Court File and Parties

COURT FILE NO.: CV-17-586658 DATE: 20181217 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: NJS CAPITAL MANAGEMENT INC. Plaintiff/Moving Party – and – 555034 ONTARIO LTD. and 1081041 ONTARIO LTD. Defendants/Responding Parties

COUNSEL: Jeffrey Larry and A. Bloom, for the Plaintiff/Moving Party H. Keith Juriansz and V. Luchko, for the Defendants/Responding Parties

HEARD: July 26 and October 23, 2018

JUSTICE S. NAKATSURU

[1] A commercial real estate deal went bad. There is a dispute between the parties about why. This case shows why it is good to have any and all agreements reduced to signed written contracts. The plaintiff, NJS Capital Management Inc. (“NJS”), entered into three standard-form Agreements of Purchase and Sale for three commercial properties from the defendants, two numbered companies controlled by Rakesh Gupta (“Mr. Gupta”).

[2] The plaintiff has sued for breach of contract. It brings two actions. The defendants bring two counterclaims. The three contracts in issue were negotiated during three days in August of 2017. The sales of the properties never went through. NJS chose not to waive a due diligence condition and backed out on one of the properties. The defendants refused to close on the other two deals. It is Mr. Gupta’s position that NJS falsely and fraudulently lead him to believe that all three Agreements of Purchase and Sale were cross-conditional and a package deal and that a collateral oral contract was formed to that effect. Mr. Gupta asserts that Mr. Nemetz induced him to sign the contracts by promising he would later sign an amendment drafted by his lawyer reflecting this agreement. When that amendment was presented to NJS, it refused to sign it.

[3] NJS brings a summary judgment motion. Originally, NJS was seeking specific performance as relief. However, given the passage of time and the changed circumstances that this has brought to the two properties it had wished to buy, it no longer seeks specific performance and will settle for damages. Given the history of these proceedings, the plaintiff asked that these damages be decided on a reference rather than on this summary judgment motion. After canvassing the position of the parties, I agreed that this would be the appropriate way to deal with damages.

[4] The defendants submit that there is no breach of contract and counterclaim for damages including punitive, aggravated and/or exemplary damages. The defendants argue that the contract should be rectified with retroactive effect so that the Agreements of Purchase and Sale are cross-conditional on the sale of all three properties. Alternatively, it is submitted that the Agreements be rescinded on the basis of fraudulent or negligent misrepresentation and/or unconscionability.

[5] I find that the defendants have breached the relevant contracts in this case. Thus, I am granting summary judgment in both actions in favour of the plaintiff. The issue of damages will be referred to a Master. The deposit paid by NJS and held by Mr. Gupta is ordered returned. Given my findings, the counterclaims made by the defendant cannot succeed and therefore are dismissed.

[6] In explaining my decision, I will first set out an overview of the evidence in the motion record. While there were cross-examinations on the affidavits, I will not refer to these to any great extent. That said, of course, I have carefully considered them.

A. Overview of the Evidence in the Record

The Factual Background

[7] The plaintiff, NJS, is a private Ontario corporation in the business of purchasing and managing residential apartment buildings in the City of Toronto. The defendant, Mr. Gupta, is the owner of many multi-residential properties in Toronto. They entered into Agreements of Purchase and Sale for three of Mr. Gupta’s properties on August 14, 2017: 81 Wilson Park (“Wilson Park”), 60-62 Triller Avenue (“Triller”) and 828 Shaw Street (“Shaw”). Those Agreements did not close. Mr. Gupta was willing to sell these properties but argues that the Agreements of Purchase and Sale for each of the properties was conditional on the sale of the others and refuses to close on Wilson Park or Triller agreements without also closing on Shaw. He argues that on behalf of the defendants, he entered into an oral agreement with NJS on August 14 to the effect that the three properties were being sold as a package; an agreement that the plaintiff has breached thereby voiding the Agreements of Purchase and Sale on all three properties.

Ari Nemetz

[8] Mr. Ari Nemetz (“Mr. Nemetz”) is the president of the plaintiff corporation, NJS. NJS is controlled by Mr. Nemetz and Hanan Sturm. NJS currently oversees the management of approximately 183 rental units in eight buildings and is looking to acquire more. It is particularly focused on the acquisition of distressed properties with potential for renovation and profit, and as a result, is heavily focused on the up-and-coming Parkdale neighbourhood of Toronto, where many such properties are located.

[9] In the summer of 2017, Mr. Nemetz was made aware by Jonathan Hittner of Avison Young – a real estate firm retained by NJS - of an opportunity to purchase some residential apartment buildings that were not listed on the MLS, but were for sale by the owner. These buildings were exactly the kind of distressed, high-upside, high vacancy properties that Mr. Nemetz sought to acquire for his business. He was put in touch with the seller, Mr. Gupta, in July 2017 and began negotiations for the purchase of many of Mr. Gupta’s buildings.

[10] Mr. Nemetz submitted three offers in late July for 382 Dovercourt Road, 394 Dovercourt Road, and 34 Heydon Park Road (“Heydon Park”). Mr. Nemetz avers that each of these offers were separate, stand-alone offers prepared on the standard Ontario Real Estate Association (OREA) form. 382 and 394 Dovercourt Road had already been sold by that time, however, NJS did enter into negotiations for Heydon Park.

[11] Mr. Nemetz states that he first met with Mr. Gupta on August 10, 2017 to negotiate the Heydon Park deal. At that first meeting, Mr. Nemetz states that he presented Mr. Gupta with an additional three stand-alone offers for Wilson Park, Triller, and Shaw (“the Properties”).

[12] On August 14, Mr. Nemetz, Mr. Gupta, Mr. Sturm, Mr. Lieberman and Jonathan Hittner met to negotiate the purchase and sale of the Properties. Mr. Nemetz avers that the meeting was lengthy, and that two main issues were under negotiation: the assumption of the existing mortgages on the Properties; and, the price of the sale. Mr. Nemetz states that Mr. Gupta wanted to increase the price on Shaw such that the total purchase price for the Properties would be $12 million instead of the total of $8.16 million NJS had offered.

[13] Mr. Nemetz states that he was unfamiliar with Shaw as a property and the neighbourhood in which it was situated. He had not been to the building at the time of this meeting, and was unaware of the size and composition of its units, or their general condition or vacancy rate. He states that this led him to make an initial offer that was on the low end, but that upon Mr. Gupta’s assurances that Shaw was the “trophy” of his portfolio he was willing to raise the price from his initial offer of $2,820,000.00 to $6,700,000.00, conditional upon NJS’s due diligence.

[14] After these and other hand-written amendments were made to the three Agreements of Purchase and Sale (“the Agreements”), they were signed and executed by Mr. Gupta and Mr. Nemetz. Mr. Nemetz swears that no agreement was made on August 14th, or at any other time, to the effect that the Agreements were a package deal or cross-conditional on one another. He says that the point was raised once during the meeting and that he flatly rejected it. He further states that Mr. Gupta made no mention of wanting to have his lawyer review the Agreements, nor does he recall him making any attempts to contact his lawyer during that meeting.

[15] Mr. Nemetz further states, in a subsequent affidavit sworn after reviewing Mr. Gupta’s position in this matter, that at no time during their meetings in August 2017 did it cross his mind to question Mr. Gupta’s cognitive ability to participate in those negotiations, or agree to the sale of his property. To the contrary, he swore that his impression of Mr. Gupta throughout their negotiations was that he was a “savvy, skillful and sophisticated negotiator” with a deep knowledge of real estate and his properties.

[16] Mr. Nemetz became aware about a week later that Mr. Gupta was taking the position that they had made an oral agreement to the effect that the Agreements were cross-conditional. He received the proposed amendments to the Agreements with that condition in writing on August 23, 2017. He swears that this was the first time he saw those amendments, and that he rejected them.

[17] Having delivered deposits for each of the Properties pursuant to the Agreements on August 14th, NJS continued to move forward with the terms of the Agreements, and made requests for due diligence documents. When they were not forthcoming, he chose to waive the due diligence conditions for Wilson Park and Triller. Mr. Nemetz states that he was willing to waive due diligence on those properties because he was familiar with them and therefore able to close on them with confidence. He states that he was unable to make the same decision regarding Shaw due to his unfamiliarity with the property. He therefore cancelled the agreement on Shaw and proceeded to close on Wilson Park and Triller.

[18] Mr. Nemetz was informed by his lawyer on October 25, 2017 that Mr. Gupta would not close on Wilson Park and Triller unless NJS also closed on Shaw. Mr. Nemetz states that NJS’s counsel advised Mr. Gupta’s lawyer that NJS would commence an action seeking specific performance if Mr. Gupta refused to close on the Wilson Park and Triller properties as per their agreement. When Mr. Gupta failed to tender on the closing date, this action was filed.

Hanan Sturm

[19] Hanan Sturm is an officer of NJS and Mr. Nemetz’s business partner. He began working with NJS approximately four years ago.

[20] Mr. Sturm avers that he was present at the meeting on August 14, 2017, where Mr. Nemetz and Mr. Gupta negotiated on behalf of their respective companies with respect to the Agreements. He recalls the meeting being approximately 2 hours long, and that he left approximately 75 minutes into it to go the bank.

[21] Mr. Sturm states that he played no part in the negotiation of the sale of the Properties. However, he observed the negotiation and he recalls that during the time he was present two main issues were discussed: the assumption of the mortgages on the Properties, and the price of the Properties. He did not recall any agreement being concluded on the first issue, however, he stated that NJS did ultimately agree to pay a higher price for the Shaw property.

[22] Mr. Sturm affirms that he and Mr. Nemetz had walked through the Wilson Park and Triller properties and were aware of the extent of capital improvements required for each property. He states that they had not done a walk-through of the Shaw property, nor were they familiar with its neighbourhood at the time of this meeting, but that Mr. Gupta assured them that Shaw was the most valuable property in his entire portfolio. He affirms that it was on the basis of this assurance that NJS was willing to increase the price for Shaw.

[23] He further avers that there was never any agreement made about a “package deal” for the Properties, or that NJS’s abilities to close on Wilson Park and Tiller would be conditional on closing on Shaw. Nor was any discussion had about Mr. Gupta contacting his lawyer to draft any amendments to the Agreements.

[24] Mr. Sturm says that throughout this meeting he found that Mr. Gupta appeared to be a “highly experienced and sophisticated real estate professional and negotiator.” In a second affidavit, sworn after reviewing Mr. Gupta’s affidavit in this matter, Mr. Sturm adopted Mr. Nemetz’s evidence that at no point during this meeting or in any of his interactions with Mr. Gupta did he question his capacity to conduct negotiations or to agree to this sale.

David Lieberman & Jonathan Hittner

[25] David Lieberman is a principal of Avison Young with 30 years of experience in the real estate industry. Jonathan Hittner is a vice-president in the Multi-Residential Sales Group at Avison Young with 11.5 years of experience in the real estate industry. Both swore an affidavit in this case stating that they were present at the meeting on August 14, 2017.

[26] While neither had a detailed recollection of the meeting and acknowledged that they participated very little in the meeting, Mr. Lieberman recalled that the meeting was very long and that handwritten revisions were made to each of the Agreements before they were signed. He did not recall Mr. Nemetz agreeing to a package deal of the Properties. Further, he states that there was no discussion at that meeting or any of the Agreements being amended after-the-fact to make them cross-conditional. Mr. Hittner affirms that his recollection of the meeting was the same. Mr. Lieberman avers that Mr. Gupta appeared to be a “sharp, shrewd and seasoned real estate professional and negotiator.” Neither he, nor Mr. Hittner expressed any doubt as to Mr. Gupta’s capacity to handle the negotiation or sale of his properties.

Neil Musselwhite

[27] Neil Musselwhite is a sale representative at Avison Young. His involvement in this story is minimal. He swears to having attended Mr. Gupta’s office on August 22, 2017 to receive a copy of the amendments to the Agreements proposed by Mr. Gupta. This was the second time he went to Mr. Gupta’s office, the first being in July 2017 when he presented NJS’s offers for the different properties. In his brief exchanges with him, Mr. Musselwhite stated that he found Mr. Gupta to be a very lucid individual.

Rakesh Gupta

[28] Rakesh Gupta is the principal of the defendant corporations in this action. He is a retired real estate broker and the owner and manager of many multiple residential properties in Toronto. He is 78 years old. Given his old age he has been looking to reduce his workload and responsibilities for the purposes of retiring. To that end he has been looking to sell his properties.

[29] Mr. Gupta avers that on or about July 27, 2017 he received a package from Avison Young containing three Agreements of Purchase and Sale on behalf of NJS for 382 Dovercourt Road, 394 Dovercourt Road, and Heydon Park, Toronto. Before this date he had no previous contact with Avison Young or NJS, and had already sold 382 and 394 Dovercourt Road. However, he contacted a sales representative, Mr. Musselwhite, to say that he was agreeable to negotiate the sale of Heydon Park.

[30] Mr. Gupta states that on or about August 9th – later agreed to have been August 10th and 11th – Mr. Nemetz, as a representative of NJS, and Mr. Lieberman and Mr. Hittner, as representatives of Avison Young, attended his office to negotiate and conclude the sale of Heydon Park.

[31] It was on this date that Mr. Gupta states that he first indicated to Mr. Nemetz that he would be willing to sell Wilson Park, Triller, and Shaw. NJS presented three separate Agreements of Purchase and Sale for the Properties shortly afterwards. The total price proposed by NJS for the purchase of all the Properties was $8,160,000.00; $2,540,000.00 for Wilson Park, $2,800,000.00 for Triller, and $2,820,000.00 for Shaw.

[32] Mr. Gupta avers that he met with Mr. Nemetz, Mr. Sturm, Mr. Lieberman, and Mr. Hittner on August 14th to negotiate the sale of the Properties. He states that he took the position that he was not willing to sell the Properties for anything less than $12 million and that he would need NJS to assume the mortgages on the Properties. He states that he expressed to Mr. Nemetz that it did not matter to him how the monies were allocated provided that the total of the package was above $12 million. Mr. Gupta states that throughout the negotiations it was understood that the Properties were being sold as one package and negotiated as such. He denies focusing on Shaw or having told Mr. Nemetz that Shaw was the “trophy” of his real estate portfolio.

[33] Mr. Gupta states that because he did not know how to draft an amendment to the Agreements to reflect the fact that the Properties were being sold as a package deal, he suggested that his lawyer would draft the necessary amendments. He swears that he attempted to reach him that night but was unable to do so and that therefore it was agreed that he would prepare the amendments at a later time and Mr. Nemetz would sign them the following day. He states that based on those assurances he signed the three Agreements.

[34] On or about August 16, 2017, Mr. Gupta states that he directed his lawyer to draft the amendments to the Agreements to indicate that the sale of each was contingent upon the sale of the other two. These amendments were given to Mr. Musselwhite who attended his office to pick up the amendments and to pass them on to Mr. Nemetz.

[35] Mr. Gupta states that it was around August 29, 2017, that he began to suspect something was wrong and began to withhold due diligence documents for the Properties until Mr. Nemetz signed the amended Agreements. Mr. Nemetz refused to do so, taking the position with Mr. Gupta that they had a signed agreement and that Mr. Gupta was obligated to follow through with the sale as outlined therein. NJS continued to move forward, ultimately waiving the conditions on Wilson Park and Triller and tendering final deposits on each. Mr. Gupta refused to close on those properties unless and until Shaw was closed on as well.

[36] Mr. Gupta states in his affidavit that he has recently been told that he is suffering from the effects of early dementia. As such, he states that he is not confident of his ability to correctly recall the specific dates but avers that he has an independent recollection of the events in question and the approximate time in which they occurred. In cross-examination, Mr. Gupta was unsure of the dates put to him by plaintiff’s counsel but was able to recall the events and answer the questions of counsel. Further, it was affirmed that despite his recent diagnosis of early dementia neither Mr. Gupta nor those close to him – his wife and family – questioned his mental capacity at the time of the agreement.

Dr. Lynn Lightfoot

[37] Dr. Lynn Lightfoot is a licensed psychologist. Her areas of practice include general clinical, health, addiction, and forensic psychology. She is a qualified Capacity Assessor under the Substitute Decision Act (1992). She conducts assessments where an opinion of legal capacity is needed to facilitate a legal proceeding or where the validity of a particular action or decision that the person has made is in question because of possible incapacity.

[38] Dr. Lightfoot was retained by the defendants’ counsel in this matter to assess the mental capacity of Mr. Gupta to manage his business affairs. Dr. Lightfoot made this assessment based on an interview conducted on April 13, 2018 with Mr. Gupta, and the documents provided to her by the defendants’ counsel. These documents included Mr. Gupta’s medical records.

[39] Mr. Gupta’s medical records revealed that he had undergone a Mini Mental Status Exam at the referral of his counsel which yielded a potential diagnosis of early dementia. The records of his family doctor indicated that Mr. Gupta has been living with a number of chronic physical conditions requiring treatment that would have been present in July 2017. Further, his records show that Mr. Gupta reported “memory issues” to his family doctor on January 13, 2018, and was prescribed medication normally used to treat mild to moderate dementia caused by Alzheimer’s disease.

[40] However, in his interview with Dr. Lightfoot on April 13th, Mr. Gupta did not report any changes to his memory or mental capacity. This would prove highly significant to Dr. Lightfoot, who found that his failure to report his memory difficulties demonstrated incapacity to appreciate his own mental condition or to retain new information. Dr. Lightfoot stated in her report that Mr. Gupta appeared to minimize his health issues, and not to appreciate the extent to which his cognitive changes would impact his ability to conduct his business affairs.

[41] This evidence led Dr. Lightfoot to the professional opinion that Mr. Gupta was, at the time of her report, incapable of managing his business affairs without a significant level of assistance and support. She notes, however, that it is impossible to determine when this cognitive decline would have begun, or what Mr. Gupta’s capacity would have been in August 2017 – approximately 8 months prior to her assessment.

[42] In cross-examination the emails, communications and agreements written by Mr. Gupta in relation to the sale of the Properties were put to Dr. Lightfoot for the first time. She acknowledged that they were sophisticated communications, and that he appeared to be able to understand and appreciate the meaning and consequences of the sales. Further, it was put to Dr. Lightfoot that Mr. Gupta had continued to manage his properties in a sophisticated fashion since the sale, and appeared to show a capacity to manage the renovations and ongoing needs of his properties. She acknowledged this as well.

B. The Test for Summary Judgment

[43] Pursuant to Rule 20, a plaintiff is entitled to move for summary judgment dismissing all or part of a defendant’s claim. Rule 20.04(2) mandates that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to all or part of the claim.

[44] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 45, the Supreme Court of Canada confirmed that summary judgment is a “significant alternative model of adjudication”. Rule 20 provides judges with fact-finding powers (i.e., the power to weigh evidence, evaluate credibility, and draw inferences) if required in order to eliminate unmeritorious claims that have no chance of success at trial.

[45] Determination of a motion for summary judgment involves a two-step approach. A judge must:

1. Determine whether there is a genuine issue requiring trial based only on the evidence before him or her, without using the fact-finding powers. If there is no genuine issue requiring a trial, summary judgment must be granted.

2. If there appears to be a genuine issue requiring a trial, the judge should then determine whether the need for a trial can be avoided by using the fact-finding powers to weigh evidence, evaluate credibility, and draw inferences.

[46] In this case, after the first day of the motion, I found that there was a genuine issue requiring a trial. While there were written contracts which on their face were clear, there were very diametrically opposed versions of what was said and done during the negotiations. Distilled to its essence is that a trial is required for the determination of the factual question whether NJS made misrepresentations during the negotiations that the sale of the properties was a package deal or that NJS had orally made a collateral agreement to that effect which they would sign an amendment once Mr. Gupta’s lawyer prepared it. Mr. Nemetz said he did not. Mr. Gupta said he did. The assessment of their credibility and reliability on this pivotal issue required a trial. This was my conclusion regarding the first stage of the Hryniak v. Mauldin test.

[47] Moving on to the second stage, I decided that a trial could be avoided if I used my expanded fact-finding powers. The credibility/reliability concerns were essentially confined to two witnesses: Mr. Nemetz and Mr. Gupta. I decided to hear evidence from those two witnesses. Since an extensive written record had already been prepared for the motion and to ensure an effective and efficient use of resources, limits were placed on their examination and cross-examination. I am keenly aware that an oral hearing must remain fair though the time limits were designed to focus the parties’ questions. I am also keenly aware that such parameters are not the norm in an adversarial hearing. However, I exercised my discretion in this fashion given the extensive background given to me through the motion record and the cross-examinations that had already taken place. Furthermore, at the hearing itself, I permitted the parties to go over the limits to ensure that procedural fairness was not sacrificed for the sake of efficiency. Thus, the use of my expanded fact-finding powers were not against the interests of justice given that their use would lead to a fair and just result and would serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[48] Having heard that testimony and having considered it in light of the entire record and the submissions of the parties, I find that summary judgment is the right disposition in this case. I do not accept the responding parties’ position that the summary judgment motion should be dismissed and the case set down for trial.

C. Analysis

[49] At this second stage of the analysis, I intend to set out the testimony that I heard in court. I will make my credibility/reliability findings. I will then assess the evidence as a whole. Then I will make my determinations on this summary judgment motion on the issues as argued by the parties. In my view, this summary judgment motion can be disposed of by making the appropriate factual findings. In other words, this is very much a fact based motion.

1. The Viva Voce Evidence

[50] I heard from the two key witnesses, Mr. Nemetz and Mr. Gupta. I will not outline their complete testimony but only a summary. Overall, the testimony was generally consistent with the affidavits and the written cross-examinations. That said, it did provide me with a significant opportunity to measure their credibility and reliability and weigh their evidence far better than on the written motion record and transcripts of cross-examination.

[51] Mr. Nemetz was the first witness. Mr. Nemetz testified that unlike Wilson Park and Triller, he had not visited Shaw and only had the rental roll for the property. He was thus willing to increase NJS’s offer for Shaw. For the other two properties, he was very certain about their worth given the information he had about them and given they were in the neighborhood that NJS operated in. From the negotiations, Mr. Nemetz got the sense that if he increased the offer on Shaw he could get all three properties. Mr. Nemetz confirmed that they never discussed making the deals cross-conditional during the negotiations. Mr. Nemetz testified that full due diligence would be performed before the deals would go ahead, although they later waived the clause for Wilson Park and Triller. They did not go ahead with Shaw as they never received the materials required to do their due diligence.

[52] Mr. Nemetz was questioned in cross-examination about the valuations of the different properties. He was cross-examined on the process of negotiating for the properties. He was asked about a paragraph in his affidavit which was alleged to be inconsistent with his testimony that he did not know any properties of Mr. Gupta except Heydon Park and Dovercourt were in play at the first meeting, and he was not advised by Mr. Gupta or others that other properties were for sale. His affidavit said in July he knew of other properties being offered, he was put in touch with Mr. Gupta, and Mr. Gupta had told him of other properties. Mr. Nemetz testified that the affidavit was worded incorrectly.

[53] Mr. Nemetz has been in business since 2012. He was questioned about how he makes offers on properties. He testified about his business model. He said typically with unsolicited offers he puts a dollar number on the property. When he has little knowledge of the property but he knows a range of prices per rental unit in a building, he selects a price that he hopes will not get turned down. That is why he later does due diligence to truly understand what the property is worth.

[54] He was questioned about not making his best offer first during negotiations. Mr. Nemetz testified that this depended upon the circumstances and the property. He was questioned about whether he was willing to go higher on Wilson Park or Triller and he replied he made his first offer the best offer as he knew these properties. He could not say whether he would have gone higher because the need did not arise.

[55] Regarding the negotiations with Mr. Gupta, he was cross-examined on whether the Agreements were cross-conditional and Mr. Nemetz said they were always three separate Agreements of Purchase and Sale. He did not believe he used the figure of $12.04 million when they entered the Agreements. Nor did he believe there were discussions about simply allocating any difference in price to Shaw. Mr. Nemetz testified he increased the value of Shaw independently of the other two properties. Given the due diligence clause, he knew he could have walked away from any of the properties including Shaw for the reasons listed including the price. If he overpaid for Shaw, he could have walked away after doing thorough due diligence. He admitted that hypothetically he could have offered $20 million for Shaw and walked away. However, he testified he priced Shaw within what he believed it could be worth; $395 per unit which was commonly priced in the market at the time. In fact, NJS had paid that amount for other properties. Mr. Nemetz also sensed that by giving Mr. Gupta what he wanted for Shaw, Mr. Gupta would be willing to do Wilson Park and Triller. However, he denied the Agreements were cross-conditional. He testified that it was negotiations - give and take - and this was his sense of what it would take Mr. Gupta to agree to the sales. For those reasons, he decided to increase his price on Shaw and conduct a real thorough due diligence later to see what it was worth. He was also questioned about taking over the mortgages and penalties. Mr. Nemetz testified that he would not take over the mortgages but would consider the cancellation fees once documentation was provided but it was not part of the deal nor did he agree to reopen the negotiations or to any future amendments on this issue. Mr. Nemetz said that he would in good faith consider doing it, but it created no legal obligation. It was just part of the negotiations.

[56] In submissions, Mr. Juriansz, on behalf of the defendants submitted that Mr. Nemetz was a most unbelievable witness. He submitted that Mr. Nemetz was unresponsive, he needed to be asked the same question many times, he asked questions to be repeated so that he had time to think, he was evasive, and he would not give direct answers.

[57] I have carefully scrutinized Mr. Nemetz’s testimony. Let me say this. Mr. Nemetz is clearly an intelligent and articulate man who knows the business that he is in. He is also precise, chooses his words carefully, and parses the words of others cautiously. Perhaps too cautiously which leads to an impression that he is trying to out-think the questioner. In addition, Mr. Nemetz appears to see the world not in black and white, but in various shades of grey, and this affects the content and manner of the answers he gave. However, the answers that he gave to the questions were responsive although, at times, the answers came out indirectly or presented in a way that corresponded to his personality.

[58] Looking at his testimony as a whole, I find that he was not evasive or incredible as suggested by the defendants. His need to have questions repeated and those indirect responses that he gave, came more from how he approached the questions; in a cautious, reflective, and perhaps pedantic manner. I find it did not come from dishonesty or a desire to avoid answering the questions.

[59] Overall, I find Mr. Nemetz was forthright, describing his present recollections even where it conflicted with the wording of paragraphs in his affidavits. Any contradictions about what he knew about which properties were available and when, were not particularly material in my view on the central issues. It had little impact on his credibility.

[60] More importantly, the substance of his evidence, as I will analyze later on, supports a finding of credibility and reliability.

[61] Mr. Gupta was the second witness. Mr. Gupta is 78 years old. He is the owner of the two companies which are the defendants. He was a real estate broker but he gave up his licence in November of 2017 due to health reasons. He said he was too old, had a broken back, and his mental capacity was on the low side. He has also reduced his management role. He also said he has some hearing loss which he became aware of in December of 2017. In terms of mental capacity, he assumes he is okay but his family says differently.

[62] Regarding the deals, Mr. Gupta was interested in selling his properties in order to retire. The NJS offer came out of the blue. A meeting was set up. He said he got an offer in the mail. They agreed to the sale of Heydon Park. NJS wanted to negotiate other properties. Mr. Gupta said he wanted $12 million for the three properties. He testified that he did not want to sell them individually but he wanted to sell all the properties together. He testified that he did not discuss the properties separately. He testified that those present representing NJS all agreed to the $12 million price. Mr. Gupta pointed out to Mr. Nemetz that $6 million for Shaw was a high price. The others present also told Mr. Nemetz this. Mr. Gupta said Mr. Nemetz said it was for income tax assessment or land transfer tax reasons. Or something. Mr. Gupta did not go into details. He said that NJS also agreed to assume the mortgages. Because Mr. Gupta did not know how to word these agreements, he signed the offers of Purchase and Sale with the understanding his lawyer would later make separate agreement for these things. Mr. Nemetz agreed to this. According to Mr. Gupta, Mr. Nemetz knew there were amendments coming from his lawyer.

[63] In cross-examination, Mr. Gupta agreed that he has been in the business for 50 years and has done thousands of Purchase and Sale Agreements. While as a broker he left it up to the lawyers to look at the agreements, as a buyer or a seller, he would, of course, be more careful about them. He agreed that he was careful about the Agreements in this case. He purchased his properties in 1968 and has now liquidated some $24 million worth of them.

[64] Regarding these transactions, he agreed there were three separate offers of Purchase and Sale Agreements. It was not presented as an agreement conditional on each other. Mr. Gupta is familiar with such deals. Mr. Nemetz did not present a package deal of the three properties at that time. When asked about the earlier offer to purchase six smaller properties by Mr. Nemetz which was structured as a package deal, Mr. Gupta said he did not really pay attention to the folder containing the offer as the price was ridiculous.

[65] Mr. Gupta was asked about the negotiations. He testified that he wanted to negotiate all the properties and the negotiations were lengthy. He recalled those present at the negotiations. He was taken through the amendments in the Agreements and agreed he made them and they were to his advantage. With section 5 of the Agreements, Mr. Gupta was aware of the due diligence clause and he indeed shortened it from 50 days to 25 days. He understood that from this section that NJS had sole discretion.

[66] Mr. Gupta agreed that there was no deadline to get the deals signed. However, he said NJS was pushing to finalize it. He testified that the amendments were to be done later. He agreed he could have waited till the amendments were drafted by the lawyer before signing the Agreements. Mr. Gupta said if he was stubborn he would have not signed them but Mr. Gupta testified that NJS gave him their word. He agreed that he understood that it was important that the whole of the agreement be written but he said he trusted them. When suggested that he could have easily written it down into the Agreements that they were cross-conditional, Mr. Gupta testified he had good experience with the Heydon Park sale and he assumed Mr. Nemetz was honest and straightforward. Mr. Gupta felt he could trust him based on that transaction. He testified that the cross-conditional clause was a little complicated so he wanted advice from his lawyer before it was written on the Agreements. His lawyer was close to his office but he closed at 5 p.m. Mr. Gupta agreed he could have postponed his acceptance. He agreed he could have had his lawyer draft just one Agreement of Purchase and Sale for the Properties. Mr. Gupta first met Mr. Nemetz on August 9 and completed the Heydon Park transaction that day. It was straightforward in his eyes. The Heydon Park deal did not close until October. Mr. Gupta testified that Mr. Nemetz had a “dirty mind” when Mr. Nemetz took his own lawyer’s advice not to sign the amendment Mr. Gupta presented. Mr. Gupta denied that he had later regrets about the deal. Mr. Nemetz told him that he will sign the amendments, so based upon that, Mr. Gupta signed the Agreements. When the amendments were not signed, Mr. Gupta instructed his lawyer not to release any documents supporting due diligence until the amendments were signed. NJS provided deposit monies to Mr. Gupta’s lawyer. Mr. Gupta testified that they had done this behind his back. His lawyers have not returned the deposits to the plaintiff.

[67] Before assessing the weight of Mr. Gupta’s testimony, let me acknowledge Mr. Gupta’s laudable efforts to come to court. He had a medical appointment at a hospital that he interrupted. He made himself available to testify, giving this court hearing priority over his health needs.

[68] Moving on, I found Mr. Gupta to be responsive to questioning and, in the main, answered questions directly. He acknowledged that he knew what a cross-conditional offer was and how he had made hand written amendments to the Agreements when he wanted them and these changes were in his favour. While some responses may have come across as evasive or unresponsive, I think this is more due to how Mr. Gupta chooses to answer some questions in a fulsome way rather than in a short direct fashion. It is true that in cross, he revealed a strong antipathy towards Mr. Nemetz especially when he said the latter had a “dirty mind”. However, I did not find good support of a hostile animus that would totally undermine his evidence. That said, there is no doubt, that he is upset with NJS and Mr. Nemetz by this transaction. In short, he feels that he trusted them and that they betrayed him. I note that this emotional state is absent from the testimony of Mr. Nemetz.

[69] The most fundamental issue I have with Mr. Gupta’s evidence is the reliability of it and the implausibility of it on the material points. The reality is that Mr. Gupta is an older man who has to recollect these past events without any notes or other aide-memories to help him. The written documents, in particular the Agreements, do not support his recollections. He also must recall these events through the lens of his subjective feelings about the wrongfulness of these events. But most importantly, I find that his recollections are implausible given the other evidence and the circumstances that existed at the time.

[70] The Agreements contain the comprehensive entire agreement clause. It is a standard clause. Given that Mr. Gupta has been involved in thousands of real estate transactions and is very familiar with this clause, it is implausible to me that Mr. Gupta would have left such a vital matter as ensuring the three properties were cross-conditional to an oral agreement. Mr. Gupta knew any conditions ought to be reduced to writing. He had advised his own clients of that in the past. It is inconsistent for Mr. Gupta to acknowledge the existence of the entire agreement clauses and their effect and importance in the impugned contracts, and yet leave this vital package deal condition out of the Agreements.

[71] I note numerous handwritten changes were made to the Agreements but no handwritten reference to cross-conditionality exists. In my view, if this condition was agreed upon, it would have been simple to add a reference to it. This would have been important given the existence of the comprehensive entire agreement clause. However, Mr. Gupta did not despite making other changes to the Agreements for his benefit. His explanation that it was agreed that his lawyer would draft the clause given it was complicated, is not plausible in the circumstances. Mr. Gupta could have earlier consulted with his lawyer. The cross-examination in court about why he would not have added even a brief reference to it or waited for his lawyer’s assistance and advice before signing the Agreements was effective. It undermined the credibility of Mr. Gupta’s testimony on this point.

[72] In addition to Mr. Gupta’s overall familiarity with these types of transactions, during the negotiations themselves, NJS presented Mr. Gupta with a package deal for the six smaller properties on the first day of the negotiations. I appreciate Mr. Gupta was dismissive of this offer and claimed he did not even look at it. However, I found that response evasive. I do not accept that Mr. Gupta would not have even given some attention to these offers at least to the extent he knew it was cross-conditional on each other. The fact that with respect to Wilson Park, Triller, and Shaw, he signed three separate deals rather than one is contrary to his assertion that he believed them to be a package deal.

[73] In sum, I find Mr. Gupta’s testimony on the material points I need to decide on this summary judgment motion, less credible and deserving of less weight than Mr. Nemetz’s testimony.

2. Mental Capacity

[74] On this summary judgment motion, the defendants have raised the issue of Mr. Gupta’s mental capacity. To that end, they provided the affidavit of Dr. Lynn Lightfoot who was cross-examined out of court. Initially, NJS believed that the defendants were taking the position that Mr. Gupta was mentally incapable of contracting within the meaning of the Substitute Decisions Act, 1992, S.O. 1992, c. 30. At the motion, upon closer scrutiny and questioning, the defendants’ position is not that Mr. Gupta lacked the mental capacity to validly enter into the impugned contracts. Such a position would obviously put into question the sale of Heydon Park and perhaps other properties Mr. Gupta was selling at the time. The position of the defendants has become more nuanced.

[75] Even though incapacity to contract is not an issue, the evidence related to Mr. Gupta’s mental state remains relevant. It is relevant to the issue of the reliability of his testimony. It also puts into context his testimony and how to weigh it. It is also relevant to the legal issues raised such as the unconscionableness of the contract. It is relevant to his bargaining power.

[76] In my view, the evidence regarding Mr. Gupta’s diminished mental incapacity lacks significant weight. Let me add quickly that I do not doubt that Mr. Gupta has aged and suffers now from physical ailments as well as concerns about the acuity of his mental abilities. However, there are a number of factors that support my finding that it is not a weighty factor in deciding this case.

[77] Firstly, while Dr. Lightfoot assesses Mr. Gupta as currently incapable of managing his business finances without a significant level of assistance and support, she was unable to opine on Mr. Gupta’s capacity at the relevant time of the negotiations and the signing of the contracts.

[78] Secondly, even her current assessment of Mr. Gupta on one of the capacity assessment tests puts him on the borderline between normal cognitive function and mild dementia. Further, Dr. Lightfoot does not particularize the kind of assistance and support Mr. Gupta requires. Also, while there was an impairment of short-term memory, he still has long-term memory which permitted him to understand the steps and processes in managing his properties and in financing and conducting real estate transactions.

[79] Thirdly, Dr. Lightfoot’s over-all opinion was negatively affected by the fact that other than the pleadings, she was not given access to important documents in this case in coming to her opinions. In particular, she was not given the Agreements. Dr. Lightfoot was not aware of the handwritten changes that Mr. Gupta made to the Agreements. She was not given the emails Mr. Gupta sent to various NJS representatives during the negotiations. She admitted that these showed Mr. Gupta understanding and appreciating the consequences of selling his properties. She was also unaware of other things Mr. Gupta had done including negotiating leases with tenants. All these things showed Mr. Gupta having done some complex things that is contrary to the opinion Dr. Lightfoot gave about his mental capacity.

[80] Finally, having heard Mr. Gupta testify, I am strengthened in my conclusions. No doubt that as a 78 year old man with serious back ailments, he presents as a physically impaired man. He now uses a walker. However, from the witness box, he still answers questions responsively, acutely, and with resolute determination. He testified that he still feels he is mentally undiminished but also has the insight that others have noticed a difference and it would be hard for him to recognize any impairment. While I do not question that Mr. Gupta is not the same man that he used to be in his prime, I have no doubt that at the time of the negotiations and Agreements, he had the capacity to contract. I also find that he was not a frail or vulnerable individual who might need the court’s protection. The circumstances of the negotiations and his own evidence given in court persuade me that it is very much otherwise.

[81] As an aside, I note that there is also evidence of a hearing loss, but there is effectively no evidence to support a finding that this hearing loss was a material impairment during the negotiations.

[82] After hearing Mr. Gupta testify and be cross-examined, I can readily conclude that he is not a push-over. He is not suggestible. I can see why these negotiations took so long. I can see how Mr. Gupta was capable of negotiating a higher price for Heydon Park; how he was also able to negotiate a much higher price for Shaw. I can see how Mr. Gupta, after the fact, tried to obtain the amendment regarding the cross-conditional sale so that he could benefit more from the sales and how obstinate he became in not providing the documents required for due diligence when he did not get his way.

[83] Furthermore, given the fact that the negotiations involved real estate transactions and contracts that Mr. Gupta was very familiar with, whatever deficits he currently suffers from, I find they are not the kind or degree that significantly affected the negotiations or affected the signing of the impugned Agreements. In other words, I find that there was not a significant mental impairment or diminished mental capacity suffered by Mr. Gupta at the time these Agreements were negotiated and signed. The other persons present during the negotiations do not support a finding that Mr. Gupta was evincing any mental impairment or diminished mental capacity. Indeed their impression of Mr. Gupta was quite the opposite. In my view, such an impression would have been quite reasonable given the totality of the evidence.

[84] One final point is that Dr. Lightfoot opines that whatever Mr. Gupta’s diminished capacity, it would not be evident to the casual observer. She has testified that it would likely not have been noticeable, if it existed at the time, to NJS. I have taken this into consideration when I have made the above findings. While I appreciate that she is an expert and I am not, when I look at the whole of the evidence, I cannot agree with the opinions she has made regarding his abilities when it comes to making contracts such as the ones before me.

3. Factual Findings Based on the Whole Record

[85] Looking at the whole of the evidence including the written record, I prefer the evidence of Mr. Nemetz over Mr. Gupta. As I will explain, Mr. Nemetz’s testimony on the salient points is more credible and reliable than Mr. Gupta. I find Mr. Gupta’s testimony of less weight. The material parts of his testimony are unsupported, implausible, and suffered under cross-examination.

[86] Let me turn to Mr. Nemetz’s testimony. Mr. Nemetz admitted in cross-examination that he agreed to offer $6.7 million for Shaw because he had a due diligence clause that permitted NJS’s sole discretion to walk away from the deal if NSJ overpaid for Shaw. This clause was not limited to Shaw but exists for the other properties. Regarding Shaw, Mr. Nemetz priced it within what he believed it could be worth at $395 a door which he testified was commonly priced in the market. There had been other recent properties priced in that way. It was Mr. Nemetz’s position that this price was not out of the realm of a price to pay but in his view, it had to be supported by due diligence.

[87] Regarding the mortgages, Mr. Nemetz said he would not assume the mortgages but would consider paying the penalties. He was not willing to re-open the negotiations or sign any amendments. Mr. Nemetz said he would only consider it but did not agree to pay for the cancellation fees. He was waiting for supportive documents. He said he was doing it in good faith but it created no legal obligation as it was not an agreement.

[88] There is no question the fact that Mr. Nemetz raised his offer price 137% on Shaw raises a red flag. Especially since he remained firm on Wilson Park and Triller. The defendants argue that Mr. Nemetz had no intention on following through with the Shaw deal, using it only as a dishonest lure to entice Mr. Gupta into agreeing to the overall deal. This, it is submitted, is evidence of fraud whereby he made the collateral agreement which Mr. Nemetz now disavows.

[89] I have considered this carefully. I accept Mr. Nemetz’s testimony about this. Mr. Nemetz testified that during negotiations he had a sense by giving Mr. Gupta what he wanted for Shaw, they could do Wilson Park and Triller. But he disagreed he took advantage of Mr. Gupta and gave him the misleading impression they were cross-conditional. Mr. Nemetz said it was a negotiation, give-and-take, and he sensed that if he gave Mr. Gupta what he wanted for Shaw he would get the other properties. He agreed to increase his price on Shaw. He would later conduct a thorough due diligence to see what it was worth. Regarding Wilson Park and Triller, Mr. Nemetz knew much more about these properties and the prices he wanted to pay. This is why he did not go higher on these properties.

[90] Mr. Nemetz’s evidence makes sense to me. No doubt he increased the price of Shaw in order to entice Mr. Gupta to agree to the prices for Wilson Park and Triller. This is as he testified to. I find that there is a credible reason why Mr. Nemetz was willing to increase the price of Shaw. When dealing with properties in such circumstances, Mr. Nemetz was more willing to give a figure that could prove incompatible with their business model but he was assured of the opportunity to back out after doing full due diligence. There was no downside for NJS. Conversely, Mr. Nemetz had already visited Wilson Park and Triller, knew their neighborhoods well, and had a firm view of their value which he was not willing to move from. Mr. Sturm’s evidence confirms this attitude.

[91] Mr. Nemetz’s evidence is also consistent with the other evidence. There were other people present on the various days during the negotiations: NJS’s sales representatives from Avison Young, (David Lieberman and Jonathan Hittner) and Mr. Sturm. I appreciate that not everyone was present at all times during the negotiations and the individuals who swore affidavits (Lieberman, Hittner, Sturm) had differing powers of recollection. However, all of these individuals including the representatives of the brokerage firm, deny that there was a package deal or that Mr. Nemetz had agreed to amendments to be later drafted. Given the importance of these details, if they were discussed at any length or agreed to, I would expect that someone privy to the negotiations would have been alerted to this and would have recalled it. The mere fact Mr. Lieberman recalls Mr. Gupta wanting to speak to a lawyer on August 14, 2017, does not detract from the thrust of their over-all evidence. Mr. Lieberman, Mr. Hittner and Mr. Sturm were cross-examined and I find that the probative value of this aspect of their evidence was not affected.

[92] It is true that Mr. Gupta wanted to sell all three properties at the prices bargained for. This I can accept readily. However, in my opinion, if there was this important oral agreement as to cross-conditionality of the sales, then why would he not have placed something into the Agreements to this effect? Or if he wanted a lawyer to draft it up as he claims, why would he not wait until his lawyer had a chance to review the documents and draft amendments or a new cross-conditional agreement before signing them? I appreciate that Mr. Gupta testified that they were pressuring him to close the deal. However, he also admitted there was no reason why he could not have delayed the signing. Thus, the fact he neither put it in the Agreements nor waited until his lawyer could amend them, leads me to conclude that he must have not thought about it at the time or was not sufficiently careful to incorporate such a provision into the written contracts. Mr. Gupta’s explanation that he simply trusted Mr. Nemetz such that it was alright with him to later sign an amendment is not plausible to me and makes no commercial sense. There was no long term relationship between the two. Mr. Gupta carefully read the Agreements and made changes. The fact he may have earlier agreed to sell Heydon Park, offers little assurance of trust given that the closing of the deal had yet to come. Finally, given Mr. Gupta’s considerable experience both in real estate and as a business man, this attitude of trust that he purports to be the true explanation for this obvious omission, is most unconvincing and lacks credibility.

[93] In the end, having looked at it in the context of the evidence as a whole, I accept Mr. Nemetz’s evidence that any cross-conditional clause or agreement was not part of the deal. I accept his evidence that he did not make false representations regarding this. I do not accept Mr. Gupta’s recollection that it was or such representations were made. Mr. Gupta never made it a part of the Agreements when he signed them. The argument that it was part of an oral contract is not supported by the evidence that I accept.

[94] I find that over time, (perhaps even a very short period of time after the signing of the deals), Mr. Gupta came to the view he should not have sold any of the properties unless he sold all of them together. However, he did not reach a mutual agreement to do so with NJS, either in written form or orally. It could well be that after seeing his lawyer and finding out that a cross-conditional clause was not included in the Agreements, he realized that he did not contract for this important clause and has come to regret the Agreements he signed. Or he may have come to this conclusion on his own. I will not speculate. However, this is a form of seller’s remorse. I can see how Mr. Gupta could now subjectively feel that somewhere through the negotiations, this must have been settled and agreed upon, given how legally imprudent it was for him to have reached and signed an agreement that did not include it. At a later point in time, he may have come to feel there was in fact an oral agreement. But in my findings, he is mistaken. Mr. Gupta has come to realize that he made a mistake about not having the sales made cross-conditional, but I find that this mistake was that of his own making and not caused by anything said or done by Mr. Nemetz. It was never agreed to by the parties.

[95] For the same reasons, I find that there was no oral agreement regarding the payment of the penalties of the mortgages or assuming the mortgages. It is reasonable to me that Mr. Nemetz would not explicitly agree to this without knowing the details. No reasonable person would make a binding agreement without such information. At best, Mr. Nemetz advised Mr. Gupta that he would consider doing it once he received that information. There was no mutual meeting of the minds on this issue either.

D. Conclusion

[96] Based on these factual findings, there is no need for a trial. Summary judgment is the proportionate and fair way to dispose of these actions.

[97] I find that the plaintiff has proven that the defendants have breached the two contracts. They did not provide the materials required for the defendants to perform due diligence. There really is no dispute of this. Mr. Gupta was clear that he would not uphold this part of the clause because NJS would not sign the proposed amendments he wanted them to sign. Further, the deals did not close because Mr. Gupta did not want them to close. Of course, this is a fundamental breach of the contracts. In addition, given my findings, I find there is no reason why the defendant in the second action, 1081041 Ontario Ltd., has not returned the deposit in relation to Shaw and is in breach of its contractual obligations. It terminated the contract and was entitled under it to the return of the $50,000 deposit. I note NJS is not pursuing its claim against counsel acting for that defendant for the failure to return the deposit.

[98] Based on these findings, let me go on to address the other issues that I must deal with on this summary judgment motion.

Fraudulent or Negligent Misrepresentation

[99] The defendants’ main point here is that Mr. Nemetz committed the tort of civil fraud by making false representations to induce Mr. Gupta to sign the Agreements by representing that they were part of one transaction and/or Mr. Nemetz had no intention of going through with the Shaw deal.

[100] The tort of civil fraud has four elements: (1) a false representation; (2) some level of knowledge of the falsehood of the representation (knowledge or recklessness); (3) the false representation was acted upon; and (4) the action resulted in a loss: Bruno Appliance and Furniture Inc. v. Hyniak, 2014 SCC 8 at paras 18-21.

[101] Given my findings, there is no merit to the defendants’ position on this. I have found that there was no package deal and no assurances made that Mr. Nemetz or NJS would later sign amendments to the Agreements.

[102] Secondly, I find that Mr. Nemetz did not fraudulently or negligently misrepresent that he would offer to buy Shaw for the negotiated purchase price when in fact he had no intention to go through with the deal. The defendants argued this was so. Certainly, as I have previously noted, the fact that NJS raised their final price on Shaw significantly from their initial offer raises suspicions. But I accepted Mr. Nemetz’s testimony that he was making a legitimate offer on Shaw. The reasons he gave why he raised the price for Shaw but not for Triller or Wilson Park are reasonable ones. The final negotiated price he offered for Shaw is based upon his view of what comparable units in that area could sell for. This part of his testimony was not impeached. Of course, I have no doubt that that the due diligence clause provided him the comfort of knowing that if the facts did not support his significantly increased offer, NJS could opt out. Further, Mr. Nemetz knew that by accepting a higher price for Shaw, this could induce Mr. Gupta to sell Wilson Park and Triller for the prices Mr. Nemetz originally offered; prices based on more solid information that he had about these properties. This undoubtedly played a role in Mr. Nemetz’s decision to increase his final offer price for Shaw. However, this does not make Mr. Nemetz’s offer to buy Shaw a fraudulent misrepresentation. It was a negotiating tactic. Perhaps a very self-interested tactical one but no more. Finally I note that while NJS eventually pulled out of the Shaw deal in October of 2017, there was good reason for doing so since Mr. Gupta would not supply the information required for NJS to perform its due diligence.

Rectification

[103] The defendants submit that the Agreements should be rescinded on the basis of rectification. Rectification is an equitable remedy whose purpose is to prevent a written document from being used as a vehicle for fraud or misconduct equivalent to fraud. It restores the parties to their original bargain: Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56.

[104] In Fairmont, Brown J. described the types of mistakes that doctrine could apply to at paras 14-15:

Beyond these general guides, the nature of the mistake must be accounted for: Swan and Adamski, at s.8.233. Two types of error may support a grant of rectification. The first arises when both parties subscribe to an instrument under a common mistake that it accurately records the terms of their antecedent agreement. In such a case, an order for rectification is predicated upon the applicant showing that the parties had reached a prior agreement whose terms are definite and ascertainable; that the agreement was still effective when the instrument was executed; that the instrument fails to record accurately that prior agreement; and that, if rectified as proposed, the instrument would carry out the agreement: Ship M. F. Whalen v. Pointe Anne Quarries Ltd. (1921), 63 S.C.R. 109, at p. 126; McInnes, at p. 820; Snell's Equity, at p. 424; Hanbury and Martin Modern Equity (20th ed. 2015), by J. Glister and J. Lee, at pp. 848-49; Hart v. Boutilier (1916), 56 D.L.R. 620 (S.C.C.), at p. 622.

In Performance Industries (at para. 31) and again in Shafron (at para. 53), this Court affirmed that rectification is also available where the claimed mistake is unilateral -- either because the instrument formalizes a unilateral act (such as the creation of a trust), or where (as in Performance Industries and Shafron) the instrument was intended to record an agreement between parties, but one party says that the instrument does not accurately do so, while the other party says it does. In Performance Industries (at para. 31)"certain demanding preconditions" were added to rectify a putative unilateral mistake: specifically, that the party resisting rectification knew or ought to have known about the mistake; and that permitting that party to take advantage of the mistake would amount to "fraud or the equivalent of fraud" (para. 38).

[105] In this case, there is no basis for rectification. There was no common mistake in terms of the drafting of the Agreements. Equally, rectification does not apply to any alleged unilateral mistake made by Mr. Gupta. I am satisfied that based on my findings, Mr. Nemetz did not know nor ought he to have known that Mr. Gupta was making a mistake about the package deal nature of the Agreements. It could not have been any clearer to Mr. Nemetz that it was not. As noted above, there was no fraud or conduct equivalent of fraud. There may have been negotiations, one that may have favoured NJS in the end, but there was no conduct akin to fraud.

[106] Further, if there was an error of judgment made, it was made by Mr. Gupta after the fact without any of the pre-requisites for the doctrine established. The doctrine does not rectify an error of judgment belatedly recognized by one party: Fairmont Hotels at para. 19.

Unconscionability

[107] The defendants seek a remedy on the basis of unconscionability. If the transaction viewed as a whole, is sufficiently divergent from community standards of commercial morality, it should be rescinded. Relevant factors include inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach, and the conduct of the parties: Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282 at para. 30.

[108] This bargain was not unconscionable.

[109] First of all, Mr. Gupta was not only an experienced real estate broker but he was an experienced businessman. He was familiar with Agreements of Purchase and Sale. He was a sophisticated man. While he was an older businessman, one cannot discount the years of experience that he brought with him.

[110] Secondly, he was not vulnerable. Neither from age nor infirmity. As I have set out above, I am not persuaded on a balance of probabilities that any deficits that he was suffering at the time made him particularly vulnerable to the plaintiff in coming to this bargain.

[111] Thirdly, the negotiation process demonstrated his abilities. During the three days of negotiations, Mr. Gupta was content to conduct them without any other assistance or help. He conducted them in his office. On the first day of negotiations, August 10, 2017, when presented with a package deal for the six smaller properties, Mr. Gupta could resolutely reject the offers feeling them to be ridiculous. On the second day, August 11, 2017, Mr. Gupta successfully negotiated the sale of Heydon Park. Not only did he close this deal, he negotiated a sale price of $6.2 million which was $800,000 more than NJS’s original offer. This deal was later successfully closed presumably to the satisfaction of Mr. Gupta. The fact Mr. Gupta could both reject an offer and come to an agreement that benefited him on the two negotiating days before August 14, 2017, shows quite convincingly that Mr. Gupta did not suffer from any unequal bargaining strength.

[112] Fourthly, on the date where the three properties were negotiated, the facts of that also support Mr. Gupta’s bargaining power. While NJS received the prices they wanted for Wilson Park and Triller, Mr. Gupta bargained a substantial increase in the price of Shaw. Further, he made a number of hand-written changes to the Agreements in respect to each property, some which were much in his favour.

[113] Fifthly, these were bona fide negotiations. They were conducted with the involvement of real estate brokers. They took place over three days. Standard Agreements of Purchase and Sale were used, amended, and signed. The participants were arms-length business persons; there were no familial or personal relationships involved in the negotiations. Mr. Gupta was free to bring any representative to these negotiations and he chose not to. He was also free to use the services of his lawyer before signing the Agreements. He was aware of this. He chose not to.

[114] Six, the breach of the contracts were contextually significant. The materials for due diligence were not provided. I find that Mr. Gupta refused to provide them to exert pressure to get the amendments he wanted signed. The deals did not ultimately close.

[115] Seven, I cannot say that bargain was substantially unfair to Mr. Gupta. There were three negotiated Agreements of Purchase and Sale. Triller and Wilson Park were at prices that NJS started off at. I cannot say based on the record that these Agreements were substantially unfair to Mr. Gupta in that the bargain made, though less than the appraisals, were dramatically less than market value. The bargain for Shaw of course was most advantageous to Mr. Gupta with respect to the price. In this case, the fundamental assertion of any alleged unfair bargain is based upon the fact that it was supposed to be a contract for a package deal. I have held it was not. Further, any unfairness arising out of the ability on the part of NJS to rescind the deals based upon its exercise of its due diligence clause or its reliance on the entire agreement clauses, is chimeric given that these clauses are standard in such contracts, Mr. Gupta was well aware of them and their effect, and he contractually agreed to them.

[116] Eight, I have already concluded that the conduct of the parties involved is not such that consideration of this factor favours rescission.

[117] In sum, summary judgment can be granted on this issue. There has been no departure from community standards of commercial morality.

[118] In my overall conclusion on this summary judgment motion, I have no doubt that much was said during these negotiations. As in many contractual negotiations. In such negotiations, transcripts are not kept of what is said. The parties strive for advantage. There is nothing wrong with that. Not everything said or done can be later parsed and minutely scrutinized by a court of law when allegations of impropriety are raised. These Agreements here were made by seasoned and experienced businessmen. It is exactly these types of negotiations and agreements that one can reasonably expect of the parties to reduce their mutual intentions to writing. That is the purpose behind the entire agreement clause. I whole-heartedly concur with what was said about such clauses in Sobocynski v. Beauchamp, 2015 ONCA 282 at paras. 43-44:

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

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

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

[119] I appreciate that such clauses do not insulate contracts from challenge. For instance, if the tort of fraudulent misrepresentation is made out. However, I am confident that the claims made by Mr. Gupta did not occur here. I cannot say whether this is a case of true seller’s remorse as argued by NJS (i.e., Mr. Gupta had second thoughts about the entire deal), or whether Mr. Gupta later came to the view that the Agreements he made should have included other matters more to his advantage (i.e., that the sale of the properties were cross-conditional and NJS would assume the mortgages or pay the penalties). But whatever be the true state of affairs, Mr. Gupta breached these contracts without justification. For that, NJS is entitled to any damages arising from the breaches.

[120] Accordingly summary judgment is granted in favour of the plaintiff on both actions for breach of contract. Both counterclaims are dismissed. The deposit will be returned. I direct a reference under Rule 54.04 to a Master in order to determine the quantum of damages suffered by the plaintiff. Upon completion of all necessary inquiries, the Master shall report back to me with the findings regarding damages for confirmation. If any further direction is required, I may be spoken to.

[121] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages excluding any attachments (any Bill of Costs, Costs Outline, and authorities). NJS shall file within 20 days of the release of these reasons. The defendants shall file within 10 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru Released: December 17, 2018

Reasons for Judgment

COURT FILE NO.: CV-17-586658 DATE: 20181217 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: NJS CAPITAL MANAGEMENT INC. Plaintiff/Moving Party – and – 555034 ONTARIO LTD. and 1081041 ONTARIO LTD. Defendants/Responding Parties

REASONS FOR JUDGMENT

NAKATSURU J. Released: December 17, 2018