COURT FILE NO.: CV-18-851
DATE: 20210105
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: FRANK NUTZENBERGER AND KIM NUTZENBERGER
Plaintiffs
AND:
FESIH ZEKI MERT
Defendant
BEFORE: Ricchetti, RSJ.
COUNSEL: J. MacDonald for the Plaintiffs
A. Lokshin for the Defendant
HEARD: December 14, 2020
Contents
THE SUMMARY JUDGMENT MOTIONS. 2
IS SUMMARY JUDGMENT APPROPRIATE IN THIS CASE?. 2
THE FACTS. 3
THE PLEADINGS. 8
DISPOSITION.. 8
Discussion of the Law.. 8
Application to this Case. 10
Conclusion on these Motions. 11
ANALYSIS. 11
i. Did Mert anticipatorily breach the APS?. 12
ii. Did the Nutzenbergers know of Mert’s anticipatory breach?. 13
iii. Did the Nutzenbergers accept Mert's anticipatory breach?. 14
iv. Were the Nutzenbergers required to tender?. 16
v. Were the Nutzenbergers able to complete their obligations under the APS?. 17
Was the September 20 Letter a tender?. 17
If it was a tender, what are the consequences of a deficient tender?. 17
Were the Nutzenbergers ready, willing and able to close the APS?. 20
Conclusion. 21
Reliance on Hunt Club and Kwon. 21
vi. Considering all the evidence, why did the APS not close?. 23
vii. Did the Nutzenbergers fail to Mitigate by rejecting Mert’s offer to buy on September 29, 2017? 23
viii. Did the Nutzenbergers breach the APS on September 28?. 24
ix. What Damages did the Nutzenbergers suffer as a result of Mert’s breach of the APS?. 24
CONCLUSION.. 26
COSTS. 26
JUDGMENT
THE SUMMARY JUDGMENT MOTIONS
[1] Both parties bring summary judgment motions in this proceeding: the Plaintiffs for judgment for damages suffered for breach of contract and delivery of the deposit; the Defendant to dismiss the action/return of their deposit and damages for breach of contract.
IS SUMMARY JUDGMENT APPROPRIATE IN THIS CASE?
[2] Counsel for both parties agree this is an appropriate case for summary judgment. Nevertheless, regardless of the consent of the parties, it is for this court to determine whether, on the evidence on these summary judgment motions, there are no genuine issues requiring a trial and that, based on that evidence, the issues can be fairly and justly adjudicated.
[3] I am satisfied that this is an appropriate case for summary judgment as:
a) the essential facts, necessary to adjudicate the competing claims, are not in dispute;
b) the relevant evidence is almost entirely documentary;
c) the issues in dispute involve primarily the application of the law to the facts;
d) the damages are largely undisputed; and
e) the use of the summary judgment procedure will serve the goals of timeliness, affordability and proportionality in light of this litigation as a whole.
[4] I am satisfied that this court can adjudicate the issues justly and fairly on these motions.
THE FACTS
[5] The Plaintiffs, Frank Nutzenberger and Kim Nutzenberger (the “Nutzenbergers”), were the homeowners of a five-bedroom house at 5 McCauley Drive in the Town of Caledon (the “Property”).
[6] The Nutzenbergers listed the Property for sale on April 18, 2017 at a price of $1,499,00. At the time, the real estate market was "hot"- that is rapidly increasing prices for homes.
[7] The Nutzenbergers were represented by a Re/Max real estate agent (“Nutzenbergers' agent”).
[8] Numerous offers were made to purchase the Property on April 25, 2017.
[9] Fesih Zeki Mert (“Mert”) was interested in purchasing the Property using his own independent real estate agent ("Mert's agent").
[10] Eventually, Mert agreed to purchase the Property on a "no condition" basis.
[11] The Nutzenbergers, as sellers, entered into an Agreement of Purchase and Sale for the Property (“APS”) with Mert, as purchaser, on April 25, 2017. The APS included the following terms:
a) The purchase price was $1,611,000;
b) The APS was not conditional on financing or on other conditions which would permit Mert to unilaterally terminate the APS;
c) A deposit of $50,000 was paid by Mert to the real estate agent;
d) Mert had until September 1, 2017 to search title and make requisitions for closing (“Requisition Date”);
e) The closing date was September 20, 2017 by 6 p.m. (“Closing Date”); and
f) The APS contained a "Time of the Essence" clause.
[12] Subsequent to entering into the APS, the market went into a correction - that is, the market prices of houses dropped because the government indicated it was considering a tax on properties purchased by foreign buyers and a change in financial institutions’ borrowing stress test.
[13] Subsequent to entering into the APS, the Nutzenbergers retained a solicitor to complete the APS.
[14] Subsequent to entering into the APS, in May 2017, the Nutzenbergers, relying on the sale of the Property to Mert, acquired another property, closed and moved into that property. To complete that purchase, the Nutzenbergers used a Line of Credit to borrow $575,000, secured by a bank mortgage on the Property (“Mortgage”). The Mortgage was the sole registered encumbrance on the Property. The Nutzenbergers intended to discharge the Mortgage from the closing funds of the APS, being approximately $1,600,000 from Mert.
[15] Subsequent to entering into the APS:
a) Mert did not retain a solicitor prior to September 17, 2017 at the earliest, possibly on September 20, 2017 and possibly not until September 26, 2017. Mert's affidavit on this point is vague as to exactly when he retained a solicitor for the transaction. In any event, on the Closing Date Mert’s agent, identified a solicitor for Mert. The first communication from Mert's solicitor is September 26, 2017 – six days after the Closing Date;
b) Mert did not make any purchaser requisitions by the Requisition Date;
c) Mert did not advise how title should be taken, deal with a Statement of Adjustments;
d) Mert did not advise what documents were required for the closing; and
e) Mert did not advise what encumbrance(s) needed to be discharged by the Closing Date.
[16] Neither Mert, nor his solicitor, communicated directly with the Nutzenbergers or their solicitor until September 26, 2017 - 6 days after the Closing Date.
[17] Mert's evidence is that he “first became aware that he will be unable to complete the Transaction is approximately seven to ten days prior to the Closing Date." Mert could not sell his home in the dropping real estate market, to generate the proceeds needed to purchase the Property. On September 15, 2017, Mert advised his real estate agent that he would not be completing the APS on the Closing Date:
" ...I advised my realtor, Mr. Currie, that I would be unable to complete the Transaction on the Closing Date and asked him to request an extension to November 27..." (para 22 of the Mert Affidavit).
[18] This information was communicated to the Nutzenbergers' real estate agent.
[19] On September 15, 2017, the Nutzenbergers' agent verbally advised the Nutzenbergers solicitor it was “unclear that Mert would close” the APS and that Mert wanted an extension to the closing. When the Nutzenbergers were advised of this, they rejected any extension to the Closing Date.
[20] After September 15, 2017, there continued to be silence from Mert or a solicitor acting for him.
[21] On September 17, 2017, Mert's agent advised that Mert had retained a named solicitor for this transaction. However, when the named solicitor was contacted, the next day, by the Nutzenbergers' solicitor, the named solicitor indicated that he had not been retained by Mert in connection with this transaction.
[22] On September 20, 2017, for the first time, Mert’s real estate agent advised, in writing, that Mert had retained a solicitor for the transaction. Mert explains the "confusion" regarding the retaining of his solicitor as: “... I was under the honest belief that the Plaintiffs agreed to the extension that I requested so I was in no real rush to retain counsel." I reject this explanation. There is no evidence to support Mert’s alleged belief. It is a "bald" statement of belief. Mert’s “belief” makes no sense whatsoever and is entirely inconsistent with the undisputed Nutzenbergers' evidence that, in response to the Mert's agent's request for an extension, the Nutzenbergers' advised their agent no extension would be granted. This information was confirmed in the September 20 Letter referred to below. Further, Mert’s evidence is inconsistent with Mert's own solicitor's letter six days after the Closing Date, where Mert’s solicitor referred to the existence of "discussions" of an extension and enquiring what the Nutzenbergers’ position was on the extension. This post Closing Date letter from Mert's solicitor does not affirm an agreement, does not allege an understanding, and does not allege Mert had a belief there was an agreement to an extension to the Closing Date: it simply refers to "discussions".
[23] When neither Mert nor Mert’s solicitor had communicated with Nutzenbergers’ solicitor by the Closing Date, at a little after 2 p.m. on the Closing Date, Nutzenbergers’ solicitor wrote to Mert and the solicitor previously named by Mert's agent (“September 20 Letter”). The September 20 Letter advised that the Nutzenbergers’ were ready, willing and able to close, provided some documents signed by the Nutzenbergers as “evidence” to support this assertion and advised that, if Mert did not close the APS, the Nutzenbergers would consider the deposit to be forfeited and would sue him for damages.
[24] In the September 20 Letter, the Nutzenbergers’ solicitor included the following documents:
a) copies of the transfer documents executed by the Nutzenbergers;
b) Statement of Adjustments;
c) Direction re funds;
d) Warranty, Bill of Sale and HST confirmation;
e) Undertaking; and
f) Declaration.
[25] Nutzenbergers' solicitor had also prepared a personal, solicitor’s undertaking to discharge the Mortgage and to indemnify Mert from any claims, costs or damages from the failure to discharge the Mortgage. This was an unlimited personal undertaking to discharge the Mortgage. This undertaking was not included in the September 20 Letter but was available for the asking by Mert or his solicitor.
[26] Nutzenbergers’ solicitor had, on September 20, 2017, requested from the bank, a discharge statement for the Mortgage. The discharge statement arrived at Nutzenbergers’ solicitor’s office, from the bank, at 8:12 a.m. on September 21, 2017 with a payout amount of $575,070.87. Mert’s counsel submits that this demonstrates the Nutzenbergers were not able to close the APS on September 20, 2017 because the discharge statement was not available. In my view, this is speculation. What is unclear is whether the discharge statement would or could have been obtained before 6 p.m. on the Closing Date, had there been any response to the September 20 Letter or other indication that Mert was prepared to close or capable of closing the APS on September 20, 2017. I am not prepared to assume it would or could not be obtained before 6 p.m. on the Closing Date. What is clear is that the Mortgage could have been easily discharged from the closing proceeds from Mert if Mert had had the financing to close the APS.
[27] On the other hand, Mert admits that he did not have the money to close the APS on September 20, 2017. Nor is there any evidence that Mert could have closed the APS at any time after September 20, 2017. Mert's counsel's factum states:
The Defendant was unable to complete the Transaction on the Closing Date because, due to his inability to sell his other property prior to the Closing Date and the new mortgage stress-test rules implemented in and around that time, his mortgage broker advised him that he will need to put down a thirty-five percent down payment, which he did not have at that time.
[28] On September 25, 2017, the Nutzenbergers re-listed the Property for $1,548,000.
[29] The first communication from Mert or from a solicitor on his behalf was not until September 26, 2017. On September 26, 2017, Mert's solicitor wrote stating that "our respective clients were discussing an extension to November 26, 2017...Would you please canvass this issue with your client and advise."
[30] The Nutzenbergers' counsel wrote back on September 28, 2017 and advised that the Nutzenbergers did not wish to extend the Closing Date of the APS and the Nutzenbergers' considered "this transaction at an end".
[31] On September 29, 2017, Mert's solicitor wrote to Nutzenbergers' solicitor advising that the tender was deficient and offered that Mert would enter into a new APS to "repurchase" the Property for the same price and terms with a further deposit of $50,000. After some discussions, no such agreement was concluded.
[32] The Nutzenbergers re-sold the Property on November 2, 2017. The sale of the Property closed on December 7, 2017.
THE PLEADINGS
[33] The Statement of Claim alleges that Mert breached the APS and seeks damages.
[34] The Statement of Defence makes the following allegations:
a) There was an agreement to extend the Closing Date;
b) Alternatively, Mert alleges both parties failed to close in that "the Plaintiffs failed to tender any of the closing deliveries on the Defendant on or before September 20, 2017";
c) In the further alternative, Mert states the Nutzenbergers failed to mitigate their damages relying on the subsequent offer by Mert to buy the Property on September 28, 2017 at the same price; and
d) A counterclaim for the Nutzenbergers' breach of the APS seeking damages of $1,580.28 and the return of the APS deposit.
DISPOSITION
Discussion of the Law
[35] Real estate transactions are complex transactions requiring at least two parties, usually through solicitors, to act in good faith to cooperate, prepare and exchange drafts and finalize numerous closing documents required to complete agreements of purchase and sale. It is not possible nor reasonable for one party to advise that they cannot close the APS and then do and say nothing until after closing, let the other innocent party do the best they can, not knowing what the defaulting purchaser is or is not going to do or knowing what documents or requisitions the defaulting purchaser wants on closing or does not/ will not accept or wants amended. The closing documents, and the form of such documents, require the cooperation of both parties: what is the form of title? what are the objections to title? what is a proper Statement of Adjustments? what documents does the other party want or insist on? and many other closing details which need to be worked out to close a real estate transaction. That cooperation is the good faith obligation each party owes to the other under the APS. While this case is not framed as a breach of good faith, actions or non-actions of the defaulting party are relevant to ascertain any alleged deficient tender (if a tender was made), whether the innocent party was ready, willing and able to close and, finally, what the fundamental reason the transaction did not close.
[36] Where a party advises they cannot close, had advised prior to closing that they cannot close, sought extension which is not granted and then does and says nothing regarding the closing, that party is the defaulting party in the transaction. Where the other party wants to and can close the agreement, they are the innocent party to the transaction.
[37] It is inequitable and the law does not permit a defaulting party to object to the lack or form of documents that would have been available on the Closing Date, despite not having requisitioned any closing documents, not prepared or cooperated in finalizing closing documents, not having a solicitor for the closing and later assert the agreement is at an end due to some technical, minor, temporary and curable breach in the documents required for closing.
[38] Where a party has anticipatorily breached the agreement, the innocent party can accept the repudiation without a need to do anything further. Tender is not necessary. The innocent party is entitled to a remedy.
[39] If there is a tender and the defaulting party relies on the “time is of the essence” clause and a deficiency in the “tender” to allege the agreement is at and end, the fundamental issue for the court to decide is: what is the fundamental reason that the transaction did not close? Among the factors to consider include: Was it that both parties could not complete the fundamental object of the agreement? Was the defaulting party not "ready, willing and able" to close the agreement? Was the innocent party “ready, willing and able” to close the agreement? Did the defaulting party cause or contribute to the failed closing? The determination by the court does not only involve a review of the tender.
[40] If the innocent party could not comply with a fundamental term of the agreement, such as transfer title, which failure was not caused or contributed by the defaulting party, the court could conclude that the agreement is at an end. However, if the innocent party establishes that the deficient tender was a mere “technical” or minor breach that was or could be cured within a reasonable time of the closing date OR that the defaulting party caused or contributed to the technical breach, then the innocent party is entitled to a remedy. Gone are the days where a technical breach at tender by an innocent party renders the agreement at an end. This is consistent with the comments of Sidney Troister at a conference entitled “The Reality Of Tendering: How Important Is Tendering On Closing In The Decisions You Render?” Sidney H. Troister, LSM Torkin Manes LLP November 8, 2017:
….. There has been an evolution in the law associated with tendering. Thirty or forty years ago, courts tended toward strict compliance with contracts. More recently, courts have looked beyond the technical and examined what was really occurring in the deal, motives, good faith, and intention, and have been prepared to look at the tender, not as proof positive of ability to close but as evidence of intention to close. The mechanics of tendering have become less important or are excused when the big picture is reviewed.
[41] This approach was also recently stated by Perrell J. in Time Development Group Inc. (In trust) v. Bitton, 2018 ONSC 4384:
[58] If one party has indicated that he or she is unable or unwilling to perform, there is some risk associated with the innocent party tendering. The risk is that if his or her offer of performance is not in perfect accord with the agreement of purchase and sale, instead of demonstrating that the party is willing and able to perform its side of the bargain, the act of tendering performance may demonstrate just the opposite. Older case law indicates that tender must be perfect; else it will demonstrate that the innocent party was not in truth ready, willing, and able to close the transaction. The older case law, however, has been overtaken by contemporary case law that infuses the analysis of the positions of the parties with notions of good faith.[13] Thus, curable imperfections in tender will not get in the way of tender achieving its evidentiary purposes.[14] In other words, where the defect in tender is curable or the defect is insufficient to justify a refusal to close the real estate transaction, the innocent party will be able to rely on the tender to show that he or she was in a position to enforce the contract.[15]
(emphasis added)
Application to this Case
[42] In this case, there is no doubt that Mert was the defaulting party and the Nutzenbergers were the innocent parties.
[43] The Nutzenbergers acted in good faith, did what they needed to and should have done to facilitate the closing of the APS, and were ready, willing and able to close the APS.
[44] There was no tender. All that was sent to Mert was "evidence" that the Nutzenbergers were ready and prepared to close the APS. The evidence clearly establishes that the Nutzenbergers were ready, willing and able to close the APS on the Closing Date or reasonably thereafter.
[45] Even if the September 20, Letter was a "tender", then the deficiency was technical (or minor in nature in the circumstances of this case) and was curable next morning.
[46] I am satisfied that the fundamental reason the APS did not close on September 20, 2017 or shortly thereafter was entirely due to Mert’s failure to have the financing to complete the closing of the APS.
Conclusion on these Motions
[47] Summary judgment is granted to the Nutzenbergers as set out below and Mert's counterclaim is dismissed.
ANALYSIS
[48] There are a number of issues raised on these motions:
i. Did Mert anticipatorily breach the APS?
ii. Did the Nutzenbergers know of Mert’s anticipatory breach?
iii. Did the Nutzenbergers accept Mert’s anticipatory breach?
iv. Were the Nutzenbergers required to tender?
v. Were the Nutzenbergers able to complete their obligations under the APS?
vi. Considering all the evidence, why did the APS not close?
vii. Did the Nutzenbergers fail to mitigate by rejecting Mert’s September 29, 2017 offer?
viii. Did the Nutzenbergers breach the APS on September 28, 2017?
ix. What damages did the Nutzenbergers suffer as a result of Mert’s breach of the APS?
i. Did Mert anticipatorily breach the APS?
[49] The Nutzenbergers submit that Mert anticipatorily breached the APS.
[50] Mert admits he advised his agent, five days prior to the Closing Date, that he could not close the APS on September 20, 2017 and required an extension to the Closing Date. Mert wanted his agent to provide this information to the Nutzenbergers agent – which he did. Mert did nothing prior to, during the date for closing and for a period of time thereafter, to close the APS because he did not have the necessary closing funds.
[51] An anticipatory breach occurs where one party to a contract repudiates the contract before performance is due. The anticipatory breach or repudiation may be, express or implicit, communicated by words or conduct of the defaulting party, that the defaulting party will not or cannot perform the terms of the contract.
[52] The test is whether a reasonable person is satisfied that the defaulting party has demonstrated the intention not to close the transaction. The Court of Appeal for Ontario in Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc. 2008 ONCA 92, at para. 37, described anticipatory breach as follows:
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 envinces an intention not to be bound by the contract before performance is due. See Pompeani v. Bonik Inc. (1997), 1997 3653 (ON CA), 35 O.R. (3d) 417, [1997] O.J. No. 4174 (C.A.) 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. …[I]n determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract. [citations omitted]
(emphasis added)
[53] In this case, it is obvious, from all the surrounding circumstances, that Mert had no intention to complete the APS because:
a) Mert’s express verbal communication, to and through his agent to the Nutzenbergers' agent, that Mert was not going to close the APS on the Closing date and he needed an extension of the Closing Date;
b) Mert's conduct including:
o There was no communication by Mert or through a solicitor on his behalf, with the Nutzenbergers or their solicitor from April 25, 2017 right up until the Closing Date;
o Mert did not retain a solicitor prior to the Closing Date; and
o Mert, nor a solicitor on his behalf, prepared or requested any requisitions or participated in preparing any closing documents, including making no requests for the discharge of the Mortgage or to advise the form and name of the title to the Property – nothing.
[54] The basis and conclusion reached in 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, at para. 13, is virtually identical to the case at bar on the question of whether there was an anticipatory breach:
The purchaser moved into the state of being in anticipatory breach of the agreement when it did not relent in the face of the vendor’s refusal [ to extend the closing] and undertake to close on the appointed date.
[55] When taken in its entirety, Mert's communication and conduct leads to only one clear and unequivocal, objective conclusion that Mert had no intention to and would not be completing the APS on the Closing Date.
ii. Did the Nutzenbergers know of Mert’s anticipatory breach?
[56] Mert's counsel submits there is no evidence that the Nutzenbergers or their lawyers were aware of the statement that Mert would not and could not close the transaction on September 20, 2017.
[57] I disagree.
[58] The unchallenged evidence of the Nutzenbergers is that they rejected an extension of the APS when told by their agent and Mert requested an extension of the Closing Date, which extension was rejected.
[59] First, there is the evidence of the Nutzenbergers that they advised their agent they would not extend the Closing Date. There was no response or action taken by Mert or his agent or any evidence Mert prepared to or took any steps to close the APS.
[60] Second, the first sentence of the second paragraph of the September 20 Letter, the afternoon of the Closing Date, to Mert and his possible solicitor, expressly sets out that the Nutzenbergers’ knew Mert was not likely closing the APS.
[61] Third, the lack of any contact from Mert or his solicitor by 2 pm on the afternoon of the Closing Date would have make it very clear, Mert was not closing the APS later that afternoon.
[62] Fourth, even if that were not enough, there was no response by Mert or a solicitor on his behalf to the September 20 Letter, when there were still more than 3 ½ hours prior to the deadline for closing. When there was no response to the September 20 Letter, it became obvious to the Nutzenbergers and their solicitor that Mert was not closing.
[63] I am satisfied that the Nutzenbergers were aware that Mert was not going to close the APS prior to the Closing Date – being by 6:00 p.m. on September 20, 2017.
iii. Did the Nutzenbergers accept Mert's anticipatory breach?
[64] Mert's alternative position is that the Nutzenbergers did not accept Mert's anticipatory breach.
[65] In Place Concorde East Limited Partnership v. Shelter Corporation of Canada, (2006) 2006 16346 (ON CA), 270 DLR (4th) 181 (ON CA), at para. 50 the Court of Appeal stated:
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: see Chapman v. Ginter 1968 72 (SCC), [1968] S.C.R. 560 at 568. However, in some cases the election to treat the contract at an end will be found to have been sufficiently communicated by the innocent party’s conduct: John D. McCamus, The Law of Contracts, (Toronto: Irwin Law Inc., 2005) at pp. 641-42.
(emphasis added)
[66] Mert points to the September 20 Letter and the attached closing documents to demonstrate that the Nutzenbergers did not accept Mert's anticipatory breach and proceeded to submit a tender, albeit a deficient one.
[67] It is correct that the September 20 Letter does not expressly state the Nutzenbergers accepted the anticipatory breach by Mert. However, the September 20 Letter cannot be read in isolation, it was still approximately four hours prior to the latest time for closing and it is not necessary for the acceptance of the repudiation to be explicit.
[68] The circumstances in this case are unique and must be considered as a whole. Prior to and on the Closing Date, there had been no direct communication from Mert or a solicitor on Mert’s behalf. All the Nutzenbergers' solicitor knew was a relayed conversation between the two real estate agents that Mert was not going to close the APS and needed an extension. The Nutzenbergers' solicitor was placed in a difficult situation by Mert's failure to communicate or participate in the closing of the APS. The Nutzenbergers' solicitor could not know for certain at approximately 2 p.m. on the day of Closing whether the third-party information, from Mert's real estate agent, that Mert would not close was accurate or not.
[69] The Nutzenbergers and their counsel wanted to demonstrate that, notwithstanding the statements and inaction by Mert, they remained ready, willing and able to complete the APS. This is consistent with the wording in the September 20 Letter where Nutzenbergers’ solicitor included some of the documents signed by the Nutzenbergers as evidence their readiness.
[70] Taken as a whole, the September 20 letter is nothing more that the Nutzenbergers’ counsel notifying that, the Nutzenbergers were ready and that if (as it appeared likely) Mert did not take steps to close, they would consider the APS to be over and they would keep the deposit and sue for damages.
[71] As the hours ticked away to 6 p.m. on the Closing Date, there can be no doubt the Nutzenbergers knew and accepted that Mert was not going to close the APS and would have to sue for damages.
[72] This conclusion is supported by the fact the Nutzenbergers re-listed the Property three days later, without any communication to or from Mert in those three days.
[73] I conclude that prior to 6 p.m. on September 20, 2017, the Nutzenbergers had accepted Mert’s breach of the APS.
iv. Were the Nutzenbergers required to tender?
[74] An anticipatory breach discharges the innocent party of its obligations under the contract and allows it to pursue damages without the need to tender.
[75] In Pompeani v. Bonik, 1997 3653 (ON CA), the Court of Appeal stated that, where the vendor was at fault, at para 18:
“…cumulatively, Bonik’s actions in abandoning the plan made part of the agreement, securing the registration of the new plan [and] ignoring correspondence from Pompeani’s solicitor for over a year before the date of closing…would lead a reasonable purchaser to believe that the vendor would not honour its obligations under the agreement… Bonik impliedly repudiated the agreement before the date of closing, thus relieving Pompeani of his obligations under the agreement and entitling him to damages. I do not think that in the circumstances Pompeani was obligated to tender.”
[76] As recently stated by the Ontario Court of Appeal in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 105:
[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: see Kirby v. Cameron, 1961 203 (ON CA), [1961] O.R. 757 (C.A.); Kloepfer Wholesale Hardware v. Roy, 1952 8 (SCC), [1952] 2 S.C.R. 465.
[77] Having concluded that Mert had repudiated the APS and the Nutzenbergers had accepted Mert's repudiation, it was not necessary for the Nutzenbergers' counsel to tender on Mert.
v. Were the Nutzenbergers able to complete their obligations under the APS?
[78] At the heart of Mert’s counsel’s submission is that the September 20 Letter was a tender and the tender was deficient. Mert’s counsel submits that, because the Nutzenbergers were not able to close on the Closing Date, the APS came to an end.
Was the September 20 Letter a tender?
[79] The September 20 Letter states:
Our clients are and remain ready, willing and able to complete the transaction today. As evidence of their ability to complete the transaction today, we enclose copies of the transfer documents executed by our clients.
[80] For the reasons stated above, I am not persuaded that the September 20 Letter was a tender.
[81] It is also important to note that the September 20 Letter did not purport to be a tender. The wording of the September 20 Letter only purported to provide “evidence” of the Nutzenbergers willingness to close the APS by providing copies of the “transfer documents executed” by the Nutzenbergers.
[82] A tender of all the closing documents was not possible because Mert had not participated in the identification, preparation and finalizing all the necessary documents. An example is Mert’s complaint of the lack of a Transfer of Title which could not be prepared by the vendor because Mert had not advised how title was going to be taken.
[83] I am satisfied that Mert, himself, prevented a full and complete tender and now cannot purport to view the September 20 Letter as a tender, let alone a deficient tender.
If it was a tender, what are the consequences of a deficient tender?
[84] Even if I am wrong and the September 20 Letter was a tender, where the innocent party has no obligation to tender, a deficient tender will NOT necessarily bring the agreement to an end.
[85] As stated by the Court of Appeal in McCallum et al. v. Zivojinovic, 1977 1151 (ON CA), supra:
It is a principle of law that no one can in such case take advantage of the existence of a state of things which he himself produced.
In Hickey v. Paletta (unreported -- Ont., June 9, 1972 [now reported 14 N.R. 4]), Hughes, J., held that the purchaser under an agreement of purchase and sale had indicated that he could not be in funds to close. The vendor proceeded to tender but did not have an executed discharge of a mortgage or an executed discharge of a lien. Hughes, J., held that having induced the plaintiff to believe that payment of the purchase price could not be made so that the plaintiff's solicitor did not go fully armed with all his documents, the defendant was not entitled to avoid the contract. He relied on the principle stated in New Zealand Shipping Co. v. Societe des Ateliers et Chantiers de France.
The Court of Appeal in an unreported decision delivered on May 16, 1973 [14 N.R. 3], declined to disturb the conclusion of Hughes, J. An appeal to the Supreme Court of Canada was dismissed (Paletta v. Hickey, [1974] S.C.R. vi, 14 N.R. 1).
A somewhat similar situation came before Hughes, J., in Kiefert et al. v. Morrison (1975), 1975 473 (ON SC), 11 O.R. (2d) 731, 67 D.L.R. (3d) 395. The purchaser's solicitor informed the vendor's solicitor prior to closing that he was not prepared to close a purchase and sale of real property. The vendor's solicitor made a tender on the plaintiff's solicitor at the time of closing. However, he did not tender a discharge of an outstanding mortgage but only an undertaking to discharge it within 60 days. Hughes, J., once again applied the principle in the New Zealand case that the purchaser was not entitled to rely upon the defective tender when he had previously indicated that he was not in a position to close. He also concluded that the solicitor for the vendor was excused from tendering by the purchaser's renunciation, applying Dmytryszn v. King, [1935] O.W.N. 355.
(emphasis added)
[86] A similar statement was stated in Silverberg v. 1054384 Ontario Limited, 2008 59325 (ON SC) at para. 104:
Mr. Simaan does not rely on the “time of the essence” clause in the agreement of purchase and sale and does not suggest that the Purchaser’s failure to make formal tender on that date is a bar to specific performance. There is good reason why he takes this position, as it is settled law that a party may not rely on time of the essence where (a) the party itself was not ready, willing and able to close on the agreed date; or (b) the party has itself been the cause of the delay; or (c) the party has waived its right to rescind. As Mr. Justice McKay, giving the judgment of the Court of Appeal in Shaw v. Holmes, (1952), 1952 285 (ON CA), 2 D.L.R. 330 (Ont. C.A.) said at 334 :
Time may be insisted upon as of the essence of the agreement by a litigant, (a) who has shown himself ready, desirous, prompt and eager to carry out his agreement: Mills v. Haywood (1877), 6 Ch. D. 196; (b) who has not been himself the cause of the delay or in default; Snell v. Brickles (1914), 1914 561 (SCC), 20 D.L.R. 209, 49 S.C.R. 360; rev’d. 1916 417 (UK JCPC), 30 D.L.R. 31, [1916] 2 A.C. 599; and (c) who has not subsequently recognized the agreement as still subsisting; he must not play fast and loose at his pleasure: Springer v. Gray (1859), 7 Gr. 276; Cudney v. Gives (1890), 20 O.R. 500; Labelle v. O’Connor (1908), 15 O.L.R. 519, and Harris v. Robinson (1892), 1892 14 (SCC), 21 S.C.R. 390.
(emphasis added)
[87] Similar decisions were rendered in Mastercraft Construction Corp. v. Baker (1978), 1978 2203 (ON SC), 19 O.R. (2d) 652, Leung v. Leung (1990), 1990 6866 (ON SC), 75 O.R. (2d) 786 (Ont. Ct. (Gen. Div.), Cameron v. Kotowski, [1998] O.J. No. 6448 (O.C.J.)
[88] The situation of an imperfect tender was described in Bethco Ltd. et al. v. Clareco Canada Ltd., (1985) 1985 2252 (ON CA), 52 OR (2d) 609 (ON CA):
I accept, of course, the trial judge's finding that neither party was able to close on the date for closing. There was, however, a very important difference in their positions. The purchaser was only temporarily unable to close; the vendor had put it out of its power with the Building Products lease and was in any event unwilling to close with a leaseback in accordance with the contract.
The trial judge, while finding that the vendor "was reluctant to complete the transaction and did everything possible to throw unnecessary hurdles in the path of the purchaser" was "not satisfied that there was an anticipatory breach". It was not the classic anticipatory breach where one party declines to close at all. Nevertheless, the vendor was in breach of contract on the closing date and was unwilling or unable to close in accordance with the contract at any time. In these circumstances, there was no need for the purchaser to tender at all. It had only to show that it would be able to close in the reasonable future and the trial judge has so found. The vendor, being unable to close, was unable to rely upon the time of the essence clause to rescind the contract. The vendor was in breach of contract and the purchaser was entitled to a remedy.
(emphasis added)
[89] The rationale for this approach is the commonly cited Rule that “time of the essence” may only be insisted upon by a litigant: (1) who has shown himself or herself ready, desirous, prompt, and eager to carry out the agreement; (2) who has not been the cause of the delay or default; and, (3) who has not subsequently recognized the agreement as still existing.
[90] In this case, Mert was the defaulting party and cannot rely on the time of the essence to bring the APS to an end.
[91] These factors all work against Mert as:
a) Mert was not ready to carry out the APS;
b) Mert was the party who caused or contributed to the default by requesting no documents and doing nothing to advance the closing;
c) Mert subsequently sought to amend the APS and later took the position there was an amendment to extend the closing date.
[92] I conclude that Mert could not and cannot rely on the Time of the Essence clause in the APS even if the tender was deficient.
Were the Nutzenbergers ready, willing and able to close the APS?
[93] Nevertheless, let me deal with Mert’s counsel that the Nutzenbergers could not strictly comply with the closing terms, therefore bringing the APS to an end. Mert submits that the Nutzenbergers “tender” on the Closing Date was deficient because it did not contain a mortgage statement for discharge purposes, a solicitor’s undertaking to discharge that mortgage, or a draft Transfer in registrable form, all as expressly required by the Agreement. Accordingly, Mert submits that the Nutzenbergers were not ready, willing and able to close on the Closing Date.
[94] Reliance by Mert on the alleged tender as proof of inability to close the transaction is misplaced. Tender is only evidence of a party's ability to complete the transaction on the closing date. The innocent party can demonstrate, with other evidence, that the innocent party was ready willing and able to close the transaction. See Silverberg v. 1054384 Ontario Limited, 2008 59325 (ON SC), at para 102:
Tender is evidence that a party is ready, willing and able to close, but it is not the only way in which proof can be made.
(emphasis added)
[95] Even if the tender was deficient, all the Nutzenbergers need to show is that they were ready, willing and able to close within a reasonable time. The Court of Appeal for Ontario in Bethco Ltd. et al. v. Clareco Canada Ltd., stated, in a case where it was the vendor was in breach and the defaulting party:
“…the vendor was in breach of contract on the closing date and was unwilling or unable to close in accordance with the contract at any time. In these circumstances, there was no need for the purchaser to tender at all. It only had to show that it would be able to close in the reasonable future and the trial judge has so found…The vendor was in breach of contract and the purchaser was entitled to a remedy.
[96] In this case, at the very latest, the Nutzenbergers were able to close the very next morning.
a) The Discharge Statement - even if I were to conclude that one could not possibly have been obtained prior to 6 p.m. on the Closing Date (which I do not), this was a curable, technical defect that did not detract from the Nutzenbergers’ ability to close the APS. Mert did not requisition a discharge statement or ask for a discharge statement. As stated above, it is unclear whether a discharge statement could or could not have been available on September 20, 2017 before 6 p.m.;
b) The solicitor’s undertaking – this was available for the asking. It had been prepared and signed. Again, if tender was required, this was a curable, technical defect that did not detract from the Nutzenbergers’ ability to close the APS; and
c) The lack of a Transfer in registrable form - this submission demonstrates the inequitable position Mert takes in this proceeding. A Transfer acceptable to Mert was not possible without consultation with Mert’s lawyer. The draft Transfer deed was referenced in the September 20 Letter:
“Because you have not retained a lawyer to act for you in this matter, we have been unable to “message” or otherwise deliver the draft deed to qualified counsel.”
Conclusion
[97] I conclude that the Nutzenbergers were ready, willing and able to close the APS on the Closing Date but for the fault of or failure by Mert.
[98] Even if the Nutzenbergers could not close the APS on the Closing Date, I conclude that even if the September 20 Letter was a tender (which was not required), Mert was the defaulting party and could not rely on a deficient tender, deficient in a minor, technical way that could have been cured by the Nutzenbergers by the next morning at the latest.
[99] Accordingly, the Nutzenbergers were not in breach of the APS and are entitled to a remedy.
Reliance on Hunt Club and Kwon
[100] Let me now deal with Mert’s counsel’s reliance on Hunt Club and Kwon.
[101] I am not persuaded that Hunt Club applies in this case. In Hunt Club, despite the purchaser not being in the position to close, the vendor insisted on closing on November 28, 2017 – the closing date in the agreement. However, on the closing date, the vendor was not able to provide title to the purchaser because the condominium registration had not been completed. The Court of Appeal concluded that the agreement had come to an end since neither party was in a position to close the agreement.
[102] In Azzerello, released shortly after Hunt Club, the purchaser could not get financing to close the agreement. The Azzerello motions judge had concluded the agreement did not close because of technical deficiencies by the vendor but due to the purchaser’s inability to have the necessary funds to close the transaction. The Court of Appeal found that: “ In any event, the motion judge made no error in finding that the reason the transaction did not close was not from any inadequate documents from the seller, but because the appellant did not have the funds to complete the purchase.” The Court of Appeal in Azzerello went on to conclude:
[31] Because the appellant made it clear on the date of closing that he did not have the funds to close and took no steps to close, the respondents were relieved of their obligation to tender. I would not give effect to this ground of appeal.
[32] In oral submissions, the appellant argued in the alternative that even if the appellant did repudiate the agreement, the respondents cannot recover damages because they never elected to either accept the repudiation or to insist on performance. The appellant cited 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2018 ONSC 6200, in support of the proposition that the innocent party must elect. As that case was under appeal at the time, counsel suggested that the court consider the result of the appeal in that case.
[33] Since this appeal was argued, Hunt Club has been affirmed by this court: 2019 ONCA 700. However, Hunt Club does not assist the appellant. In Hunt Club, the vendor insisted on a certain closing date, and then neither party was able to close on that date. As a result, the agreement was at an end and the purchaser was entitled to the return of the deposit. In this case, the vendor was ready, willing and able to close. It was the purchaser’s lawyer who advised that the purchaser did not have the funds to close.
[103] There is another significant distinction between the two Court of Appeal decisions. In Hunt Club, the failure of the vendor was an inability to provide “title” to the property through no fault of the defaulting purchaser. This was a failure in Hunt Club to provide the fundamental term of the bargain in a real estate transaction. In Azzarello, the deficiency on closing could have been easily cured and the purchaser had not asked for the document. This was fundamental to the Azzarello decision and is much closer to the facts in this case:
[20] The motion judge rejected the tender argument on a number of grounds. Although the tender package contained a Direction re Funds that was signed by Mr. Ferreira rather than by the respondents, that document could have been replaced with one signed by the respondents, had the appellant asked before closing. The appellant cannot rely on any such alleged defence when he was not able to close and when he was taking the position that there was no one upon whom to tender because the two lawyers who were communicating with Mr. Ferreira were not actually his lawyers. The motion judge found that the transaction did not close not because of any problem with the tender but because the appellant did not have the funds to complete the transaction.
[104] I accept that Azzarello is the applicable authority in this case.
[105] Mert’s counsel also relies on Kwon v. Cooper, [1995] O.J. 4654, urging the court to come to the same conclusion. I do not accept this submission. In Kwon the vendor was not willing, ready and able to close on the closing date. The vendor “... did not have a discharge of the existing first mortgage or the guarantee required of the vendor under the contract. In addition, his statement of adjustments, contrary to the terms of the contract, called for all cash on closing.” In Kwon, there is no indication when the discharge (as opposed to a discharge statement) would be available, whether a guarantee would be available and the vendor had demanded cash on the closing contrary to the terms of the agreement. In this case, the only thing which Mert can point to as potentially not available on the Closing Date was the discharge statement (and it might or might not have been available if Mert had made any indication he was prepared to close). The solicitor’s undertaking (which was unlimited to the solicitor’s obligation to discharge the Mortgage) was available. The Transfer could not be completed without the assistance of Mert, which did not materialize at any time before, during and after the closing date.
vi. Considering all the evidence, why did the APS not close?
[106] There is no doubt that the fundamental reason the APS failed to close was entirely the fault of Mert and not the Nutzenbergers.
vii. Did the Nutzenbergers fail to Mitigate by rejecting Mert’s offer to buy on September 29, 2017?
[107] Mert’s counsel submits that the Nutzenbergers failed to mitigate their damages because they did not accept Mert's offer on September 29, 2017 to purchase the Property on the same terms, with a later closing, which offer included a further $50,000 deposit.
[108] I reject this submission.
[109] First, there is no evidence that Mert had the funds to complete the APS or that he would have the funds to complete the APS on a further date.
[110] Second, the Nutzenbergers had no obligation to deal with Mert, a purchaser who had already breached the APS due to a lack of financing. As a result, it was not unreasonable for the Nutzenbergers to reject Mert's second offer. This argument was rejected by the Ontario Court of Appeal in Azzarello at paragraphs 34 to 41.
[111] This submission was similarly rejected in the 2019 case of McKnight v. Morrison, 2019 ONSC 552:
The Vendor was not required at law to wait for the Purchaser, who had already breached the Agreement, to sell the Brampton Property and attempt to revive the repudiated contract, regardless of how sincere the Purchaser’s intentions may have been.
[112] I reject this submission.
viii. Did the Nutzenbergers breach the APS on September 28?
[113] Mert’s further alternate position is that the APS did not terminate on September 20, 2017 but remained available to be closed on reasonable notice. If this were the case, Mert’s counsel submits the Nutzenbergers breached the APS by terminating it on September 28, 2017.
[114] Given my conclusions above, there is no need to deal with this submission. However, it should be remembered that the September 28, 2017 letter was in response to a letter from Mert’s solicitor on September 26, 2017 requesting discussion on an extension – six days after the Closing Date and one day after the Nutzenbergers had re-listed the Property. It was not an offer to close the APS then or within a short time thereafter.
ix. What Damages did the Nutzenbergers suffer as a result of Mert’s breach of the APS?
[115] The Nutzenbergers are entitled to the damages reasonably foreseeable and unavoidable arising from Mert’s breach of the APS.
[116] Mert does not deal with the Nutzenbergers’ damages in his affidavit or in Mert’s counsel’s factum.
[117] Given that I have rejected Mert’s counsel’s submission on mitigation, the following damages are undisputed and hereby assessed by this court.:
a) The difference in the sale price in this case was $186,000 less the $8,407.20 reduction in the commission payable by the Nutzenbergers on the subsequent sale ($177,592,80);
b) The Nutzenbergers’ legal costs for the APS transaction ($2,282.00); and
c) Property taxes from September 21, 2017 to December 7, 2017 ($1,704.61).
[118] The Nutzenbergers’ evidence on damages includes attaching many documents on other damage claims leaving it to the judge to ascertain the amounts relate to each head of damages. For example, extracting the amount paid for the mortgage or the amount of interest paid on credit cards. Including all sorts of receipts, credit card statements (many of which are not legible is NOT the way to prove damages. However, I have concluded the following damages can be reasonably ascertained from the evidence:
a) In addition, the Nutzenbergers’ mortgage payments from September 21, 2017 to December 7, 2017, on the Mortgage that was to have been discharged, are recoverable damages. I calculate this to be $4,337.90 based on the Bank Statement of January 7, 2018 showing that the principal amount was $555,750 at an interest rate of 3.7% ($555,750 x 3.7% x 77/365). This calculation was necessary since the Nutzenbergers’ affidavit relied on credit card statements which were redacted, included notations, and included a claim for credit card interest making the calculation based on these documents not readily ascertainable by this court;
b) I agree that the necessary expenses to winterize the Property given the date on which the APS was to close and the relisting of the Property, are reasonably incurred expenses that would not have been necessary had the APS closed on September 20, 2017: sprinkler winterized $115.82; and pool closing $383.07. These are expenses that were necessary to avoid damage to the Property. These damages are assessed at $498.89;
c) I reject the expense of lawn fertilization; and
d) I reject credit card interest which I find to be unclear and too remote.
[119] The total damages awarded to the Nutzenbergers are $186,416.20 plus pre-judgment and post-judgment interest.
[120] Mert’s deposit (together with any accrued interest) shall be released to the Nutzenbergers and shall be credited to the amount of this judgment upon receipt.
CONCLUSION
[121] The Nutzenbergers’ motion for summary judgment is granted.
[122] Judgment is granted to the Nutzenbergers in the amount of $186,416.20 together with pre-judgment interest in accordance with the Courts of Justice Act from December 7, 2017 to today’s date and post-judgment interest in accordance with the Courts of Justice Act from today’s date until paid.
[123] Mert’s deposit, together with any accrued interest, shall be released to the Nutzenbergers and be credited to the amount of this judgement herein upon receipt of these monies by the Nutzenbergers.
[124] Mert’s motion for summary judgment is dismissed. Mert’s counterclaim is hereby dismissed.
COSTS
[125] Cost Outlines were submitted by counsel on the hearing date.
[126] Either party seeking costs shall serve and file written submissions on entitlement and quantum within three weeks of the release of these reasons. Written submissions shall be limited to 5 pages, with additional attached Offers to Settle and authorities.
[127] Any responding party shall have two weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 5 pages with additional attached Offers to Settle and authorities.
[128] There shall be no reply submissions without leave.
Ricchetti, RSJ
Date: January 5, 2021