returned to the Purchaser. If the transactions contemplated by the Agreement are not completed solely by reason of default of the Purchaser, the Vendor shall be entitled to retain the Deposit(s) together with interest thereon in addition to any other rights or remedies that it may have pursuant to this Agreement or at law.

[29] Article 11.1 set out the parties’ termination rights:

If any of the conditions in this Agreement have not been fulfilled, waived or performed at or prior to Closing, then the party not in default hereunder may terminate this Agreement by notice in writing to the other party, and in such event the parties shall be released from all obligations hereunder.

[30] Article 13.3 provides that:

Each agreement and obligation of either of the parties hereto in this Agreement, even though not expressed as a covenant, be considered for all purposes to be a covenant.

[31] Article 13.7 stipulates that “Time shall be of the essence in this Agreement”.

[32] Article 13.18 specifies that all amendments are to be in writing:

This Agreement and any Ancillary Agreement may only be amended or otherwise modified by written agreement executed by the Vendor and the Purchaser.

[33] Similarly, Article 13.19 provides that no waiver of part of the Agreement was to be taken as waiver of any other part of the agreement and that any waivers were to be in writing:

(a) No waiver of any of the provisions of this Agreement or any Ancillary Agreement shall be deemed to constitute waiver of any other provision (whether or not similar); nor shall such waiver be binding unless executed in writing by the Party to be bound by the waiver,

(b) No failure on the part of the Vendor or Purchaser to exercise, and no delay in exercising any right under this Agreement shall operate as a waiver of such right, nor shall any single or partial exercise of any such right preclude any other or further exercise of such right or the exercise of any other right.

[34] Finally, Article 13.26 of the Agreement provided that neither party was to register a caution or certificate of pending litigation on title to the property:

The Purchaser covenants and agrees with the Vendor that the Purchaser will at no time register or permit to be registered on title to the Property this Agreement or a notice or assignment or transfer thereof or a caution, purchaser’s lien, or certificate of pending litigation or any encumbrance or cloud whatsoever, and that any such registration shall permit the Vendor to terminate this Agreement or to exercise any of its remedies as set forth in this Agreement. The Purchaser agrees that this Agreement shall be deemed not to have created in the Purchaser any Interest whatsoever whether equitable, legal or otherwise in the Property.

Analysis:

Motion for Summary Judgment

[35] The issues to be decided on the motion for summary judgment are as follows:

a. Was the Vendor entitled to terminate the Agreement due to the Purchasers’ failure to pay the full deposit on September 30, 2016?

b. What is the effect, if any, of the Purchaser’s evidence regarding the October 3, 2016 meeting?

c. Is this an appropriate case for relief against forfeiture?

Test on Motion for Summary Judgment

[36] Under subrule 20.04(2) of the Rules of Civil Procedure, summary judgment is to be granted if the Court is satisfied that there is no genuine issue requiring a trial.

[37] As set out in Hryniak v. Mauldin, 2014 SCC 7, at para. 49, there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits using the summary judgment process. This is the case when the process: “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.”

[38] On a motion for summary judgment, the judge should first determine if there is a genuine issue requiring a trial based on the evidence before him or her without using the fact-finding powers in subrule 20.04(2.1). If there appears to be a genuine issue requiring a trial, Rule 20.04(2.1) permits the motion judge, at his or her discretion, to: (1) weigh the evidence, (2) evaluate the credibility of a deponent, or (3) draw any reasonable inference from the evidence unless it is in the “interest of justice” for these powers to be exercised only at trial: Hryniak, at para. 66. The motion judge is also permitted to use the expanded powers under Rule 20(2.2) to direct a procedure such as a mini-trial, rather than a full trial.

[39] The parties may not rely on the prospect that additional evidence may be tendered at trial; parties must put their best foot forward on a motion for summary judgment: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (Ont. S.C.J.), at para. 26, aff’d 2014 ONCA 878 (Ont. C.A.), leave to appeal to SCC refused, [2015] S.C.C.A. No. 97 (S.C.C.).

[40] Finally, on a motion for summary judgment, the Court has the power to grant judgment to the responding party in appropriate circumstances: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922 at para. 52.

Right to Terminate Due to Failure to Pay Deposit

[41] Under the terms of the Agreement, there is no doubt that the Vendor was entitled to terminate the Agreement when the Purchasers failed to pay the deposit.

[42] Pursuant to the September 14, 2016 amendment, the parties had agreed that the plaintiffs would make the payment on the final portion of the deposit by 5:00 pm on September 30, 2016. Article 11.1 permitted the defendant to terminate the Agreement in the event the plaintiffs failed to fulfill any conditions in the Agreement by giving notice to the plaintiffs. On September 30, 2016, the plaintiffs advised the defendants that they would not be able to make the payment of $2,518,400 by 5:00 pm that day and requested a further extension. The defendant refused the request for an extension, and gave notice to the plaintiff that it was exercising its right to terminate the Agreement.

[43] In 1473587 Inc. v. Jackson, [2005] OJ 710, upheld by the Court of Appeal in (2005), O.J. 3145, this Court considered a similar situation. In that case, the purchaser through inadvertence failed to pay a deposit by the deadline set out in an agreement of purchase and sale, and sought to remedy the default two days later. There was a provision stating “time in all respects shall be of the essence”. The Court found that this was sufficient to allow the vendor to terminate the agreement. In reaching that conclusion, the Court made reference to a quote from the Supreme Court of Canada’s decision in Sail Labrador Ltd. v. Challenge One (The), [1999] S.C.J. No. 69:

Courts will generally give effect to the parties’ intentions when upholding any clear contractual provisions which provides that the breach of a certain term, no matter how slight, will justify rescission of the entire contract by the non-offending party.

[44] The Court went on to emphasize that parties should be held to the bargain they have struck in order to ensure certainty between the parties:

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 p.m. and the vendor rescinded the contract at 5:11 p.m. 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.

[45] In this case, the parties went further than including a provision to the effect that time is of the essence. They also specified in Article 11.1 that if any condition had not been fulfilled, the party not in breach could terminate the Agreement. In 1473587 Inc., para. 17, the Court referred to a case in which a similar provision had formed the basis for the termination, stating that while a “time is of the essence” provision is sufficient, a comprehensive termination clause makes the right to terminate even clearer:

Mr. Horst argued that if failure to pay the deposit on time as agreed was intended by the parties to amount to a fundamental breach of contract such as would entitle the Vendors to treat the agreement as discharged, clearer and more explicit language would be required. He referred to the clause in an agreement in issue in Glenarda Developments Ltd. v. Pinheiro, [1994] O.J. No. 1813, 40 R.P.R. (2d) 212 (Gen. Div.) as the kind of thing that would be required to enable a party to take the position that the defendant Vendors assert here. The provision in Glenarda read:

It is agreed that in the event of any breach of this agreement by the purchaser, or upon default by the purchaser in any of his several obligations set forth in this agreement, the vendor shall have the right to declare this agreement at an end without further notice and, in addition to and without prejudice to any other remedy available to the vendor, the deposit paid by the purchaser hereunder shall be forfeited to the vendor in addition to and without prejudice to any other remedy available to the vendor arising out of such default.

While such a provision, dealing as it does with all contractual obligations not just those as to time, may spell out more explicitly than other formulae just what may happen on any breach or default, I am of the view that the language used by the parties in the agreement before me produces the same result for non-compliance with a timed obligation.

[46] In this case, it is noteworthy that the breach was more significant than being late by a few minutes or even a few days. Rather, what the plaintiffs proposed on September 30, 2016, was that they would pay $750,000 towards the balance of the deposit owing immediately, with $1,000,000 within two business days and $768,400 by the end of October. Accordingly, under their proposal, the breach was not to be remedied until a month following the deadline the parties had agreed to for payment of the final portion of the deposit.

[47] The plaintiffs suggest that the defendant was acting in bad faith when it terminated the Agreement because it was motivated by an opportunity to get a better deal with another purchaser. While the Supreme Court of Canada has recognized a duty of good faith in the performance of contracts (Bhasin v. Hrynew, 2014 SCC 71), such a duty does not preclude parties from relying on and enforcing clear terms of a contract. The Court rejected a similar argument in 1473587 Inc., para. 22:

While it may seem unfair, or perhaps more accurately, unfortunate to Loblaw that another purchaser with an inclination to do business came along precisely at the time Loblaw fell into breach of the deposit provision, it was through no fault, guile, deception or subterfuge on the part of the Vendors. The Vendors’ solicitor returned the six-day overdue cheque the same day he received it, telling Loblaw that the Vendors did not agree to accept the late deposit. That the Vendors discussed and subsequently came to an agreement with Forecast based on the early advice that the first agreement was no longer binding does not, in my view, come anywhere near using their position unfairly or playing fast and loose with Loblaw.

[48] Given the clear wording of the Agreement, there is no doubt that the Vendor was entitled to terminate the Agreement when the Purchasers failed to deliver the final deposit payment by 5:00 pm on September 30, 2016, and the Agreement was accordingly properly terminated later that day.

Effect of October 3, 2016 Meeting

[49] While the Purchasers do not appear to seriously dispute that the Vendors had the right to terminate the Agreement when they failed to complete the payment of the deposit on September 30, 2016, the Purchasers argue that what occurred at the October 3, 2016 meeting served to revive or amend the Agreement. They argue that at that time, the Vendor agreed to complete the Agreement with a later closing date in exchange for which the Purchases would pay the interest owing on a mortgage on the property. They further argue that the defendant’s failure to provide any direct evidence of what occurred at the meeting should lead me to draw an inference that such an agreement was in fact reached at the meeting.

[50] In contrast, the defendant argues that it has put forward evidence that no such agreement was reached at the meeting. In particular, the defendant relies on the letter it sent on September 30, 2016 terminating the Agreement, and its letter following the October 3, 2016 meeting in response to the Purchasers’ lawyer’s letter, wherein the Vendor denied that such an agreement was reached and confirming the termination of the Agreement. In addition, the defendant argues that, in accordance with the terms of the Agreement and the Statute of Frauds, amendments could only be made in writing.

[51] I agree with the plaintiffs that if the defendant contests the accuracy of what occurred at the meeting, it should have put forward an affidavit from Mr. Wang or Ms. Merry who were both representatives of the defendant present at the meeting. As required by the Rules of Civil Procedure and the case law, in order to contest to the plaintiffs’ evidence, the defendant ought to have put its best foot forward and provided direct evidence about what occurred at the meeting. In the absence of such direct evidence, I am entitled to draw an adverse inference that the plaintiff’s evidence is an accurate description of what occurred at the October 3, 2016 meeting: Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753 at para. 9.

[52] However, despite the defect in its evidence, I accept the defendant’s argument that even if what was said at the October 3, 2016 meeting is as reported by the plaintiffs, given the clear wording of the Agreement, a verbal discussion and a handshake could not have the effect of amending the Agreement. Furthermore, the Statute of Frauds precludes verbal agreements in relation to the sale of lands.

[53] As set out above, Article 13.18 requires all amendments to be made in writing and 13.19 provides that all waivers are to be in writing. In this case, not only was the agreement the plaintiff relies on not in writing, but the plaintiff’s own evidence is that Mr. Wang refused to reduce it to writing. Accordingly, by the explicit and clear terms of the Agreement, even if the parties reached a verbal agreement at the October 3, 2016 meeting, the agreement is not valid as it was not made in writing as required by the Agreement.

[54] Furthermore, section 4 of the Statute of Frauds, R.S.O. 1990, c. S.19, provides that no action to enforce a contract in regards to a sale or disposition of an interest in land is enforceable unless is in writing. In 1473587 Inc., para. 12, the Court considered an argument that the vendor agreed verbally to an extension of the deposit in that case, holding that “a written agreement for the purchase and sale of real property cannot be amended other than by written document”. See also: 2055384 Ontario Inc. v. DiBastiano, [2005] O.J. No. 4587 at paras. 7 to 10 (Master).

[55] Counsel for the plaintiffs rely on a couple of decisions to argue that courts have previously recognized that parties can verbally extend deadlines under a contract for the purchase and sale of land. In Iwanczuk v. Centre Square Developments Ltd., [1967] 1 O.R. 447 (Ont. High Court), the Court found that an ongoing course of conduct between the parties precluded the vendor from suddenly terminating the agreement without giving the purchaser an opportunity to close the transaction. In that case, at para. 9, the Court noted that there was an ongoing relationship between the lawyer for the purchaser and the law clerk for the vendor who were “extremely informal … in their dealings with each other”. The Court also had regard to the fact that there had been previous extensions both verbally and in writing. In those circumstances, the Court found that the parties had no regard to the time is of the essence provision in the agreement and the defendant should not be allowed to rely on it to terminate the agreement without notice. In contrast, in this case there is no such ongoing course of conduct. On the contrary, the only prior extension of time was made as a formal written amendment to the Agreement. In addition, the Agreement explicitly requires all amendment to be in writing.

[56] The other case the plaintiffs rely on is Trudale Explorations Ltd. v. Bruce (1978), 20 O.R. (2d) 593 (C.A.). In that case, the Court of Appeal found that an oral agreement to extend a mining exploration option precluded the defendant from terminating the agreement after having verbally agreed to extend the time for exercising the option. The Court noted that the recipient of the verbal extension had already acted on the promise. There the Court found that as a matter of equity, the owner could not unilaterally strictly enforce the terms of the written agreement and terminate the contract. Key distinguishing factors between this case and Trudale are that in Trudale there was detrimental reliance and there is no mention that the agreement explicitly stated that all amendments or waivers were to be in writing.

[57] The relationship in this case is more analogous to the relationship between the parties in the decision in 2336574 Ontario Inc. v. 1559586 Ontario Inc., 2016 ONSC 2467, wherein this Court considered a situation in which a party sought to close a deal one day later than provided for in the agreement. In that case, Morgan J. emphasized that good faith in the context of these types of transactions requires parties to adhere to the terms of the bargain they have struck; it does not require parties to agree to a further extension:

Where the parties have a long term, ongoing relationship, a level of good faith may be expected that imposes flexibility and obligations beyond the letter of the contract; where they are commercially experienced buyers and sellers in a discreet, one-off transaction, the level of contract adherence would not be expected to vary from the strict contractual terms: Yam Seng, at para. 142.

The Vendor’s obligation here was to have the Condominium ready to transfer to the Purchaser and to set the final closing date. The Purchaser’s obligation was to have the closing funds ready on the closing date and to pay them to the Vendor. The Purchaser did not have an obligation to take a few less dollars or to take the closing money a few days late. Given the relationship of Vendor and Purchaser in a discreet real estate deal, good faith meant sticking to the contract, not bending the contract – even just a little bit – to one side’s will.

[58] Counsel for the plaintiffs also argued at the hearing of the motion that in this case the factual matrix of the Agreement includes the common cultural background of the parties. He argued that Mr. Xu’s father and Mr. Wang come from the same region of China, where it would be customary to make agreements based on the honour of one’s word and a handshake. However, counsel’s suggestion that in the parties’ common culture agreements reached in this manner are to be honoured was only put forward in argument and was unsupported by any evidence from the parties themselves or from an expert. More importantly, the factual matrix may be relevant to understanding the context in which an agreement was made for the purpose of interpreting the agreement; it cannot serve to abrogate the clear written terms of an agreement, which in this case explicitly required all amendments to be in writing and required the plaintiffs to complete the payment of the deposit by 5:00 pm on September 30, 2016 (see Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 at para. 60).

[59] Finally, and in any event, I am not persuaded that what occurred at the meeting as described by the plaintiffs amounts to an agreement to extend the timelines under the Agreement. Mr. Xu’s evidence in his affidavit and on the cross-examination does not suggest that the parties agreed to change the schedule for the payment of the deposits. On the contrary, his evidence is that Mr. Wang refused to take the bank draft for $1,750,000. Mr. Xu’s evidence is also that Mr. Wang said that he could not sell the property now because he was facing too much pressure from other sources, but that Mr. Wang stated that he would sell the property to the plaintiffs at the end of March, 2017. While Mr. Wang indicated that the plaintiffs would have to carry the $22,000,000 mortgage at a rate of 5% per annum, there was no discussion about when the balance of the deposit would be paid and Mr. Wang specifically rejected the portion of the balance of the deposit offered by Mr. Xu. Under the circumstances, even on Mr. Xu’s own evidence, it appears that at most Mr. Wang was agreeing to agree at a later date. This is evident from his refusal to accept the deposit and to put anything in writing. In other words, at most this was an agreement to agree; not an enforceable agreement with ascertainable terms. At that point, the Agreement had already been terminated and the discussion, even as reported by Mr. Xu, cannot amount to a new agreement.

[60] Therefore, in accordance with the clear terms of the Agreement, the Vendor was entitled to terminate the Agreement on September 30, 2016, when the Purchasers failed to pay the balance of the deposit that was due that day. The October 3, 2016 meeting did not revive or alter the Agreement, because any amendments to the Agreement were to be made in writing.

Relief from Forfeiture

[61] Under the terms of the Agreement, the defendant is entitled to retain the deposit if the Agreement is terminated due to the Purchasers’ breach. However, the plaintiffs argue that this is an appropriate case for relief from forfeiture. I disagree.

[62] Section 98 of the Courts of Justice Act provides that “A court may grant relief against penalties and forfeiture, on such terms as to compensation as are considered just.”

[63] The test developed by the courts for granting relief from forfeiture was recently restated by the Court of Appeal for Ontario in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, as follows:

a. Whether the forfeited deposit was out of all proportion to the damages suffered, and

b. Whether it would be unconscionable for the seller to retain the deposit.

[64] The Court of Appeal emphasized that even if the vendor suffered no damages, this is not sufficient to establish that forfeiture of a deposit would be unconscionable: Redstone, para. 17.

[65] Citing the Court of Appeal’s decision in Peachtree II Associates-Dallas L.P. v. 857486 Ontario Ltd. (2005), 76 O.R. 362, the Court in Redstone, paras. 23 to 25, also emphasized that relief against forfeiture should only occur in exceptional circumstances:

Justice Sharpe continued, noting that “Judicial enthusiasm for the refusal to enforce penalty clauses has waned in the face of a rising recognition of the advantages of allowing parties to define for themselves the consequences of breach” (at para. 34). He cited in support Dickson J., who decried the prohibition of penalties as “blatant interference with freedom of contract”, and advocated treating both penalties and forfeitures under the rubric of unconscionability: Elsley v. J.G. Collins Insurance Agencies Ltd., [1978] 2 S.C.R. 916 at p. 937, 83 D.L.R.(3d) 1, 1978 CarswellOnt 1235, at para. 47 (WL Can).

The point is well made in Union Eagle Ltd. v. Golden Achievement Ltd., [1997] UKPC 5, [1997] A.C. 514, by Lord Hoffman for the Judicial Committee of the Privy Council who said, at p. 519 (A.C.):

[I]n 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 grounds 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.

I would agree that the finding of unconscionability must be an exceptional one, strongly compelled on the facts of the case.

[66] With respect to the issue of proportionality, in Redstone, para. 28, the Court of Appeal found in that case that there was no evidence that a 7% deposit was commercially unreasonable. In this case, the deposit of $1,000,000 is a bit more than 2% of the purchase price and there is no evidence that this was commercially unreasonable or otherwise inappropriately disproportionate. See also 2336574 Ontario Inc., para. 34. While $1 million seems like a large number, it is a relatively small percentage of the sale price overall and is not so out of proportion as to warrant relief from forfeiture.

[67] The Court in Redstone, para. 30, stated that the indicia of unconscionability are never closed, but that the cases have considered factors such as inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach, and the conduct of the parties.

[68] In this case, there is nothing to suggest that enforcing the Vendor’s right to forfeit the deposit would be unconscionable. The parties were sophisticated real estate developers involved in a multimillion dollar deal. There is nothing to suggest that they were in unequal bargaining positions or that there was an imbalance in the manner in which the deal was negotiated.

[69] The Vendor argues that the breach was relatively minor because the Vendor had previously been willing to grant an extension and it was clear that the Purchasers would be able to complete the payment of the deposit in the near future. As noted above, there was no ongoing course of conduct that should have led the Purchasers to view the failure to meet the September 30, 2016 as insignificant to the Vendor. There had only been one prior extension and it was granted in writing. In addition, from the Vendor’s perspective, there was in fact no certainty that the Purchaser would meet its obligations. This was the second time the Purchaser requested an extension, and at the time the extension was sought the Purchaser indicated that it intended to have the balance of the deposit available by the end of the month. There was no certainty that the Purchasers would in fact be in position to complete payment of the deposit by the later proposed or to make the payment required on closing. Accordingly, given the circumstances and the clear terms of the Agreement, I do not accept that the breach can be characterized as minor. Even if it was minor, as indicated above, none of the other indicia of unconscionability are present in this case.

Conclusion on Motion for Summary Judgment

[70] I am satisfied that I can make a just and fair determination of this matter based on the evidence available on the motion and the submissions of counsel. In this case, the factual issues are discrete and most of the evidence is in writing and undisputed. The only disputed evidence is in relation to what occurred at the October 3, 2016 meeting. In my view and as I explained above, it would not assist to have a trial in this case for the purpose of hearing viva voce evidence about what occurred at the meeting given the terms of the Agreement and the course of conduct between the parties up to September 30, 2016. Accordingly, I find that there is no genuine issue for trial, and the Purchaser’s action is dismissed.

Certificate of Pending Litigation

[71] As I have granted the motion for summary judgment in favour of the defendant, the motion for a certificate of pending litigation is moot.

[72] However, if it had been necessary to decide the issue, I would have dismissed the motion. Article 13.26 of the Agreement clearly precludes the plaintiffs from obtaining a certificate of pending litigation and shows that the plaintiffs agreed that they did not acquire a legal or equitable interest in the property.

[73] Courts have enforced similar provisions. For example, in St. Thomas Subdividers v. 639373 Ontario Ltd., 1988 CarswellOnt 438 (Ont. HCJ), the Court considered a clause in an agreement of purchase and sale wherein the purchaser agreed that the agreement did not create an interest in the land. In that case, the Court allowed an appeal from a Master’s Order granting a certificate of pending litigation, finding that the language of the clause in the agreement was clear and the purchaser was sophisticated and ought to have known what he was agreeing to when he signed the agreement.

[74] There are similar circumstances in this case. The parties were sophisticated, and the plaintiffs explicitly agreed not to register a certificate of pending litigation and that they had not acquired an interest in the land.

Conclusion

[75] The defendant’s motion for summary judgment is granted and the action is dismissed. There shall be a declaration that the Agreement is terminated and that the Purchasers have forfeited their deposit of $1,000,000. The motion for a certificate of pending litigation is also dismissed.

[76] At the conclusion of the argument on the motions, counsel for the parties indicated that they did not have costs outlines. If the parties are unable to agree on costs, the defendant is to make brief written submissions no longer than three pages in length within 10 days of the date of these reasons, and the plaintiffs are to make brief responding submissions no longer than three pages in length within 20 days of the date of these reasons.

FAVREAU J. RELEASED: July 20, 2017

COURT FILE NO.: CV-16-562318 DATE: 20170720 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N : XU Plaintiff – and – 2412367 ONTARIO LIMITED Defendants

REASONS FOR JUDGMENT

FAVREAU J. RELEASED: July 20, 2017