Court File and Parties

Court File No.: CV-18-600357 / CV-19-613652 Date: 2019-10-23 Superior Court of Justice - Ontario

Re: ZHENGYING XING, Applicant in CV-18-600357 (Respondent in CV-19-613652) And: YUCCA LANDS LTD., Respondent in CV-18-600357 (Applicant in CV-19-613652)

Before: Kimmel J.

Counsel: Christopher Stienburg, Counsel, for Zhengying Xing R. Christopher M. Belsito, Counsel, for Yucca Lands Ltd.

Heard: September 19, 2019

Endorsement

Background

[1] Zhengying Xing seeks in his application the return of monies paid pursuant to an agreement of purchase and sale that was terminated by Yucca Lands Ltd. for alleged defaults by Xing. Yucca seeks a declaration in its application that the deposit and other monies paid by Xing have been forfeited due to his default. These applications were heard together.

[2] Xing made an offer to purchase a vacant lot in the Headwater Estates development in Richmond Hill (the “Property”) dated February 25, 2016 that included a home to be built by Yucca (the “Offer”). The Offer was on Yucca’s standard form and included the Tarion Addendum, various standard schedules, and a Schedule “Z” that had been specifically negotiated by the parties. The Offer was accepted by Yucca and the parties agree that it became a binding agreement of purchase and sale on February 26, 2016 for a purchase price of $2,175,000.00 (the “APS”). Under the Tarion Addendum, the First Tentative Closing Date was scheduled for November 30, 2017.[^1]

[3] Yucca’s standard form Schedule “X” to the APS imposed general restrictions on Xing’s ability to assign, convey, list, sell, or transfer his rights under the APS without Yucca’s consent. The negotiated Schedule “Z” gave Xing the right, before closing, to assign the Offer as long as Yucca was provided with notice of the assignment and provided that both the assignee and Xing remained liable as the buyer. This Schedule also allowed for some extras to be provided at an additional cost to the Purchaser.

[4] The house to be built for Xing on the Property was one of ten luxury homes being built by Yucca in the Headwater Estates subdivision. An agreed upon $100,000.00 deposit and total of $16,154.00 for upgrades and extras was paid by Xing to Yucca in installments between February of 2016 and early November of 2017. There is no dispute about the timing or amounts of these payments.

[5] On November 18, 2017, Xing’s real estate agent listed the Property as an “assignment sale” on the Multiple Listing Service website with a listing price of $2,880,000.00 (the “MLS Listing”). Xing did not seek or receive Yucca’s consent to this listing. Upon discovering the MLS Listing, a notice was sent by Yucca’s real estate agent (Armando Sadozai) to Xing’s real estate agent (Boxin Wang) on December 1, 2017 demanding that the MLS Listing be removed. Xing’s real estate agent suspended the MLS Listing that same evening. In accordance with the MLS protocol, the listing was permanently terminated two business days later, on December 5, 2017.

[6] On or about December 6, 2017 Wang called Sadozai. During that telephone call, Wang says that he was advised by Sadozai that Yucca would not take any further action against Xing in respect of the MLS Listing.

[7] Yucca claims not to have been advised of the removal of the MLS Listing by Sadozai, its own real estate agent. It instructed its lawyers to terminate the APS in mid-December of 2017 on the basis that the MLS Listing was a default under Section 14 of Schedule “X” to the APS. On December 14, 2017, Xing communicated, through counsel, that he still wanted to proceed with the transaction. Xing later accepted that the APS was not proceeding and sought the return of all monies he had paid under the APS.

[8] Yucca also complains about postings by Xing’s real estate agent and his daughter on two social media messaging platforms, WeChat and WeiBo, about the prospect of a sale or assignment of Xing’s interest in the Property that were initiated at or about the same time as the MLS Listing in November of 2017 (the “social media postings”).

[9] The social media postings are primarily written in Mandarin and have not been translated, but the dollar amount of $2,490,000.00 is referred to in both of them. Although Yucca claims to have discovered the social media postings on January 2, 2018, it acknowledges that it did not complain about them until a meeting held on April 10, 2018 with Xing’s daughter and her ex-husband. Xing’s daughter and her ex-husband deny this was discussed on April 10, 2018. According to Xing, the first complaint he heard from Yucca about the social media postings was not until August 2, 2018.

[10] Yucca listed the Property for sale on MLS in May of 2018.

Positions of the Parties

[11] Xing argues that to the extent the MLS Listing was a breach of the APS it was cured within the prescribed time and cannot be relied upon as a breach or grounds to terminate the APS or for the forfeiture of monies paid.

[12] Yucca claims that Xing’s breach of the APS included the social media postings (the “alleged social media breaches”), which were not removed when the MLS listing was terminated, and in fact were not removed until early August of 2018. Yucca maintains that it was not notified that the MLS Listing had been terminated and, in any event, Xing’s default had not been fully cured when it terminated the APS in December of 2017 because of the continuing social media postings.

The Issues to be Decided

[13] The issues raised on these applications are as follows:

a. Was Xing in breach of section 14 of Schedule “X” and in default of the APS by:

i. the MLS Listing; and/or

ii. the social media postings on WeChat and WeiBo?

b. Did Yucca provide sufficient notice of the alleged default(s) and was Xing entitled to notice of same?

c. Did Xing cure any noticed default(s) within the time prescribed under the APS?

d. Was Yucca entitled to terminate the APS in mid-December of 2017 after the MLS Listing had been terminated?

e. Is Yucca entitled to retain the deposit and other monies paid by Xing under the APS?

Was Xing in breach of section 14 of Schedule “X” and in default of the APS?

[14] Section 14 of Schedule “X” to the APS includes the following restriction:

14. RESTRICTION ON CONVEYANCE: The Purchaser further covenants and agrees that he will in no way, directly or indirectly assign, convey, list for sale, sell or otherwise transfer his rights under this Agreement prior to the Closing Date to any other person without the consent of the Vendor in writing, which consent may be withheld in the Vendor’s sole discretion…Further, the Purchaser hereby covenants and agrees that at any time prior to Closing any default by him in the performance of any of his covenants or obligations contained herein shall entitle the Vendor, at its sole option, to terminate this Agreement and upon such termination, all monies paid to the Vendor hereunder shall be forfeited to the Vendor and this Agreement shall be at an end and the Purchaser shall not have any further rights hereunder.

[15] Schedule “Z” that was appended to and expressly said to form part of the APS granted the Buyer (Xing) the right:

…at any time prior to closing, to assign the within Offer to any person, persons or corporation, either existing or to be incorporated, and upon delivery to the Seller of notice of such assignment together with the assignee’s covenant in favour of the Seller to be bound hereby as Buyer, the Buyer herein before named shall NOT stand released from all further liability hereunder.

[16] There is no provision in the APS or any of its schedules that determines which of these provisions takes precedence in the event of an inconsistency. There is a potential inconsistency, in that Schedule “Z” appears to allow an assignment as long as Yucca is provided with notice of the assignment and provided that both the assignee and Xing remained liable, as the Buyer, whereas Schedule “X” appears to require the Vendor’s consent in writing in advance of any assignment. This potential inconsistency does not need to be resolved in this case because no assignment occurred.

[17] Xing concedes that the MLS Listing was technically offside of section 14 of Schedule “X” of the APS. He attested that his failure to seek and obtain the Vendor’s consent before the listing for sale (or assignment) of his rights under the APS was an innocent mistake because he thought, without checking the other provisions in the APS, that if the Vendor had agreed to allow him to assign his rights as had been specifically negotiated in Schedule “Z”, a listing of an assignment sale would logically also be permitted. However, he recognizes that, while this may be his explanation for not seeking consent in advance, it does not excuse the fact that, without Yucca’s consent, the MLS Listing was technically a default of section 14 of Schedule “X” and it was not expressly permitted under Schedule “Z”.

[18] However, Xing does not concede that the social media postings made on his behalf by his real estate agent and his daughter were in breach of section 14 of Schedule “X” (the “alleged social media breaches”). Xing argues that these are separate acts or steps in the nature of marketing by word-of-mouth, but they are not listings themselves, even though it was acknowledged that they could have led to an assignment or sale of the Property.

[19] Yucca considers these social media postings to be part of the MLS Listing for the sale or assignment of the Property and seeks to characterize them as a part of the breach that was not cured prior to the termination of the APS in mid-December of 2017.

[20] I find that social media postings were not a breach of section 14 of Schedule “X” of the APS. Marketing or advertising a potential assignment, sale or transfer of the Purchaser’s rights under the APS, or of the Property itself, is not expressly restricted under section 14. The social media postings were not a direct or indirect assignment, conveyance, listing, sale, or transfer of the Purchaser’s rights under the APS, and that is all that section 14 restricts. Yucca submits that any attempt to convey, assign, or list the Property (or the Purchaser’s rights under the APS) is also prohibited by section 14 and that would cover marketing and advertising the prospective sale or assignment of Xing’s rights under the APS. However, the words of that section make no reference to “attempts” to do these things and attempting to do something is not the same as directly or indirectly doing it. Section 14 appears in Yucca’s standard form Schedule “X” to the APS and if Yucca had wanted to restrict attempts to do these things, or to restrict marketing or advertising specifically, it could have done so.

[21] The words Yucca chose are clear and unambiguous. The ordinary, grammatical, and literal meaning of the words of section 14 does not prohibit or restrict the social media postings. See Starrcoll Inc. v. 2281927 Ontario Ltd., 2016 ONCA 275, 68 R.P.R. (5th) 173, at paras. 16-17.

[22] Yucca did not complain about the social media postings from January 2, 2018 when it first learned of them until, at the earliest, during a meeting with the Purchaser’s representatives on April 10, 2018. This lack of complaint is consistent with, and reinforces, my finding that the social media postings were not breaches of the APS, but my finding is not dependent upon this subsequent conduct on Yucca’s part.

[23] The first issues raised on the applications are answered as follows:

i. Xing did technically breach section 14 of Schedule “X” and was in default of the APS by the MLS Listing that was made without the Vendor’s consent; but

ii. Xing did not breach section 14 of Schedule “X” and was not in default of the APS by the social media postings on WeChat and WeiBo.

Yucca’s Notice of the Alleged Default(s)

[24] Section 15 of Schedule “X” provides for the following:

15. DEFAULT REMINDERS

a) Default by the Purchaser: The Purchaser shall be deemed to be in default under this Agreement… ii. Upon a breach of, or failure in performance or observance of any covenant, term, agreement, restriction, stipulation or provision of this Agreement to be performed and/or observed by the Purchaser.

Section 15 further provides that if a default continues for five days after written notice thereof, if required, has been given to the Purchaser or the Purchaser’s solicitor by the Vendor or its solicitor, then the Vendor shall have the option to invoke certain additional rights and remedies provided for, including the right to declare the Agreement to be null and void, in which event, all monies paid for the deposit and for any extras or upgrades shall be forfeited as liquidated damages.

[25] Yucca’s real estate agent, Sadozai, sent an email to Xing’s real estate agent (Wang) on December 1, 2017 at 7:01 p.m. identifying himself as the listing agent for the Property and demanding that “You need to immidiateky [sic] remove yhis [sic] listing from mls or the builder will revoke the contract and keep the buyers [sic] deposit. Kindly call me as soon as possible.” A phone number was provided.

[26] Xing complains that this message did not technically comply with the notice requirements under sections 10 and 15 of Schedule “X”. That may be so, since the message was not delivered personally, by facsimile, or mail to the Purchaser or his lawyer. However, through this message Xing received actual notice of the alleged default (the MLS Listing) and was advised of the consequences that would ensue if he failed to remove the MLS Listing (the builder will keep the deposit). The best evidence of his receipt of this notice is the swift and immediate action that was taken by Xing that very same evening to ensure that the MLS Listing was removed.

[27] I find that this notice, from the Vendor’s real estate agent to the Purchaser’s real estate agent, constituted proper notice given pursuant to section 15 of Schedule “X” of the APS on December 1, 2017 of the MLS Listing default by the Purchaser (the “Default Notice”).

[28] Although the APS does not specify what breaches require notice under section 15, the fact that the Default Notice was given by Yucca’s real estate agent, and received by Xing’s real estate agent, brings the MLS Listing breach by Xing under section 15.

[29] The earliest date that has been identified for notice having been given of the alleged breach due to the social media postings is April 10, 2018, and the latest date such notice was given (and that a finding could be made of actual notice having been received by Xing based on the record before me) was not until August 2, 2018. That said, given that I have found the social media postings were not defaults under the APS by Xing, whether notice and an opportunity to cure was required to be given, and whether the notice was timely and compliant, does not need to be determined on these applications.

Xing’s Timely Cure of Default

[30] Section 15(c) and the last part of section 14 of Schedule “X” are in conflict with each other, in that section 15 allows for notice and the opportunity to cure a default upon notice having been given of such, whereas section 14 does not. These sections of Schedule “X” of the APS must be read together and as part of the whole agreement and the court must assess the commercial reasonableness of the plain meaning of the words used. See Starrcoll Inc., at paras. 16-17.

[31] At common law, when a notice of default is provided, the validity of the termination of the APS (discussed in the next section of these reasons) depends, in part, upon whether the breach was remedied within the period specified in the notice. See Kingdom Construction Limited v. Regional Municipality of Niagara, 2018 ONSC 29, 80 C.L.R. (4th) 260, at paras. 94-95.

[32] The only commercially reasonable reading and interpretation of these provisions of the APS is that, once notice is given of a breach, it comes under section 15 and the opportunity for cure must be provided, as the December 1, 2017 Default Notice in this case in fact provided and allowed for. The breach, and any rights arising from it, must be held in abeyance or suspended during the cure period. If the breach is cured, then there is no continuing default and no right to terminate the APS under section 14 of Schedule “X”, or to declare it null and void under section 15.

[33] Xing also relies upon the principle of contra proferentum. To the extent there is any ambiguity or uncertainty as to the meaning of section 14 of Schedule “X”, in circumstances of a breach for which notice has been provided under section 15, the APS should be construed, and this ambiguity or uncertainty should be resolved, against Yucca as the party who drafted it. I agree. See 473807 Ontario Ltd. v. TDL Group Ltd. (2006), 2006 25404 (ON CA), 271 D.L.R. (4th) 636 (Ont. C.A.), at para. 63.

[34] Since the MLS Listing was suspended on December 1, 2017 and terminated on December 6, 2017, it was no longer continuing on the 5^th day after the Default Notice. I find that the MLS Listing default was “cured” as section 15 of Schedule “X” expressly allows for.

[35] Turning next to Yucca’s complaint that it did not receive notice from Xing of his cure. The APS is silent on whether or how the Purchaser should give notice of having cured a default. On a strict and literal construction, Yucca’s standard from APS does not entitle it notice of the cure or to complain of not having been advised by Xing that the MLS Listing had been suspended and terminated.

[36] In any event, Yucca did receive notice of Xing’s cure, through the very same channel that its own technically deficient Default Notice was delivered – through the real estate agents for the parties. The “cure” could also have been discovered by Yucca (or its agent) the same way the default was originally identified, through the public MLS Listing.

[37] I find that, while Yucca was not technically entitled to receive a formal notice from Xing that the MLS Listing default had been cured, it did in fact receive such notice through its real estate agent. Yucca cannot complain now that it was unaware of the fact that the MLS Listing had been removed in accordance with what the Default Notice demanded be done.

The Validity of Yucca’s December 11, 2017 Notice of Termination of the APS

[38] Xing received a letter from Yucca’s lawyers in mid-December of 2017 stating that Yucca was terminating the APS because the MLS Listing was a default under section 14 of Schedule “X” of the APS (the “Termination Notice”).[^2] The Termination Notice claimed all deposit and interest had been forfeited by Xing.

[39] However, I have found that the right to terminate under section 14 (together with any rights arising under section 15) of Schedule “X” upon default was suspended when the Default Notice was given, and that right of termination was no longer available after the default had been cured by Xing.[^3]

[40] Thus, Yucca was not entitled to terminate the APS in mid-December of 2017 as it purported to do, and I find that its Termination Notice was invalid.

[41] Xing’s lawyers advised Yucca’s lawyers by email on December 14, 2017 that the MLS Listing default had been cured and that Yucca’s agent had been advised of such. Yucca understood from this correspondence that Xing was seeking to proceed with the purchase of the Property. However, Yucca was still considering its options and did not respond initially to Xing’s requests and subsequent follow up in January of 2018.

[42] Eventually, Xing’s lawyer advised Yucca’s lawyer by correspondence dated January 30, 2018 that Yucca’s purported termination of the APS was invalid, and that the APS was thus rescinded and demanded the return of Xing’s deposit and all monies paid for upgrades. This constituted acceptance by Xing of Yucca’s breach by its unlawful termination of the APS and brought the APS to an end, effective no later than December 13, 2017, upon delivery of the Termination Notice.

Yucca’s Entitlement to Retain Amounts Paid by Xing Under the APS

[43] Since Yucca did not validly terminate the APS under section 14 of Schedule “X”, there was no forfeiture by Xing of monies he had paid to the Vendor. Further, since the MLS Listing default was cured within the five days provided for, no monies were forfeited by Xing under section 15 of Schedule “X”.

[44] Although the point is moot in light of my earlier findings, I will deal with Xing’s alternative argument that he should be granted relief from forfeiture. Xing argued that he should be entitled to relief from forfeiture in any event, because the amount forfeited ($116,154.80) is out of proportion to the damages suffered (since no damages have been proven) and it would be unconscionable for Yucca to be permitted to retain the monies he paid for his deposit and extras. Xing argued that the indicia of unconscionability are present in this case because the breach was de minimis, was a function of inconsistencies in the APS and an innocent misunderstanding resulting from the added Schedule “Z”, and did not lead to any harm (no offers or inquiries were received in response to the MLS Listing or the social media postings).

[45] I disagree. If Yucca had the right to terminate the APS under section 14 of Schedule “X” or to declare it null and void under section 15, then the provisions of those sections which allow the Vendor to retain all monies paid by the Purchaser for the deposit or extras are prima facie valid and enforceable. The APS provides that these are liquidated damage amounts and it would not be unconscionable for the Vendor to rely upon those contractual provisions, and the very consequences provided for in the APS and set forth in the Default Notice regarding the MLS Listing, if the MLS Listing breach had not been cured.[^4]

[46] Further, it is argued that Yucca’s reliance upon the subsequently discovered alleged social media breaches was disingenuous (and therefore unconscionable) given the time that elapsed between their discovery (January of 2018) and any complaint from Yucca about them (in April or August of 2018). If I had found the alleged social media breaches to have been defaults under the APS then my determination of whether to grant relief from forfeiture for those breaches would have required more evidence about the untranslated content of the social media postings, additional fact finding (perhaps based on the presentation of viva voce evidence) about the points of disagreement concerning the timing and content of discussions about the social media postings, as well as further legal submissions about the ability of Yucca to rely on an after-discovered default as a ground for termination. However, these issues do not need to be addressed in light of my earlier findings which render the issue of relief from forfeiture moot.

Disposition and Costs

[47] The relief sought in paragraphs (a), (b), and (d) of Xing’s Notice of Application (under Court File No. CV-18-600357) is granted, the APS is declared to be at an end effective December 13, 2017 and Yucca is ordered to repay Xing all monies paid by Xing pursuant to the APS, totalling $116,154.80, plus pre-judgment interest in accordance with section 130 of the Courts of Justice Act, R.S.O. 1990, c. C-43.

[48] Yucca’s application (under Court File No. CV-19-613652) is dismissed.

[49] Counsel advised that the parties had exchanged offers that may impact their cost submissions. It was agreed that they would exchange cost outlines after the hearing and then have an opportunity to make brief cost submissions following the release of my decision, if they are unable to reach an agreement on costs.

[50] If the parties do reach an agreement on costs, counsel are to advise me of such in writing by Friday November 1, 2019. Arrangements can be made at that time for an order(s) to be signed reflecting my decision and what has been agreed about costs. If no agreement is reached on costs, then Xing may make brief written submissions of no longer than 3 pages double spaced (to be accompanied by his cost outline) within 20 days thereafter. Yucca may make brief written responding submissions of no longer than 3 pages double spaced (to be accompanied by a cost outline) within 20 days thereafter. Xing may make brief written reply submissions of no longer than 1.5 pages double spaced, if so advised, within 10 days thereafter.

[51] All submissions should be served on the opposing parties and delivered to my attention at Judges’ Reception, Superior Court of Justice at 361 University Avenue (Room 140), Toronto, Ontario M5G 1T3.

Kimmel J.

Date: October 23, 2019

[^1]: I was not directed to any evidence about the extension of the First Tentative Closing Date, nor did I receive any submissions about the consequences of it not having been formally delayed, which the Tarion Addendum provides for.

[^2]: There are two versions of this letter, one dated December 8, 2017 appended to Yucca’s responding affidavit and one dated December 11, 2017 appended to Xing’s affidavit. Both parties agree that this termination letter was not received by Xing until December 11, 2017 at the earliest and that it was transmitted by email to Xing’s counsel on December 13, 2017.

[^3]: Yucca argued that Xing’s lawyer admitted in his December 14, 2017 email that Xing was in breach of section 14 of Schedule “X” and that the notice provided of this breach was proper notice of termination. I do not agree with this interpretation of the December 14, 2017 email, which simply acknowledges that the MLS Listing had not been approved in advance due to an innocent mistake, and records the steps taken on behalf of Xing to correct or “cure” the situation.

[^4]: See 2336574 Ontario Inc. v. 1559586 Ontario Inc., 2016 ONSC 2467, 77 R.P.R. (5th) 137, at para. 27 and Xu v. 2412367 Ontario Inc., 2017 ONSC 4445, 89 R.P.R. (5th) 57, at paras. 41-48 for examples of cases where the court has held the parties to their bargains and upheld forfeitures of deposits in circumstances of breach entitling a party to terminate an agreement.