NEWMARKET COURT FILE NO.: FC-18-56969-00

DATE: 20210427

SUPERIOR COURT OF JUSTICE – ONTARIO – FAMILY COURT

RE: W.Z., Applicant

AND:

L.K., Respondent

AND:

2782708 Ontario Inc.

BEFORE: The Honourable Mr. Justice G.A. MacPherson

COUNSEL: T.M. Roll, Counsel for the Applicant

A. Koren, Counsel for the Respondent L.K.

T. Arnold, Counsel for the Respondent 2782708 Ontario Inc.

HEARD: April 12, 2021

Amended - ruling on motion

Relief Requested

[1] The Applicant brings a motion requesting an Order:

(a) setting aside the November 7, 2020 Agreement of Purchase and Sale (amended on December 3, 2020) of the jointly held matrimonial home known municipally as 30 Squire Bakers Lane, Markham Ontario; and

(b) punitive damages in the amount of $10,000.

Background

[2] The parties separated in January 2018.

[3] There is one child of the marriage namely, N.Z. born September 23, 2015.

[4] When the parties separated, the Respondent moved out of the matrimonial home, 30 Squire Bakers Lane, Markham Ontario. The Applicant and the child remained living in the matrimonial home and continue to reside there today.

[5] The Application was filed in August 2018.

[6] The parties attended a Case Conference on February 14, 2019, a Case Conference on June 18, 2019, a Settlement Conference on February 11, 2020 and a Motion on March 11, 2020.

[7] At the March 11, 2020 Motion, the parties attended before Justice Sutherland and entered into a consent Order.

[8] The March 11, 2020 Consent Order contained the following terms:

The matrimonial home, 30 Squire Bakers Lane, Markham Ontario, shall be listed for sale by a listing agent the parties mutually agree upon and, if no agreement is reached on who the listing agent will be, a mechanism for selecting same;
The list price will be as recommended by the agent; the agent’s commission will not exceed 5%; the listing period will be for 60 days; the listing agreement will be executed by both parties; the real estate agents will have access to the matrimonial home; both parties will be advised of open houses; both parties will cooperate with the listing agent and execute required documentation; and the listing agent will be provided a copy of the Order;
The listing agent will recommend a real estate lawyer and the parties will agree on the lawyer, failing which there is a mechanism for selection of the real estate lawyer;
The net proceeds of the sale of the matrimonial home will be held in trust after satisfying the encumbrances, commissions and legal fees;
Until closing the parties will continue to pay their equal share of the mortgage payments; and
The parties are free to make an offer to purchase the other’s interest in the home before it is listed for sale. If either party makes an offer to purchase the other’s interest after listing, there will be no right of first refusal.

Sale of the Property

[9] The parties selected Roger Kortschot of Royal Lepage as the listing agent.

[10] As I understand it, there were significant delays in listing the property as a result of Covid-19.

[11] The property was listed for sale at a list price of $1,275,000.

[12] The property was listed on or about October 15, 2020.

Mr. K’s Offer

[13] On November 5, 2020 the parties received an offer to purchase the property from Mr. ‘K.’

[14] The offer was for $1,180,000.

[15] The offer was conditional on financing and inspection.

[16] There were verbal indications that Mr. K would increase his offer to $1,280,000.

[17] The Applicant states that he wanted to accept the offer but, he states, the Respondent did not.

Respondent’s Interest in Purchasing the Property

[18] Through counsel, the Respondent verbally offered to match Mr. K’s offer.

[19] Counsel for the Applicant advised him to speak directly to the Respondent. The Applicant states that he approached the Respondent but they did not come to a deal.

[20] The Respondent states that the Applicant did not approach her. They had no discussion.

[21] The Applicant offers that he did not want the Respondent to purchase the property which he believed was ‘unduly expensive.’

2782708 Ontario Inc.’s Offer

[22] On November 7, 2020 an offer to purchase the matrimonial home was received from 2782708 Ontario Inc. through an independent agent, Joy Noln. The offer was without conditions and the purchase price was $1,285,000.

[23] The Applicant states that he was suspicious of this offer and asked counsel, in this litigation, to complete a corporate search. The corporate search identified the registered head office and name of the company owner. The Applicant, satisfied with the results from the corporate search, executed the Agreement of Purchase and Sale. As I understand it, he was satisfied that the purchaser was an unrelated third party.

[24] The Applicant and the Respondent executed the Agreement of Purchase and Sale.

[25] The closing date, pursuant to the agreement, was March 16, 2021.

Errors on the November 7, 2020 Agreement of Purchase and Sale

[26] There were three errors on the Agreement of Purchase and Sale:

(a) the purchase price was listed as $50,000 (which was to be the deposit);

(b) the deposit was listed as $1,285,000 (which was to be the purchase price); and

Amendment to the Agreement of Purchase and Sale December 3, 2020

[27] All parties to the November 7, 2020 Agreement of Purchase and Sale executed an amendment on December 3, 2020.

[28] The amendment corrected the three errors:

(a) the purchase price was changed from $50,000 to $1,285,000;

(b) the purchase price was changed from $1,285,000 to $50,000; and

[29] All parties at the herein motion agree that all three errors were in no way nefarious. They were honest mistakes and honestly corrected.

[30] On the evening of December 3, 2020, after the amendments to the Agreement of Purchase and Sale had been initialed, the Applicant asked his counsel to complete a corporate search.

[31] The corporate search revealed that 2782708 Ontario Inc. was registered in the names of B. Z. (President) and D. K. Director). B. Z. and D. K. are the Respondent’s parents. 2782708 Ontario Inc. was owned by the Respondent’s parents.

[32] The Applicant argues that he was deceived, that the Respondent and 2782708 Ontario Inc. colluded and that this was an orchestrated fraud. Accordingly, he did not close on March 16, 2021. Today he requests an Order that the Agreement of Purchase and Sale be set aside and he requests $10,000 in punitive damages.

Analysis

Can the Agreement of Purchase and Sale be Set Aside Under Section 23 of the Family Law Act?

[33] The Applicant relies on Sections 21 and 23 of the Family Law Act to grant the court authority to set aside the Agreement of Purchase and Sale.

[34] Section 23 of the Family Law Act states:

Powers of court respecting alienation

23 The court may, on the application of a spouse or person having an interest in property, by order,

(a) determine whether or not the property is a matrimonial home and, if so, its extent;

(b) authorize the disposition or encumbrance of the matrimonial home if the court finds that the spouse whose consent is required,

(i) cannot be found or is not available,

(ii) is not capable of giving or withholding consent, or

(iii) is unreasonably withholding consent,

subject to any conditions, including provision of other comparable accommodation or payment in place of it, that the court considers appropriate;

(d) direct the setting aside of a transaction disposing of or encumbering an interest in the matrimonial home contrary to subsection 21 (1) and the revesting of the interest or any part of it on the conditions that the court considers appropriate; and (emphasis added)

(e) cancel a designation made under section 20 if the property is not a matrimonial home. R.S.O. 1990, c. F.3, s. 23.

[35] Section 21 of the Family Law Act states:

Alienation of matrimonial home

21 (1) No spouse shall dispose of or encumber an interest in a matrimonial home unless,

(a) the other spouse joins in the instrument or consents to the transaction; (emphasis added)

(b) the other spouse has released all rights under this Part by a separation agreement;

(d) the property is not designated by both spouses as a matrimonial home and a designation of another property as a matrimonial home, made by both spouses, is registered and not cancelled. R.S.O. 1990, c. F.3, s. 21 (1).

Setting aside transaction

(2) If a spouse disposes of or encumbers an interest in a matrimonial home in contravention of subsection (1), the transaction may be set aside on an application under section 23, unless the person holding the interest or encumbrance at the time of the application acquired it for value, in good faith and without notice, at the time of acquiring it or making an agreement to acquire it, that the property was a matrimonial home. R.S.O. 1990, c. F.3, s. 21 (2).

Proof that property not a matrimonial home

(3) For the purpose of subsection (2), a statement by the person making the disposition or encumbrance,

(a) verifying that he or she is not, or was not, a spouse at the time of the disposition or encumbrance;

(b) verifying that the person is a spouse who is not separated from his or her spouse and that the property is not ordinarily occupied by the spouses as their family residence;

(c) verifying that the person is a spouse who is separated from his or her spouse and that the property was not ordinarily occupied by the spouses, at the time of their separation, as their family residence;

(d) where the property is not designated by both spouses as a matrimonial home, verifying that a designation of another property as a matrimonial home, made by both spouses, is registered and not cancelled; or

(e) verifying that the other spouse has released all rights under this Part by a separation agreement,

shall, unless the person to whom the disposition or encumbrance is made had notice to the contrary, be deemed to be sufficient proof that the property is not a matrimonial home. R.S.O. 1990, c. F.3, s. 21 (3).

Idem, attorney’s personal knowledge

(4) The statement shall be deemed to be sufficient proof that the property is not a matrimonial home if it is made by the attorney of the person making the disposition or encumbrance, on the basis of the attorney’s personal knowledge. R.S.O. 1990, c. F.3, s. 21 (4).

Liens arising by operation of law

(5) This section does not apply to the acquisition of an interest in property by operation of law or to the acquisition of a lien under section 48 of the Legal Aid Services Act, 1998. R.S.O. 1990, c. F.3, s. 21 (5); 1998, c. 26, s. 102.

[36] Section 23(d) of the Family Law Act grants the court authority to set aside a transaction dispensing or encumbering an interest in the matrimonial home contrary to subsection 21(a) and the revesting of the interest or any part of it on the conditions that the court considers appropriate.

[37] The Applicant’ argument, as I understand it, is that under section 21(1) the Respondent encumbered the Applicant’s interest without his consent to the transaction and that he did not join in the instrument or consent to the transaction.

[38] There is no doubt that the Applicant executed the Agreement of Purchase and Sale on November 7, 2020 and the amendment to the Agreement on December 3, 2020. The Applicant has, as a matter of fact, joined in the instrument. There can, therefore, be no contravention of section 23(1) (a).

[39] It is noteworthy that these provisions are used, almost exclusively, for the benefit of a non-titled spouse.

[40] It is also noteworthy that section 23 of the Family Law Act states that a court ‘may’ set aside a transaction. Accordingly, there is some discretion to do so. Even if the court had authority to set aside the Agreement of Purchase and Sale pursuant to section 23 of the Family Law Act, I would not have done so for the reasons that follow.

[41] As stated, the property was listed for sale on October 15, 2020. As stated, the list price was $1,275,000.

[42] The only offer the parties received, save and except for the offer from 2782708 Ontario Inc., was from Mr. ‘K’ for $1,180,000. The Mr. “K” offer was conditional on financing and a building inspection. There were verbal indications that Mr. ‘K’ might increase the sale price to $1,280,000.

[43] By contrast, the offer from 2782708 Ontario Inc. was for a higher amount than that of Mr. ‘K.’ It was a superior offer to that of Mr. “K” in that it did not have any conditions attached. The offer was also $10,000 above the list price. The Applicant was, by his action of executing the Agreement of Purchase and Sale, content with the terms. No other offers were received.

[44] I am satisfied that the amount of the offer results in the purchaser obtaining the property at fair market value.

Can the Agreement Of Purchase and Sale be Set Aside on the Basis of Fraud or Deceit?

Fraud

[45] The Supreme Court of Canada in Bruno Appliance and Furniture Inc. v. Hryniak[^1] described the elements of common law fraud, as follows:

(1) a false misrepresentation made by the defendant;

(2) some level of knowledge of the falsehood of the representation on the part of the defendant whether through knowledge or recklessness;

(3) the false representation caused the plaintiff to act; and

(4) the plaintiff’s actions resulted in a loss.

[46] The false misrepresentation must induce the aggrieved party to act upon the fraudulent misrepresentation. The act of the aggrieved party must result in damages; for “fraud without damages give…no cause of action.”[^2] Thus, proof of loss is required.

[47] Equitable fraud is similar but founded in equity and concerns the conduct of a party to another, having regard to their special relationship, such that the conduct is an unconscionable thing to do to the other.

Deceit or Fraudulent Misrepresentation

[48] Deceit or fraudulent misrepresentation, as in common law fraud, encompasses elements that must be satisfied on the balance of probabilities. Many of the elements are similar to the elements required for fraud. The five elements for fraudulent misrepresentation or deceit are:

(1) A false statement made by the defendant;

(2) The defendant knew that the statement is false or being indifferent to its truth or falsity;

(3) The defendant having an intent to deceive the plaintiff;

(4) The false statement being material in that it induced the plaintiff to act; and

(5) The plaintiff suffered damages due to it so acting.[^3]

[49] There is some overlap with the concepts of deceit and fraud.

Was There a False Statement?

[50] The first element of both deceit and fraud is a false statement or representation. The Applicant and the Respondent did not discuss the offer from 2782708 Ontario Inc. at all. The Applicant never asked the Respondent for the identity of the purchasers and, accordingly, she did not explicitly make a false statement/representation.

[51] It is noteworthy that false representation can include misrepresentation by omission, silence, and half-truths.[^4]

[52] The consent Order made on March 11, 2020 contains a number of conditions related to the sale of the matrimonial home. There is no condition that the Respondent or the Respondent’s parents (or 2782708 Ontario Inc.) are precluded from purchasing the property. In fact, the conditions of the Order related to the sale of the home permit the Respondent to purchase the property, including after the property was listed for sale, but it precludes a right of first refusal.

[53] I am not satisfied that the identity of the purchasers in the agreement of purchase and sale is material. If the identity of the purchasers was material, the Applicant could have included the identity of the purchasers as a condition of the sale. Alternatively, following his knowledge of the three errors on the Agreement of Purchase and Sale dated November 7, 2020, including the incorrect number on the numbered company, he could have completed a corporate search before agreeing to the amendments but he elected not to.

[54] I do not find that there was a false statement or misrepresentation made. The Respondent’s silence in the context of a non-material term does not, in my estimation, rise to the level of an unconscionable thing to do to another.

Did the Respondent’s Silence Induce the Applicant to Act?

[55] I am not convinced that the Applicant, by virtue of his dearth of knowledge regarding the identity of the purchasers, was in any way induced to execute the Agreement of Purchase and Sale. As stated, if the name of the purchasers was material in any way, why did he not include it as a term of the consent Order? Why did he not make inquiries directly to the Respondent or complete a corporate search? The deposit cheque was signed by the Respondent’s parents if the Applicant had chosen to look.

Did the Applicant Suffer Damages?

[56] Finally, the Applicant has suffered no damages.

[57] He executed the Agreement of Purchase and Sale willingly.

[58] The terms contained in the agreement of purchase and sale from 2782708 Ontario Inc. included a sale price above the list price and the highest of the two offers received. The offer was without conditions.

[59] There are no damages. Fraud or deceit without damages does not result in a cause of action.

Good Faith

[60] The Applicant argues that the Respondent breached her common law duty of good faith in regards to the Agreement of Purchase and Sale. As I understand the organizing principle of ‘good faith’, parties must perform their contractual duties honestly and reasonably. The principle itself manifests itself in existing doctrine.

[61] The Applicant argues that the Respondent breached her statutory and common law duty by concealing the fact that her parents were the owners of 2782708 Ontario Inc. I disagree.

[62] The identity of the purchasers is not material.

[63] There is no evidence the Respondent concealed this information.

[64] The information was readily available to the Applicant.

[65] The Applicant’s decision not to ask the Respondent or to complete a corporate search cannot result in a finding the Respondent acted in bad faith. Even if it did, the doctrines, upon which this principle might manifest itself, deceit and fraud, have been considered earlier in this decision.

Commentary

[66] There is no doubt in my mind that the Respondent was likely aware of the purchaser’s identity. To argue otherwise belies credulity. It is unfortunate that the Respondent engaged in a course of action that is likely to strain any goodwill that might have existed for parents of a 5-year old.

[67] The Applicant, however, in my estimation, has made much ado about precious little.

Order

The Applicant’s motion is dismissed.
If the parties cannot agree on the issue of costs regarding this motion, I shall consider the request for costs. The Respondents shall serve on the Applicant and file electronically, through the Trial Coordinator, their written submissions, limited to three pages, exclusive of the Bill of Costs and Offers to Settle within 20 days of the date of this decision. The Applicant shall serve on the Respondents and file electronically, through the Trial Coordinator, his written submissions, limited to three pages exclusive of the Bill of Costs and Offers to Settle within 10 days thereafter. There shall be no right of Reply.

Justice G.A. MacPherson

Date: April 27, 2021

[^1]: 2014 SCC 8, [2014] 1 S.C.R. 126; 2014 SCC 8.

[^2]: Holley v. The Northern Trust Company, Canada and The Royal Trust Company, 2014 ONSC 889 at para. 118.

[^3]: Holley, supra, at paras.111-118.

[^4]: Borelli v. Chan 2018 ONSC 1429, 2018 ONSC1429 at para 912.

W.Z. v. L.K. et al, 2021 ONSC 3096

Case Summary