Introduction

[1] The applicants seek to enforce an agreement of purchase and sale pursuant to which they are to be the purchasers of a condominium unit in a building in Toronto that has almost been completed. The respondent argues that it does not have an obligation to complete the sale because of delays in approvals and construction.

[2] For the reasons that follow, I find that the agreement is valid and enforceable. The applicants are not in breach of the agreement, and there is no basis on which the respondent can terminate the agreement based on delays that were not caused by the applicants. From the record before me, it is evident that the respondent is attempting to avoid its obligations to complete the sale for the purpose of benefitting from an increase in the value of real estate since the agreement was made. Given the nature of the property, the applicants are entitled to specific performance.

Facts giving rise to the application

[3] The parties entered into an agreement of purchase and sale dated May 5, 2013, whereby the applicants are to purchase a condominium unit located at 243 Niagara Street, Suite 400, Toronto (the "Agreement"). At the time the parties entered into the Agreement, the condominium building still required various approvals and construction had not yet commenced.

[4] The Agreement provides that the purchase price is $649,000.00. The applicants were to pay a deposit of $50,000.00, made in installments of $5,000.00 over a period of 120 days starting from the day the Agreement was made

[5] Initially, the Agreement provided that the occupancy date was to be on or before September 1, 2014, and that the unit was to be transferred to the applicants within six months of the occupancy date. However, the Agreement did provide that the occupancy date could be extended or accelerated under specified circumstances.

[6] Paragraph 14 of the Agreement addressed the circumstances under which the occupancy date could be changed:

14(a) The Purchaser acknowledges and agrees that the Occupancy Date set out in subparagraph 2(a) of this Agreement is a proposed Occupancy Date (the "Proposed Occupancy Date"). The Vendor agrees that, it shall provide written notice (the "Notice") to the Purchaser prior to the Proposed Occupancy Date of a confirmed Occupancy Date (the "Confirmed Occupancy Date") being a date selected by the Vendor in its sole and unfettered discretion (and which date should not be more than ninety (90) days from the Proposed Occupancy Date of [sic] from the date of any extensions(s) thereto by the Vendor as provided).

(c) Notwithstanding anything hereinafter contained, the Vendor shall have the unilateral right to extend the Proposed Occupancy Date for one or more periods of time not exceeding twenty-four (24) months in total to any particular new Proposed Occupancy Date, upon giving the Purchaser prior written notice of each extension. The Vendor shall also have the unilateral right to accelerate the Proposed Occupancy Date (for one or more periods of time, not exceeding six (6) months in total) to any other particular date, upon giving the Purchaser written notice thereof of each accelerated date not less than thirty (30) days prior to the said accelerated Proposed Occupancy Date.

(d) If the Vendor shall be unable to complete the transaction by the Confirmed Occupancy Date for any reason whatsoever, the Vendor may extend the Confirmed Occupancy date for one or more periods of up to one hundred and eighty (180) days in the aggregate, if written notice is given to the Purchaser at least five (5) days before any extension of the Confirmed Occupancy date (provided, however, that the Vendor shall always be permitted a five (5) day grace period with respect to any delay in the occupancy of the Unit) or alternatively, the Vendor may at its sole option declare the Agreement null and void, in which event the deposit(s) shall be returned to the Purchaser with interest at the rate prescribed under the Act, and the Vendor shall not be liable for any costs or damages suffered or incurred by the Purchaser thereby.

(e) The Vendor shall have the unilateral right to extend the Unit Transfer Date for one or more periods of time not exceeding eighteen (18) months in total from the Confirmed Occupancy Date, upon giving the Purchaser not less than five (5) days prior written notice of such extension.

[7] Subsequently, on May 24, 2013, the parties entered into an addendum to the Agreement (the "Addendum"). The Addendum explicitly removed paragraphs 14(c) and (d) from the Agreement, and made the additional following modifications to the Agreement:

a. The Proposed Occupancy Date was extended from September 1, 2014, to no later than February 1, 2015;

b. If the transaction did not close by February 15, 2015, the applicants could withdraw from the Agreement without penalties and with the return of their deposit; and

c. The Unit Transfer Date was to be within six months of the Occupancy Date.

[8] The Addendum also provided that where there were discrepancies between the Agreement and the Addendum, the provisions in the Addendum were to prevail.

[9] The applicants did pay the $50,000 deposit within 120 days of entering into the Agreement.

[10] There were delays in obtaining various permits, which led to delays in the commencement of construction. Ultimately, construction did not commence until May of 2016.

[11] Up to that point, despite the delays, neither the applicants nor the respondent sought to terminate the Agreement.

[12] In February of 2017, the applicants were contacted by a representative of the respondent who advised them that there would be changes to the layout of the condominium unit, including the removal of balconies provided for in the original plans. On February 25, 2017, the applicants attended a site visit to discuss the changed layout and the progress of the construction. The applicants' evidence is that, at that time, the respondent's representative did not raise any issues about terminating the Agreement. While the applicants were disappointed with the removal of the balconies, they nevertheless wanted to proceed with the purchase of the unit.

[13] On February 26, 2017, the respondent's representative sent an email to the applicants purporting to terminate the Agreement on the basis of paragraphs 14(c) and (d) of the Agreement and offering the applicants an opportunity to purchase the condominium unit at an increased purchase price of $875,000.00:

Hello Carol and Kelly

Thank you for the site meeting on Sat. and are pleased that despite the significant changes to the original design you which (sic) to proceed.

As I mentioned to you the delays over the last 4yrs plus is a direct result of the City of Toronto process in obtaining the SPA and CP Permits.

I which (sic) to draw your attention to Paragraph 14 (C) and (D) of the Agreement of Purchase and Sale. As a result of these delays, we incurred significant costs and would like to extend to you the first right of Refusal. The new price is 925,000., however, we wish to offer a discount of $50,000

This offer is open until March 3/17

Regards

Don

[14] The applicants then retained a lawyer who communicated with representatives of the respondent that paragraphs 14(c) and (d) were no longer operative given the Addendum. The respondent's representative responded with an email March 23, 2017, in which he took the position that paragraph 14(e) of the Agreement permitted the respondent to terminate the Agreement:

Dear Sir,

Upon reviewing the Addendum dated May 5/17.

Please refer to your item 9 paragraph 14(d) as stated the Occupancy date was Feb 1/15, that unit transfer date Max. 6 months, therefore, Aug. 1/15.

That has not been achieved. The agreement has come to an end.

However, we wish to offer you the the (sic) first wright (sic) of Refusal to purchase at the new revised price as indicated before.

We will extend the offer until Friday March 24/17, 12 o clock noon time.

Regards Don

[15] As the respondent maintained that it had the right to terminate the Agreement, the applicants commenced this application on April 7, 2017. The applicants seek specific performance of the Agreement. Their position is that, despite the delays in construction and the change in the layout of the condominium unit, they still want to close the transaction. In addition, they claim that the condominium unit is unique and that therefore this is an appropriate case for specific performance.

Procedural history

[16] Unfortunately, the procedural history of this application is rather fraught. Most notably, counsel for the respondent did not appear at the hearing of the motion on December, 20, 2017.

[17] In order to provide an explanation for my decision to proceed with the application despite the fact that counsel for the respondent did not appear at the hearing, it is important to provide some of the procedural background.

[18] As indicated above, the application was commenced on April 7, 2017. Initially, the hearing was scheduled for April 24, 2017.

[19] After the commencement of the application, counsel for the applicants was contacted by a lawyer who indicated that he was retained to respond to the application on the respondent's behalf. The respondent's lawyer advised that he was not available on May 8, 2017, and the parties negotiated an adjournment of the hearing to September 11, 2017, which was reflected in a consent order made by Master Short on May 8, 2017. The consent order included the following terms:

a. The respondent was to preserve and not dispose of the property until the issues on the application were determined; and

b. The application was scheduled for September 11, 2017, and required the parties to comply with a schedule that, inter alia, provided that the respondent was to serve its responding record by June 14, 2017.

[20] Despite the timetable set by the Master's order, the respondent did not serve its responding record by June 14, 2017, and on August 25, 2017, the respondent's initial counsel obtained an order removing himself as counsel of record.

[21] By September 11, 2017, the respondent had retained new counsel but no responding materials had been served and a representative of the respondent attended Court to request an adjournment. Justice Diamond granted the adjournment to December 20, 2017, on terms that included the following:

a. The December 20, 2017, date was peremptory on the respondent;

b. The respondent was to serve responding materials by no later than September 25, 2017;

c. Cross-examinations were to be completed by October 27, 2017;

d. The respondent was precluded from marketing, listing, selling, transferring or encumbering the property at issue pending a further order of the Court; and

e. Justice Diamond's order could be registered on title.

[22] On September 25, 2017, the respondent served a record which was filed with the Court titled "Affidavit of Documents of 2341464 Ontario Inc". The affidavit essentially follows the prescribed form for an affidavit of documents in the Rules of Civil Procedure, and it was sworn by an articling student with the new firm retained by the respondent. It contains the Agreement and Addendum, and a number of documents dealing with issues that arose with the City of Toronto in getting approval for the construction of the building.

[23] The parties also exchanged facta. In the revised factum filed by the applicants on December 11, 2017, counsel for the applicants raises the propriety of the affidavit of documents served by the respondent as evidence on the application.

[24] At the beginning of the hearing on December 20, 2017, counsel for the applicants informed me that counsel for the respondent would not be attending the hearing due to a medical emergency. No adjournment was requested. Rather, I was advised that an articling student and the respondent's principal were present in the courtroom and that the respondent was content to proceed on the basis of the materials that had been filed in response to the application.

[25] Given the history of this matter, that the date for the application was peremptory, and that I was advised that the respondent was content to proceed based on its written materials, I heard submissions from counsel for the applicants. I reserved my decision, indicating that I would consider the arguments in the factum filed by the respondent.

Issues and analysis

[26] The issues to be decided on the application are:

a. Is the affidavit of documents filed by the respondent proper evidence on the application?

b. Is the respondent entitled to terminate the Agreement?

c. Are the applicants entitled to specific performance?

Affidavit of documents

[27] As referred to above, the only evidence put forward by the respondent was an affidavit of documents sworn by an articling student. While the factum filed by the respondent purports to refer to the affidavit of Donald Desrochers, who is the respondent's principal, there is no such affidavit; the documents actually referred to in the factum are the documents attached to the articling student's affidavit of documents.

[28] The applicants take the position that the documents put forward in the affidavit of documents are not admissible as evidence in response to the application, and I agree.

[29] As a first point, I note that the Rules of Civil Procedure do not even provide for the delivery of an affidavit of documents in the context of an application.

[30] More importantly, documents attached to a clerk's affidavit without any context or explanation do not comply with the rules regarding evidence admissible on an application.

[31] Rule 4.06(2) of the Rules of Civil Procedure provides that affidavits are to be based on the personal knowledge of the deponent, unless the Rules provide otherwise:

An affidavit shall be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that the deponent could give if testifying as a witness in court, except where these rules provide otherwise.

[32] Rule 39.01(5) specifies that affidavits on an application can include hearsay evidence on non-contentious matters, but the source of the information must be provided:

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.

[33] In this case, the affidavit of documents is no more than a list of documents with no further narrative. Accordingly, it clearly does not comply with the Rules regarding admissible evidence on an application.

[34] While I find that the affidavit of documents is inadmissible, I take this opportunity to make two further points on this issue.

[35] While the respondent indicated through counsel for the applicants at the beginning of the hearing that the respondent was content to rely on its responding materials rather than make submissions, the applicants were clear in their revised factum served on December 11, 2017, that they took issue with the admissibility of the affidavit of documents so it should have been apparent to the respondent in advance of the hearing of the application that there was a real risk that the affidavit of documents would not be admitted.

[36] In addition, and more significantly, in my view, even if the documents in the affidavit of documents had been properly put in evidence, they would not affect the outcome of the application. Some of the documents are the same as those put forward by the applicants, such as the Agreement and the Addendum. Most of the other documents relate to the delays in getting necessary approvals from the City of Toronto to proceed with construction. Given my finding below that the respondent is not entitled to unilaterally terminate the Agreement due to these types of delays, the source and extent of the delays is irrelevant.

Validity of Agreement

[37] There is no doubt that the timelines provided for in the Agreement and Addendum have not been met. The issue on this application is whether the respondent can rely on these delays to terminate the Agreement.

[38] The applicants advance two principle arguments in support of their position that the Agreement remains valid and enforceable. They argue that with the removal of paragraphs 14(c) and (d) of the Agreement, the respondent is not entitled to unilaterally terminate the Agreement due to delays and that there is no other provision in the Agreement that allows the respondent to do so. In addition, the applicants argue that the respondent's repudiation of the Agreement is not valid because the applicants have not accepted the repudiation.

[39] In contrast, the respondent argues that the Agreement is no longer valid because it has been frustrated due to delays beyond its control and because of the changes in the floor plan.

[40] I accept the arguments advanced by the applicants and reject those made by the respondent.

[41] With the removal of paragraph 14(d) in the Agreement, the respondent agreed to give up the right to unilaterally terminate the agreement if it was unable to complete the transaction by the dates provided for in the Agreement and Addendum. In the event of such delays, only the applicants retained the right to withdraw from the Agreement in accordance with the following provision in the Addendum:

Notwithstanding any terms to the contrary, the Firm Occupancy Date, Outside Occupancy Date, Purchaser's Termination Period shall not be extended past February 1, 2015. After this date the purchasers can withdraw from the contract with no penalties and charges and the deposits will be returned in full.

[42] Under the circumstances, the respondent could only terminate the Agreement if there was some other basis for the termination in the Agreement or if performance of the contract was frustrated.

[43] With respect to the Agreement, the respondent purports to rely on Paragraph 14(e) of the Agreement which gives the respondent the unilateral right to extend the "Unit Transfer Date for one or more periods of time not exceeding eighteen (18) months in total from the Confirmed Occupancy Date" and Paragraph 10 of the Addendum that provides that "Dimensions of the Unit shall not vary by more than 3%". The respondent argues that the Unit Transfer date will exceed 18 months from the Confirmed Occupancy Date due to the delays in constructions and that, with the removal of the balconies, the dimensions of the unit will vary by more than 3%. However, these provisions do not give the respondent a right of termination. Rather, they are meant to protect the applicants. In this case, while the applicants may have a right of terminations based on delays in reaching the occupancy date or in changes to the layout of the unit, the applicants have made clear that they are prepared to waive these issues and proceed with the sale.

[44] It is also not open to the respondent to rely on the doctrine of frustration to avoid its obligations to sell the unit to the applicants. As reviewed in Victoria Wood Development Corporation Inc. v. Ondrey et al. (1978), 1978 CanLII 1447 (ON CA), 22 O.R.(2d) 1 (C.A.), at para. 39, the doctrine of frustration applies to contracts involving the sale of property. However, in order to succeed in arguing that the contract is frustrated, the respondent must demonstrate that, due to a supervening event that fundamentally changes the obligations to be performed, it has become impossible to perform the contract:

In my view we must apply to a contract for sale of land the same principles respecting frustration of contracts as are applicable to any other contract. That exercise requires us to consider the terms of the contract and the factual background in which it was made, in order to see what the obligations under the contract were and whether the supervening event has so changed the nature of those obligations that to compel their performance, under the changed conditions, would be to order performance of something radically different from what the two parties agreed to under their contract. We cannot impose upon the parties an allocation of risk that is neither explicit in the contract nor implicit in its terms, when considered in the light of the circumstances in which it was made.

[45] In this case, the subject matter was the purchase and sale of the condominium unit. While there have been some delays and some changes to the floor plan, the parties' ability to perform the contract has not been frustrated. The respondent is still able to sell the condominium unit to the applicants. This is not a situation in which the respondent is unable to perform its obligations; for example, it is not a situation where the respondent was not able to obtain the necessary approvals and the building had not been built. In this case, at the time the respondent purported to terminate the Agreement, the building was almost complete and ready for occupancy. Moreover, the parties clearly turned their mind to issues of potential delay and changes in the floor plan, and their bargain does not allow the respondent to unilaterally terminate the Agreement in these circumstances.

[46] The respondent's ability to perform its obligations under the Agreement is most evident from the fact that the respondent's communications to the applicants purporting to terminate the Agreement included an offer to sell the same unit at a higher price. This is a transparent indication from the respondent that it is able to complete the transaction, but that it wishes to receive more money.

[47] Accordingly, the respondent was not entitled to unilaterally terminate the Agreement. Given that the applicants did not accept the respondent's repudiation, the Agreement remains valid.

Specific performance

[48] The applicants seek specific performance on the basis that the property is unique.

[49] In Canamed (Stamford) Ltd. v. Masterwood Doors Ltd., [2006] O.J. No. 802 (Sup. Ct.), at paras. 98 to 102, this Court reviewed the principles applicable in determining whether to grant specific performance:

Specific performance, by its nature, is an equitable remedy. The historic approach has been that specific performance was usually available in real estate transactions. Land, by its very nature, was considered unique and specific performance was routinely granted. Over time, this traditional approach changed.

The Supreme Court of Canada in Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415, makes it quite clear that the equitable remedy of specific performance should not be routinely granted in real estate cases. The Court must be satisfied that the property is unique to the extent a substitute is not readily available.

Sopinka J. states the proposition as follows in paragraph 22 of Semelhago, supra:

Courts have tended, however, to simply treat all real estate as being unique and to decrease specific performance unless there was some reason for refusing equitable relief ... Some courts, however, have begun to question the assumption that damages will afford an inadequate remedy for breach of contract for the purchase of land. In Chaulk v. Fairview Construction Limited (1997), 14 NFLD and P.E.I.R. 13, the Newfoundland Court of Appeal (per Gushue J.A.), after quoting the above passage from Adderly v. Dixon, stated at page 21:

The question here is whether damages would have afforded Chaulk an adequate remedy and I have no doubt they could and would have. There was nothing whatever unique or irreplaceable about the houses and lots bargained for. They were merely subdivision lots with houses, all of the same general design built on them which the respondent was purchasing for investment or resale purposes. He had sold the first two almost immediately at a profit and intended to do the same with the remainder. It would be quite different if we were dealing with a house or houses which were of particular architectural design or were situated in a particularly desirable location, but this was not the case.

Specific 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. The guideline proposed by Estey J. in Asamera Oil Corp. v. Seal Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, with respect to contracts involving chattels is equally applicable to real property. At p. 668, Estey J. stated:

Before a plaintiff can rely on a claim for specific performance so as to insulate himself from the consequences of failing to procure alternate property in mitigation of his losses, some fair and real substantial justification for his claim to performance must be found.

Lax J. in John E. Dodge Holdings Ltd. v. 805062 Ontario Limited, 2001 CanLII 28012 (ON SC), [2001] O.J. No. 4397 set out the principles of Semelhago.

Semelhago assessed and examined in each case, the plaintiff and the property. The danger in framing the issue as one of "uniqueness", a term that carries with it a pre-Semelhago (ante diluvian aroma) is that the real point of Semelhago will be lost. It is obviously important to identify the factors or characteristics that make a particular property unique to a particular plaintiff. The more fundamental question is whether the plaintiff has shown that the land, rather than its monetary equivalent, better serves justice between the parties. This will depend on whether money is an adequate substitute for the plaintiff's loss and this in turn will depend on whether the subject matter of the contract is generic or unique.

It would appear that the party seeking specific performance must not only satisfy the Court that that property is unique to the extent a substitute is not readily available, but also must satisfy the Court that there is a fair, real and substantial justification for the claim to specific performance.

[50] In this case, the applicants’ evidence on the uniqueness of the property is rather limited, but I am nevertheless satisfied that specific performance is warranted.

[51] The unit is a full floor in a small building on Niagara Street in Toronto. The applicants' evidence includes a statement that the property is unique given its size, amenities, features and location. The applicants also rely on the fact that they entered into the Agreement over four years ago, and that a property with these features would no longer be available in the same price range.

[52] I also note that in its factum, the respondent only argues that it was entitled to terminate the Agreement; it does not dispute that specific performance is an appropriate remedy in the event the termination was invalid.

[53] Finally, this is a case in which granting specific performance is fair and justified. The applicants have shown themselves to be very flexible in the face of extensive delays and changes in the layout of the unit. In contrast, the respondent only raised concerns over increased costs once the unit was finally close to completion, and then purported to terminate the Agreement while seeking to sell the unit to the applicants at a higher cost. By its conduct, the respondent has demonstrated the challenges the applicants would face in finding a similar unit in the same price range and it has arguably prejudiced the applicants’ ability to find an alternative by waiting until the eleventh hour to try to terminate the Agreement. Under the circumstances, in my view, holding the respondent to the bargain it struck with the applicants is certainly fair and justified.

Conclusion

[54] For the reasons set out above, the application is granted and the applicants are entitled to the following relief:

a. A declaration that the Agreement and Addendum are valid and remain in force; and

b. An order that the applicants are entitled to specific performance of the Agreement and Addendum, and the transaction is to close by no later than 30 days from the date of this decision, by which I mean that by no later than 30 days from the date of this decision, the applicants are to be granted occupancy and title to the property, and the respondent is to complete all other steps required to close the transaction.

[55] The applicants are entitled to their costs on a partial indemnity basis which I fix at $20,000 inclusive of HST and disbursement.

[56] Finally, if any issues arise between the parties in relation to the implementation of the order for specific performance, counsel may contact me through my assistant to arrange a Case Conference.

FAVREAU J.

Date: January 30, 2018

Jones v. 2341464 Ontario Inc., 2018 ONSC 717

Case Summary

Introduction

Facts giving rise to the application

Procedural history

Issues and analysis

Affidavit of documents

Validity of Agreement

Specific performance

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 2

Legal Tests 2