COURT FILE NO.: CV-17-589017 DATE: 20180822 ONTARIO SUPERIOR COURT OF JUSTICE

Court File and Parties

BETWEEN:

KNRS Acquisitions Inc. Applicant – and – Shaipoor Fariad Respondent

Counsel: Ron Aisenberg, for the Applicant Larry J. Levine, for the Respondent

HEARD: August 21, 2018

C. Gilmore, J.

Reasons for Decision

Overview

[1] This is an application pursuant to Rule 14.05(3)(d) of the Rules of Civil Procedure. There were initially three issues to be determined; 1) whether the respondent was entitled to rely on the deposit clause, 2) whether the respondent was entitled to rely on the solicitor’s approval condition if he did not exercise his discretion reasonably, honestly, and in good faith, and 3) whether the applicant was entitled to specific performance.

[2] As a result of discussions between counsel, the issues have been narrowed to one. The respondent did not rely on the deposit clause, and his counsel conceded that the circumstances of this case satisfy the requirement of uniqueness in accordance with the relevant case law on specific performance. That left the issue of the exercise of the solicitor’s approval clause which was the only issue argued before the court.

[3] After hearing argument on August 21, 2018 I accepted the applicant’s arguments and signed the draft judgment provided. That judgment stipulated that the Agreement of Purchase and Sale was still in effect and that specific performance was awarded to the applicant, thereby requiring the respondent to complete the transaction. Further terms of the judgment included that the transaction will be completed within 42 days following the release of these Reasons for Decision, that the balance of the application would be heard before me (if required), and that costs of $52,667.42 were awarded to the applicant.

[4] At the conclusion of the hearing and after brief comments related to my decision, I indicated to counsel that I would be releasing detailed reasons. These are the reasons.

Factual Background

[5] The applicant, as purchaser and the respondent as vendor, entered into an Agreement of Purchase and Sale (“the Agreement”) on December 1, 2017 for the sale of property at 91 Neptune Drive, Toronto (“the property”) for $3.5 million.

[6] The property is a three storey, twelve unit apartment building on Bathurst Street, south of 401 in Toronto.

[7] The principal of the applicant is Kaelen Sherman. The respondent is the sole registered owner of the property. He is often referred to as “Shaw” in texts and correspondence. He is also a real estate agent. The applicant’s real estate agent is Yehuda Gelberger (“Yehuda”).

[8] The respondent’s counter-offer contained a Schedule “B” with a single paragraph “Seller’s Solicitor’s Approval Condition” (“the clause”). The counter-offer was accepted by the applicant.

[9] The clause was drafted by the respondent and is set out below:

This Offer is conditional upon the approval of the terms hereof by the Seller’s Solicitor. Unless the Seller gives notice in writing delivered to the Buyer or to the Buyer’s address as hereinafter indicated personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 10:00 p.m. on December 06, 2017, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Seller and may be waived at the Seller’s sole option by notice in writing to the Buyer as aforesaid within the time period stated herein.

[10] On December 5, 2017 at 2:31 p.m. the respondent texted Yehuda the following message:

Dear Yehuda:

The family is going through a tragic event that took place recently and hence has been advised to not go through this transaction, surely it’s our priority at the moment. Appreciative of your understanding. God Bless.

Shaw

[11] The respondent’s evidence was that he had continuously advised Yehuda that his mother and brother had a 2/3 beneficial interest in the property although the respondent was the sole registered owner. According to the respondent, he wanted to sell the property but his mother and brother did not. As such, the purpose of the clause was to allow his mother and brother to get legal advice as to whether the respondent could force the sale of the property in the face of their opposition.

[12] The respondent’s cousin was murdered in Kabul, Afghanistan on November 23, 2017. The family learned of the murder on December 3, 2017. The respondent’s mother immediately flew to Afghanistan to be with her family and the respondent’s brother made arrangements to fly to Malaysia on December 5, 2017 to meet with his sister and eventually his parents. According to the respondent, it was therefore impossible for him and his mother and brother to have the communication with a lawyer as contemplated in the clause.

[13] On December 4, 2017 the respondent spoke to his brother (Abuzar) about the sale of the property. His brother was opposed to the sale and told him “This is not a time for me to be discussing this. I’ve made my position clear in the past. It hasn’t changed.” [1] After this discussion, the respondent sent the text to Yehuda on December 5, 2017 advising he would not be going through with the transaction (reproduced at para 10 above). Thereafter, the respondent took the position that the Agreement was at an end.

[14] The respondent did not speak to his mother about the Agreement until after it had been repudiated and not until late December 2017. [2]

[15] Yehuda’s evidence was that he was aware that there were other (unregistered) beneficial owners of the property but he was not told who they were, what their portion of ownership interest was, or that they did not want to sell. Yehuda’s understanding was that the clause was included because the other owners wanted a lawyer to approve the terms of the Agreement.

Analysis and the Law

[16] The respondent’s counsel submitted that the circumstances of this case are unusual. This is not a case where the vendor attempted to repudiate because a better offer had come along. Further, there was no bad faith. The vendor and his family were unexpectedly faced with a family tragedy which entirely diverted their attention from the Agreement. The clause was, therefore, not satisfied and the deal came to an end.

[17] Alternatively, the respondent’s counsel submits that there is a triable issue related to whether or not Yehuda had actual knowledge of the purpose of the clause. If so, his client was bound by it. There is also a triable issue related to the reasonableness of the behaviour of the respondent in all of circumstances given the family tragedy.

Exercise of the Solicitor’s Approval Clause

[18] Both counsel agree that in exercising the clause, the respondent must act reasonably, honestly and in good faith. [3]

[19] It is this court’s view that moral blameworthiness or family dynamics do not factor into the test. The sole consideration is whether the termination of the Agreement was effected in accordance with the clause. In this case, it was not. Rather, the respondent conceded that without his brother’s consent, he was not prepared to complete the deal. The reason for repudiation had nothing to do with the terms of the clause. In fact, there was no evidence that the respondent, his mother or his brother ever consulted a lawyer about the terms of the Agreement.

[20] The relevant clause in this case does not contain any sole or absolute discretion wording. However, as the applicant correctly points out, even if it did, the third party (in this case the lawyer notionally consulted by the respondent and his family) would have to act in good faith, reasonably and honestly in exercising his or her discretion. [4]

[21] It is clear from a review of the transcripts of the examinations of both the respondent and his brother that neither of them nor their mother went to seek legal advice on the very issue for which the clause was inserted into Schedule B, that is, whether the mother and brother could prevent the sale given the form of their ownership interest.

[22] The facts are clear that when the respondent’s brother refused to consent to the sale, the respondent sent the text to Yehuda on December 5, 2017 and repudiated the Agreement. That repudiation was inconsistent with the requirement that the clause be exercised reasonably or in good faith. As such, the Agreement remains valid.

Contractual Interpretation

[23] The clause is unambiguous on its face. Therefore, the surrounding circumstances related to the respondent’s family’s personal tragedies cannot overwhelm the wording of the clause. As per Sattva Capital Corp. v. Creston Moly Corp [5]; “While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62)”.

[24] In the case at bar, the relevant clause contained no reference to conditions related to the respondent’s mother or brother, their ownership interest or their consent to the sale. As the applicant’s counsel submitted, even if the clause had contained those detailed additional terms, the respondent did not consult a lawyer about it. He simply terminated the deal when his brother would not discuss it.

[25] In Hatami v. 1237144 Ontario Inc. [6] the plaintiff sought return of her deposit on the grounds that the vendor had misrepresented the property as zoned for commercial use when it was not. The court found that it would have been a simple matter to make zoning a part of the condition of the agreement, but that was not done. As such, the court was not in a position to ignore the clear meaning of the existing terms of the agreement.

[26] In the case at bar, the respondent seeks to have the court expand the clear terms of the clause to include circumstances and/or conditions which were simply not there. As such, he has not exercised the clause reasonably or in good faith.

[27] Given the clear terms of the clause and the failure of the respondent to exercise the clause reasonably or in good faith, the Agreement shall remain intact and the sale will proceed as per my executed judgment.

C. Gilmore, J. Released: August 22, 2018

Footnotes

[1] Transcript of the Examination of Abuzar Fariad, qq. 54-55 – 2nd Supp. A.R. Tab 10.

[2] Transcript of the Cross-Examination of Shaipoor Fariad, qq. 70-75, 2nd Supp. A.R., Tab 9.

[3] Bhasin v. Hrynew, [2014] 3 SCR 494, 2014 SCC 71 at para 93.

[4] See Greenberg v. Meffert et al..

[5] Sattva Capital Corp. v. Creston Moly Corp, [2014] 2 SCR 633, 2014 SCC 53 at para 57.

[6] Hatami v. 1237144 Ontario Inc. 2018 ONSC 668 at para 38.