Court File and Parties

COURT FILE NO.: CV-16-421-00SR DATE: 2020 12 16 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Jamie McKean and Jacquiline Berry Plaintiffs – and – Huan Wang and Aimhome Realty Inc. Defendants

Counsel: I. de Rijcke, Counsel for the Plaintiffs Y. Wang, Counsel for the Defendant Huan Wang

HEARD: October 6 and 7, 2020 by Zoom Video Conference

Justice Mossip

Judgment

Introduction

[1] The plaintiffs entered into an Agreement of Purchase and Sale (“APS”), with the defendant Huan Wang, for the purchase of a property located municipally at 376 Lakeshore Road West, Oakville.

[2] The purchase price set out in the APS was $1,718,000, with a deposit paid by the purchasers in the sum of $50,000 to the listing broker and with a closing date of July 31, 2015.

[3] The sequence of events which lead to the parties not closing the transaction are set out in the Agreed Statement of Facts and are not disputed.

[4] As a result of the transaction not closing, the plaintiffs sued for the return of the deposit money. The defendants sued for damages, after relisting the property and selling to a third party at a loss, and for forfeiture of the deposit money.

[5] The defendant Aimhome Realty paid the deposit into court and is no longer a party in the proceedings.

[6] A trial was held over two days, by way of Zoom videoconference. The witnesses were:

Jamie McKean (one of the Plaintiffs); Virginia Tinti (Real estate lawyer for the Plaintiffs); Huan Wang (the Defendant); and Peng Li (Listing Real Estate Agent).

[7] The evidence at trial did not contradict the evidence in the Agreed Statement of Facts. There was little evidence of significance at the trial that affected the ultimate result in this decision. I will only refer briefly to the evidence that I relied on to reach my decision.

[8] The parties put forward their positions in extensive written submissions, with accompanying Briefs of Authority.

[9] Although there were some peripheral issues raised by the parties, this decision is based on a legal determination of whether, on the agreed facts and other evidence, the plaintiffs were lawfully entitled to refuse to close the purchase and sale transaction on July 31, 2015.

[10] For the reasons that follow, I find the plaintiffs are entitled to the relief sought in their Statement of Claim, being the return of their deposit plus interest. It follows that the counterclaim of the defendants for damages and forfeiture of the deposit is dismissed.

Issues in Dispute

[11] In the plaintiffs’ reply written submissions, counsel at para. 4 writes, “the statement of issues and law in the written submissions of the defendant do not at all match the issues identified and set out by the plaintiffs in their written submissions”.

[12] I agree with that statement. Counsel for the parties approached their claims based on an analysis of different issues, although there was some overlap in the issues they addressed.

[13] The plaintiffs’ written submissions set out the issues as follows:

Issue No. 1: Is the appointment of an Attorney under the Substitute Decision Act (Ontario) a waiver of the Rule against Hearsay or, does a substitute decision-maker have the authority to provide evidence by way of a sworn Declaration as to the residency status of a donor? Issue No. 2: Were the Plaintiffs entitled to Make “Reasonable Inquiry” of the residency as a test to avoid a statutory super lien on title? Issue No. 3: In the event of a seller refusing to answer undertakings that were requested by a purchaser’s lawyer and, in anticipation of the closing date being imminent, do such refusals provide a basis or ground for a purchaser to no longer be required to tender documents and purchase money on the basis that such conduct by the seller is an anticipatory breach? Issue No. 4: What is the test to be applied with respect to proof of not being a non-resident for the purposes of section 116 of the Income Tax Act? Issue No. 5: Could the Defendant Seller convey Good and Marketable title to the Plaintiffs on July 31, 2015, the closing date?

[14] The plaintiffs, in their submissions, addressed each of these issues with reference to the evidence and caselaw, and submitted that based on the jurisprudence, the plaintiffs are entitled to judgment in their favour.

[15] The defendant’s written submissions defined the issues as follows:

a. Whether the Vendor abandoned the Property prior to closing; b. Whether the alleged disrepair constituted a breach of a condition of the APS; c. Whether the requisitions raised by the plaintiff were valid; d. Whether the Vendor repudiated the APS through anticipatory breach; e. Whether the statutory declaration executed by the POA was valid; f. Whether the Vendor satisfied the requirement to prove her tax residency status; g. Whether the Vendor is entitled to forfeit the deposit and recover damages; and h. Whether the vendor mitigated her damages.

[16] The defendant, in her written submissions, addressed each of these issues with reference to the evidence and caselaw, and submitted that the defendant was entitled to damages for the plaintiffs’ breach of contract, including forfeiture of the deposit by the plaintiffs.

[17] Sorting through the detailed written submissions, Books of Authority and the evidence from trial, I find the two issues that I need to resolve are:

1. Was the s. 116 statutory declaration, signed by a Power of Attorney on behalf of the vendor, sufficient proof that the vendor was not a non-resident, as required in the APS?
2. Was the solicitor’s personal undertaking, to discharge a private mortgage, sufficient for the purchaser to satisfy the requirement in the APS to deliver to the vendor a good and marketable title free of encumbrances?

[18] The answer to these questions flows from the terms in the APS and whether there was a breach of those terms which entitled the plaintiffs to treat the contract at an end and not close the transaction.

Agreement of Purchase of Sale

[19] The terms of the APS that are relevant to my decision are as follows:

Para. 10: Title: Provided that the title to the property is good and free from all registered restrictions, charges, liens and encumbrances except as otherwise specifically provided in this agreement….

Para. 12: Documents and Discharge: ……If a discharge of any Charge/Mortgage held by a corporation incorporated pursuant to the Trust and Loan Companies Act (Canada), Chartered Bank, Trust Company, Credit Union, Caisse Populaire or Insurance Company and which is not to be assumed by Buyer on completion, is not available in registrable form on completion, Buyer agrees to accept Seller’s lawyer’s personal undertaking to obtain, out of the closing funds, a discharge in registrable form and to register same, or cause same to be registered, on title within a reasonable period of time after completion, provided that on or before completion Seller shall provide to Buyer a mortgage statement prepared by the mortgagee setting out the balance required to obtain the discharge, and, where a real-time electronic cleared funds transfer system is not being used, a direction executed by Seller directing payment to the mortgagee of the amount required to obtain the discharge out of the balance due on completion.

Para. 17: Residency: (a) Subject to (b) below, the Seller represents and warrants that the Seller is not and on completion will not be a non-resident under the non-residency provisions of the Income Tax Act which representation and warranty shall survive and not merge upon the completion of this transaction and the Seller shall deliver to the Buyer a statutory declaration that Seller is not then a non-resident of Canada….

Para. 20: Time Limits: Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein may be extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically authorized in that regard.

Legal Parameters

(i) Breach of Contract – Good and Marketable Title

[20] An APS with respect to a residential property is first and foremost a contract where the rights and obligations of the parties are set out in the terms of the agreement.

[21] Both parties are obligated by the contract to do certain things. Failure to perform terms of the agreement may result in a successful claim for damages to be paid to the innocent party after the transaction has closed. Other failure to perform a term may allow the innocent party to rescind the contract.

[22] Which remedy flows from the failure to perform a contract term, depends on the term that is alleged to be the subject of a breach.

[23] It goes without saying that the fundamental goal of a lawyer acting for a purchaser is to obtain a good and marketable title to the property being purchased at the conclusion of the transaction.

[24] The plaintiffs in the Book of Authorities cited text and jurisprudence which defines what is a good and marketable title and in relation specifically to the discharge of mortgages from title prior to closing. Most of the decisions are from decades ago and are settled law. Some changes have occurred by statute or practice.

[25] In the decision of Fong v. Weinper, [1973] 2 O.R. 760 (H.C.), the court held that the vendor’s agreement to discharge any existing mortgage against the property on or before closing, meant that the purchaser could insist that the discharge of the mortgage be produced and registered on or before the date of closing. The court held that this obligation was a term of the contract between the parties that the vendor was bound to fulfill.

[26] In Zender et al. v. Ball et al. (1974), 5 O.R. (2d) 747 (H.C.), a similar issue arose. A discharge of mortgage was presented on closing that was not in registrable form (there was also a declaration of possession difficulty). The court wrote:

Where the evidence supplied by a vendor falls short of showing good title, he cannot insist on completion, as a Court will not force upon the purchaser anything less than a marketable title unless the purchaser has specifically contracted otherwise. Therefore, where there is a valid objection to title which is not answered by the vendor nor waived by the purchaser, the agreement is by its terms void and the deposit should be returned. [Citations omitted.]

[27] One further decision on this issue is Polischuk et al v. Hagarty (1984), 49 O.R. (2d) 71 (C.A.). In this decision, the acceptance by a purchaser’s lawyer to take an undertaking to discharge a mortgage, instead of requiring a discharge itself to be produced, was found to be a breach of the lawyer’s retainer to the client. By this act, the lawyer did not carry out his retainer to give his client a good and marketable title.

[28] A good and marketable title has been defined in real estate texts and caselaw to be a title that can “at all times and under all circumstances be forced upon an unwilling purchaser”: Armitage v. Liptay (1977), 16 O.R. (2d) 223 (C.A.).

[29] As will be set out in the analysis, the standard terms in all APS now allow for a purchaser to accept a lawyer’s personal undertaking to register a discharge of an institutional mortgage as set out in the APS. A portion of the purchase funds are directed to that institution, in the amount outstanding on the mortgage, as per an up-to-date discharge statement. The discharge of the mortgage registration details are provided by the vendor, within a reasonable time after the closing.

[30] The APS does not say anything about any delay in discharge of a mortgage held by an entity, person, or not listed in the agreement. The governing body for lawyers in Ontario, the Law Society of Ontario (“LSO”), has published Practice Guidelines setting out a lawyer’s responsibilities with respect to private mortgages. I will elaborate on these Guidelines below.

(ii) Anticipatory Breach/Tender Requirements

[31] Based on decisions from a number of cases over the past decades, anticipatory breach in contract law is settled law, both generally, and in the context of residential real estate.

[32] The plaintiffs set out a number of these cases in their written submissions. I will set out a summary of the principles.

[33] In Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721, the court held, at para. 37:

An anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due. To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it…. [T]he court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract. [Citations omitted.]

[34] The innocent party has certain legal options when the breaching party demonstrates they will not complete their contractual obligations. In Place Concorde East Limited Partnership v. Shelter Corporation of Canada (2006), 270 D.L.R. (4th) 181 (Ont. C.A.), at para. 50, the court wrote:

Thus, a repudiatory breach does not automatically bring an end to a contract. Rather, it confers a right upon the innocent party to elect to treat the contract at an end thereby relieving the parties from further performance. As a general rule, the innocent party must make an election and communicate it to the repudiating party within a reasonable time. [Citations omitted.]

[35] In Kennelly v. Hashemi, 2017 ONSC 5502, at paras. 32, 38, aff’d 2018 ONCA 558, the court wrote the following, dealing specifically with anticipatory breach and real estate agreements:

[32] As agreed between the parties, in order to determine whether there has been a breach of the purchase agreement in this case, the test is whether Mr. Hashemi was in a position to convey substantially what the Applicants contracted to get. In this case, the Applicants contracted to get good title to the property, free of encumbrances, specifically the registered charges and the Mifsud caution. After considering the evidence before me, including the surrounding circumstances outlined above, I have concluded that Mr. Hashemi was not in a position to convey good title to the Applicants, and accordingly was in breach of the purchase agreement.

[38] Clearly, property that continues to be subject to prior registered mortgages or a caution from a previous agreed buyer would not be free of encumbrances, as required by the purchase agreement. Either or both of those impediments to title would have significantly affected the buyers’ use or enjoyment of the property, raising the prospect of loss of the property, significant financial loss or, at a minimum, impeded access to financing. In these circumstances, I am satisfied that Mr. Hashemi was unable to convey substantially what the Applicants contracted for under the purchase agreement. Accordingly, Mr. Hashemi was in breach of the purchase agreement. The Applicants were not in breach, and are entitled to the return of the deposit.

[36] The jurisprudence confirms that formal tender by an innocent party in a real estate transaction is not required. It must be clear that the contract is repudiated by the breaching party by words or action. In DiMillo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 45, the court wrote:

For a party to be entitled to specific performance, the party must show he or she is ready, willing and able to close. While tender is the best evidence that a party is ready, willing and able to close, tender is not required from an innocent party enforcing his or her contractual rights when the other party has clearly repudiated the agreement or has made it clear that they have no intention of closing the deal. [Citations omitted.]

[37] Further, the court writes at para. 49:

Thus, when a party by words or conduct communicates a decision not to proceed to closing, the other party is released from any obligation to tender in order to prove he was ready, willing and able to close. [Citations omitted.]

Analysis and Decision

(i) Discharge of Private Mortgage

[38] Virginia Tinti, solicitor for the plaintiffs, sent a requisition letter dated July 20, 2015, setting out a number of requisitions that the vendor had to satisfy prior to closing.

[39] It is not disputed that the time for submitting requisitions set out in the APS was on or before July 15, 2015. If I found that any of the requisitions did not go to the root of the title of the property, the purchaser might have to accept title with the deficiency. If the requisition deals with an issue that goes to the root of title, that issue can be raised up to the date of closing. It can also be a basis for a purchaser not to close the transaction. Requisitions that deal with a breach of the contract (APS) can be made up until the closing date. A breach of that term can be a basis for the innocent party not to close the transaction.

[40] Among other requisitions that were set out in the July 20, 2015 letter, the following are relevant for my purposes:

17. Instrument No. HR988440 is a Charge/Mortgage of Land registered January 12, 2012 from Huan Wang in favour of The Bank of Nova Scotia securing the principal sum of $1,110,750.00. Required: On or before closing, production and registration of a good and valid discharge of this Mortgage.

18. Instrument No. H.R. 1261845 is a Charge/Mortgage of Land registered April 28,2015 from Huan Wang in favour of Jin Jiao Capital Management Inc. securing the principle sum of $300,000. Required: On or before closing, production and registration of a good and valid discharge of this Mortgage.

19. I understand your clients are non-residents of Canada, please be advised that I will require on closing a clearance certificate for each of the title holders under s. 116 of the Income Tax Act, otherwise I will be holding back 25% of the gross sale proceeds until receipt of the clearance certifies.

[41] The vendor’s real estate lawyer, Jim Zhang, sent to Ms. Tinti draft documents prepared by his office that were required to complete the sale.

[42] The standard undertakings were of note as follows:

1. The person signing was set out as the vendor, Huan Wang.
2. In two of the documents, “I am not a non-resident of Canada within the meaning of Section 116 of the Income Tax Act (Canada) and nor will I be a non-resident of Canada at the time of closing”, were crossed out on one of the undertakings and on the Statutory Declaration prepared in draft.
3. Jim Zhang sent a draft Undertaking with respect to both the institutional mortgage to the Bank of Nova Scotia, and the private mortgage to Jin Jiao Capital Management Inc. The undertaking stated that the vendor would discharge both the mortgages on closing and register the discharge mortgages and had up to 120 days to do so.

[43] Mr. Zhang’s letter dated July 29, 2015 set out, among other things:

1. That he would provide a statutory declaration regarding s. 116 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), on closing;
2. That he would provide a mortgage discharge statement and his personal undertaking to discharge both mortgages and advise when he had done so.
3. Confirmation that the vendor is not a non-resident in Canada and that the vendor’s declaration will be provided.

[44] Mr. Zhang ended the letter by stating that the vendor will sign the closing documents by Power of Attorney (“POA”) and enclosed a copy of the POA registered on title with the Land Registrar on July 29, 2015.

[45] The POA was dated June 9, 2014. It was a Continuing Power of Attorney and authorized the attorney to take any and all acts on behalf of the donor except make a will. There were no conditions or restrictions to the attorney set out in the document. The POA stated it was executed in front of two witnesses. No Affidavit of Execution by the witnesses was attached. The registration document stated that the POA was to be for a “limited purpose”.

[46] On July 30, 2015, Ms. Tinti sent further correspondence to Mr. Zhang. Among other issues addressed, Ms. Tinti replied as follows to the relevant issues she raised in her initial requisition letter. Ms. Tinti advised that the purchasers would not accept a personal undertaking to discharge a private mortgage. Ms. Tinti reminded Mr. Zhang that it was contrary to the Rules of Professional Conduct to do so. She advised Mr. Zhang that she required a discharge of the private mortgage to be obtained, executed, and registered on or before closing.

[47] Ms. Tinti also stated that she would not accept the proof proposed to resolve the s. 116 issue. Specifically, Ms. Tinti advised that she would not accept the attorney executing a s. 116 declaration, swearing that the vendor was not a non-resident of Canada. Further, Ms. Tinti advised that the POA was incomplete as there was no Affidavit of Execution. Ms. Tinti set out further concerns with respect to the POA, and why she would not accept it as conveying a good and marketable title to her clients. Ms. Tinti asked to see the original POA, and to be advised of the circumstances of the execution of the POA by the vendor.

[48] Ms. Tinti ends this letter by writing:

I can only assert that given the lack of attention to the property and your response to my letters, your client has no intention in honouring the terms of the agreement of purchase and sale and provide my clients with the home they bargained for and were to receive pursuant to the agreement of April 12, 2015.

[49] A Direction regarding funds was sent by the vendor’s solicitor to the purchaser’s solicitor. This Direction provided for the mortgage payouts to be made directly to the two mortgagees. There was a balance of approximately $319,729 to be paid to the vendor.

[50] Mr. Zhang also provided a Discharge Statement from Scotiabank with respect to the first mortgage. This statement made no reference to the second mortgage and specifically did not state that the second mortgage was in good standing. There was no signed Discharge Statement produced with respect to the second mortgage. There was no executed Discharge of the second mortgage produced prior to closing.

[51] On July 30, 2015, Mr. Zhang wrote to Ms. Tinti that he would provide the Discharge of the private mortgage, “conditional upon receiving the closing funds no later than 2:00 p.m. on the date of closing”. He would then arrange to process the discharge with the private mortgagee’s solicitor. He stated he could not provide the discharge until he had the purchaser’s closing funds.

[52] Mr. Zhang ended this letter by writing “[t]he vendor is ready, willing and able to complete the above-noted transaction and will not agree to your client’s any further [sic] re-negotiation of the purchase price”.

[53] On July 30, 2015, by separate letter, Mr. Zhang delivered to Ms. Tinti the signed documents needed to complete the transaction. The sale documents were all executed by the POA, including the s. 116 Declaration that the vendor was not a non-resident.

[54] The documents also included Mr. Zhang’s personal undertaking to discharge both the institutional and private mortgages.

[55] On July 31, 2015, the date set for closing, Ms. Tinti wrote to Mr. Zhang. She advised him that he had not responded in any substantive way to the issues she had raised in her letters to him. The relevant concerns she summarized as follows:

1. The right of the purchasers to a final inspection to ensure the property is in the same condition on closing as it was when purchased;
2. The production of the discharge of the private mortgage is not subject to receipt of the mortgage funds by him. He must produce the executed discharge prior to closing;
3. The POA declared as to the residency of the vendor, does not meet the contractual obligation set out in para. 17 of the APS. The statutory declaration must be that of the seller and not the seller’s attorney.
4. There was no signed mortgage payout statement by the institutional first mortgagee that the second mortgage is in good standing and the payments are up to date as is required.

[56] Ms. Tinti also raised the issue of possible arrears of realty taxes by the vendor. There was no up-to-date tax statement from the town of Oakville showing that any payments had been made by the vendor since February 2015. The statement of adjustments credited the vendor as if that payment had been made.

[57] In this letter, Ms. Tinti stated that the vendor was not ready, willing and able to close the transaction because he had not fulfilled the vendor’s contractual obligations.

[58] Mr. Zhang sent a further letter on July 31, 2015 re-iterating his earlier position with respect to the private mortgage and the POA. He set out at the end of the letter that time remained of the essence and that the purchasers will forfeit their deposit and the vendors seek damages if the transaction does not close.

[59] Ms. Tinti responded on July 31, 2015 to Mr. Zhang’s letter addressing the contents of his letter. The relevant portions deal with:

1. His failure to produce a payout statement signed by the private second mortgagee, and a copy of the executed discharge of that mortgage.
2. A s. 116 clearance certificate or statutory declaration, signed by the seller herself, and not her POA, swearing she was not a non-resident of Canada.

[60] The last paragraph of this letter reads as follows:

Despite several letters sent to you, you have not addressed in any material way or provided support for the continuing assertions which do not address the points raised in my letters to you. Again, my client needs to receive the home they bargained for, instead, your client has removed himself from the home and left it to deteriorate and it continues to do so. For you to make the statement that your client will forfeit my clients’ deposit is an acknowledgement by you that you fundamentally misunderstand the nature of this transaction. My clients will pursue you and your client and the realtor for all remedies available to it should the deposit be released to your client. I am putting you on notice of this by way of this letter. The deposit can not be forfeited unless there is mutual agreement of the parties or by court order.

[61] Obviously, the transaction did not close on July 31, 2015; the reasons for not closing are not in dispute.

[62] Ms. Tinti did not formally tender the funds on closing to Mr. Zhang. At the trial, both Mr. McKean and Ms. Tinti testified that the funds for closing were readily available if the defects on title pursuant to the APS had been rectified by the vendor by the closing date.

(ii) Breach of Contract/Late Requisition/ Root of Title

[63] The parties frame the basis for their claims differently. The plaintiffs rely on the defendant’s breach of the terms of APS, specifically with respect to the private mortgage discharge, and secondly, the s. 116 declaration not signed by actual vendor, but by the POA. The other two issues the plaintiff raised, namely, the condition of the house and the alleged arrears of realty taxes, are items of damages, not issues that would allow the purchasers not to close the APS agreement.

[64] The defendant submits that the plaintiffs were late in their requisitions on title pursuant to the APS. The requisition letter was delivered past the date requisitions could be submitted as set out in the APS. Since the above requisitions do not go to the root of title, the purchasers cannot treat the contract at an end if those requisitions are not fulfilled. The purchasers must close the transaction with the answers provided by the vendor’s lawyer. The purchasers must accept the title conveyed with the answers given by the vendor to the requisitions.

Decision

(i) Contractual Right

[65] I am satisfied the plaintiffs’ position on what this lawsuit is about is correct. The plaintiffs were entitled to enforce the term of the APS with respect to the vendor’s obligation to discharge any and all encumbrances on title, on or before the date set for closing.

[66] The APS provides, at para. 12, that the purchaser can accept the seller’s lawyer’s personal undertaking to obtain out of the closing funds a discharge in registrable form of an institutional mortgage. The undertaking further provides that the solicitor will register the discharge within a reasonable time after the closing. A private mortgage is not one of the mortgagees listed in that paragraph.

[67] The purchasers can and did insist on the production of a signed discharge statement and a signed discharge of mortgage with respect to the private mortgage.

[68] The LSO issued Practice Guidelines for electronic registration of title documents for lawyers practicing in Ontario. These Guidelines were approved by Convocation on June 28, 2002 (updated as at November 20, 2015). E-Reg Practice Guideline 5 includes the following provision:

In the case of “private mortgages” (mortgages held by persons other than financial institutions), and in the absence of any express provision to the contrary in the Agreement of Purchase and Sale, lawyers should not give or accept personal undertakings respecting discharge after closing. Unless the private mortgage is paid out and discharged prior to closing, it may be necessary for the vendor’s solicitor or the mortgagee’s solicitor to seek written authority from the tender in the recommended form of Acknowledgement and Direction to create the required electronic form of discharge and arrange for it to be registered on closing.

Acting on proper written authority, the vendor’s solicitor could include a Discharge of Mortgage in the DRA as one of the documents to be registered on closing, subject to compliance with the escrow terms of the agreement. The vendor’s solicitor would confirm to the lender that a DRA was being utilized as part of the closing procedure and that the discharge of mortgage would be shown as a document for registration under that agreement, subject to the terms of the escrow.

[69] Caution has always been necessary when a private mortgage is registered on title. An exception for the discharge of institutional mortgages to be completed with a lawyer’s personal undertaking is set out in the standard APS. Private mortgages are not included in that exception and a lawyer’s personal undertaking to discharge a private mortgage after closing is not permitted. The old jurisprudence requiring the vendor to produce an executed discharge of the private mortgage on closing is applicable.

[70] The defendant’s counsel did not dispute the position taken by plaintiffs’ counsel on this issue. The defendant’s counsel submitted that a three-way Document Registration Agreement (“DRA”) is an acceptable resolution for a second (private) mortgage discharge. Counsel submitted that it was up to Ms. Tinti to “propose” this solution when Mr. Zhang did not do so.

[71] I reject this submission. It is the vendor’s obligation to provide a copy of the signed discharge statement and executed discharge of a private mortgage, on or before closing. It is also the vendor’s obligation to come up with a legal and enforceable alternative to that contractual requirement that is acceptable to the purchaser, if the executed discharge is not going to be produced on closing.

[72] As set out in the jurisprudence and the Guidelines published by the Law Society of Ontario, which governs the practice of Ontario lawyers, the plaintiff had the legal right to assert this contractual term and refuse to close the transaction in the circumstances she faced. Ms. Tinti was justifiably concerned that she would not be able to ensure her clients had a good and marketable title to the subject property without the discharge in registerable form of the private mortgage.

[73] The defendant breached the terms of the contract with respect to her obligations with respect to the discharge of the private mortgage on title. The plaintiff was not obliged to close the APS as a result of that breach.

[74] The jurisprudence is also clear that, if by words or actions, the defendant (in this case) has breached the contract, the innocent party (plaintiffs in this case) can accept the anticipatory breach and not close the transaction.

[75] As to whether an actual tender on the date set for closing is necessary, the case law states that the innocent party does not have to go through a meaningless tender procedure. If the contract is breached, the innocent party can pursue their remedy in court regardless of whether they formally tendered on the party in breach and indicated they would not close, because of the breach of contract. I accept the undisputed evidence at the trial that the plaintiffs would have delivered the funds required for closing if the vendor had not breached the APS term with respect to the private mortgage. A formal tender was not necessary.

(ii) Non-Resident Issue

[76] As for the other basis for not closing, the failure of the vendor to sign her own statutory declaration with respect to her residency in Canada, this is an interesting issue. I was not given, nor could I find, any jurisprudence directly on this issue.

[77] The plaintiffs state that the APS requires the production of a certificate that the vendor is not a non-resident of Canada, or a statutory declaration, signed by the vendor herself, swearing to her residency status. A statutory declaration with respect to Canadian residency, signed by a POA, is simply setting out hearsay according to the plaintiffs. A purchaser cannot rely on that POA declaration as proof of the statement in the statutory declaration.

[78] The defendant submits that a statutory declaration required to close a real estate transaction, along with other closing documents, can be signed by a POA. Counsel for the defendant referred to the following statement from M. Jasmine Sweatman, Powers of Attorney and Capacity: Practice and Procedure, 2nd ed. (Toronto: Canada Law Book, 2014), at p. 410: “statutory declarations or affidavits required to be signed by the vendor as closing documents may also be signed by the attorney.” There is no authority or footnote referenced for that statement, which alone does not satisfy me of the proposition put forward by the defendant on this issue.

[79] I have decided this matter on the basis that the vendor could not give good and marketable title because she did not produce the executed discharge of the private mortgage on title on or before closing.

[80] On the record and the authorities before me, I do not make any decision as to whether a statutory declaration as to s. 116 of the Income Tax Act, signed by a POA for a vendor, can be relied on by a purchaser as proof that a vendor is not a non-resident of Canada.

Order

[81] The plaintiff is entitled to judgment in the amount of the deposit, being $50,000, plus pre-judgment interest in accordance with s. 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[82] The plaintiffs shall have 30 days from today’s date to serve and file their brief costs’ submissions, including any offers to settle, and bills of costs.

[83] The defendant shall have 30 days from the date of receipt of the plaintiffs’ submissions to file brief responding submissions, including any offers to settle.

[84] The plaintiffs shall have 10 days from the date of receipt of the defendants’ costs submission to make a brief reply.

“Justice Mossip” Justice N.M. Mossip Released: December 16, 2020