Court File and Parties

Court File No.: 57594/17 Date: 2018/10/01 Ontario Superior Court of Justice

Between: Rohit Rangwani, Alok Nagpal, Dashpal Singh Takhar, Manish Gupta, Rohan Dhand, and Sandeep Chhabriya, Applicants – and – Pinewoods Home (Niagara) Ltd., Respondent

Counsel: A. Vishwanth Nrupathunga, for the Applicants P. Mahoney and A. Mannell, for the Respondent

Heard: September 14, 2018

The Honourable Justice J. R. Henderson

Reasons for Decision

Introduction

[1] The respondent (“Pinewood”) is a real estate developer that planned to develop vacant land in the city of Niagara Falls into a townhouse condominium complex to be known as Smart Townes 3. During the development of Smart Townes 3, as part of Pinewood’s marketing strategy, Pinewood encouraged prospective purchasers to execute and submit Reservation Agreements in order to reserve condominium units in the complex at specified prices pending a formal agreement of purchase and sale.

[2] The six applicants in this action are prospective purchasers who executed or submitted such Reservation Agreements, all of which are dated June 3, 2016. In the spring of 2017, the applicants received draft formal agreements of purchase and sale from Pinewood that corresponded to their Reservation Agreements. The applicants have refused to sign the draft agreements of purchase and sale.

[3] The applicants submit that the Pinewood’s draft agreements of purchase and sale contain terms that are inconsistent with the terms of the Reservation Agreements, including an increase in the price of the condominium units, terms regarding payment of H.S.T., significant additional deposits, and a prohibition on resale for two years after closing.

[4] It is the position of the applicants that the Reservation Agreements constitute binding agreements and that Pinewood is bound to sell the condominium units to the applicants for the prices and on the terms set out therein. Further, the applicants submit that Pinewood’s attempt to insert additional onerous terms into the formal agreements of purchase and sale constitutes bad faith bargaining and unconscionable conduct. Therefore, the applicants request that this court strike the contentious portions of the draft agreements of purchase and sale, and replace those portions with terms that are consistent with the Reservation Agreements.

[5] It is the position of Pinewood that the Reservation Agreements are not binding contracts of purchase and sale as the Reservation Agreements do not contain all of the essential terms of the contract. Pinewood submits that as consideration for submitting a Reservation Agreement, an applicant is placed on a priority list that entitles the applicant to receive information about the development and to priority with respect to the negotiation of a binding agreement of purchase and sale.

[6] Pinewood submits that if the Reservation Agreements are not binding then the applicants have no claim. Further, if the Reservation Agreements are binding, Pinewood submits that the additional terms proposed by Pinewood in the draft agreements of purchase and sale are not inconsistent with the Reservation Agreements and that there has been no bad faith bargaining or unconscionable conduct.

[7] In this application, the applicants also make claims for specific performance of the Reservation Agreements and for damages as a result of Pinewood’s conduct. As discussed at the return of the application, I find that specific performance cannot apply in this case. Moreover, if there is any liability as a result of Pinewood’s conduct, the issue of damages should be determined by way of a trial of an issue. Accordingly, in this decision, I will deal only with the liability issues.

Findings of Fact

[8] In the spring of 2016, Pinewood developed a concept for the condominium development to be known as Smart Townes 3, and applied for draft plan approval. I note that in these circumstances, section 52 of the Planning Act, R.S.O. 1990, c. P.13, prohibits any person from offering land for sale prior to the approval of a plan of subdivision.

[9] As part of its marketing strategy, Pinewood used a reservation system in order to promote the sale of the condominiums and to determine the public interest in Smart Townes 3. This involved the use of Reservation Agreements whereby any prospective purchaser could provide a deposit and reserve a condominium unit in the complex.

[10] Pinewood scheduled a public meeting, called a Release, for June 3, 2016. The Release was intended to be a meeting at which prospective purchasers could obtain information about Smart Townes 3, and sign and submit Reservation Agreements if they wished to do so.

[11] One of the applicants, Rohit Rangwani (“Rangwani”), is a realtor who had previously been involved with Pinewood in an earlier condominium development known as Smart Townes 2. Rangwani and Michael Colaneri (“Colaneri”), vice-president of Pinewood, orally agreed that Pinewood would pay Rangwani a commission with respect to any units that Rangwani sold in Smart Townes 3 in the same manner as Smart Townes 2. I note that no reservation system had been used by Pinewood with respect to Smart Townes 2.

[12] Rangwani became aware of the Release meeting and the proposed reservation system prior to June 3, 2016. He asked if he could submit his own Reservation Agreement for two units by email rather than attend the Release, and Colaneri agreed.

[13] On or about June 3, 2016, Rangwani submitted his personal Reservation Agreement by email, and he also submitted Reservation Agreements on behalf of the applicants Nagpal and Chhabriya by email. Subsequently, the applicants Gupta and Dhand delivered their Reservation Agreements to Pinewood. The remaining applicant, Takhar, telephoned a request for a Reservation Agreement directly to Pinewood and Pinewood accepted that request.

[14] Each Reservation Agreement consists of one page. The pre-printed portions of all of the Reservation Agreements are identical. In each Reservation Agreement the vendor is identified as “Pinewood Homes (Niagara) Ltd.” There is a place to insert the purchaser’s name, and in each case the purchaser’s name is handwritten and identifies one of the applicants.

[15] The text of the Reservation Agreement reads as follows:

In consideration of a deposit of ONE THOUSAND xx/100 ($1,000.00) payable to PINEWOOD HOMES (NIAGARA) LTD. , we/I agree to reserve a unit in the complex known as “Smart Townes 3”, Located at Ascot Circle in Niagara Falls, Ontario, pending a formal agreement of “Agreement of Purchase and Sale”. The deposit cheque will be held until the formal agreement is completed and the full down payment deposit will be discussed and agreed upon. The deposit will be applied as part of the purchase price of the residence.

[16] Below the abovementioned text there are five separate boxes that can be selected under the heading of Product Options. Each box identifies a product and a price, such as “Inside Unit $229,900” or “End Unit $239,900”. There is another box that totals the price of the options that are selected. At the bottom of the page there are signing lines for the purchaser and for a sales representative of Pinewood.

[17] I accept that each of the six Reservation Agreements in this case were accompanied by a deposit cheque in the amount referenced in the Reservation Agreements, and that none of those deposit cheques were ever cashed.

[18] On five of the six Reservation Agreements, the words “Preference Only” are handwritten across the face of the agreement. I find that these words were written by Maureen Redman (“Redman”), the sales representative for Pinewood, who wrote these words on the Reservation Agreements when she received them from the applicants and signed them on behalf of Pinewood.

[19] At the time of the Release, Pinewood had not obtained draft plan approval from the municipality. Draft plan approval was obtained, with certain conditions, on August 23, 2016. These conditions were satisfied by approximately March 2017, at which time Pinewood circulated the draft agreements of purchase and sale.

[20] The portions of the draft agreements of purchase and sale that are contentious include:

1. Paragraph 4.1 that references payment of H.S.T.
2. Paragraph 4.1(a), (b) and (c) that references increased deposits.
3. Paragraph 8.5 regarding the purchase price that reads as follows: The Purchase Price shall be adjusted from the date of execution of the Reservation Agreement between the parties to the date of closing in the event of any increase of expenses to the Vendor…The Vendor’s determination of the Purchase Price adjustment herein shall be final and binding, but in any event, the adjustment shall not exceed eighteen percent (18%) of the Purchase Price.
4. Paragraph 9.1 that reads as follows: The purchaser shall not list for sale, advertise for sale, nor assign his interest under this Agreement or in the property…at any time before the two (2) year anniversary of the Closing Date has passed.

Analysis

[21] There are two broad liability issues. First, this court must determine whether the Reservation Agreements constitute binding agreements. Second, if so, this court must determine if Pinewood has bargained in bad faith or engaged in unconscionable conduct.

[22] Regarding the first issue, in general terms a valid binding contract is created where all of the elements of offer, acceptance, consideration, intention, and certainty are present. Further, the test for determining whether the parties intended to enter into a binding agreement is an objective one based on how a reasonable bystander would view the parties’ conduct. See G.H.L. Fridman, The Law of Contract in Canada, 6th ed., (Toronto, Carswell, 2011) at p. 15-17.

[23] In the case of Bawitko Investments Ltd. v. Kernels Popcorn Ltd., [1991] O.J. No. 495 (Ont.C.A.), at p.13 Robins J.A. wrote the following:

[W]hen the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original and preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the “contract to make a contract” is not a contract at all.

[24] I also accept the statement made by Hoegg J.A. of the Court of Appeal for Newfoundland and Labrador, who wrote the following at para. 37 in Donovan Homes Ltd. v. Modern Paving Ltd., 2011 NLCA 49:

The authorities leave no doubt that essential terms which go to the core of an agreement must be settled in order for a contract to be enforceable. Equally, there is no doubt that non-essential terms and details do not have to be settled in order for legal effect to be given to the reasonable expectation of the parties. Indeed, in the case of a contract meant to endure over an extended period of time, it may be that details or other non-essential matters are not even able to be determined at the time the parties agree to contract.

[25] In the present case, the primary question is whether each Reservation Agreement contains all of the essential terms necessary to create a legally binding contract. The applicants submit that each Reservation Agreement contains the names of the parties, the purchase price, the location of the property, and the type of product being purchased, and that there are no other essential terms necessary to create a binding contract.

[26] The Supreme Court of Canada has stated that generally the essential terms of a contract for the purchase and sale of real property are the parties, the property, and the price. See the decision in McKenzie v. Walsh, 61 S.C.R. 312 at p. 313.

[27] I find that the Reservation Agreements in this case identify the parties and the price, but that the Reservation Agreements do not sufficiently identify the subject property.

[28] The Reservation Agreements do not identify the precise condominium units that were being purchased, nor do they identify the precise locations of those condominium units. In my view, the identification of the specific condominium unit and the specific location of the unit are essential terms for the sale of any condominium. Therefore, for this reason alone, the Reservation Agreements are not binding contracts.

[29] Further, each of the Reservation Agreements references only a general type of condominium unit, such as an end unit or an inside unit, which I find does not sufficiently describe the unit for the purpose of forming a contract. In this case there are multiple floor plans and multiple trim levels available for each type of unit, and for each floor plan and each trim level there is separate pricing. Therefore, even if the precise condominium unit and the location had been identified, the absence of particulars regarding the floor plans and the trim levels, in my view, supports a finding that the Reservation Agreements are not binding.

[30] Still further, in determining whether there is a binding contract, the court must objectively analyze the intentions of the parties. Here, the parties could not possibly have intended to contract for a specific condominium unit as none of the units had been built, the draft plan had not yet been approved, and the Planning Act prohibited Pinewood from offering any condominium unit for sale at the relevant time.

[31] Moreover, the terms of the Reservation Agreements themselves read in part, “The deposit cheque will be held until the formal agreement is completed and the full down payment deposit will be discussed and agreed upon.” This sentence implies that there were terms, including the down payment, that were essential to the agreement that had to be agreed upon in the future. As was written in the Bawitko decision, a “contract to make a contract” is not a contract at all.

[32] In addition, I find that in five of the six Reservation Agreements the handwritten words “Preference Only” form part of the Reservation Agreements as these words were written by a representative of Pinewood at the time that the Reservation Agreements were received and accepted by Pinewood. These words support the view that the Reservation Agreements only gave the applicants priority over other prospective purchasers with respect to the negotiation of a final agreement to purchase a condominium unit.

[33] For all of these reasons, I find that the Reservation Agreements do not contain all of the essential terms of the contract. The Reservation Agreements are not binding contracts.

[34] Given my finding that the Reservation Agreements are not binding, I do not need to consider whether Pinewood attempted to insert onerous terms into an existing contract. If there is no existing contract between the parties, Pinewood is free to propose whatever terms it chooses and the applicants are free to accept or reject those terms.

Conclusion

[35] For all of the above reasons, this application is dismissed.

[36] If the parties cannot resolve the issue of costs, I direct that the party seeking relief shall deliver written submissions to the trial co-ordinator at St. Catharines within 20 days of the release of this decision, with responding submissions to be delivered within 10 days thereafter. If no submissions are received within this timeframe, the parties will be deemed to have settled the costs issue as between themselves.

J. R. Henderson J. Released: October 1, 2018