SUPERIOR COURT OF JUSTICE

OSHAWA COURT FILE NO.: CV-16-97453

DATE: 20180516

ONTARIO

BETWEEN:

Shripragas Sivasubramaniam

Applicant

– and –

Yar Mohammad and Jamila Khudabakhsh

Respondents

Garth B. Dingwall, for the Applicant

Michael Title, for the Respondents

HEARD: April 19, 2018

REASONS FOR DECISION

CHARNEY J.:

Introduction

[1] The applicant, Shripragas Sivasubramaniam, seeks an order for specific performance of an Agreement of Purchase and Sale (APS) in relation to a detached home owned by the respondent and located on Cragg Crescent in Ajax, Ontario (the property).

[2] This Application raises two interrelated issues:

i. Which party breached the terms of the APS when the deal failed to close on April 29, 2015?

ii. If the vendors were in breach of the APS, is specific performance the appropriate remedy in this case?

Facts

Agreement of Purchase and Sale

[3] The applicant is the sole income earner for his family. He works full time in the shipping and receiving section of a food industry facility. He earns less than $45,000 per year in this position and earns some additional income working for $14.00 per hour as a cook in a restaurant.

[4] In 2014 the applicant began to look for a house in the Ajax area. He wanted a house in an area with a Tamil-Canadian cultural community. He could only afford approximately $500,000, perhaps as high as $530,000, which restricted him to the Ajax area rather than something closer to Toronto like Scarborough or Markham.

[5] After looking for properties for several months, the applicant was shown the respondents’ property on Cragg Crescent in Ajax. It was listed for $495,000.

[6] The applicant and the respondents entered into an APS for the sale of the property on March 8, 2015. The applicant was the purchaser, and the respondents were the vendors. Pursuant to the terms of the APS, the sale price of the home was $525,000, and the closing date was April 29, 2015. The applicant paid a $10,000 deposit.

[7] Paragraph 2 of the APS provided for vacant possession on closing. Paragraph 2 provides:

This Agreement shall be completed by no later than 6:00 p.m. on the 29th day of April, 2015. Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.

[8] There were no other terms in the APS relevant to the issue of vacant possession.

[9] The APS did not require the purchaser to assume or accept a tenant, and there is no reference in the APS to the home being tenanted.

[10] Paragraph 26 of the APS included an “entire agreement” clause, and stated:

This Agreement, including any Schedule attached hereto, shall constitute the entire Agreement between the Buyer and the Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.

[11] The applicant was purchasing the home to live in with his wife, two children and his mother. When he purchased the home he was living in a condominium with his family. In reliance on the purchase of the new home he listed his condominium for sale. Since he was selling and vacating his family’s condominium to pay for the new home, receiving vacant possession was an important condition of the APS for the applicant.

[12] The MLS real estate listing description of the property did state: “Aaa Tenant” (sic).

[13] The applicant’s Supplementary Affidavit states that he saw the reference to a tenant in the listing, and he advised his own realtor that he did not wish to purchase a tenanted property, since his intention was to move into the property with his family. The applicant also states that his real estate agent raised this issue with the respondents’ real estate agent on March 9, 2015, when he submitted his offer to purchase the property. He states that the respondents’ real estate agent stated, in the applicant’s presence, that the tenant would be moving out by or before the closing.

[14] The applicant visited the property in April 2015 with his real estate agent after the APS was executed to inspect the property, as per Schedule A of the APS. At this attendance they met a tenant, who appeared concerned with the purpose of their visit. The applicant and his real estate agent advised the tenant that the applicant had not agreed to assume any tenants upon closing, and this was a matter that the tenant would have to take up with the respondents.

Lawyers’ Correspondence

[15] At this point, the applicant’s real estate lawyer, Mr. Maharaja, became involved in correspondence with the respondents’ real estate lawyer to try to address, inter alia, the issue of vacant possession. The details of this correspondence are set out below because these details are relevant to the issue of anticipatory breach.

[16] On April 15, 2015, the requisition date under the APS, Mr. Maharaja wrote to the vendor’s real estate lawyer, Ms. Chegini, regarding the vacant possession/tenancy issue. His letter stated:

I am writing this letter to specifically mention about the tenancy issue in the subject property. Please note that the purchaser anticipates that the sellers would have taken necessary steps to deliver vacant possession of the property on completion. Purchaser is making all arrangements to move into the subject property on the completion date. Any delay will cause my client serious financial and other damages to the purchaser. Therefore, I hereby request you to pay special attention to this matter.

[17] On April 16, 2015, Mr. Maharaja again wrote to Ms. Chegini, as follows:

We acknowledge receipt of your responses for the requisitions submitted to your office. We have observed that the documents as revised by you contravene the terms of the Agreement of Purchase and Sale in writing between the parties. We specifically noticed the deletion with respect to delivery of vacant possession of the subject property. We have discussed this issue with our client and my client advises us that he will not be in a position to accept any document that alter or amend the terms of the Agreement of Purchase and Sale in writing. Accordingly, we expect to have the documents executed by the sellers without any alteration or deletion and any alteration or deletion will be considered as breach of terms.

[18] On April 17, 2015 Ms. Chegini replied:

[T]he matter regarding the assumption of the tenancy is one that should be negotiated between our clients and their realtors, the subject agreement of purchase and sale DOES NOT require vacant possession.

(Upper case emphasis in original)

[19] On April 17, 2015 Mr. Maharaja replied:

Briefly, my client makes arrangements with the hope that your clients will comply with any and all terms of the Agreement of Purchase and Sale. In the event of any breach on your clients’ part, my client will suffer serious damages. If the sellers have contrary intent kindly advise us, particularly with respect to “vacant possession” as per paragraph 2 of the Agreement of Purchase and Sale.

[20] Mr. Maharaja followed up with another fax on April 20, 2015, to advise that his client, the purchaser:

…is making arrangements with the hope that your clients will comply with any and all terms of the Agreement of Purchase and Sale. My client is also taken steps to sell the property that he presently residing in, to raise funds for the purchase transaction.

[21] On April 20, 2015, Ms. Chegini replied:

The letters that you continue to draft and send to my office are a waste of my time and simply put extremely unfounded. If you continue to threaten my client with your unfounded interpretation of the law and attempt to force my client into signing your form of documents I shall report you to the law society of upper canada (sic) for investigation because it is worrying that you have such a limited grasp of real estate law and yet are practicing in this field. Your form of document SHALL NOT BE signed and I will not waste another minute of my time discussing this matter with you. (Upper case emphasis in original)

[22] Mr. Maharaja replied the same day:

In response to your last correspondence, please be advised that my client has valid reasons to request your clients to execute my forms of documents. Your forms fail to provide complete and clear information. Particularly, your documents fail to include clauses connected to delivery of vacant possession and existing mortgage particulars. Finally, in my opinion, requesting compliance to the terms of an agreement does not amount to anything that demands complaining to the Law Society.

[23] On April 21, 2015, Mr. Maharaja again wrote to Ms. Chegini as follows:

Further to my letter of requisitions and subsequent mutual correspondence, please be advised that my client informs me that he has reliable information from the real estate agent that the sellers may not deliver vacant possession of the subject property as agreed in writing on completion of this transaction on April 29, 2015. As I could see from your correspondence, you continue to be ambiguous about the subject of “delivery of vacant possession” and misinterpret the contents of the Agreement of Purchase and Sale…

I reiterate that my client demands vacant possession of the subject property on the scheduled date. In the event that the sellers fail to comply with the terms of the APS and your office fail to advise your clients properly and knowingly assist them in misleading my client and my office, my client will have no other choice than to hold both the sellers and your office for any and all damages suffered by him.

[24] Ms. Chegini replied the same day:

The vacant possession clause is intentionally being left as my clients have advised me that the property is currently being tenanted and the tenant has not yet confirmed that he/she shall be vacating the property. I do understand that this is not ideal for your client, however this is a matter that was discussed between our clients and their respective realtors during negotiations (this is what I am being told). I have and will continue to stress the importance of vacant possession to my client but I am unable to force the tenant to move out and this matter and all matters relating to this sale have nothing to do with me or my law office. You appear to be taking this matter personally and your continuous threatening and unfounded faxes and emails will not be tolerated by me. I remind to refrain from shifting the blame of this situation on me or my office. I have been very honest with you regarding the fact that my clients may not be able to give your clients vacant possession and I have and continue to make efforts for the tenant to vacate the property but unfortunately the tenant is not cooperating. I do recommend that you ask your clients realtor to communicate with my clients realtor and they discuss the situation and try to resolve it.

[25] Mr. Maharaja replied the same day:

I am not taking this matter personally, but very seriously. As I presently represent my client, I will not ask my client to handle this matter through the real estate agent or brokerage. (Emphasis in original)

[26] And Ms. Chegini replied again with the last email of April 21, 2015:

As stated to you before neither I or my client can confirm that vacant possession will be given on final closing. If and when I get any updates on this matter I will update you.

[27] On April 22, 2015 Ms. Chegini wrote to Mr. Maharaja, taking the position that the APS did not require vacant possession on closing. She took the position that since the MLS listing of the property noted that the property was tenanted, the purchasers were required to assume the tenancy until the termination of the lease in December, 2015. She concluded:

Ultimately we are ready, willing and able to close this transaction, my client will make all efforts to request that the tenant does vacate the property, but in the event that this is not possible, your client must assume the tenant.

[28] On April 26, 2015, Mr. Maharaja wrote to Ms. Chegini:

Despite my numerous correspondences, so far you have been ambiguous and failed to state my client whether the sellers will deliver vacant possession of the subject property on completion of this transaction. Instead you have been raising irrelevant issues. Therefore, I am left with the option to make a reasonable presumption and to act on that presumption to better serve my client. Accordingly, from all the communications I received from your office up to now, I can reasonably presume and conclude that the sellers will NOT deliver vacant possession as agreed in writing.

In the above circumstances, as I could and my client could reasonably believe that the sellers will NOT deliver vacant possession of the property on closing, my client will halt his efforts to sell his present property and as an effort to mitigate my client’s damages, I will also discontinue working on this file and stop dealing with the mortgagee. I will wait until I get a signal from your office as to the date on which your client will be ready to deliver vacant possession of the subject property to my client, to advise my client and to resume working on this file.

At the same time, my client will take all necessary legal regulatory steps to recover his damages and discipline those who failed in their duties.

(Emphasis in original)

[29] April 29, 2015 was the scheduled closing date. On that date Ms. Chegini sent a fax to Mr. Maharaja. The fax cover page stated:

My client and his realtor cannot guarantee a date for vacant possession and they no longer wish for this matter to continue, my client is of the opinion that your client knew from the beginning that he was purchasing a tenanted property and he had the opportunity to purchase this property and assume the tenant as discussed in person when he inspected the property and when he met with the tenant and your client has decided not to do so…My client asks that your client sign and send a mutual release, terminating this agreement. It is a shame that our joint efforts and hard work has gone to waste and this could have all been prevented if the tenant was assumed for the remainder of her lease. My client will not pay me for my time spent on this file, I do hope that your client pays you.

[30] The letter appended to Ms. Chegini’s fax cover page stated:

Our client is ready, willing and able to close today so long as your client assumes the existing tenant as agreed to between the parties.

As you have indicated that your client shall not be closing today because they no longer wish to assume the existing tenant, we are holding your client in default the deposited monies may be forfeited and paid to our client and our client may look to your client for any damages and costs suffered by our client, including but not limited to any additional legal fees, and mortgage payments.

[31] Mr. Maharaja replied:

I am in receipt of your last faxed letter which incorrectly holds my client for default.

I had the opportunity to discuss this matter with my client who proposes to proceed with a claim against the sellers who refused to comply with the terms of the Agreement of Purchase and Sale and claims/regulatory proceedings against their representatives for their failures. Accordingly, my client instructs me to inform you to advise your clients about my client’s intent and prevent them from causing further damages to my clients.

[32] Finally, on April 29, 2015, Mr. Maharaja wrote to Ms. Chegini to determine whether the vendors were in a position to deliver vacant possession on that date or at some later date. This letter clearly indicates that the applicant was not prepared to elect to terminate the agreement. The letter stated:

Further to my previous correspondence…I hereby request you to provide my office with an update as to the date on which the sellers will be able to deliver vacant possession of the subject property. Nevertheless, your clients’ unwillingness and inability to deliver vacant possession as stipulated in the Agreement of Purchase and Sale constitutes an anticipatory breach therefore does not require my client to tender upon the sellers.

[33] Mr. Maharaja closed his letter by indicating that his client still wanted the property and was prepared to take vacant possession at a later date:

Apart from all what have taken place, I still believe that your office can take steps to lower any future losses by setting (with the consultation of the sellers) an alternate date for completion of this transaction. Our client informs me that he is in a position to negotiate alternatives.

[34] I am advised by counsel that the $10,000 deposit continues to be held in trust by the vendors’ real estate agent. The vendors have never proposed any alternate dates for closing with vacant possession, and take the position that the applicant defaulted by failing to close on April 29, 2015.

[35] The tenants did move out of the property on December 15, 2015, and the respondent and his family moved into the property on December 25, 2015. On May 10, 2016, the respondent re-listed the property for $649,900.

[36] There is a dispute as to why the listing was cancelled. The applicant contends that the listing was cancelled because his lawyer contacted the listing brokerage advising that the applicant maintained an interest in the property, and “subsequently registered a Caution-Land filing” against the property. The date of the registration of the “Caution-Land filing” is not disclosed in the affidavit material.

[37] The respondent contends that he cancelled the listing because he received some financial assistance from friends and family and no longer needed to sell the home for the money, and that he plans to remain in the home because his daughter is going to the local school.

[38] The applicant commenced this Application on September 24, 2016, seventeen months after the April 29, 2015 closing date.

Procedure

[39] The applicant commenced this claim by way of Notice of Application. At the outset of the hearing I canvassed with counsel the appropriateness of proceeding by way of Application.

[40] Rule 14.02 of the Rules of Civil Procedure, R.R.O., 1990, Reg. 194, provides:

14.02 Every proceeding in the court shall be by action, except where a statute or these rules provide otherwise.

[41] Rule 14.03(1) provides that the “originating process for the commencement of an action is a statement of claim” with enumerated exceptions that are not relevant to this case.

[42] The applicant’s counsel advised that he proceeded under Rule 14.05(3)(d), which provides:

(3) A proceeding may be brought by application where these rules authorize the commencement of a proceeding by application or where the relief claimed is,

(d) the determination of rights that depend on the interpretation of a deed, will, contract or other instrument, or on the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

[43] He argues that the applicant’s right to specific performance depends on the interpretation of the APS, and in particular the term in paragraph 2 of the APS that provides “Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.”

[44] In contrast, the respondents argue that the written agreement is not binding because the applicant knew there was a tenant when he made the offer to purchase the house, and the respondents were told by their own real estate agent that the applicant would retain the tenant until the end of the lease.

[45] The respondents’ counsel did not object to this case proceeding by way of Application under rule 14.05(3). He indicated that both parties were of limited means, and that the application process was the least expensive and most expeditious way to proceed.

[46] I am not certain that an Application was the best way to proceed in this case. In my view, this case would have benefited from an exchange of pleadings under Rule 25.01 (statement of claim and statement of defence), which are not part of the application process.

[47] That said, Rule 2.01(2) provides that the “court shall not set aside an originating process on the ground that the proceeding should have been commenced by an originating process other than the one employed.” Moreover, the parties have proceeded on the basis that this was the proper and preferable procedure. They have exchanged affidavits and conducted cross-examinations on those affidavits, so the court has the same sort of record that would be available on a motion for summary judgment under Rule 20, had this case been commenced by way of action instead of application.

[48] Rule 38.10 gives the judge hearing the application powers similar to a judge hearing a motion for summary judgment under Rule 20, including the authority to have the whole application or any issue proceed to trial and to be treated as an action. Rule 38.10 provides:

38.10 (1) On the hearing of an application the presiding judge may,

(a) grant the relief sought or dismiss or adjourn the application, in whole or in part and with or without terms; or

(b) order that the whole application or any issue proceed to trial and give such directions as are just.

(2) Where a trial of the whole application is directed, the proceeding shall thereafter be treated as an action, subject to the directions in the order directing the trial.

(3) Where a trial of an issue in the application is directed, the order directing the trial may provide that the proceeding be treated as an action in respect of the issue to be tried, subject to any directions in the order, and shall provide that the application be adjourned to be disposed of by the trial judge.

[49] Having proceeded by way of application, the parties have introduced their evidence by way of affidavit and cross-examination on the affidavits pursuant to Rule 39.01. Affidavit evidence on applications is restricted by Rule 39.02(5), which provides:

(5) An affidavit for use on an application may contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit.

[50] In the present case, the applicant, Mr. Sivasubramaniam, and the respondent, Mr. Mohammad, have each filed at least one affidavit. They each refer to their respective real estate agents and what they were told by their respective real estate agents. Neither real estate agent provided an affidavit. To the extent that the affidavits are based on hearsay evidence from the real estate agent, the facts are contentious and the evidence is not admissible under Rule 39.01(5).

[51] For example, the respondent states in his affidavit: “It was my understanding from Mr. Paikar [the respondent’s real estate agent] that the Purchaser was retaining the tenant until the end of her lease”. That may well have been the respondent’s understanding with his own real estate agent, but, in the absence of an affidavit from Mr. Paikar, there is simply no evidence that there was any such oral agreement or understanding between the purchaser or his real estate agent and Mr. Paikar.

Which party breached the terms of the APS when the deal failed to close on April 29, 2015?

[52] This brings me to the first substantive issue in this application.

[53] In my view the terms of the APS are quite clear. Paragraph 2 of the APS expressly provides that “vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement”. There is nothing in the APS to “otherwise provide” that the purchaser would assume the property with the tenant. The fact that the MLS description of the property noted that it was tenanted is entirely irrelevant given the terms of sale in the APS.

[54] Moreover, para. 26 of the APS included an “entire agreement” clause.

[55] In Soboczyynski v. Beauchamp, 2015 ONCA 282, the Ontario Court of Appeal discussed the general purpose and application of an “entire agreement” clause in a contract. The Court stated, at paras. 43 to 46:

An entire agreement clause is generally intended to lift and distill the parties’ bargain from the muck of the negotiations. In limiting the expression of the parties’ intentions to the written form, the clause attempts to provide certainty and clarity.

In Inntrepreneur Pub Co. Ltd. v. East Crown Ltd., [2000] 41 E.G. 209 (U.K. Ch.), Lightman J. colourfully described the purpose of an entire agreement clause as follows:

The purpose of an entire agreement clause is to preclude a party to a written agreement threshing the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty... For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere. [Emphasis added in original.]

Legal commentators appear to be united in their view that entire agreement clauses are, generally speaking, retrospective in nature. According to Angela Swan, “An “entire agreement” clause deals only with what was done or said before the agreement was made and seeks to exclude those statements and acts from muddying the interpretation of the agreement; it is a contractual invocation of the parol evidence rule”: Canadian Contract Law, 3d ed. (Markham: LexisNexis Canada, 2012), at p. 600 (emphasis in original); see also John D. McCamus, The Law of Contracts, 2d ed. (Toronto: Irwin Law Inc., 2012), at p. 733.

Justice P.M. Perell agrees. He says that “[t]he parol evidence rule then directs that the written contract may not be contradicted by evidence of the oral and written statements made by the parties before the signing of the contract. The entire agreement clause is essentially a codification of the parol evidence rule”: "A Riddle Inside an Enigma: The Entire Agreement Clause" (1998) The Advocates' Q. 287 at 290-91 (emphasis added).

[56] Accordingly, whatever understanding or misunderstanding the respondent had as a result of comments from his own real estate agent before the APS was signed, the APS, by its terms, represents the whole agreement as between the parties. And the terms with respect to vacant possession are clear and unequivocal.

[57] There is no evidence that the applicant made any statements or promises to the respondents subsequent to the signing of the APS to suggest that he would waive the vacant possession condition. Indeed, the correspondence reproduced above is very clear that the purchaser, through his lawyer, insisted on vacant possession in every communication with the vendors’ lawyer.

[58] The law relating to anticipatory breach of contract was summarized by the Ontario Court of Appeal in Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92, at para. 37:

An anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due. See Pompeani v. Bonik Inc. (1997), 1997 CanLII 3653 (ON CA), 35 O.R. (3d) 417, [1997] O.J. No. 4174 (C.A.). To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it. See McCallum v. Zivojinovic (1977), 1977 CanLII 1151 (ON CA), 16 O.R. (2d) 721, [1977] O.J. No. 2341 (C.A.). …[I]n determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract.

[59] In addition, the Ontario Court of Appeal held in Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576 at para. 47, that the test for anticipatory breach is an objective one based on a consideration of the surrounding circumstances: “a party can repudiate a contract without subjectively intending to do so.” The Court (at para. 48) adopted this summary from Angela Swan, Canadian Contract Law, 3d ed. (Markham: LexisNexis Canada, 2012), at p. 618:

The person (or his or her solicitor) may believe when the statement is made that he or she has an excuse for non-performance and that it is the other party who is in breach of the contract. The characterization of the statement as an “anticipatory breach” [or “repudiation”] will then be made when the dispute goes to trial.

[60] Similarly, the Ontario Court of Appeal in Pompeani adopts the following statement from Waddams, The Law of Contracts, 3rd ed., paras. 613-614:

Repudiation can be by words or conduct evincing an intention not to be bound by the contract. It was held by the Privy Council in Clausen v. Canada Timber & Lands, Ltd. that such an intention may be evinced by a refusal to perform, even though the party refusing mistakenly thinks that he is exercising a contractual right. [Emphasis added]

[61] When confronted by an anticipatory repudiation or breach, the innocent party has two options: accept the repudiation and treat the agreement as being at an end, or decline to accept the repudiation and insist on performance. In Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415, the Supreme Court of Canada stated, at para. 15:

In cases such as the one at bar, where the vendor reneges in anticipation of performance, the innocent party has two options. He or she may accept the repudiation and treat the agreement as being at an end. In that event, both parties are relieved from performing any outstanding obligations and the injured party may commence an action for damages. Alternatively, the injured party may decline to accept the repudiation and continue to insist on performance. In that case, the contract continues in force and neither party is relieved of their obligations under the agreement.

[62] Thus, a repudiatory breach does not automatically bring an end to a contract. Rather, the innocent party has the two options described by the Supreme Court. As a general rule, the innocent party must make an election and communicate it to the repudiating party within a reasonable time: see Chapman v. Ginter 1968 CanLII 72 (SCC), [1968] S.C.R. 560 at 568.

[63] Finally, the analysis of Lederer J. in Kalis v. Pepper, 2015 ONSC 453 at paras. 10 to 12 is also relevant to the issues raised in this case:

When can it be said that a contract has been repudiated? It has been said that:

Repudiation is conduct that demonstrates that a contracting party has absolutely renounced its contractual obligations.

A party to a contract repudiates by clearly stating that he or she does not intend to perform his or her obligations under the contract.

(Paul Perell, Real Estate Transactions, 2nd edition, Canada Law Book at p. 340, [and cases cited therein]…

For any action or statement to be relied on as repudiation, it must be clear, absolute and certain. Otherwise, any expressed uncertainty could be taken as repudiation and it would be impossible (or at least risky) for a party to a contract to express concerns or seek assistance from the other party to address such concerns lest it be taken as repudiation.

[64] In the present case, the correspondence between Mr. Maharaja and Ms. Chegini makes it abundantly clear that the vendor’s express refusal to give vacant possession to the purchaser on closing meant that it was the vendor who repudiated the contract. Given the applicant’s intention to live in the property with his family on closing, this breach would deprive the innocent party of substantially the whole benefit of the contract.

[65] In this regard, it does not matter if the respondent honestly believed that he did not have to provide vacant possession. The test for anticipatory breach is an objective test, and the vendor’s (or his lawyer’s) mistaken belief that he was exercising a contractual right when he refused to provide vacant possession does not excuse his repudiation of the contract.

[66] Mr. Maharaja’s letter of April 29, 2015, makes it clear that the applicant was not electing to terminate the agreement, but insisted on its continued performance and tried to find an alternate closing date in which vacant possession would be given by the vendor. Accordingly, the applicant made it clear that it was his intention to keep the agreement alive.

[67] Significantly, the applicant did not demand a return of his deposit, which also indicates a continued intention to enforce the terms of the APS. In Justice Perell’s article “Common Law Damages, Specific Performance and Equitable Compensation in an Abortive Contract for the Sale of Land: A Synopsis” (2011), 37 Advocates Quarterly 408, he writes as follows (at 413):

A purchaser who demands the return of his or her deposit is electing to end the contract and will not have a claim for specific performance.

See also: R.J. Sharpe, Injunctions and Specific Performance 2nd ed. (Toronto: Canada Law Book, 2015) at para. 10.700:

It has been held that if the promisee asks the promisor for restitution of benefits conferred, usually the return of his deposit, an election for that relief has been made, the contractual obligation of the promisor is at an end and specific performance is no longer available to the promisee

[68] The respondent, through his lawyer, took the position that “My client and his realtor cannot guarantee a date for vacant possession and they no longer wish for this matter to continue”. It was, therefore, the respondent who breached the APS by clearly stating that they would not provide vacant possession on April 29, 2015 or on any date. The respondents made it clear that they would not propose a new closing date for the property when vacant possession could be conveyed.

If the vendors were in breach of the APS, is specific performance the appropriate remedy in this case?

[69] As indicated above, I have concluded that the vendors were in breach of the vacant possession clause of the APS. The next issue, therefore, is whether specific performance is the appropriate remedy in this case.

[70] In Semelhago, the Supreme Court of Canada discussed the circumstances in which specific performance was available. The Court rejected the traditional approach that specific performance would be automatically granted (at the purchaser’s option) for breaches of contract for sale of realty (para. 20):

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. Both residential, business and industrial properties are 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.

[71] Accordingly, the Court concluded, at para. 22, that, “[s]pecific performance should, therefore, not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available.”

[72] Whether specific performance is to be awarded is a question that is determined on the facts of an individual case. In Landmark of Thornhill Ltd. v. Jacobson (1995), 1995 CanLII 1004 (ON CA), 25 O.R. (3d) 628 (C.A.), at p. 636, the Ontario Court of Appeal identified three factors bearing on the exercise of discretion in favour of specific performance: (i) the nature of the property involved; (ii) the related question of the inadequacy of damages as a remedy; and, (iii) the behaviour of the parties, having regard to the equitable nature of the remedy.

[73] While Landmark of Thornhill was decided prior to the Supreme Court of Canada’s decision in Semelhago, the Ontario Court of Appeal has confirmed that these three factors continue to be part of the analysis: Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858 at para. 32, leave to appeal to S.C.C. dismissed, [2015] S.C.C.A. No. 50. See also: Rock Developments v. Khalid Real Estate, 2015 ONSC 5261 at paras. 71-72.

[74] The Ontario Court of Appeal explained the meaning of “uniqueness” in the context of a commercial property in John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003), 2003 CanLII 52131 (ON CA), 63 O.R. (3d) 304, leave to appeal to S.C.C. dismissed, [2003] S.C.C.A. No. 145 at paras. 38-39:

In Semelhago v. Paramadevan … at para. 22, Sopinka J. observed that specific performance will only be granted if the plaintiff can demonstrate that the subject property is unique in the sense that, “its substitute would not be readily available”. Although Sopinka J. did not elaborate further on this definition, in 1252668 Ontario Inc. v. Wyndham Street Investments Inc., [1999] O.J. No. 3188 at para. 23, Justice Lamek stated that he

[does] not consider that the plaintiff has to demonstrate that the Premises are unique in a strict dictionary sense that they are entirely different from any other piece of property. It is enough, in my view, for the plaintiff to demonstrate that the Premises have a quality that makes them especially suitable for the proposed use and that they cannot be reasonably duplicated elsewhere.

I agree that in order to establish that a property is unique the person seeking the remedy of specific performance must show that the property in question has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended [citation omitted].

[75] Several recent cases have considered the availability of specific performance in the context of residential real estate.

[76] In Chai v Dabir, 2015 ONSC 1327, Stinson J. stated, at paras. 27 -29:

The question for me to address, therefore, is whether I am prepared to find that 7 Cathcart was unique to the extent that a substitute was not readily available. Put another way, in the present case could the plaintiff demonstrate some fair, real and substantial justification for her claim to performance? For the reasons that follow, in my view, the plaintiff has met this test.

The plaintiff had specified various criteria when she was looking for a house. Over the course of two years, she looked at more than 50 properties. She attempted without success to acquire at least 10 of them. The house at 7 Cathcart met the plaintiff’s requirements, specifically in relation to its location, affordability, configuration (three bedrooms with a garden and garage) and condition. The defendants’ house was in a particularly desirable location, given its proximity to the Finch subway station.

The plaintiff’s efforts to find and acquire another comparable property in the same vicinity before and after she signed the agreement of purchase and sale with the defendants are, in my view, ample evidence that a substitute for 7 Cathcart was not readily available. Given the highly competitive and relatively thin market for suitable houses in the Newtonbrook area, I am satisfied that this property was unique and that the plaintiff has shown ‘fair, real and substantial justification’ for seeking specific performance.

[77] In Yan v. Nadarajah, 2015 ONSC 7614 (appeal dismissed, 2015 ONCA 196) Vallee J. canvassed a number of cases addressing the issue of specific performance in the context or residential real estate, at paras. 49 – 51:

[I]n order to succeed a claim for specific performance, they [the plaintiffs] must show that the property is unique in that it has a quality that cannot be readily duplicated elsewhere. The time to determine whether a property is unique is the date on which the breach takes place. Here, it would be on the date that the defendants refused to close the transaction. (see John Dodge Holdings Ltd. v. 805062 Ontario Ltd. pars 39 and 40). A vendor can challenge the presumption of uniqueness of real property by providing evidence that the property can be replaced for the purchaser’s purposes. (see 904060 Ontario Ltd. v. 529566 Ontario Ltd. par 14).

In Tropiano v. Stonevalley Estates Inc. on page 8, Sharpe J. (as he then was), who is an authority on specific performance, found that the applicant was entitled to specific performance. He was satisfied that the evidence established that the property was unique. He stated, “This is a residential property and there is evidence that the applicant attached particular significance to the fact that the property in question was a ravine lot and the location of the lot was important to the applicant. In my view, this evidence meets the test of uniqueness contemplated by Semelhago.”

[78] An important aspect of a claim for specific performance in the residential context is the subjective element. In John E. Dodge Holdings Ltd. Justice Lax, whose decision was upheld by the Court of Appeal, stated, at para. 59:

In terms of the subjective aspect, the court should examine this from the point of view of the plaintiff at the time of contracting. In some cases, there may be a single feature of the property that is significant, but where there are a number of factors, the property should be viewed as a whole. The court will determine objectively whether the plaintiff has demonstrated that the property has characteristics that make an award of damages inadequate for that particular plaintiff.

[79] The importance of subjective elements in a residential real estate agreement were highlighted by Pepall J. (as she then was) in DeFranco v. Khatari, [2005] O.J. No. 1890, at para. 35:

In this regard, frequently the purchase of a home is one of, if not the most significant acquisitions made in one’s lifetime. Not surprisingly, subjective factors feature prominently in the selection of a home.

[80] Finally, I reference my own decision in 954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, where I stated, at para. 151:

I would observe that while the premise upon which the Supreme Court’s decision in Semelhago was based—that “Residential, business and industrial properties are all mass produced much in the same way as other consumer products”— may have been true in 1996, it does not necessarily reflect the current real estate and development market in the Greater Toronto Area. In a housing market in which land is in increasingly limited supply and home sales are often characterized by bidding wars among prospective purchasers, it is no longer accurate to assume that residential properties are “mass produced”, at least within the GTA. This does not abrogate the stated principles applicable to granting specific performance, but it does suggest that the criteria will be more easily met within the present GTA housing market.

Uniqueness

[81] In the present case, the applicant has provided a list of reasons why the property was “particularly suitable for the purpose for which it was intended”. The intended purpose was to live in with his family. The applicant lists the following factors that made this home particularly suited for that purpose:

a) One of his primary concerns was to find a property in a neighbourhood with a Tamil-Canadian cultural community for his wife and mother (whose English language proficiency is limited).

b) The home was a detached home with 4 bedrooms and a front and back yard on a quiet residential street.

c) The home was located within a close proximity to the children’s elementary school and other amenities such as grocery shopping, since his wife and mother do not have access to a car.

d) The home was located a short drive from Highway 401, which would permit the applicant to commute to his job in Toronto.

e) The applicant had limited financial resources and could not afford more than the $525,000 agreed to for this home.

[82] Several of these factors are fairly generic descriptions of any detached home in a typical modern subdivision. Indeed, the respondent’s evidence is that the home is part of a subdivision with approximately 500 homes of different sizes and styles, and approximately 200 homes are similar to the respondent’s home in the same community.

[83] I accept the applicant’s evidence that this house was particularly suited for its intended purpose because it was in a neighbourhood with a significant Tamil-Canadian cultural community and was within his price range.

[84] The question of uniqueness is not just whether there are other similar homes in the same neighbourhood or subdivision, but whether any of those homes were “readily available” for the applicant to purchase when the respondent breached the APS. When the housing market is characterized by rapid price increases, affordability becomes an important factor in the analysis: Sutton v. Sodhi, 2017 BCSC 325 at para. 22 (). The availability of similar homes outside of the applicant’s price range does not, in my view, qualify as a “readily available” substitute.

[85] In Walker v. Jones, 2008 CanLII 47725 (ON SC), Strathy J. (as he then was), referenced affordability as one of the factors that made the home unique to the plaintiff. See for example para. 11: “The price was attractive and was within her budget”.

[86] At para. 123, Strathy J. notes that while the real estate agent testified that there were other homes available in the same neighbourhood, he did not say “that there were homes available at the date of the breach of contract that could have been obtained at a comparable price”. This was a significant factor in Strathy J.’s analysis of the appropriateness of specific performance.

[87] Strathy J. held that specific performance was the appropriate remedy in that case. The plaintiff’s “price range” was a important consideration (at paras. 162 – 165):

Applying the principles in these cases to the circumstances before me it is clear that the motivation for the purchase of Mount Fuji was not as an investment, but as a home for the plaintiff, Ms. Walker, her children and her mother, the plaintiff, Ms. Minto. I accept the plaintiff’s evidence that the property had a bundle of features that made it particularly attractive to her on a subjective level, given her price range and her unique needs. Viewed objectively, one might say that this was a typical home in a typical subdivision, but from the plaintiff’s perspective, it had unique and attractive attributes that were ideally suited to her needs and those of her family. It is clear that others viewed the property as particularly attractive, given the multiple offers on the second day it was shown for sale.

The defendant presented no evidence that there was any specific substitute residence available in the area of Mount Fuji which was available at the time of the breach of contract or shortly thereafter that would have met the plaintiff’s requirements and that would have been within her means.

The evidence of Mr. Moore suggests that the market was rising in the period between May and the end of November and it is a reasonable conclusion that the market was still “hot” and did not begin to cool off until some time into the new year. In these circumstances, considering that the defendant had purported to forfeit the plaintiff’s deposit, that the plaintiff had incurred legal expenses in the aborted transaction, together with moving expenses, rent and other costs, and considering that the holiday season was approaching, I do not think it was at all unreasonable for the plaintiff to seek specific performance rather than enter the still turbulent and rising real estate market. As well, the evidence does not establish that she could have found a reasonably comparable substitute property in her price range. (Emphasis added).

[88] The applicant has provided a list of comparable properties listed on MLS that might be considered roughly comparable to the Cragg Crescent property in size and approximate geographic area within the Town of Ajax for the time period from January 2015 to December 2016. The list includes 25 properties. The listings range from $499,000 to $699,000.

[89] Two of these properties sold before the April 29, 2015 closing date for between $515,000 and $525,000 on January 19, 2015 and February 5, 2015 respectively. A third home sold for $535,000 on May 9, 2015. All the other homes sold for in the high $500,000’s or the $600,000’s, substantially in excess of the applicant’s budget, with one exception: one property sold on March 24, 2016 for $499,000 after being listed for less than a week.

[90] Accordingly, the evidence presented does show that after the respondents breached the APS by refusing to provide vacant possession, the homes that sold were already selling for substantially more than the applicant’s maximum price, with only one home, sold about a week later, that was even in the ballpark. The only exception is the property that sold on March 24, 2016, which appears to be an anomaly, and which the applicant testified he was not aware of because of its brief time on the market. In my view, a single property that quickly sold one year later does not negate the applicant’s position that a substitute property was not readily available.

[91] Indeed, on May 10, 2016, the respondent re-listed the Cragg Crescent property for $649,900, which gives a fair indication of the price of equivalent properties at that time.

[92] On April 29, 2015, when the APS failed to close, the applicant was confronted with much the same situation as described by Strathy J. in Walker. The market was rising. Moreover, the respondents had purported to forfeit the applicant’s deposit, making it even more difficult for the applicant to collect a down payment and bid for other properties. In these circumstances, it was reasonable for the applicant to try to negotiate a new closing date, or seek specific performance if that effort failed. As well, the evidence does establish that the applicant would not have found a reasonably comparable substitute property in his price range.

Adequacy of Monetary Damages

[93] In addition to the property’s uniqueness, the court should consider the related question of whether monetary damages would be adequate in the circumstances. I accept the argument that there is a real risk that an award of damages will not meaningfully do justice between the parties.

[94] In Walker, Strathy J. held that damages were not an equally or more just remedy in that case because (at paras. 169-70):

If damages were ordered, whether based on the value of the property on the date of breach or the value of the property today, I cannot assume they would be collected in any reasonable time. Ms. Walker would be put in a position of looking for another house in a fluctuating market and with fluctuating mortgage conditions, with no assurance that she would be able to locate anything at all comparable given the features of this house. It could be more than a year before this would occur and I do not think it is either fair or reasonable to put the plaintiff and her family through that kind of delay.

Looking at the other side of the scale, I do not think there is anything inequitable in holding the defendant to his original bargain. He will be in exactly the position that he would have been had the contract been performed on November 30th.

[95] Those same considerations apply in the present case.

[96] Moreover, damages in lieu of specific performance are assessed as at the date of the trial: Semelhago at para. 18. In addition to requiring further expensive and prolonged litigation to assess damages, the evidence indicates that the respondent has no other substantial assets, which means that if damages are ordered, it is likely that the only way for the applicant to enforce the court order and recover his damages award will be through the recourse of a writ of seizure and sale against the Property. The transactional costs (in both time and money) associated with further litigation and obtaining a writ of seizure and sale reduces the likelihood that the plaintiff will be fully compensated by damages.

[97] Accordingly, I conclude that the remedy of damages is comparatively inadequate to do justice in this case.

Delay

[98] The only issue that gives me pause in this case is the question of delay. While the applicant immediately tried to negotiate a new closing date, he did not commence this application until 17 months after the aborted closing. The question is whether this delay is sufficient to disentitle the applicant to the remedy of specific performance.

[99] The case of 370866 Ontario Ltd. v. Chizy, 1987 CanLII 4122 (ON SC) predates the Supreme Court decision in Semelhago, and so much of the analysis must be approached with some caution. The Court did, however, discuss the issue of delay in the context of a four year delay in a claim for specific performance. The Court concluded that, as a result of the plaintiff’s delay, the plaintiff should be awarded damages rather than specific performance. The Court stated:

Ordinarily the plaintiff would be entitled to the order for specific performance. However, specific performance is an equitable remedy and I have concluded that it would be grossly inequitable to make such an order in this case. The writ of summons was issued on January 26, 1979. Pleadings were completed by March 23, 1979. Discoveries were held on February 19, 1980. For over four years nothing happened. The action was finally set down on July 16, 1984. It could have been set down in April, 1980. By the time the action came on for trial, inflation and a sweeping surge in Toronto real estate prices had converted this $25,000 property to an $85,000 property. The plaintiff, who must bear responsibility for the excessive delay in bringing this action to trial, now asks the court's assistance to obtain the $85,000 property at its 1978 price of $25,000

A purchaser must not be assisted in such a manner. If such a bargain could be enforced, a purchaser could commence action and then let the matter ride. If property prices rose, the vendor would pay the carrying costs until the purchaser elected to realize his profit. If prices fell, the purchaser could let the action drop. This is an investment where all the risk is assumed by the vendor.

There is no explanation of the delay in this case of over four years and four months.

I hold, therefore, that the plaintiff is not entitled to specific performance.

[100] The issue of delay also arose in the Yan case. The Court in that case considered a delay defence advanced by the Defendant vendor in circumstances where there was an unexplained delay of one year in which the Plaintiffs appeared to have taken no steps and two other periods of delay in which the Plaintiffs were taking some steps but could have been moving the matter forward more efficiently. In total, approximately two years went by in which the plaintiffs could have been taking more active steps to advance the action.

[101] In addition to the decision in Chizy, the defendants relied on R.J. Sharpe, Injunctions and Specific Performance 2nd ed. (Toronto: Canada Law Book, 2015) (loose leaf, release 24), ch. 1 which states in paragraph 1.820 that, “a plaintiff, once entitled to an injunction or specific performance may lose that right on account of delay in asserting the claim.”

[102] Vallee J. held that the delay in question was not sufficient to disentitle the plaintiffs to the remedy of specific performance. In this regard she relied on the following quotation from the Supreme Court of Canada’s decision in Bark-Fong v. Cooper, 49 SCR 14, 1913 CanLII 38 (SCC):

The doctrine of laches, it has been frequently said, is not a technical doctrine, and in order to constitute a defence there must be such a change of position as would make it inequitable to require the defendant to carry out the contract, or the delay must be of such a character as to justify the inference that the plaintiffs intended to abandon their rights under the contract or otherwise to make it unjust to grant specific performance. It cannot be said that anything has occurred which makes it inequitable that the respondent should be called upon to perform his contract; the only change suggested is that the property has risen in value. I confess I do not see why that should be regarded as a ground for thinking it is unfair that the defendant should be held to his contract.

[103] The Court of Appeal confirmed the decision of the trial judge in Yan, stating at para. 21:

We agree that litigants should not be permitted to unduly delay seeking specific performance so that they can obtain an economic advantage. However, the motion judge carefully considered the issue of delay… She concluded that the pace of the respondents’ prosecution of the claim did not disentitle them from obtaining an order for specific performance.

[104] The issue of delay was indirectly adverted to by the Supreme Court of Canada in Semelhago at para. 14, where the Court stated:

The order for specific performance may issue many months or even years after the breach. The value of the asset may have changed.

[105] The fact that the order for specific performance may issue “many months or even years after the breach” of the APS does not, by itself, appear to be out of the ordinary or act as an impediment to the granting of specific performance.

[106] In the present case, the only delay was the initial delay in commencing the application. While the application could have been commenced earlier, the fact remains that the applicant did make clear his intention to continue with the agreement. The applicant’s counsel wrote to the respondents’ counsel and listing brokers again in June of 2015 in an effort to negotiate a new closing date, but received no substantive response.

[107] The application was originally returnable on November 8, 2016, but was adjourned on consent to March 2, 2017. The application has been adjourned at least three more times since then. On the record before me it appears that all adjournments were on consent.

[108] In the totality of circumstances, it is my view that the applicant’s delay in commencing the application is not sufficient to disentitle the applicant from obtaining an order for specific performance. Initiating litigation is a significant and expensive step, it should not be undertaken lightly, and this application was commenced well within the two year limitation period. Nor is there anything in the record before me to suggest that the delay since November 8, 2016 is the responsibility of the applicant.

Hardship

[109] Finally, the respondent claims that he will suffer undue hardship if the applicant is granted specific performance. The home is now worth substantially more than the original contract price, and he will have difficulty purchasing a new property if he is paid only the original contract price. I note that the same hardship would likely apply if the respondent were required to pay damages in lieu of specific performance, since the damages would be the difference between the contract price and the value of the house as at the date of trial: Semelhago at paras. 18 and 19.

[110] In addition, the authorities indicate that hardship to the parties must be assessed at the time the contract is entered into. In Stewart v. Ambrosina et al., 1975 CanLII 462 (ON SC), 10 O.R. (2d) 483, Cory J. (as he then was), stated:

Even if it is assumed that undue hardship is a ground for refusing specific performance, such hardship must have existed at the time the contract was made and cannot be hardship that has arisen subsequently from a change of circumstances: see 36 Hals., 3rd ed., p. 301. That proposition would seem to be fair and well founded. If there is to be any certainty of contracts, the law must deal with the situation as it existed at the time of the formation of the contract. If that were not the case, then difficult problems arise. How long after the contract, for example, should the Court look at the circumstances of the parties to determine if there is undue hardship? Is the time to extend for one month or one year after the date of the contract, or date for its performance? The more extended the time for considering undue hardship may be the more the defendant raising such a defence benefits from a delay in the trial of an action based on his breach, for a subsequent illness or accident may give rise to a hardship that could be considered undue.

I have researched as diligently as I could and I have regretfully reached the conclusion that I cannot on the basis of hardship arising subsequent to the date of the contract and its date for performance, refrain from granting specific performance.

[111] There was no evidence of hardship at the time the contract was made in 2015, and, accordingly, hardship does not qualify as a ground for refusing specific performance in this case.

Conclusion

[112] This Court Orders:

a) There shall be an order for specific performance of the Agreement of Purchase and Sale (APS), dated March 8, 2015, of the property legally described as Lot 143, Plan 40M2285 and municipally known as 16 Cragg Crescent, Ajax, Ontario.

b) The Applicant may register a certificate of pending litigation against the property pending the specific performance of the APS.

c) The Applicant is entitled to a conveyance of the property as provided in the APS on a closing date to take place within 60 days after the date of this order. If the parties need assistance as to the scheduling of the closing or any other matters related to the closing, I may be spoken to.

d) The Applicant may pay out any liens or charges registered against the property, and any arrears of property taxes, and upon paying the balance of the amount of the purchase price to the Respondent, the Applicant’s real estate counsel may register a deed vesting title of the property in the Applicant on the agreed closing date.

[113] If the parties cannot agree to costs, the applicant may serve and file written submissions of no more than three pages, plus costs outline and any offers to settle, within 20 days of the release of this decision, and the respondents may respond, subject to the same terms, within a further 15 days.

Justice R.E. Charney

Released: May 16, 2018

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Shripragas Sivasubramaniam

Applicant

– and –

Yar Mohammad and Jamila Khudabakhsh

Respondents

REASONS FOR DECISION

Justice R.E. Charney

Released: May 16, 2018