COURT FILE NO.: CV-17-580766

DATE: 20180718

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Time Development Group Inc. (In trust) and 188 Crestwood Development Inc.

Plaintiffs

– and –

Claude Bitton and Odette Bitton

Defendants

Damien Buntsma and Stephanie R. Garraway for the Plaintiffs

Gary M. Caplan and Sandra Koljuskov for the Defendants

HEARD: July 9, 2018

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] This is an abortive real estate transaction action. The Plaintiffs, Time Development Group Inc. (In trust) and 188 Crestwood Development Inc. sue for specific performance. The Defendants, Claude Bitton and Odette Bitton, are discontinuing their counterclaim for damages, and they now move for a summary judgment dismissing the Plaintiffs’ action for specific performance.

[2] For the reasons that follow, I grant the Bittons’ motion, which disposes of both the action and the counterclaim. The Plaintiffs’ action is dismissed, and the Bittons shall have their costs of the claim and the counterclaim on a partial indemnity basis of $29,750.04, all inclusive.

B. Facts

[3] The Bittons assembled and own three contiguous properties municipality known as 188, 196, and 198 Crestwood Road in Vaughan, Ontario. The property is a prime property for redevelopment.

[4] In May 2018, Zul Jaffer, a real estate agent at Century 21 Leading Edge Realty Inc., introduced Mr. Bitton to Yuan Hua (Mike) Wang, who is the President of Time Development, which was interested in purchasing the Bittons’ properties for a residential home redevelopment project. Mr. Jaffer was the dual agent acting for both Mr. Wang’s company and for the Bittons in the negotiations that followed.

[5] On June 16, 2016, the Bittons signed a Standard form OREA Agreement of Purchase, which was dated May 31, 2016. Under the 2016 Agreement, the Bittons agreed to sell all but a small portion of their three properties to Time Development, in trust. 188 Crestwood Development Inc., an associated Time Development corporation, was to take title, and I shall, therefore, refer to Time Development and 188 Crestwood Development Inc. collectively as Time Development.

[6] The 2016 Agreement specified a purchase price of $8.75 million, a $200,000 deposit, and a two-year term vendor take-back second mortgage for $3.0 million with interest at 4% per annum. The Agreement was conditional on the property obtaining a zoning minor variance. The deposit was to be held by the real estate brokerage. The transaction was scheduled to close on October 31, 2016.

[7] For present purposes, the following standard terms of the 2016 Agreement are pertinent:

20. TIME LIMITS: Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein may be extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically authorized in that regard.

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

[8] On September 21, 2016, Mr. Bitton and Mr. Wang, with Mr. Jaffer’s assistance but without any assistance from lawyers, signed the First Amendment to the 2016 Agreement. The First Amendment removed the condition as to a minor variance, increased the deposit to $300,000, and changed the closing date to thirty days after the minor variance was obtained but no later than November 3, 2016. If the minor variance was not obtained, then the 2016 Agreement was to become null and void and the deposit was to be returned to Time Development.

[9] The minor variance was not obtained by November 3, 2016, but Mr. Bitton and Mr. Wang continued to negotiate with Mr. Jaffer’s assistance again without any lawyers being involved.

[10] On January 10, 2017, the Bittons and Time Development entered into the Second Amendment to the 2016 Agreement. The Second Amendment increased the purchase price to $10.55 million on account of including the remaining portion of the Bittons’ land. The deposit was increased to $500,000. The date for closing was now scheduled for thirty days after the City of Vaughan approved a road allowance or to thirty days after June 15, 2017 if Time Development could not get the road allowance approval by May 8, 2017.

[11] Mr. Bitton was eager to have the transaction closed because he intended to use the purchase monies to close another transaction in the summer of 2017. Mr. Bitton wished to monitor Mr. Wang’s progress in obtaining the redevelopment planning approvals from the municipality and Mr. Wang agreed to have Mr. Jaffer provide Mr. Bitton with progress reports.

[12] In May 2017, the Plaintiffs requested financing for the transaction from Foremost Financial, with whom they had arranged financing in the past.

[13] On June 12, 2017, Foremost Financing agreed to finance the transaction, and it issued a commitment letter. The lender’s commitment was for a $6.33 million first mortgage loan conditional upon; (a) an as-is appraisal indicating a value for the properties of not less than $10.55 million and (b) a best-use appraisal indicating a value for the properties of not less than $16.5 million assuming that the properties were redeveloped as eleven serviced residential lots.

[14] It shall be significant to note that the lender’s commitment specified that there shall be no financing subsequent to the first mortgage without the prior written consent of Foremost Financial other than a two-year Vendor take-back second mortgage in the amount of $3.0 million with interest at 4 per cent. In other words, Foremost Financial anticipated that Time Development was investing $1.22 million of its own money in the redevelopment project.

[15] On June 16, 2017, because the road allowance approval was still outstanding, Mr. Bitton and Time Development signed the Third Amendment to the 2016 Agreement. In the Third Amendment, Time Development waived all conditions and agreed to close on July 17, 2017. Time Development also agreed to release the deposit to the Bittons. The Bittons agreed to take back a two-year $5 million mortgage with interest at 4% per annum with $2 million to be paid on November 30, 2017.

[16] On June 19, 2017. Mr. Jaffer informed Mr. Bitton that it was not possible to have a second vendor take-back mortgage as drafted by the parties, and instead, a second mortgage for $3 million and a third mortgage for $2 million were required.

[17] I pause to note here that it was never explained why Mr. Jaffer believed that it was not possible to have the proposed second mortgage and why he said that two discrete subsequent mortgages were necessary. In any event, Mr. Bitton and Mr. Wang responded with the Fourth Amendment and the Fifth Amendment to the Agreement.

[18] Under these Amendments: (a) the Bittons agreed to take back a two-year term $3 million second mortgage with interest at 4% per annum; (b) the Bittons agreed to take back a six-month $2 million third mortgage with interest at 4% per annum; and (c) the closing was scheduled for July 31, 2017.

[19] On June 21, 2017, Yi Zhou, Time Development’s conveyancing lawyer wrote to Robert Pollack, the Bittons’ conveyancing lawyer, and advised that that the $500,000 deposit could be released to the Bittons, which is in fact what happened after Mr. Jaffer delivered the funds to Mr. Pollack.

[20] I pause again in the narrative and note that as a part of this litigation, Time Development asserts that it was an act of bad faith, or, to use the double negative, it was an example of the Bittons not acting in good faith that they took the deposit and that it was not held in trust by their lawyer. I can dispose of this argument by saying that I disagree. Time Development and apparently Mr. Jaffer, who would normally wish to hold the deposit as security for his real estate commission, agreed that the deposit should be released to the Bittons before the closing of the transaction. This intent was confirmed by Mr. Zhou, and acting in accordance with the agreement of the parties is not an act of bad faith. The Bittons later gave credit for the deposit in the statement of adjustments for the pending closing of the transaction.

[21] Returning to the narrative, on July 13, 2017, Time Development accepted the Foremost Financial mortgage commitment, and as of this juncture, it appears that both sides were preparing to close on July 31, 2017.

[22] On July 25, 2017, there were three significant developments. First, Time Development submitted the application for a minor variance to the City of Vaughan. Second, their conveyancing lawyer, Mr. Zhou, sent a requisition letter to Mr. Pollock. Third, most significantly, Foremost Financial withdrew its commitment to finance the transaction for Time Development.

[23] Mr. Wang said that Foremost Financial’s lending committee rejected making any loan because the market conditions had changed. There may have been other reasons for the withdrawal of the commitment, for instance, there is no evidence that Time Development had provided the required two appraisals. I need not make a finding as to why the commitment was withdrawn. The significant facts are that the commitment was withdrawn and that the Bittons were in no way responsible for Time Development’s predicament.

[24] Mr. Wang made frantic efforts to find a replacement lender, but on July 27, 2017, he spoke to Mr. Jaffer by telephone. Mr. Wang told Mr. Jaffer that Time Development did not have funds to close because of the lost financing from Foremost Financial. Mr. Jaffer advised Mr. Wang that he should request an extension of the closing of the transaction from the Bittons. Mr. Jaffer said he would speak to Mr. Bitton to confirm that there would be an extension.

[25] Neither party called Mr. Jaffer as a witness, but Mr. Wang deposed that Mr. Jaffer spoke to him later in the day on July 27, 2017 and confirmed that Mr. Bitton had agreed that there would be an extension. Mr. Wang then instructed Mr. Zhou to obtain an extension of the closing date.

[26] For his part, Mr. Bitton testified that Mr. Jaffer did speak to him and that Mr. Jaffer told him that Time Development’s financing had fallen through. Mr. Bitton, however, vigorously denied that he agreed to grant any extension.

[27] Meanwhile, still on July 27, 2017 at 4:11 p.m., Mr. Zhou emailed Mr. Pollack a draft amendment to extend the closing of the 2016 Agreement to September 29, 2017. Mr. Pollack immediately forwarded the email to Mr. Bitton and asked whether an extension to September 29, 2017 had been discussed or agreed.

[28] Mr. Bitton testified that he phoned Mr. Jaffer and advised that there would be no further extensions because he needed the purchase monies for another transaction. This conversation was confirmed in an email the evening of July 27^thaddressed to Mr. Jaffer and copied to Mr. Pollack that stated:

Zul

This is terrible to pull this today late Thursday July 27 with only tomorrow Friday July 28 as one business day. Monday is CLOSING DAY JULY 31, last minute. After all we went through. You know the damages I will suffer in the $ millions. I have ordered the three houses discharges among other things, firm and binding commitments. Pay out of my matured mortgages for an empty building and now what? 2 days before closing? You told me Time Development, Mike, is very big and very solid and now crumbles my life at the very last minute. Please have him borrow the funds from any other source, even from private lenders at higher rates for a couple months; it will save everyone terrible and extremely costly litigation starting after the Week End (MONDAY). And I can guarantee you the outcome of that battle is going to be very costly in damages. No surprises I am warning you in advance and giving you the heads up. Better close Monday or suffer the serious and costly consequences. My lawyer and I hope to hear good news tomorrow. Thank you

Claude

[29] On July 28, 2017, the next day, Mr. Pollock informed Mr. Zhou by email that the Bittons would not agree to a new closing date. The email stated:

Good morning Yi. Unfortunately, our clients are not willing to extend the closing date. Will your client not be in a position to close this transaction on Monday?

Regards,

Robert Pollock,

[30] That day, Mr. Pollack also responded to Time Development’s requisition letter, and he forwarded some closing documents including the statement of adjustments, which as noted above gave credit for the $500,000 deposit. Also included was a vendor take-back mortgage and associated documents for review by Mr. Zhu.

[31] It is to be noted that Mr. Pollack took it upon himself to consolidate the second and third mortgage into a second mortgage. No objection to this change in how the transaction should be performed was made before the date scheduled for the closing of the transaction.

[32] On July 31, 2017, the date for closing, Mr. Bitton testified that Mr. Jaffer phoned him and said that Time Development needed an extension of the closing date. Mr. Bitton said again he would not agree to an extension.

[33] On July 31, 2017, at 10:28 a.m., Mr. Pollock emailed Mr. Zhou attaching closing documents. The email message stated:

Good morning Yi;

Please see attached:

• Statement of adjustments;

• Direction re funds;

• Declaration of Possession;

• HST Declaration;

• Warranties and Bill of Sale;

• Undertaking/Affidavit;

• our undertaking to discharge the HSBC mortgages, together with discharge statements;

• signed ORA.

We have the keys in our office. Please advise whether you will be in a position to close today; if this is not the case, please advise whether you are willing to waive the requirement of a formal tender. As you can see, our client is ready, willing and able to close this transaction today. We will release the deed upon receipt of the balance due on closing, title direction, undertaking to readjust, executed Acknowledgement and Direction re: VTB mortgage, acknowledgement of standard charge terms, and evidence that our clients are shown as loss payees on the insurance policies for the subject properties.

Rgds,

Robert Pollock, LL. M.

[34] On July 31, 2017 at 12:37 p.m., Mr. Pollack emailed Mr. Zhou a redirection of funds for the closing.

[35] In the afternoon of July 31, 2017, Mr. Pollock and Mr. Zhou had a telephone conversation. Mr. Pollack had already offered a tender of performance by the Bittons. After the conversation, Mr. Pollack wrote the following email message:

Hello Yi;

As you are aware, we did not receive the closing documents and the balance due on closing today. Further to our telephone conversation, you have confirmed that you did not have the necessary funds from your client to complete this transaction, nor have you seen any financing commitment. We have demonstrated that our client was ready, willing and able to complete this transaction today. We have therefore noted your client in default of their obligations under the Agreement of Purchase and Sale, which is now hereby terminated. The deposit has been forfeited to our client, without prejudice to their rights to institute proceedings against your client for damages suffered as a result of your client's breach.

Yours truly,

Robert Pollock

[36] It is Time Development’s position that neither party was in position to close on July 31, 2017 and that the Bitton’s tender was defective because it was not in compliance with the Fourth and Fifth Amendments to the Agreement. In particular, one second mortgage instead of discrete second and third mortgages was tendered. Time Development submits that one subsequent mortgage was not in accord with the terms of the Fourth and Fifth Amendments, which called for two discrete subsequent mortgages.

[37] Later on the abortive closing date, at 5:07 p.m., Mr. Bitton received an email message from Shirley Wang (unrelated to Mr. Wang) of Time Development that stated:

Hello Claude,

Zul notified us that based on the conversation between you and Zul, you agreed to extend the closing date for another 60 days. If so, could you please do us a favour to sign back the attached Amendment to confirm so. Meanwhile, we will provide the Application Package which was sent to the City to you shortly. Thanks.

Sincerely,

Shirley Wang

[38] Mr. Bitton responded with an email message to Mr. Jaffer at 11:22 p.m. that stated:

Zul when did l agree?

Please confirm that I never said that.

Thank you

[39] On August 2, 2017, Mr. Bitton send an email message to Mr. Jaffer with copies to Ms. Wang, Mr. Pollack, a Sinthu Krishna, and Mr. Wang that stated:

Zul,

I spoke to you twice and you still have not confirmed the alleged granting of the extension. You told me today that you only told the purchaser that you will try and obtain an extension. I asked to confirm that today. You promised you would as you also promised to try and get me a copy of the application, etc. to the city. It is public knowledge as you know and I am still the legal owner of the site. I told you that my lawyer will contact your Broker and clarify and deny that I ever agreed to any extension whatsoever. Please comply and avoid any escalation of the sad situation. Regards,

Claude

[40] On August 3, 2017, Mr. Bitton sent an email to Ms. Wang in response to her email of July 31, 2017 that stated:

Shirley,

Please send the full package as you indicated on Monday for review before I consider any other options. Thank you. Salutations,

Claude.

[41] On August 14, 2017, Time Development commenced an action for specific performance.

[42] On August 16, 2017, Time Development moved ex parte and obtained a Certificate of Pending Litigation. In its motion material for the Certificate of Pending Litigation, Mr. Wang deposed that Time Development wished to reinstate time of the essence, and he attached a draft letter from its real estate lawyer that was to be send later that week. There is, however, no evidence that the letter reinstating time of the essence and setting a new closing date was ever sent.

[43] There is no evidence that Time Development positioned itself to actually be able to close the transaction after the abortive closing on July 31, 2017.

[44] On November 20, 2017, the Bittons delivered a Statement of Defence and a Counterclaim for damages.

[45] On April 13, 2018, the City of Vaughan closed Time Development’s redevelopment application, and it refunded the application fees.

[46] On April 26, 2018, the Bittons moved to discharge the Certificate of Pending Litigation from title. Master Short vacated the certificate, but Master Short ordered that the property be preserved pursuant to Rule 37, thus keeping alive the prospects of a judgment for specific performance.

[47] The Bittons then moved for a summary judgment dismissing Time Development’s action for specific performance. Hard upon the return of the summary judgment motion, the Bittons, who it may be recalled have had Time Development’s $500,000 deposit since the summer of 2017 discontinued their counterclaim for damages.

[48] Time Development did not bring a cross-motion for summary judgment, and it submits that a trial is necessary; i.e., that the case is not suitable for a summary judgment. In the alternative, Time Development submits that if a summary judgment were to be granted, it should be a summary judgment for specific performance.

C. Discussion

1. The Test for a Partial Summary Judgment

[49] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: “the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.” With amendments to Rule 20 introduced in 2010, the powers of the court to grant summary judgment have been enhanced. Rule 20.04(2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

[50] In Hryniak v. Mauldin[^1] and Bruno Appliance and Furniture, Inc. v. Hryniak,[^2] the Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record, without using the fact-finding powers introduced when Rule 20 was amended in 2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting a summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[51] If, however, there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the powers under rules 20.04(2.1) and (2.2). As a matter of discretion, the motions judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use will lead to a fair and just result and will serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole. To grant summary judgment, on a review of the record, the motions judge must be of the view that sufficient evidence has been presented on all relevant points to allow him or her to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the issues in the case.[^3]

[52] Hryniak v. Mauldin does not alter the principle that the court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial. The court is entitled to assume that the parties have advanced their best case and that the record contains all the evidence that the parties will present at trial.[^4] Thus, if the moving party meets the evidentiary burden of producing evidence on which the court could conclude that there is no genuine issue of material fact requiring a trial, the responding party must either refute or counter the moving party’s evidence or risk a summary judgment.[^5]

2. Legal Background

[53] In a contract where time is of the essence, where a plaintiff sues for specific performance, the plaintiff must show that he or she was ready, willing and able to close on the date fixed for closing, that the default of the defendant was in no way attributable to the plaintiff’s fault, and that he or she continues to be ready, willing and able to perform the contract.[^6]

[54] For an innocent party to treat the agreement at an end for fundamental breach or repudiation, time must be of the essence. The commonly recited rule for time of the essence is that time may be insisted upon as of the essence only by a litigant: (a) who has shown himself or herself ready, desirous, prompt, and eager to carry out the agreement; (b) who has not been the cause of the delay or default; and, (c) who has not subsequently recognized the agreement as still existing.[^7]

[55] When both contracting parties breach the contract, the contract remains alive with time no longer of the essence, but either party may restore time of the essence by giving reasonable notice to the other party of a new date for performance.[^8]

[56] Tender is the act of offering to perform one's contract obligations. By tendering, the innocent party shows his or her readiness and willingness to carry out the contract, that he or she is not the cause of the delay or default and that there has been no waiver.[^9] By tendering the innocent party puts himself or herself in the position of relying on time being of the essence.

[57] Tender, however, is not a prerequisite to the innocent party enforcing his or her contractual rights. Tender is not required from an innocent party when the other party has clearly repudiated the agreement. Numerous cases have held that the law does not require what would be a meaningless or futile gesture.[^10] Moreover, when there is an anticipatory breach, the innocent party need not wait to the date for performance before commencing proceedings for damages or in the alternative for specific performance of the agreement.[^11] Despite the absence of any tender, the court may be satisfied by other evidence that the innocent party is entitled to enforce the contract because time is of the essence and there has been a fundamental breach of the agreement by the other party.[^12]

[58] If one party has indicated that he or she is unable or unwilling to perform, there is some risk associated with the innocent party tendering. The risk is that if his or her offer of performance is not in perfect accord with the agreement of purchase and sale, instead of demonstrating that the party is willing and able to perform its side of the bargain, the act of tendering performance may demonstrate just the opposite. Older case law indicates that tender must be perfect; else it will demonstrate that the innocent party was not in truth ready, willing, and able to close the transaction. The older case law, however, has been overtaken by contemporary case law that infuses the analysis of the positions of the parties with notions of good faith.[^13] Thus, curable imperfections in tender will not get in the way of tender achieving its evidentiary purposes.[^14] In other words, where the defect in tender is curable or the defect is insufficient to justify a refusal to close the real estate transaction, the innocent party will be able to rely on the tender to show that he or she was in a position to enforce the contract.[^15]

[59] In 2014, in Bhasin v. Hrynew,[^16] the Supreme Court of Canada accepted and began the development a doctrine of good faith in the performance of contracts. Bhasin v. Hrynew is authority that the common law of contract includes an organizing principle based on recognizing good faith as an operative principle in the performance of contracts. Bhasin v. Hrynew is authority for the proposition that the common law of contract includes as a rule of law a duty of performing contractual obligations honestly. Bhasin v. Hrynew is a case about how the principle of good faith may manifest itself sometimes as a rule of law applicable to all contracts, sometimes as a rule of law applicable to particular categories of contracts, and sometimes as a principle that will produce a rule of law for new categories of contracts.

[60] It is, however, important to note that Justice Cromwell did not recognize good faith as a rule or law or as a general duty applicable to all contracts. He did not recognize it as a stand-alone duty or a rule. Rather, he recognized it as an informing principle. Justice Cromwell noted that as a principle, good faith had variously been explained as a rule of law, as a matter of the implication of implied terms to give a contract business efficiency, or as a matter of contract interpretation. He explained that good faith could manifest itself in different ways for different types of contracts and different types of contractual relationships; he stated:[^17]

In many of its manifestations, good faith requires more than honesty on the part of a contracting party. For example, in Dynamic Transport, this Court held that good faith in the context of that contract required a party to take reasonable steps to obtain the planning permission that was a condition precedent to a sale of property. In other cases, the courts have required that discretionary powers not be exercised in a manner that is "capricious" or "arbitrary": Mason, at p. 487; LeMesurier v. Andrus (1986), 1986 CanLII 2623 (ON CA), 54 O.R. (2d) 1 (C.A.), at p. 7. In other contexts, this Court has been reluctant to extend the requirements of good faith beyond honesty for fear of causing undue judicial interference in contracts: Wallace, at para. 76.

[61] As a legal principle, good faith also could yield legal rules applicable to all or just some types of contract. Justice Cromwell explained how good faith as an organizing principle would operate in the development of the law. He stated:[^18]

The first step is to recognize that there is an organizing principle of good faith that underlies and manifests itself in various more specific doctrines governing contractual performance. That organizing principle is simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily.

As the Court has recognized, an organizing principle states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free-standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines and may be given different weight in different situations: …

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

This organizing principle of good faith manifests itself through the existing doctrines about the types of situations and relationships in which the law requires, in certain respects, honest, candid, forthright or reasonable contractual performance. Generally, claims of good faith will not succeed if they do not fall within these existing doctrines. But we should also recognize that this list is not closed.

The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another -- even intentionally -- in the legitimate pursuit of economic self-interest: A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177, at para. 31. Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601, at para. 31. The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or "palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.

Tying the organizing principle to the existing law mitigates the concern that any general notion of good faith in contract law will undermine certainty in commercial contracts. In my view, this approach strikes the correct balance between predictability and flexibility.

[62] What emerges from Justice Cromwell’s judgment is that good faith is an organizing principle. Successful claims of good faith will usually fall within existing doctrines, but the existing doctrines are not a closed list. In performing a contract, a contracting party should have appropriate regard to the legitimate contractual interests of the other contracting party, but what amounts to having appropriate regard will vary depending on the context of the contractual relationship and performance in good faith does not necessarily require acting to serve the other contracting party’s interests.

[63] Good faith merely requires that a party not seek in bad faith to undermine the other’s interests. Unlike fiduciary duties, good faith performance does not engage loyalty to the other contracting party or a duty to put the interests of the other contracting party first. The principle of good faith is applied in a manner that is consistent with the fundamental commitments of the common law of contract that places great weight on the freedom of contracting parties to pursue their individual self-interest. The development of the principle of good faith is not an opportunity for ad hoc judicial moralism or to be used as a pretext for scrutinizing the motives of contracting parties.

[64] In Bhasin v. Hrynew, the Supreme Court held that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations. Indeed, Justice Cromwell said that a basic level of honesty is what commercial parties expected and such expectations were reasonable and normal. Justice Cromwell stated:[^19]

Commercial parties reasonably expect a basic level of honesty and good faith in contractual dealings. While they remain at arm's length and are not subject to the duties of a fiduciary, a basic level of honest conduct is necessary to the proper functioning of commerce. The growth of longer term, relational contracts that depend on an element of trust and cooperation clearly call for a basic element of honesty in performance, but, even in transactional exchanges, misleading or deceitful conduct will fly in the face of the expectations of the parties.

[65] Justice Cromwell described the nature and ambit of this general duty of honesty in contractual performance. He stated:[^20]

…. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one's contractual performance.

The duty of honest performance that I propose should not be confused with a duty of disclosure or of fiduciary loyalty. A party to a contract has no general duty to subordinate his or her interest to that of the other party. However, contracting parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests. [….]

[66] And requiring honesty in the performance of contracts was something reasonably expected for all contracts and thus, it was appropriate to recognize a duty of honesty in performance in all contracts. In Justice Cromwell’s view this was a modest incremental development and a normative one for the universe of contractual relationships.

3. Application of the Law to the Facts

[67] There is no need for a trial in this action. The law of abortive real estate transactions is well established, and with one possible exception, the facts of this case are uncontested or uncontestable because the parties left an indelible email record of the events and their positions.

[68] The history of this real estate transaction was well documented. On a review of the evidentiary record, I am satisfied that there is sufficient evidence presented on all relevant points to allow me to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the issues in the case. I am satisfied that it is in the interests of justice to decide the action and the counterclaim by means of a summary judgment motion.

[69] With respect to the law, the Bittons submit that they were the innocent party and that Time Development breached the 2016 Agreement, and thus, the Bittons were entitled to terminate the agreement and to claim the deposit as forfeited. With respect to the law, Time Development’s argument is that neither party was in the position to close on May 31, 2016 and that the Bittons were not in the position to enforce the contract because they had agreed to extend closing to September 2016 or because time was no longer of the essence, and thus the Bittons were not entitled to terminate the contract.

[70] Turning to the facts, the one exception where there is a contest about the facts is the matter of whether or not Mr. Jabber told Mr. Wang that Mr. Bitton had agreed to extend the closing date of the 2016 Agreement 60 days to September 29, 2017. I, however, find as a fact that Mr. Jaffer made no such assurance, and I find as a fact that Mr. Wang misunderstood or in his desperate and despairing state deceived himself into thinking that an assurance was given.

[71] Mr. Bitton’s account that he did not agree to the extension is corroborated by the email and I believe his evidence, which is more consist with the documents, and I do not find Mr. Wang’s evidence reliable on this point. The hearsay evidence that Mr. Jaffer did not and would not have agreed to bind Mr. Bitton also supports Mr. Bitton’s account of the events.

[72] In any event, as I shall shortly explain, even it was the case that Mr. Jaffer said that Mr. Bitton had agreed to any extension, Mr. Wang would have realized, as demonstrated by the fact that Ms. Wang sent a draft Amendment Six to the 2016 Agreement, that nothing could be finalized until an amendment in writing was signed. Agreements for the sale of the land must be in writing, and documenting changes to the 2016 Agreement was an ingrained habit of the parties.

[73] In other words, until both parties signed what would have been Amendment Six, Mr. Bitton could have changed his mind. Mr. Wang knew that an amendment had to be signed to extend the closing date. I, however, do not believe that Mr. Bitton changed his mind. I find as a fact that the Bittons simply did not agree to extend the closing of the transaction.

[74] Further, I find that it was not an act of bad faith in the circumstances of this case for the Bittons to insist on the July 31, 2017 closing date for the sale transaction. As Justice Cromwell noted in Bhasin v. Hrynew, the principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract that generally places great weight on the freedom of contracting parties to pursue their individual self-interest and even cause loss to the other contracting party, even intentionally in the legitimate pursuit of economic self-interest.

[75] The Bittons were not responsible for the withdrawal of the lender’s mortgage commitment and the Bittons did nothing dishonest. They were not required to act to serve what was in the best interests of Time Development. Justice Cromwell also noted that the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.

[76] It is informative that Mr. Wang knew that he had to ask for an extension in writing. He actually was more begging than asking for an extension because of the late arriving news from Foremost Financial that it would not finance the transaction. But, Mr. Bitton was not complicit in Foremost Financial’s decision, and Mr. Bitton was under no legal obligation to assist Time Development by giving it more time to find a replacement lender. In the circumstances of the immediate case, Mr. Bitton’s personal motivations for refusing to grant an extension are not relevant in the analysis of whether he was performing the contract in good faith.[^21]

[77] Truth be told, even if Foremost Financial had not withdrawn its mortgage commitment, Time Development would not have been put in funds at the scheduled closing because it had not obtained permission from Foremost Financial to place $5.0 million of subsequent financing after its first mortgage loan. Had the transaction closed without Foremost Financial’s permission then a breach of contract and possibly a fraud would have been perpetrated on the lender. But the point remains that the Bittons were entitled to insist on having the 2016 Agreement performed in accordance with its terms. It is not an act of bad faith to insist on a contract being performed in accordance with its terms.

[78] The situation then was that Time Development breached the 2016 Agreement when it was unable to close on July 31, 2017. Specific performance is not available to a party who is not ready, willing, and able to close the transaction. The Bitton’s lawyer’s email message on July 31, 2017 unambiguously terminated the Agreement and forfeited Time Development’s deposit.

[79] However, Time Development argues that the 2016 Agreement is still alive and that the remedy of specific performance is still available to it because the Bittons were also guilty parties inasmuch as they too were not ready, willing, and able to perform their side of the bargain. In other words, Time Development submits that the parties by their mutual conduct had turned off time of the essence and, therefore, the Bittons were not entitled to terminate the transaction and forfeit the deposit.

[80] I disagree with Time Development’s argument that time was no longer of the essence on the May 31, 2017.

[81] It has never been explained why from a substantive legal perspective the second or third mortgage could not be combined into one document, but if it is true that the tendering of one mortgage instead of two mortgages was not compliant with the terms of the 2016 Agreement, then these defects were readily curable. The evidence shows that the Bittons were ready and capable of closing the transaction and they were eager to do so. It would have been a very easy matter for Mr. Pollack to redraft the standard form mortgages into a second and third mortgage.

[82] The evidence shows that the Bittons were capable and willing to close the transaction if Time Development had tendered the balance of the closing funds as set out in the statement of adjustments. The Bittons were actually eager to close, and they were not the cause of Time Development’s inability to close. The Bittons were under no good faith principle or rule that would oblige them to forego their rights under the 2016 Agreement to insist on a July 31, 2017 closing.

[83] Thus, in my opinion, the Bittons were entitled to enforce the contract by terminating it and forfeiting Time Development’s deposit.

D. Conclusion

[84] For the above reasons, I dismiss Time Development’s action for specific performance. I declare that the deposit is forfeit. The Bittons have discontinued their counterclaim. This disposes of the action, and the counterclaim. The Bittons are entitled to costs for the summary judgment motion and the action, which I have assessed at $29,750.04, all inclusive.

Perell, J.

Released: July 17, 2018

COURT FILE NO.: CV-17-580766

DATE: 20180718

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Time Development Group Inc. (In trust) and 188 Crestwood Development Inc.

Plaintiffs

– and –

Claude Bitton and Odette Bitton

Defendants

REASONS FOR DECISION

PERELL J.

Released: July 18, 2018

[^1]: 2014 SCC 7. [^2]: 2014 SCC 8. [^3]: Campana v. The City of Mississauga, 2016 ONSC 3421; Ghaeinizadeh (Litigation guardian of) v. Garfinkle Biderman LLP, 2014 ONSC 4994, leave to appeal to Div. Ct. refused, 2015 ONSC 1953 (Div. Ct.); Lavergne v. Dominion Citrus Ltd., 2014 ONSC 1836 at para. 38; George Weston Ltd. v. Domtar Inc., 2012 ONSC 5001. [^4]: Dawson v. Rexcraft Storage & Warehouse Inc., 1998 CanLII 4831 (ON CA), [1998] O.J. No. 3240 (C.A.); Bluestone v. Enroute Restaurants Inc. (1994), 1994 CanLII 814 (ON CA), 18 O.R. (3d) 481 (C.A.); Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372 at para. 11. [^5]: Toronto-Dominion Bank v. 466888 Ontario Ltd., 2010 ONSC 3798. [^6]: O'Neil et al. v. Arnew (1976), 1976 CanLII 758 (ON SC), 16 O.R. (2d) 549 (H.C.J.); Dacon Construction Ltd. v. Karkoulis, 1964 CanLII 252 (ON SC), [1964] 2 O.R. 139 (H.C.J.); Watts v. Strezos, 1953 CanLII 164 (ON SC), [1955] O.R. 615 (H.C.J). [^7]: 2329131 Ontario Inc. v. Carlyle Development Corp., 2014 ONCA 123; Domicile Developments Inc. v. McTavish (2000), 1999 CanLII 3738 (ON CA), 45 O.R. (3d) 302 (C.A.); King v. Urban & Country Tpt. Ltd. (1973), 1973 CanLII 740 (ON CA), 1 O.R. (2d) 449 (C.A.); Koffman v. Fischtein (1984), 1984 CanLII 1874 (ON SC), 49 O.R. (2d) 124 (H.C.J.), aff’d (1986), 1986 CanLII 2656 (ON CA), 53 O.R. (2d) 671 (C.A.); Morgan v. Lucky Dog Ltd. (1987), 45 R.P.R. 263 (Ont. H.C.J.); Bethco Ltd. v. Clareco Can. Ltd. (1985), 1985 CanLII 2252 (ON CA), 52 O.R. (2d) 609 (C.A.); Metro. Trust Co. v. Pressure Concrete Services Ltd., (1976), 1975 CanLII 445 (ON CA), 9 O.R. (2d) 375 (C.A.), affg. 1973 CanLII 480 (ON SC), [1973] 3 O.R. 629 (H.C.J.);; Campbell v. Sovereign Securities & Holdings Co., 1958 CanLII 99 (ON SC), [1958] O.R. 441 (H.C.J.); aff’d 1958 CanLII 107 (ON CA), [1958] O.R. 719 (C.A.); Lucifora v. Walfish, [1955] O.W.N. 898 (C.A.); Shaw v. Holmes, 1952 CanLII 285 (ON CA), [1952] 2 D.L.R. 330 (C.A.); Walton v. Morris, [1944] O.W.N. 410 (H.C.J.); Brickles v. Snell (1916), 30 D.L.R. 3 (P.C.); Mills v. Haywood (1877), 6 Ch. D. 196. [^8]: Domicile Developments Inc. v. McTavish (2000), 1999 CanLII 3738 (ON CA), 45 O.R. (3d) 302 (C.A.); King v. Urban & Country Tpt. Ltd. (1973), 1973 CanLII 740 (ON CA), 1 O.R. (2d) 449 (C.A.); Shaw Industries Ltd. v. Greenland Enterprises Ltd., (1991), 1991 CanLII 3955 (BC CA), 79 D.L.R. (4th) 641 (B.C.C.A.). [^9]: Cooper v. Mysak (1986), 1986 CanLII 2700 (ON SC), 54 O.R. (2d) 346 (Div. Ct.); Majak Properties Ltd. v. Bloomberg, (1977) 1976 CanLII 864 (ON SC), 13 O.R. (2d) 447 (H.C.J.); Leung v. Leung (1990), 1990 CanLII 6866 (ON SC), 75 O.R. (2d) 786 at para. 48 (Gen. Div.). [^10]: Nepean Carleton Developments Limited v. Hope, 1976 CanLII 36 (SCC), [1978] 1 S.C.R. 427; Kloepfer Wholesale Hardware Automotive Co. v. Ray, 1952 CanLII 8 (SCC), [1952] 2 S.C.R. 465; Bark-Fong v. Cooper (1913) 1913 CanLII 38 (SCC), 49 S.C.R. 14; Bethco Limited v. Clareco Can Ltd. (1985), 1985 CanLII 2252 (ON CA), 52 O.R. (2d) 609 (C.A.). [^11]: Roy v. Kloepfer Wholesale Hardware and Automotive Co. Ltd., 1952 CanLII 8 (SCC), [1952] 2 S.C.R. 465; O'Neil et al. v. Arnew, (1976)1976 CanLII 758 (ON SC), 16 O.R. (2d) 549 (H.C.J.). [^12]: Silverberg v. 1054384 Ontario Ltd., 2008 CanLII 59325 (ON SC), [2008] O.J. No. 4585 (S.C.J.); Whittal v. Kour (1969), 1969 CanLII 701 (BC CA), 8 D.L.R. (3d) 163 (B.C.C.A.). [^13]: Morgan v. Lucky Dog Ltd. (1987), 45 R.P.R. 263 (Ont. H.C.J.); Le Mesurier v. Andrus (1986), 1986 CanLII 2623 (ON CA), 54 O.R. (2d) 1 (C.A.), leave to appeal to S.C.C. ref’d [1986] 2 S.C.R. v; Green v. Kaufman (1996), 6 R.P.R. (3d) 141 (Ont. C.A.). [^14]: Victorian Homes (Ontario) Inc. v. eFreitas, [1991] O.J. No. 324 (S.C.J.); Towne Meadow Development Corp. v. Chong [1993] O.J. No. 693 (Gen. Div.); Leung v. Leung (1990), 1990 CanLII 6866 (ON SC), 75 O.R. (2d) 786 (Gen. Div.). [^15]: Leung v. Leung (1990), 1990 CanLII 6866 (ON SC), 75 O.R. (2d) 786 (Gen. Div.); Beckett v. Karklins (1974), 1974 CanLII 676 (ON SC), 5 O.R. (2d) 211 (H.C.J.). [^16]: 2014 SCC 71. [^17]: Bhasin v. Hrynew, 2014 SCC 71 at para. 89. [^18]: Bhasin v. Hrynew, 2014 SCC 71 at paras. 63-66, 70-71. [^19]: Bhasin v. Hrynew, 2014 SCC 71 at para. 60. [^20]: Bhasin v. Hrynew, 2014 SCC 71 at paras. 73, 86. [^21]: Time Development submitted that Mr. Bitton admitted during his cross-examination to a distrust of Mr. Wang because of his Oriental ethnicity. If true - and I make no finding in this regard - Mr. Bitton’s motivation for not helping Mr. Wang out of his predicament caused by the lost financing is, according to Bhasin v. Hrynew, not relevant factor to determining whether or not Mr. Bitton was acting in accordance with the operative rules of good faith.