OVERVIEW

[1] This application was heard on July 18, 2018. The applicant, Jesan Real Estate Ltd. (“Jesan”) seeks an order declaring that an Occupancy Agreement and Option to Purchase Agreement are null and void. Jesan also seeks leave to issue a Writ of Possession for the property located at 25 Napa Valley Cres., Brampton (the “property”).

[2] The respondent, Sean Doyle, resides at the property. The remaining respondents, who are all members of Mr. Doyle’s family, have not responded to the application and did not participate in the hearing. Mr. Doyle did not file a cross-application seeking any relief but filed a response to the application.

[3] The evidence filed for this application was an affidavit sworn by Mr. Mosharef Khan, a principal of Jesan, an affidavit sworn by Mr. Doyle and transcripts from the cross-examinations on those affidavits. The answers to undertakings were also filed as a document brief.

[4] In August 2018, I was informed that the parties were attempting to resolve the matter via mediation. Those efforts were unsuccessful and ten months later, in May 2019, I was informed that the parties would require a decision. As a result, there has been a significant delay since this matter was last before the court.

[5] Jesan owns the property. On February 17, 2014, Zaheera Bari and Mosharef Khan, in trust for a corporation to be formed, (Jesan) and the respondents entered into two agreements in connection with the property. The first agreement was an Occupancy Agreement (“OA”) and the second was an Option to Purchase Agreement (“OPA”). Mr. Doyle has resided at the property since entering these agreements. Generally, the agreements provided that the respondents would pay a deposit and then monthly payments for a period of time, after which they could exercise an option to purchase the property for a fixed price. This type of agreement is commonly referred to as a “rent-to-own” arrangement.

[6] Mr. Doyle communicated his intention to exercise the option and purchase the property by delivering an Agreement of Purchase of Sale through Mr. Wayne Muir, who the parties agree acted as their mutual real estate agent throughout the term of these agreements. That first offer was signed by Mr. Doyle but was not signed by Jesan. One month later, a second Agreement of Purchase and Sale was prepared by Mr. Muir for a higher price. Both parties signed that agreement. That transaction did not close, however, because Mr. Doyle could not secure financing. When Mr. Doyle then sought to extend the term of the OPA, Jesan informed him that he was in breach of the OPA and that the OPA was null and void.

[7] Jesan’s position is that Mr. Doyle did not strictly comply with the terms of the agreement to exercise the option and, as such, the OPA is null and void. Further, by entering into the second Agreement of Purchase and Sale, Mr. Doyle acknowledged that he was in breach of the OPA. As a result of Mr. Doyle’s failure to close the second transaction, he has forfeited the deposit and must vacate the property.

[8] Mr. Doyle’s position is that he did not breach either the OA or OPA. He submits that he properly exercised the option to purchase and that Jesan wrongfully refused to close the initial transaction.

[9] For the reasons that follow, I find that Mr. Doyle was not in breach of the OPA and that he complied with the terms of the option to purchase. Jesan’s application is, therefore, dismissed.

REVIEW OF THE EVIDENCE

a) The Agreements

[10] The starting point for this application is to review the terms of the two agreements at the heart of the dispute.

[11] The agreements were prepared by the real estate agent, Mr. Muir. The parties agree that Mr. Muir was a dual agent, acting for both parties. There is no evidence that either Jesan or Mr. Doyle retained counsel to review the agreements before they were signed. It appears that Mr. Muir was the key figure in organizing this rent-to-own program, although neither party filed an affidavit from Mr. Muir.

[12] According to the terms of the OA dated February 17, 2014, in return for the right of occupancy, the respondents agreed to pay Jesan a monthly payment of $2,515 for a term of 36 months, commencing March 31, 2014, and ending February 28, 2017. In the event a cheque was returned for insufficient funds (“NSF”), the respondents were to pay a $100 fee and would have 120 hours to replace the NSF cheque by cash or a bank draft.

[13] During the course of the OA term, there were some NSF cheques which were either not paid within 120 hours or were paid by way of an etransfer, as opposed to cash or bank draft, as per the terms of the OA.

[14] According to the OA, any notice that the respondents gave to Jesan was to be made by mail at the “address shown below.” No address was included in the OA.

[15] According to the OPA, also dated February 17, 2014, the respondents were granted the option to purchase the property for $489,000 at the end of the term of the OA, so long as they complied with all conditions and were not in default. The agreement stated that the respondents agreed to pay an initial deposit of $20,000 upon signing the OA, which was to be held by the real estate agent until the “day of Occupancy when it [was] to be released to the Owner.” That payment was to go towards the down payment for the property, if the option to purchase was exercised. It was non-refundable if the respondents did not exercise the option to purchase the property. While the respondents moved into the property in February 2017, the down payment was not released to Jesan until April 2017 – after the respondents had taken occupancy which was not in compliance with the terms of the OPA.

[16] According to the OPA, from the monthly rental payments under the OA, the amount of $375 per month was to be credited towards the down payment to purchase the property in the event the respondents exercised the option to purchase. In the event the respondents did not exercise their option to purchase the property, they would forfeit the monthly option payment credits. Accordingly, by the end of the three-year term of the OA, the total down payment to be used towards the purchase of the property, if the option was exercised, would be $33,500.

[17] According to the OPA, the occupant was granted the option to purchase the property at the end of the term of the OA, so long as the occupant complied with all conditions and was not in default. The OPA included the following terms:

EXERCISE OF OPTION: The option may be exercised 60 days prior to the end of the term of the Occupancy Agreement unless mutually agreed to accelerate the Option, but not earlier than 2 years and shall be exercised by mailing or personally delivering written notice of intent to purchase to the Owner and by an additional deposit in in the amount of $1,000.00 (CDN) One Thousand Dollars payable in Trust to the Owner’s Solicitor.

Notice, if mailed, it shall be registered mail, to the Owner at the address set forth below and shall be deemed to have been given upon the day following the day shown on the post office receipt.

In the event the option is exercised the Option Deposit shall be credited back to the Occupant. The Monthly Option Payments Credits, if any shall be credited back to the Occupant, for each month the Occupancy Payment has been paid when due. If the Occupancy fee was late for any month, even for one business day, credit will not be given for that month. These funds will only be credited if the option is exercised and the sale of the Property closes, in particular, if the option is not exercised, the Occupant forfeits and the Owner retains all Option Deposits and Credits. If the Occupant is not in breach of contract and the Owner decides to terminate the contract, the Option Deposit shall be credited back to the occupant. By exercising the option, the Occupant states that their obligation to purchase is unconditional. In particular, the Occupant states that the required financing is in place. The Investor hereby acknowledges that the Occupant is not in default and that this agreement is firm and binding for title transfer to the Occupant and must abide by this agreement.

EXPIRATION OF OPTION: Notice of intent to purchase may be made at least 90 days before the last day of the term of the Occupancy Agreement. If notice is not received and/or the Property is not purchased, the Option to Purchase expires. Upon expiration, the owner shall be released from all obligations hereunder and all Occupants rights hereunder, legal or equitable, shall cease.

EXTENSION OF AGREEMENT: If financing cannot be obtained on behalf of the Occupant by the designated mortgage team, and the occupant is not in default, then this Agreement shall continue on a month to month basis for an additional (6) six months with no increase in the Occupancy payment or change in the Monthly Option Payment Credit. The Purchase Price shall however increase at the rate of 0.25% per month. If after these additional (6) sic months, the Property still has not closed, then the Monthly Option Payment Credit can, at the option and absolute full discretion of the Owner, be increased. The Purchase Price shall increase at the rate of .3% per month.

ENTIRE AGREEMENT: This Agreement, including the Occupancy Agreement and the Utilities Agreement constitutes the entire Agreement between the Parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral, between the Parties in connection with the subject matter in this Agreement except as specifically set out in this Agreement.

TIME: Time shall be of the essence of this Agreement.

DISCLOSURE: Signing of this Agreement in no way guarantees that the Occupant will qualify for a Mortgage or be able to obtain financing for the Property to complete the purchase of the Property.

(a) It is the Occupant’s responsibility to obtain adequate financing to complete the purchase transaction of the Property. The Occupant’s overall financial situation at the time of purchase, including employment, income, credit scores and interest rates will be determining factors and the occupant acknowledges that the Owner had no control over this.

(b) The Owner recommends that the Occupant review their credit situation on a quarterly basis with a professional credit counselor as designated by the program to assist with the preparation for home ownership.

(c) The Owner recommends that that Occupant start the process of obtaining financing for the Property Purchase, with the designated mortgage broker of the program 120 days prior to the end of the term of this Agreement.

(d) The Owner will do everything reasonably possible within reach to assist the Occupant complete the Purchase of the Property.

[18] As with the OA, no address for the owner was included in the OPA.

b) The First Offer to Purchase

[19] Mr. Doyle’s evidence was that, after three years of living at the property, he notified Jesan of his intention to purchase it. In his affidavit, he did not specify when or how he notified Jesan of this intent.

[20] During cross-examination on his affidavit, Mr. Doyle’s evidence was that, towards the end of December 2016, he contacted Mr. Muir by phone and possibly by email to start the process of purchasing the property. In satisfaction of an undertaking, Mr. Doyle provided phone records that show the dates he called Mr. Muir’s phone between January 11, 2017, and March 29, 2017. There are no records of phone calls or emails showing any contact with Mr. Muir towards the end of December 2016.

[21] Mr. Doyle’s evidence was that, on January 24, 2017, he informed Mr. Muir that the other respondents were willing to let him exercise the option to purchase the property, alone, as he was the only one with a high enough credit score to obtain financing. Mr. Doyle attached to his affidavit an email from Mr. Muir dated January 24, 2017, confirming this arrangement.

[22] According to Mr. Doyle, Mr. Muir informed him on January 30, 2017, that the total deposit, including monthly credits, was $33,500. He was also informed that the OPA required an additional $1,000 to exercise the option. Mr. Doyle’s evidence was that Mr. Muir advised him to round up the deposit to $35,000 by paying $1,500 rather than $1,000. Mr. Doyle attached an email to his affidavit from Mr. Muir dated January 30, 2017, confirming this figure. In that email, Mr. Muir also stated that the property was worth over $600,000 and likely closer to $650,000.

[23] Attached to Mr. Doyle’s affidavit, was a copy of a bank draft, dated March 3, 2017, in the amount of $1,500 made payable to Jesan Realty. The “Re” line states that it is for “RTO Final Payment.”

[24] Mr. Khan, a principal of Jesan, swore an affidavit on its behalf. He deposed that, on or about February 3, 2017, he received an email from Mr. Muir attaching an Agreement of Purchase and Sale offering to purchase the property for $489,000 with Mr. Doyle being listed as the purchaser (“Offer One”). According to Offer One, the down payment was $35,000 and the closing date was March 31, 2017. Offer One was signed by Mr. Doyle.

[25] Mr. Doyle’s undisputed evidence was that Mr. Muir prepared Offer One.

[26] Mr. Khan’s evidence was that, upon receiving the email with the attached Offer One, he advised Mr. Doyle that the email did not constitute a valid notice of his intent to purchase in accordance with the terms of the OPA. He provided no specifics in his affidavit about how or when he communicated this to Mr. Doyle.

[27] Mr. Doyle’s evidence was that, on February 13, 2017, Mr. Muir informed him that Jesan did not want to close the transaction as the property might now be worth $750,000. Mr. Doyle further deposed that Mr. Muir told him that he had “won the lottery” through the increased property value so Mr. Doyle should negotiate a settlement or Jesan would “walk off with all the money.” This was confirmed in an email from Mr. Muir dated February 13, 2017. In that same email, Mr. Muir told the respondents that he was hoping to negotiate a settlement to get the deal closed and he asked the respondents to be patient.

[28] In a further email from Mr. Muir dated February 21, 2017, he told the respondents that, if Jesan refused to transfer/sell, they would have to commence litigation and it could take three to five years and would cost $50,000 in legal fees. He informed the respondents that they could either solve the matter or go to court.

[29] During cross-examination on his affidavit, Mr, Khan admitted that he had heard that the real estate market was “really, really high.” Although he could not recall exactly what Mr. Muir told him in the spring of 2017 about the value of the property, his evidence was that it was worth more than $700,000. He confirmed during cross-examinations that he did not sign Offer One and, at the time, he did not consult a lawyer. His evidence was that he did not tell Mr. Doyle he was not going to sign Offer One. He also admitted during cross-examination on his affidavit that he was not sure that he told Mr. Doyle upon receipt of Offer One that the email attaching the offer did not constitute valid notice of intent to purchase in accordance with the terms of the OPA. This conflicts with Mr. Khan’s sworn affidavit evidence that he informed Mr. Doyle, upon receipt of Offer One, that he was not going to sign it because Mr. Doyle was in breach of the OPA terms. In response to an undertaking to review his records regarding what he told Mr. Doyle after receiving Offer One, he produced a copy of a letter his lawyer sent to Mr. Doyle’s lawyer on April 18, 2017.

[30] During his cross-examination, Mr. Khan agreed that he told Mr. Muir that he thought the deal was unfair but denied telling Mr. Muir that he was not going to sell. Specifically, Mr. Khan was asked whether he thought the sale agreement for $489,000 was fair when the value had increased to over $700,000. Mr. Khan answered that, from a business point of view, he did not believe it was fair and agreed with the suggestion that he should get more.

c) The Second Offer to Purchase

[31] There is no dispute that Mr Muir prepared another Agreement of Purchase and Sale dated March 2, 2017 (“Offer Two”). According to this offer, the purchase price was $550,000 and it was also scheduled to close on March 31, 2017. The down payment was, again, $35,000. Mr. Doyle signed this agreement on March 1, 2017, and Mr. Khan signed on behalf of Jensen, on March 7, 2017.

[32] Mr. Doyle’s evidence was that he signed Offer Two under duress and pressure from Mr. Muir. He felt that, if he did not sign, he would have to spend a large amount of money litigating the matter.

[33] Mr. Doyle’s evidence was that, on March 7, 2017, Mr. Muir informed him that an additional $9,500 in fees was needed to close the transaction. On March 20, 2017, Mr. Doyle gave Mr. Muir’s assistant that amount in cash to cover fees, to obtain a mortgage and to transfer the title. He obtained a receipt confirming that the money had been received by Mr. Muir’s office.

[34] Offer Two did not include a clause stating that the offer was conditional on Mr. Doyle securing financing.

[35] Mr. Doyle’s evidence was that, on March 26, 2017, Mr. Muir advised him it was Jesan’s position that Mr. Doyle had made three late payments of the $375 monthly amount over the course of three years of occupancy. From Jesan’s perspective, the OPA stated that even a single late payment did not count, so Jesan was owed $1,125 ($375 x 3). On March 27, 2017, Mr. Doyle provided a cheque in that amount to Jesan – a copy of which was attached to Mr. Doyle’s affidavit. This evidence was not disputed by Jesan.

[36] On March 27, 2017, Jesan provided a letter to Mr. Muir’s office stating that it was holding $35,000 as the deposit to purchase the property, “given with the now accepted Agreement of Purchase and Sale dated March 2, 2017.”

[37] On March 28, 2017, three days before the scheduled closing, Mr. Khan received an email from Mr. Muir advising that he required Mr. Khan’s signature to amend Offer Two to add another purchaser to the agreement. An amended offer was not attached to the email from Mr. Muir.

[38] That same day, Mr. Khan received an email from the respondent, Anthy Koutsoukos, advising that her family needed Mr. Khan to sign the amendment to Offer Two. Later that day, the respondent, Deena Koutsoukos, attended at Mr. Khan’s house and told him that Mr. Doyle was having difficulty obtaining financing and therefore wanted to add a family member as a purchaser to Offer Two. This evidence is not disputed by Mr. Doyle

[39] On March 29, 2017, Mr. Khan received an email from Mr. Muir’s office enclosing the proposed amended Offer Two which added Anggelos Koutsoukos as a purchaser. Mr. Khan’s evidence is that he spoke to his lawyer who delivered a letter to Mr. Doyle, on March 29, 2017, advising that Mr. Khan would not be signing the amended Offer Two. The letter further stated that time was of the essence and that, if the transaction did not close on March 31, 2017, the deposit would be forfeited and Jesan would take steps to obtain vacant possession. This evidence is not disputed by Mr. Doyle.

[40] The transaction did not close on March 31, 2017. Jesan’s lawyer tendered all closing documents on Mr. Doyle’s lawyer.

[41] On that same day, Mr. Doyle’s evidence is that he advised Jesan, through his lawyer, that he was exercising his right to extend the terms of the OPA by six months. In a letter from his lawyer, Mr. Doyle confirmed that he could not close the transaction that day because he was still arranging financing. The letter also states that Mr. Doyle’s inability to secure financing was due to Jesan’s breach of the OPA, wherein the agreed purchase price was $489,000 and not $550,000, which was unilaterally imposed by Jesan.

[42] In a letter dated April 18, 2017, Jesan advised Mr. Doyle’s lawyer that it took the position that the email containing Offer One, sent February 2, 2017, did not constitute valid notice of Mr. Doyle’s intent to purchase the property in accordance with the OPA for the following reasons:

i. The email was not delivered personally or via registered mail;

ii. The email did not enclose a deposit in the amount of $1,000; and,

iii. The email was not delivered within 60 days prior to the end of the terms of the OA, which was stipulated in the OA to be February 28, 2017.

[43] The letter also stated that, as of February 28, 2017, the OA was at an end and therefore the option to purchase had expired.

[44] According to Jesan, Mr. Doyle should have provided notice of his intention to excise the purchase option by December 28, 2016 – 60 days prior to the end of the OA.

[45] As Mr. Doyle believed he had an interest in the property, his lawyers registered a caution on title on April 20, 2017.

[46] Mr. Doyle continues to reside in the property and pays the monthly amount of $2,515 on a without prejudice basis.

ISSUES AND POSITION OF THE PARTIES

[47] The first issue is whether Mr. Doyle complied with the terms of the OPA when he exercised the option to purchase. If I find that he was not in breach of the OPA, there are no further issues. If I find that he was in breach of the OPA, the second issue is whether he was in breach of Offer Two, and if so, whether the $35,000 deposit is forfeited to Jesan. Mr. Doyle has not filed a cross-application seeking either specific performance of the OPA or for relief from forfeiture.

[48] Jesan’s position is that Mr. Doyle breached the OPA because he failed to comply with the terms for exercising the purchase option. Jesan’s position is that the OPA was a unilateral contract that required strict compliance with its terms. Jesan also asserts that the Second Offer was a binding offer which Mr. Doyle failed to close, thereby entitling Jesan to retain the deposit.

[49] Mr. Doyle’s position is that the contract was a bilateral contract and there was substantial compliance with the terms of the OA and OPA. Accordingly, Jesan should not be entitled to rescind the contract. In the alternative, Mr. Doyle submits that the terms of the OPA regarding the purchase option are vague, uncertain and ambiguous. Based on his interpretation of the OPA, he complied with all its terms and the sale of the property ought to proceed, as per Offer One.

PRELIMINARY FINDING REGARDING THE DATE OF NOTICE

[50] Based upon the evidence, I find that Mr. Doyle first notified Jesan of his intention to exercise the option on February 3, 2017, when Mr. Khan received an email from Mr. Muir attaching Offer One. I also find that Jesan first notified Mr. Doyle via letter, dated April 28, 2017, that it considered him in breach of the OPA after Offer Two did not close.

ANALYSIS

[51] Both parties rely on Sail Labrador Ltd. v. Navimar Corp., 1999 CanLII 708 (SCC), [1999] 1 S.C.R. 265. Jesan relies on that decision in support of its position that the OPA was a unilateral contract which required Mr. Doyle to strictly comply with the terms to exercise his purchase option. In cases of unilateral contracts, courts have historically required strict performance of conditions precedent to give rise to liability on the part of the optionor: Sail at para. 37. In other words, if the optionee (Mr. Doyle) seeks to enforce terms of an option for sale, he must show that he strictly complied with the terms to exercise that option. In a unilateral contract, deficient performance of a condition precedent will allow the optionor (Jesan) to refuse to honour the option without showing there was substantial non-performance: Sail at para. 39.

[52] In this case, Jesan’s submits that Mr. Doyle failed to strictly comply with three terms, or conditions precedent, to exercise the option to purchase. Specifically, Jesan claims:

(1) He failed to pay the $1,000 deposit;

(2) He failed to deliver the notice by mail or personally to Jesan; and

(3) He failed to deliver notice in time.

[53] Conversely, Mr. Doyle relies on Sail to support of his position that the OPA was a bilateral contract, to which the doctrine of substantial non-performance applies. Bilateral contracts do not require strict compliance and, where there is an alleged breach, the non-offending party can only consider the contract rescinded where there has been substantial non-performance of the terms. Therefore, if I find this to be a bilateral contract, I must also find that Mr. Doyle’s failure in performance substantially deprived Jesan of what was bargained for.

[54] Mr. Doyle submits that he did substantially perform the terms to exercise the option and that Jesan cannot consider the agreement to be rescinded.

[55] As noted in Sail, while options are often considered to be unilateral contracts, this is not always the case; an option may be an element of a bilateral contract in which it is contained, rather than an independent, unilateral contract: Sail at paras. 34-40. This determination is a matter of construction which involves a review of the text of the contract and the context surrounding it in order to determine the intentions of the parties: Sail at para. 41.

[56] In Sail, there were two agreements. One was a charter agreement by which one party agreed to pay the other monthly amounts to use a vessel. The agreement contained an option to purchase the vessel after a five-year period for a fixed amount. Based on a review of the facts, the Court found the lease and the option formed a single bilateral contract. This finding was based on three broad categories that demonstrated an intimate connection between the two agreements which was indicative of a bilateral contract:

i) Same consideration for both agreements – the same rent payments functioned as consideration for both the charter party and the option to purchase: Sail at para. 42.

ii) A dependent relationship between the two agreements – the ability to exercise the option was made dependent on performing the terms of the underlying agreement: Sail at para. 44.

iii) Both agreements involved the same property – the charter party and the option to purchase related to the same vessel: Sail at para. 45.

Application in this case:

[57] In reviewing the terms of the OA and OPA l, I similarly find the agreements to be intimately connected to one another for the following reasons:

i) The lease payments function as both consideration for the option, under the OA, and as part of the down payment to purchase the property, in the OPA.

ii) Secondly, the OPA specifically depends on performing the terms of the OA. As stated in the OPA, the occupants were granted an option to purchase the property only if they complied with the terms of the OA and were not in default; and,

iii) The OA and the OPA involve the same property, namely, 25 Napa Valley Cres., Brampton.

[58] These connections strongly suggest the parties intended this to be a bilateral contract. Following the Court’s direction in Sail, however, I must also consider the text of OA and OPA, as well as the context surrounding the agreements to determine the intention of the parties.

[59] For the reasons set out below, I find that the text of the OPA and the behaviour of the parties during the agreements further support the finding that this was a bilateral contract.

The Text of the OPA

[60] As previously quoted, the OPA contains several specific provisions setting out what will occur if the option is exercised. These can be found, above, at the heading “EXERCISE OF OPTION.” The wording in the provisions under that heading strongly suggest the parties made the type of ‘mutual promises’ that are inherent to bilateral contracts: Sail at para. 39.

[61] Under that section, if Mr. Doyle exercises the option, he is stating that his obligation to purchase the property is “unconditional” and that he has the required financing in place. Once Mr. Doyle exercises the option, the following is to occur:

The Option Deposit is credited to the purchase price.
His Monthly Option Payment Credits shall be credited to him for each month they were paid, unless any one or more of these were paid late, in which case Mr. Doyle receives no credit for that/those month(s). Additionally, these credits only apply once the sale of the property closes.

[62] If Mr. Doyle does not exercise the option, the following is to occur:

He forfeits the Option Payment Credits and Jesan retains all those amounts, along with all Option Deposits.

[63] Lastly, if Mr. Doyle is not in breach of the OPA but Jesan terminates the contract, Jesan must credit the Option Deposit back to him. By signing the agreement, Jesan also acknowledges that the agreement is “firm and binding for title transfer to [Mr. Doyle] and must abide by this agreement” (sic).

[64] In discussing the rationale behind the inapplicability of substantial non-performance to unilateral contracts, the analysis in Sail is fundamentally rooted in practical terms. The Court states, “since the optionee has made no counter-promise, the optionor has no remedy if the performance is deficient except to refuse to honour its promise”: Sail, at para. 39, emphasis added. Such concerns do not apply in this case, however, because the optionee (Mr. Doyle) has made a counter-promise; if he does not exercise the option, he forfeits the Option Payment Credits and Deposits. This further suggests the agreement was a bilateral contract.

The Parties’ Behaviour During the Course of the Agreement

[65] The OPA also includes a term that time is of the essence, which requires strict compliance within a specified time. However, the conduct of the parties over the course of the lease demonstrates that they did not intend time to be of the essence or, at the very least, that Jesan acquiesced to delayed payments on multiple occasions.

[66] For example, the initial $20,000 deposit was to be paid to Jesan when the respondents took possession of the property. It was not, in fact, paid until after the respondents took occupancy, contrary to the terms of the OPA. The respondents also made late monthly lease payments, after NSF payments, beyond 120 days which was not in compliance with the OA. These payments were made by etransfer, which also was not in compliance with the OA. Lastly, even after Jesan signed the Second Offer, on March 27, 2017, it accepted late payments for three months of late lease payments. Thus, although the OPA stated that time was of the essence, Jesan did not enforce strict compliance.

[67] Even where a ‘time is of the essence’ provision exists, the party intending to rely upon it must meet a number of common law conditions: Webster v. BCR Construction, 2012 ONSC 2217, at para. 48. One such condition, is that the party attempting to rely on it cannot do so “where they have waived the provision or otherwise acquiesced to the delay”: Webster, citing Union Eagle Ltd. v. Golden Achievement Ltd., [1997] 2 All E.R. 215 (Hong Kong P.C.). Therefore, even if the parties had initially intended time to be of the essence, Jesan’s repeated acquiescence with respect to the timing undermines a finding in their favour on this point.

Absence of other Provisions Concerning Strict Enforcement

[68] Even in bilateral contracts, parties may still expressly provide for strict enforcement of the contractual terms. If so, a clear contractual provision must be added to provide that breach of a certain term, no matter how slight, may allow the non-offending party to rescind the entire contract. If there are no such provisions, then the doctrine of substantial non-performance will apply: Sail at para. 50. In this case, there are no additional provisions concerning strict enforcement.

FINDING REGARDING THE NATURE OF THE CONTRACT

[69] Given the intimate connections between the OA and the OPA, as well as the text of the agreement and the behaviour of the parties, I find the OPA and OA to be a bilateral contract. As such, the doctrine of strict compliance does not apply. I find that Mr. Doyle substantially complied with the terms by which he was to exercise the option to purchase and he was, therefore, in compliance with the OPA.

[70] My finding is also based on the ambiguity in the wording of the terms of the condition precedent of the OPA regarding Mr. Doyle’s exercise of the purchase option. If the contract was a unilateral contract requiring strict compliance, as Jesan assets, then the wording of the contract regarding the manner in which the option was to be exercised ought to have been drafted clearly and without ambiguity. Such ambiguity, especially concerning notice requirements, is antithetical to a unilateral contract where the doctrine of strict compliance would apply. Simply put, one cannot ‘strictly comply’ with an ambiguous term.

APPLICATION OF FINDINGS TO JESAN’S CLAIMS

[71] I will now deal with each of the three terms that Jesan said Mr. Doyle breached when he exercised the option to purchase.

(1) The $1,000 Deposit

[72] Jesan’s position is that Mr. Doyle breached the OPA as he did not include an additional $1,000 deposit when he notified Jesan of his intention to exercise the option. The OPA does not state when the additional $1,000 deposit was to be paid. It simply said that an additional deposit in the sum of $1,000 was to be paid. That term is ambiguous. It does not state that the $1,000 was to be delivered at the same time as the notice to exercise the option. Mr. Doyle did pay the additional $1,000 on March 3, 2017, as part of the bank draft of $1,500 and Jesan accepted this payment.

(2) Defective Notice

[73] Jesan’s position is that Mr. Doyle did not comply with the option to exercise as Jesan received notice by way of an email and not by mail or personal delivery, as stated in the OPA. According to the OPA, the notice was to be delivered at the address “set forth below,” but no address was provided in the agreement. If Jesan required strict compliance with respect to serving notice at a specific address, it should have included that address in the OPA. It failed to do so. Although Mr. Khan asserts that Mr. Doyle was aware of his address, it is not clear on the evidence before me whether Mr. Khan’s address was the same as Jesan’s address. Given this lack of clarity and specificity, it is not possible to insist on strict compliance of that term when no address was set out in the agreement.

[74] While there must be explicit certainty and direct, unequivocal communication when an optionee exercises his rights, appellate courts have taken a functional view of notice requirements in similar cases. As the Court of Appeal for Ontario stated in Ross v. T. Eaton Co.:

[where] an offeree wishes to depart from the method of acceptance prescribed ...(which is not insisted on as the sole method of acceptance), he ... can only do so effectively if the communication is by a method which is not less advantageous to the offeror and the acceptance is actually communicated to the offeror. (emphasis added)

1992 CarswellOnt 615 (Ont. C.A.) at para. 22.

[75] This point was reiterated in 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., where the Court stated:

The exercise of an option is similar to the acceptance of an offer. The law of contract requires that the acceptance of an offer be communicated to the person who made the offer. In order for the acceptance to be a valid one it must be clear and unambiguous.

1993 CarswellOnt 5327 (Ont. C.A.), at para. 1.

[76] In 120 Adelaide, a provision specified that the tenant was required to exercise their option to renew a lease, in writing, at least 18 months before the tenancy expired. While the tenant/optionee was ultimately unsuccessful, the Court was clear that “if [the notice] letter had been timely[,] it would have fulfilled the requirements” under the contract, notwithstanding issues in form: at para 2.

[77] With these principles in mind, I find that the email Jesan received from Mr. Doyle via Mr. Muir was clear and unambiguous notice of Mr. Doyle’s intent to exercise his option rights under the OPA. I further find that receiving notice in the fashion was not less advantageous to Jesan.

[78] This case is similar to notice provided in both Excel Autobody Ltd. v. Tsang & Sons Holdings Ltd., 2015 BCSC 553, and DirectCash Management Inc. v. Macs’ Convenience Stores Inc., 2018 ABQB 231.

[79] In Excel Autobody Ltd. v. Tsang & Sons Holdings Ltd., Excel Autobody signed a commercial lease agreement with an option to renew after the five-year term. During the term of the lease, the property was sold to a new landlord, Tsang & Sons, who eventually claimed Excel had improperly served its notice of intent to exercise the renewal option. Excel had delivered notice by registered mail to Tsang’s business address, and also by email to an address at which the parties had previously corresponded. Among other points, Tsang argued that the notice was ineffective because: (1) the original lease had never been amended and still listed the former landlord’s address and (2) notice by email was not prescribed in the lease agreement. The Court rejected both arguments and found that:

it is clear that both notice by registered mail sent to the address to which the rent payments are directed and by means of email to an address known to be used by the Landlord are “not less advantageous” than delivery to an address that belongs to the previous landlord.

Excel, at para. 41

[80] Similarly, in DirectCash, the parties had a service agreement containing a clause for automatic renewal after the three-year term. The agreement also contained a notice of non-renewal clause that permitted Macs’ to notify DirectCash of its intent to end the agreement with at least three months’ notice. At the end of the term, Macs’ gave notice by way of an email to an account manager at DirectCash. Among other things, DirectCash claimed this notice was defective because: (1) it was not sent to the president of DirectCash, as per the agreement; and (2) it was sent from ‘Couche-Tard,’ as opposed to ‘Macs’.’ In rejecting DirectCash’s arguments on these points, the Court reiterated the practical purpose that notice provisions serve:

Again, this appears to be DirectCash making a case for strict compliance with the notice requirements in the absence of any actual confusion by DirectCash. All the evidence from both parties, including the internal report to the DirectCash Board of Directors referenced above, supports a finding that DirectCash knew precisely which services agreement was referenced in the December 15, 2014 email.

I also rely on the historical treatment of Macs’ corporate personalities by DirectCash, specifically the fact that DirectCash employees had, throughout the contractual relationship, sent and received emails from Couche-Tard employees on behalf of Macs with no objection and no confusion.

That the notice was sent from the email of a Couche-Tard executive rather than from an email address with the Defendant’s actual legal name is of no consequence in the face of these facts.

DirectCash, at paras. 26-28 (emphasis added)

[81] Similar to Excel and DirectCash, there is no evidence before me that either party had expressed any dissatisfaction with using email and texts to communicate and to communicate through Mr. Muir, prior to commencing this action. I, therefore, find that there could have been little confusion on February 3, 2017, when Mr. Doyle expressed the intent to exercise his rights under the OPA. Also similar to Excel and DirectCash, neither the OA nor the OPA specifically prohibited notice by means other than delivery at an address which, again, was never specified in the agreement.

(3) Untimely Notice

[82] Jesan asserts that Mr. Doyle breached a condition precedent of the purchase option by providing late notice of his intent to exercise the option on February 3, 2017 – the date Jesan received the First Offer enclosed in Mr. Muir’s email. Jesan’s position is that, based on the OPA, it should have received notice 60 days before the end of the OA. As the OA terminated on February 28, 2017, Jesan submits the notice should have been received no later than December 28, 2016.

[83] The specific wording of the OPA is that the “option may be exercised 60 days prior to the end of the term of the Occupancy Agreement unless mutually agreed to accelerate the Option, but not earlier than 2 years by mailing or personally delivering written notice of intent to purchase…” The OPA also states that “Notice of Intent to purchase may be made at least 90 days before the last day of the term of the Occupancy Agreement.” These two terms of the OPA are conflicting, as one term speaks of 60 days and the other of 90 days. Furthermore, the OPA does not state that the notice of intent to exercise the option must be exercised 60 or 90 days before the end of the term of the OA; it only states that it may be exercised at that time.

[84] One interpretation is that the earliest Mr. Doyle could exercise the option was 60 days before the end of the OA term, unless the parties agreed to an earlier date. He therefore could exercise the option anytime between 60 days before the OA ended and the last day of the OA. Another interpretation is that the word “may” relates to the occupants’ choice about whether or not to exercise the option and does not relate to the 60-day time limit. In other words, if they chose to exercise the option, they had to do so by 60 days before the end of the OA, at the latest.

[85] The permissive term “may” is used, rather than the mandatory “must.” If the intention was that the option had to be exercised by no later than 60 days before the end of the term of the OA, the contract should have been drafted clearly, using that mandatory language. The contract should have stated that, if the respondents intended to exercise the option, they were required to do so by no later than 60 days before the end of the lease.

[86] Given these different interpretations of the notice provision, I find that the agreement contains ambiguous wording as to when the purchase option was to be exercised. If Jesan required strict compliance regarding how Mr. Doyle was to exercise the purchase option, it should have drafted these terms in an unambiguous way that was internally consistent with the rest of their agreement. It failed to do so or failed to have its agent – Mr. Muir – do so, as he drafted the agreement on the parties’ behalf.

[87] Having found this to be a bilateral contract, I find that Mr. Doyle substantially complied with the terms of this condition precedent. Jesan received notice of Mr. Doyle’s intention to exercise the option, prior to the end of the term of the OA. Although notice was not sent personally or by mail, Jesan was notified by way of an email to Mr. Khan. Lastly, Jesan did receive payment of the additional $1,000 deposit.

[88] Jesan’s position is that Mr. Doyle accepted that the OPA was void by entering into the Second Offer. In his affidavit, Mr. Khan deposed that he informed Mr. Doyle that the February 3rd, 2017, email did not constitute valid notice of intent to purchase in accordance with the terms of the OPA. As indicated above, I do not accept that evidence, given the conflicting account Mr. Khan provided when cross-examined on his affidavit.

[89] Based on Mr. Khan’s evidence, Jesan did not accept Offer One because the value of the property increased, and not as a result of Mr. Doyle being in breach of the terms of the OA or OPA. It is reasonable to infer that Mr. Khan did not want to sell the property for the agreed-upon amount of $489,000 when the value of the property had increased to $700,000. This is consistent with the contents of Mr. Muir’s email to the respondents on February 13, 2017, which stated that the investor (Jesan) did not want to close and preferred to negotiate a settlement. This is also consistent with Mr. Muir’s email to the respondents dated February 21, 2017, that stated, if Jesan would not agree to sell, the applicants would have to commence court action that could take 3-5 years and would cost $50,000.

[90] Mr. Doyle did not make the Second Offer for a price of $550,000 on the basis that he had not complied with the terms of the OPA. Rather, Jesan would not agree to sell the property at the agreed-upon price only because the market value of the property had increased considerably. As Mr. Khan deposed during his cross-examination, he did not think that was fair. Jesan and Mr. Doyle did not enter the Second Offer as a result of the OPA being rescinded due to Mr. Doyle’s breach of the option to purchase. The Second Offer was the means for Jesan to get a higher price for the property than had been agreed upon in the OPA.

[91] By executing the Second Offer, Mr. Doyle was not acknowledging that the OPA was null and void. If he was acknowledging that the OPA was null and void, he would not have paid Jesan $1,125 on March 27, 2017, for late payments owing under the OA. If the parties had reached an agreement that Mr. Doyle was in breach and that the OPA was null and void when the Second Offer was signed, it is logically inconsistent that he would then pay Jesan any money owing under the OA to avoid default.

[92] Furthermore, the bank draft to pay the additional $1,000 deposit, plus $500 to round up the deposit, was dated March 3, 2017 – the day after Mr. Doyle signed the Second Offer. This too is inconsistent with the view that Mr. Doyle accepted the OPA to be null and void. If he had, there would have been no reason for him to make any additional down payments to comply with the OPA. I therefore find that Mr. Doyle made the Second Offer believing that the OPA was still in full force and effect and not null and void, as asserted by Jesan.

[93] Given my findings that Mr. Doyle was not in breach of the OPA, I do not have to consider whether he was in breach of the Second Offer or if he has forfeited the $35,000 deposit to Jesan. I also do not have to consider Mr. Doyle’s request for an extension of the OPA on March 31, 2017, as he was not in default and properly exercised his notice of intention to purchase the property. Jesan failed to comply with its obligation to sell the property for the agreed-upon price of $489,000.

Final Comments

[94] If I am incorrect, and the OPA is a unilateral contract requiring strict compliance, I do not find that Mr Doyle was in breach of those terms because his alleged breach would fall in the de minimis range. It is not a fundamental breach permitting rescission: Sail at para. 75.

[95] Additionally, as indicated in Sail, courts should err on the side finding a contract to be bilateral rather than unilateral, where the facts support it. In the words of Bastarache J., I must “[keep] in mind that [the Supreme Court] has previously approved of the tendency by courts to treat offers as calling for bilateral rather than unilateral performance whenever a contract can fairly be so construed.”: Sail, at para 41, citing Dawson v. Helicopter Exploration Co., 1955 CanLII 45 (SCC), [1955] S.C.R. 868 (S.C.C.), at p. 874, per Rand J.

[96] Sail was recently followed in SaskEnergy Inc. v ADAG Corp. Canada Ltd., 2019 SKQB 263. I agree with R.S. Smith J. that “the presumption is that there is a bilateral contract unless there is evidence that indicates that the parties intended the option to form a unilateral contract.”: SaskEnergy, at para 49. No such evidence existed in this case.

CONCLUSION

[97] Having found that Mr. Doyle exercised the option to purchase in accordance with the terms of the OPA, I dismiss Jesan’s application.

[98] Subject to any offers to settle, Mr. Doyle is entitled to his costs. If the parties cannot agree on the quantum of costs, they shall file and serve written submissions, of no more than two pages, double-spaced, costs outline and relevant offers to settle by November 29, 2019.

L. Shaw J.

Released: November 6, 2019

COURT FILE NO.: CV-17-2610-00

DATE: 2019 11 06

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

JESAN REAL ESTATE LTD.

Applicant

and –

SEAN DOYLE, JOHN KOUTSOUKOS, DEENA KOUTSOUKOS and ANTHY KOUTSOUKOS

Respondent

REASONS FOR JUDGMENT

L. Shaw J.

Released: November 6, 2019

Jesan Real Estate v. Doyle et al, 2019 ONSC 6448

Case Summary

OVERVIEW

REVIEW OF THE EVIDENCE

a) The Agreements

b) The First Offer to Purchase

c) The Second Offer to Purchase

ISSUES AND POSITION OF THE PARTIES

PRELIMINARY FINDING REGARDING THE DATE OF NOTICE

ANALYSIS

FINDING REGARDING THE NATURE OF THE CONTRACT

APPLICATION OF FINDINGS TO JESAN’S CLAIMS

CONCLUSION

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Legal Tests 1