Court File and Parties

NEWMARKET COURT FILE NO.: CV-17-130424-00 DATE: 20190712 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Iraj Nabizadeh, Plaintiff – and – Seyed Mehdi Yadi Hamedani, Defendant

Counsel: Elena E. Mazinani, for the Plaintiff Sourena Sabazevatam Rashid, for the Defendant

HEARD: November 29, 2018

REASONS FOR DECISION

DE SA j.

The Project

[1] In November 2016, Iraj Nabizadeh (the “Plaintiff”) and Seyed Mehdi Yadi Hamedani (the “Defendant”) discussed the terms of a business partnership in relation to the land and building (which was a house) located at 41 Maple Grove Avenue, Richmond Hill, Ontario (hereinafter, the “Property”). The Plaintiff was the Defendant’s real estate agent. The parties agreed that they would purchase the Property together with a view to developing it (the “Project”).

[2] The Defendant would be responsible for the purchase of the Property and the Plaintiff would be responsible for costs associated with the construction on the Property. The parties agreed that once the Property was sold the profit would be distributed between the two of them proportionate to their financial contributions.

[3] On or about November 17, 2016, the Defendant purchased the Property for $855,000. In March 2017, the Defendant registered a mortgage in favour of Home Trust Company in the amount of $677,934.50. The Defendant paid a deposit of just under $200,000 towards the purchase price of the Property.

[4] The cost of the construction project was estimated to be anywhere from $1,300,000 to $1,500,000. On July 1, 2016, the parties registered a second mortgage against title to the Property in favour of Baybank Capital Inc. in the amount of $1,200,000 to finance the construction project (the “Construction Loan”).

[5] Baybank Inc. was going to advance four mortgage draws of $250,000 each for a total of $1,000,000. In addition to paying back the Construction Loan, the Plaintiff was responsible for obtaining and investing the remaining $300,000 to $500,000.

[6] The Plaintiff retained a lawyer to assist with drafting a Trust and Partnership Agreement (“TPA”) that would finalize the terms of the arrangement. The cost of the entire project was expected to be approximately $2,100,000 to $2,300,000. The profit was expected to be from $700,000 to $900,000, and as noted above, this amount was to be distributed proportionately between the Defendant and Plaintiff in accordance with their relative contribution.

The Agreement Breaks Down

[7] After reviewing the proposed TPA, the Defendant felt that the proposed TPA was too much in favour of the Plaintiff. For example, while the Defendant put $200,000 down, the proposed TPA required the Defendant to transfer one half the value of the Property in favour of Plaintiff in exchange for $2.

[8] In addition, the Defendant secured the Construction Loan against the Property. While the Plaintiff was paying the Construction Loan, the Defendant’s investment of $200,000 in the Property was placed at risk.

[9] The Project also started to look like it was going to take much longer than discussed. The construction was initially expected to take a year, but the permits were taking longer than expected to obtain. The Defendant continued to pay all the expenses associated with carrying the Property. He also had to rent a condominium while he waited for the Property to be developed.

[10] Given the circumstances, the Defendant told the Plaintiff he no longer wanted to carry on with the Project and wanted to sell the Property. The Plaintiff did not agree with this suggestion as the Project, once completed, would bring in much more money. The Plaintiff told the Defendant that if he did not want to complete the Project, he would likely be willing to buy the Property on his own.

[11] Ultimately, the Defendant decided to list the Property. The Defendant tried to call the Plaintiff with a view to submitting a bid. However, the Plaintiff was angered by the Defendant’s intentions, and blocked the Defendant’s calls.

[12] Unable to contact the Plaintiff, the Defendant listed the Property for sale and on November 19, 2016, the Property was sold. Ultimately, the Defendant sold the Property for the sum of $1,300,000. The transaction was scheduled to close on April 3, 2017.

The Minutes of Protocol

[13] Having discovered that the Defendant had sold the Property, the parties arranged a meeting on November 20, 2016 to discuss the situation. Attending the meeting was the Plaintiff, the Defendant, and Mr. Peiman Noroozi (a close friend of the parties).

[14] At the meeting, the Plaintiff told the Defendant that he wanted to purchase the Property. The Defendant agreed that if the purchaser failed to follow through with the purchase, he would sell the Property to the Plaintiff for the same amount ($1,300,000). In the alternative, it was agreed that if the Defendant was not able to get out of the agreement with the new purchaser, he would give the Plaintiff a total of $240,000 in an effort to compensate the Plaintiff for the expenses he incurred over the nine months the Project was proceeding.

[15] The parties entered into the Minutes of Protocol (the “Minutes of Protocol”), dated November 20, 2016. The Minutes of Protocol specified:

• If no agreement was reached with the new buyer of the house to discharge the sales agreement, the total of $240,000 would be paid to Iraj Nabizadeh (the Plaintiff), by Mr. Seyed Mehdi Yadi Hamedani (Defendant) to compensate for the agreed costs on the date of closing.

[16] The Minutes of Protocol attached the list of incurred expenses which totalled just over $176,000. It was understood that much of the $240,000 would be directed at compensating amounts already spent by the Plaintiff. There were also outstanding amounts that would still have to be paid that had also been listed in the Minutes of Protocol.

Events after the Meeting

[17] The Defendant was not able to get out of the sale of the Property with the other buyer. The Property was sold for $1,300,000. The difference from the sale and purchase of the house was $445,000. Of this amount, the Defendant had to pay a number of expenses:

1. The Defendant had to pay back the Construction Loan together with the termination penalty that cost $230,582.06 ($50,000 was given to the Defendant at the time the loan was taken);
2. Real estate fees of $65,000;
3. He had to incur an additional $20,000 to make the house marketable for sale.

[18] While the original list of expenses was anticipated to be $176,000, the Plaintiff did not incur actual expenses totalling this amount. In actual fact, the Plaintiff incurred expenses of approximately $118,593.03, broken up as follows:

1. Payment to surveyor: $1,695;
2. Payment for variance to the Town of Richmond Hill: $3,991;
3. Payment to Town for Tree Preservation: $150;
4. Payment to Town for Sanitary and Storm Sewer Connection: $48,210.10;
5. Payment to Town for Site Alteration Permit Fee: $1,172.24;
6. Payment for to Town for installation of plumbing fixtures and drains: $6,597.52;
7. Payment to Town for Grading: $10,000;
8. Payment to Enbridge Gas: $72.14;
9. Payment to Power Stream: $51.65;
10. Payment to Toronto Region Conservation: $550;
11. Payment to Enviro Tree Care: $615.85;
12. Payment to Tahami Engineering and Construction - $1,695
13. Payment to Window City: $22,600;
14. Payment to Tarpin Lumber: $8695.35;
15. Mortgage Payments to Baybank Capital Inc. from October 2016 to March 2017: $12,499.98.

Position of the Plaintiff

[19] The Plaintiff seeks that he be compensated in accordance with the Minutes of Protocol. He takes the position that the Defendant owes him $240,000 as per the agreement reached in the Minutes of Protocol. This amount reflected what is owed given the Plaintiff’s time, expenses, and forgone profits in relation to the Project.

[20] The Defendant disputes that he owes the Plaintiff anything further. The Defendant takes the position that the $240,000 identified in the Minutes of Protocol was directed at compensating the Plaintiff for the listed expenses he incurred in relation to the Property. Many of the listed expenses were paid off by Defendant, and accordingly, the Plaintiff cannot expect payment for these amounts.

Analysis

[21] In order to form a contract, the parties must be of one mind as to the essential terms of the contract. To determine whether the parties reached a meeting of the minds, or consensus ad idem, the court applies an objective test. The court considers whether a reasonable person, apprised of all the circumstances, would believe the parties had reached an agreement. J.M.B. Cattle Corp. v. 2144032 Ontario Inc., 2015 ONSC 7372.

[22] As explained in Kernwood Ltd. v. Renegade Capital Corp., words and conduct are considered in assessing whether the Contract was complete:

It is well-settled law that, except in certain situations, a party's intention to be bound can be manifested by words or conduct: Calvan Consolidated Oil & Gas Company Limited v. M.E. Manning, [1959] S.C.R. 253 at 261. A manifest intention to be bound can be established by conduct or words where an objective interpretation of the conduct or words of the parties would lead a reasonable person to conclude that the parties intended to be bound: Industrial Tanning Co. v. Reliable Leather Sportwear Ltd., [1953] 4 D.L.R. 522 at 525 (Ont. C.A.). In such cases, the requirement of a signature is treated as a mere formality. [Emphasis added.]

[23] The parties clearly agreed that any loss/damages sustained by the Plaintiff by the sale of the Property would be compensated through the $240,000 negotiated in the Minutes of Protocol. In my view, this would include the expenses, and time spent by the Plaintiff to develop the Property as well as any “lost profits”.

[24] According to the Defendant, the Minutes of Protocol never contemplated compensation for “lost profits”, or any compensation for the Plaintiff’s time. The Defendant argues that he himself was not compensated for his investment and/or his forgone opportunities. He should only be obligated to compensate the Plaintiff for his “actual” expenses.

[25] I disagree. The Defendant, in my view, clearly profited from the sale of the Property. Even if the Defendant made nothing, however, the Plaintiff would be entitled to some compensation for his time, and for the Defendant’s unilateral decision to breach the TPA.

[26] The parties had agreed to work together in a Project for a future profit. The Defendant unilaterally decided to terminate the TPA, and sell the subject Property. In my view, the Minutes of Protocol contemplated a measure of compensation for the Plaintiff’s future loss. This is evident from the fact that the amount of $240,000 exceeded any contemplated expenses the Plaintiff would incur.

[27] However, I also agree with the Defendant that the $240,000 was largely directed at compensating the Plaintiff for expenses incurred. Accordingly, to the degree that these expenses were already compensated, I agree any expenses paid by the Defendant should be deducted from the amounts provided to the Plaintiff. Even if the TPA is not clear in this regard, it is apparent that this was the intention of the parties.

[28] As the Supreme Court of Canada explained in Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, [2016] 2 S.C.R. 720 at para. 12:

If by mistake a legal instrument does not accord with the true agreement it was intended to record — because a term has been omitted, an unwanted term included, or a term incorrectly expresses the parties’ agreement — a court may exercise its equitable jurisdiction to rectify the instrument so as to make it accord with the parties’ true agreement. Alternatively put, rectification allows a court to achieve correspondence between the parties’ agreement and the substance of a legal instrument intended to record that agreement, when there is a discrepancy between the two. Its purpose is to give effect to the parties’ true intentions, rather than to an erroneous transcription of those true intentions (Swan and Adamski, at §8.229). (Emphasis added).

[29] In this case, the Plaintiff already received $157,575 from the original Construction Loan. This amount was never paid back by the Plaintiff, but rather, the Construction Loan was paid back by the Defendant after the Property was sold. Accordingly, this amount is properly deducted from the amount claimed by the Plaintiff.

[30] I would not award the Defendant any of the money lost in relation to the custom windows, the Tarpin or any of the other “lost” expenses. In my view, this money was lost because of the Defendant’s decision to terminate the original TPA and sell the Property. These losses were understood/contemplated by the terms of the Minutes of Protocol. These losses should be absorbed by the Defendant.

Disposition

[31] I would award the Plaintiff a total amount of $240,000 less the $157,575. The total would be calculated at $82,425. When working off expenses, this amount may be slightly more than the profit the Defendant actually made from the sale. However, in my view, this would be proper given that it was the Defendant who made the decision to sell the Property at the time in breach of the TPA.

[32] Accordingly, the Defendant is ordered to pay the Plaintiff $82,425 as the amount remaining due under the Minutes of Protocol.

Costs

[33] I will consider costs submissions from the parties within 4 weeks of this decision. The Plaintiff is to provide its costs submissions within three weeks of this decision. The Defendant has one week thereafter to respond.

Justice C.F. de Sa Released: July 12, 2019