Fenyes et al. v. Nellipudi et al., 2021 ONSC 3913

LINDSAY FILE NO.: CV-21-70

DATE: 20210601

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Andrew Stephen Fenyes and Joanne Marie Cain

Applicants

– and –

Sreedhar Reddy Nellipudi, Prem Sheela Nellipudi and Kawartha Waterfront Realty Inc.

Respondents

Jordan N. Potasky for the Applicants

Christina M. Bowman, for the Respondents, Sreedhar Reddy Nellipudi and Prem Sheela Nellipudi

Jeffrey Klein for the Respondent, Kawartha Waterfront Realty Inc.

HEARD: May 20 and 25, 2021 - Videoconference

DECISION ON APPLICATIONS

Sutherland J.:

Overview

1The applicants and the respondents, Sreedhar Reddy Nellipudi and Prem Sheela Nellipudi (these respondents) each brought an application seeking relief from this Court.

2The applicants seek a declaration that the Agreement of Purchase and Sale entered into between them and these respondents dated March 17, 2021 (the APS) regarding the property municipally knows as 7348 Highway 35, Coboconk, Ontario (the Property) is null and void and became null and void as of 12:00 a.m. on April 3, 2021; a declaration that these respondents have no interest in the Property; a declaration that the Notice registered against the title of the Property as Instrument No. KL176619 on May 3, 2021 (a Purchaser’s Lien) is an improper and invalid registration and that the Purchaser’s Lien be discharged from the title of the Property and an order that the deposit paid by these respondents be paid to these respondents forthwith.

3These respondents seek a declaration that the APS is a valid and legally enforceable APS; a declaration that these respondents have an interest in the Property; an order that the Purchaser’s Lien remain registered on the title of the Property until resolution or a further court order; in the alternative, leave to issue a Certificate of Pending Litigation against the Property and if the Court finds that the APS is not a valid and enforceable agreement, an order that the deposit be paid to them forthwith.

4Neither of the parties had any objection to the Court resolving the issues in dispute between the parties based on the affidavits filed in the applications. There have been no cross- examinations. Counsel confirm that the facts are generally not in dispute. The respondent, Kawartha Waterfront Realty Inc. (Kawartha) did not participate in the hearing of the applications. Kawartha indicated that it would abide by any Order of this Court that deals with the deposit of $100,000 provided by these respondents.

5These respondents indicated that they commenced an action in Brampton for specific performance among other things, after the applicants commenced their application.¹

6After hearing submissions, I advised counsel that due to the perspective closing on May 28, 2021, I would provide them with my disposition of the applications with reasons to follow. On May 27, 2021, I released my disposition that the relief requested by the Applicants is granted.

7Below are my reasons.

Background

8The APS was a Form 100 of the Ontario Real Estate Association for the Province of Ontario and included the following terms:

(a) A sale price of 2.5 million dollars;

(b) A deposit of $100,000 payable to Kawartha Waterfront Realty Inc.;

(c) The APS shall be irrevocable at 10:00 p.m. on March 23, 2021;

(d) The APS was accepted on March 23, 2021 at 9:42 p.m.;

(e) A closing date of June 7, 2021;

(f) A list of chattels included in the APS which included “all furnishings as viewed indoor and outdoor except items in Schedule B”;

(g) Buyer allowed until 6:00 p.m. on May 25, 2021 to conduct a title search;

(h) Time in all respects be of the essence.

9There were also three provisions that are material to the dispute between the applicants and these respondents. The three provisions are:

26. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to the Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This agreement shall be read with all changes of gender or number required by the context.

SCHEDULE A

THIS OFFER IS CONDITIONAL upon the inspection of the subject property, by a home inspection at the Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than the 10^th calendar day following the date of acceptance of this Offer, that this condition is fulfilled, this Offer shall be null and void and the deposits shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.

THIS OFFER IS CONDITIONAL upon the Buyer arranging, at the Buyer’s own expense, a new FIRST Charge/Mortgage satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than the 10^th calendar day following the date of acceptance of this Offer, that this condition is fulfilled, this Offer shall be null and void and the deposits shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.

10The applicants and the respondents utilized the same real estate agent, David Donais (the Agent). The applicants and these respondents consented to utilize the Agent. The deposit was paid to Kawartha.

11The applicants and these respondents entered into further negotiations, via email, with emails sent to and replied to through the Agent. I will discuss these emails later in these reasons.

12The negotiations appear to have culminated in an Amendment to Agreement of Purchase and Sale, being form 120 of OREA for the Province of Ontario. This Amendment Agreement was delivered to the applicants on April 2, 2021 and was to be accepted by 11:59 p.m. on April 2, 2021. The Amendment Agreement included deletion of the conditions concerning an inspection and financing and that all furnishings in the cabin, cabin loft, sofa set in cabin and furnishings in screened room of cabin be excluded from the sale and work the applicants would agree to complete prior to closing. The applicants did not sign back the Amendment Agreement.

13On April 3, 2021 at 9:01 a.m., the Agent sent an email to the applicants indicating that these respondents decided not to improve the terms of the APS.

14On April 3, 2021, the applicants entered into a new Agreement of Purchase and Sale with the Sahai (APS2). APS2 had no conditions concerning financing or an inspection. Terms in APS2 included:

(a) Price of $2.5 million dollars;

(b) A closing date of May 28, 2021;

(c) A deposit of $100,000 made payable to Kawartha Waterfront Realty Inc.;

(d) The use of the same agent, David Donais;

(e) Any title search to be completed by May 14, 2021;

(f) Confirmation of Acceptance on April 3, 2021 at 4:00 p.m.;

(g) A Schedule B with the inclusions and exclusions of chattels.

15Around April 18, 2021, a Mutual Release was sent to these respondents to sign and once signed, the return of their deposit. These respondents refused to sign the Mutual Release.

16On April 20, 2021, counsel for these respondents delivered a letter to the applicants. Counsel for these respondents took the position that there was a legally enforceable APS. The Amendment Agreement included the terms of the deletions of the conditions concerning inspection and financing which was a waiver or notification of fulfilment of the conditions. Further, that the applicants violated the duty to act in good faith in contracts.

17On April 23, 2021, by email, counsel for the applicants responded. In that email, the applicants took the position that the respondents failed to comply with the conditions on inspection and financing and as such, 10 calendar days later, April 2, 2021, the APS expired and was null and void. The Amendment Agreement was not a waiver or notification of fulfilment. The Amendment Agreement contained items that the applicants did not agree. The applicants did not sign the Amendment Agreement and as such there was no agreement. Further, the applicants deny that they failed to act in good faith. Counsel in the email states:

My client’s not only acted in good faith, but when they received the Amendment, which they were not prepared to accept, your clients were given the opportunity to provide a revised amendment without the added items or items in order to rectify the problem, by the following morning, and they chose not to do so.

18On May 3, 2021 at 12:29 p.m., these respondents registered a Notice, a Purchaser’s Lien, on the title of the Property pursuant to section 71 of the Land Titles Act.

19On May 11, 2021, a title search was conducted and the applicants discovered the Purchaser’s Lien registered on title.

20On May 13, 3021, the applicants commenced their Application.

21These respondents commenced their Counter Application thereafter.

Issues

22The issues for this Court to determine are:

1. Is there a valid legally binding APS?

2. Should the Purchaser’s Lien be discharged?

3. Did the applicants breach a duty to act in good faith?

Is there a valid legally binding APS?

23These respondents contend that there is a firm and binding APS when the Agent sent the Amendment Agreement to the applicants. The respondents contend that the applicants were aware of the terms of the APS. Through the exchange of emails between these respondents and the applicants through the Agent, there was an agreement on the items that were required to be remedied along with chattels that were to from part of the APS. The failure of the applicants to sign the Amendment Agreement does not affect the knowledge that the applicants had that the two conditions of inspection and financing were deleted from the APS. In effect, the Amendment Agreement was notice that the two conditions have been fulfilled or waived.

24The respondents direct the Court to Bawitko Investments Ltd. v. Kernels Popcorn Ltd²., Ruparell v. J. H. Cocrance Investments Inc.³, and Eric Sand and Gravel Limited v. Seres’ Farm Limited and Tri-B Acres Inc.⁴ for the proposition that for review of the surrounding circumstances in this case, there was a completed binding APS between the applicants and these respondents.

25Bawitko involves a dispute concerning terms of a franchise agreement. The appellant, Kernels was provided with a draft franchise agreement which was very complex, numbering 50 pages. Shortly after receiving the draft franchise agreement and documents, a meeting took place in the offices of the appellant. The trial judge found at that meeting the representatives of the parties shook hands and had an agreement confirming the renewal fee, terms to extend the draft agreement from 5 to 10 years, fee payable on the resale of the franchise and personal guarantees contemplated by the draft agreement.

26The trial judge determined there was an oral agreement and the appellant breached that oral agreement. The Court of Appeal allowed the appeal and dismissed the action. The Court of Appeal found that there was no ad idem on all the terms necessary to form a completed and legally enforceable franchise contract. The Court of Appeal stated:

It follows from this conclusion that the trial judge was in error in holding that Passander (the appellants representative) had agreed to put his signature to “a contract already agreed upon.” The terms found to have been agreed upon could not by themselves constitute a full and binding contract. If, however, such were the case, the respondent was in breach of the contract in that it was not ready and willing to complete the transaction in accordance with the “contract already agreed upon” but, instead, manifested a willingness to complete only pursuant to the terns of a franchise that formed no part of its alleged agreement with the appellant. Furthermore, time admittedly being of the essence of the contract, the appellant was entitled to require that the documents be executed within a reasonable time and certainly before the store opened; it was not.⁵

27Ruparell concerns the failed purchase of shares in a Volkswagen auto dealership and its land. The plaintiff and the defendants were negotiating the purchase of a dealership and the land in which the dealership was situated. A Non-binding letter of intent was executed. The Letter of Intent allowed for due diligence and that the defendants would not negotiate with any entity until April 15, 2020. Due to the pandemic, the plaintiff put in for another Offer on April 16, 2020. The parties exchanged terms under the new April Offer. On April 28, 2020, before the final offer could be signed, the defendants received another offer from a Volkswagen Dealer. On May 5, 2020, the plaintiff was advised on the offer from a third-party Volkswagen Dealer and was given the opportunity to submit another offer. The plaintiff refused and placed a certificate of pending litigation on title. The trial judge found in favour of the plaintiff and ordered damages and return of the deposit. In so finding, the trial judge concluded that the plaintiffs have established that there was a binding agreement on April 24, 2020 and that the defendants breached the agreement when they attempted to improve the offer of the plaintiff after receiving a superior offer from another dealership.

28Eric Sand was the purchase of 54,231 acres of land owned by the defendant Seres. The plaintiff and defendant met four times in an attempt to negotiate a deal for the purchase of the land. On January 8, 2003, an agreement was reached to purchase the land at an agreed upon price to close on April 11, 2002. The agreement was an oral one. The next day the plaintiff provided a draft agreement and a deposit in the amount of the full purchase price. The defendant did not sign back the offer. The lessor of the property, Tri-B Acres had a right of first refusal. Once the defendant received the offer from the plaintiff, it forwarded the offer to Tri-B Acres who matched the offer with a deposit of only $25,000. The trial judge found that there was a legally binding oral agreement between the plaintiff and the defendant and that Tri-B Acres did not match the offer of the plaintiff. The defendant breached the oral agreement. The trial judge awarded specific performance. The Court of Appeal dismissed the appeal rejecting the argument of the defendant that there was no agreement but “an agreement to agree”. The Court of Appeal agreed with the trial judge that all the essential terms of the oral agreement have been agreed upon and it was just incorporating those terms into a written agreement. There was an intention between the parties to be bound by the oral agreement.

29I do not find these cases provided helpful to these respondents in the circumstances of this case. In this proceeding, there is no dispute that there was a binding written APS between the parties. The APS was executed by the applicants and these respondents. It was fully accepted on March 23, 2021. The terms of the APS were clear and unambiguous. The terms of the agreement were contained only within the provisions contained in the APS.

30I agree with the applicants that the reasoning of 226095 Ontario Inc. v. Invecom Associates Limited⁶is applicable to this proceeding and I adopt that reasoning. In Invecom, the trial judge deals with a situation similar to the facts of this proceeding but in reverse. The trial judge found that the purchaser, Invecom forfeited their deposit of $400,000. Invecom requested an extension of the Agreement to fulfil conditions. The conditions indicated, similar in this proceeding, that unless Invecom indicated in writing by a specific time to the contrary, the condition would deem to be satisfied and waived. On the day of the expiry, Invecom sent a second request for an extension to 226095. The seller refused. Invecom did not send a notice in writing that the conditions could not be satisfied and thus, per the terms of the conditions, they were deemed to be satisfied and waived. The purchasers refused to close indicating that the transaction was at an end. Ivecom argued that the Draft Extension Agreement constituted the written notice required indicating that it could not satisfy the conditions. The trial judge disagreed. The Court of Appeal dismissed the appeal and upheld the reasoning of the trial judge that the Agreement was clear and unambiguous. The Draft Extension Agreement did not constitute written notice by Invecom that it could not satisfy the conditions per the pertinent paragraphs in the Agreement. The Draft Extension Agreement was an offer to extend the agreement. It was not written notice that the conditions were not satisfied and were waived, as contemplated by the Agreement.

31In the facts of this matter, there is no question that there were negotiations between the applicants and these respondents concerning chattels to be included and excluded along with work to be performed following the inspection of the respondents.

32There is no argument that the terms of the APS are not clear and unambiguous. Thus, the Court is to review the wording of the all the terms of the APS.

33There is also no question that the two material conditions concerning financing and inspections were for the benefit of these respondents and were required to be waived 10 days after March 23, 2021, being April 2, 2021.

34The APS is clear that: “This agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition which affects this Agreement other than as expressed herein.” Any oral or written representations that do not form part of the APS including its schedules are not included as terms of the APS.

35The Amendment Agreement was not executed by the applicants. These respondents, it appears to the Court, were hedging their bets that the applicants would accept the terms of the Amendment Agreement which included terms of included chattels and work to be done. The deadline for acceptance of the Amendment Agreement was one minute before the expiry of the conditions to notify fulfilment or waive, failing which the APS would be null and void. The applicants did not accept the terms of the Amendment Agreement and on the strict reading, unless the two conditions were notified were fulfilled or waived in writing by April 2, 2021, the APS is at an end. It becomes null and void.

36I do not accept the argument of these respondents that the Amendment Agreement, by including terms to delete, was a notification or waiver of the two conditions. First, I do not accept that a form of Amendment Agreement which requires the signature of all parties concerned is a waiver. The Amendment Agreement was simply that, an offer to amend the agreement on the terms in the Amendment Agreement that requires acceptance of all parties concerned. In addition, the two conditions were included in the APS solely for the benefit of these respondents. The respondents had within their power to send the required waiver or notification in writing and then request the proposed terms of amendment. The respondents did not, I suspect, because if they did, they would be legally bound by the terms of the APS whether the applicants accepted the terms of the Amendment Agreement or not. It appears that the respondents were not willing to take that risk.

37Second, no evidence was provided to the Court to show that these respondents were ready, willing and able to close the transactions. By not providing a waiver, notification of acceptance of the conditions or evidence that these respondents had financing for the purchase, the Court cannot ascertain that the respondents were ready willing and able to finalize the APS. As the Court of Appeal indicated in Bawitko, a determination of whether the aggrieved party was ready, willing and able to close the transaction is pertinent to whether there was an intention and ability to complete the transaction.

38Thus, I find that these respondents did not comply with the two conditions concerning inspection and financing. They did not notify fulfilment or waive the two conditions by the end of the calendar day on April 2, 2021 and from the plain and unambiguous language of the conditions, the APS is null and void and the deposits to be returned without deduction. These respondents no longer had an interest in the Property as of 12:00 a.m. on June 3, 2021.

Should the Purchaser’s Lien be discharged?

39In order for these respondents to have a Purchaser’s Lien, these respondents must show that:

1. These respondents are not in breach of the terms of the APS.

2. The deposits that were paid are being withheld from theses respondents.⁷

40A Purchaser’s Lien is not a claim for damages or a claim for an interest in the entirety of the land in question. A Purchaser’s Lien is an equitable interest or lien on the property for security of the deposits paid.⁸

41In this situation, these respondents are in breach of the APS. The APS is at an end. The applicants offered to return the deposit upon these respondents executing the mutual release. These respondents refused to do so. The deposit was secure with Kawartha.

42Accordingly, I find that these respondents did not have an equitable interest to secure the deposits paid. The Purchaser’s Lien shall be discharged and deleted from title of the Property.

43The applicants contend that these respondents never had a purchaser’s lien for they breached the APS, refused to accept the deposits and the deposits were secure by being paid to the real estate broker, Kawartha. Moreover, the applicants contend that these respondents deliberately did not comply with the requirements of the registration of a Purchaser’s Lien by failing to include in the Land Transfer Tax Affidavit the full amount of the consideration for the purchase and in so doing, did not pay the required fee to the Government. Also, these respondents did not disclose that the applicants were willing to pay the deposit to theses respondents. The applicants contend that the actions of these respondents were deliberate to cloud the title of the applicants.

44I make no finding on this submission of the applicants. I need not address this factual matrix to determine that the relief requested by the applicants that the Purchaser’s Lien must be discharged and deleted from title of the Property.

Did the applicants breach a duty to act in good faith?

45These respondents contend that the applicants breached their duty to act in good faith. These respondents argue that they owed a duty of honesty and the applicants must not lie or knowingly mislead the respondents about matters directly linked to the performance of the APS.⁹

46These respondents argue that the conduct of the applicants amount to not acting honestly with these respondents. The applicants knowingly mislead these respondents. These respondents refer to emails between the applicants and the Agent that the applicants were negotiating APS2 in early April 2021. The applicants asked advice of the Agent if the signature of the applicants are still required ”to bind this deal” given that the respondents have added the “to do” changes and if these respondents do not waive the two conditions, do the applicants have a “contingency offer” that becomes binding being APS2?¹⁰

47No evidence has been provided that indicates any response to the questions posed by the applicants in the emails or any communication between the Agent and these respondents concerning the Amendment Agreement and the timing of the expiry of the Amendment Agreement.

48Moreover, the emails provided were communications between the applicants and the Agent and these respondents and the Agent. There was no affidavit filed by a representative of the respondent, Kawartha. There was no evidence provided on what advice, if any, either the applicants or the respondents received from the Agent. There was no evidence provided of any direct communication between the applicants and these respondents.

49The Supreme Court of Canada indicated in C.M. Callow Inc., a contracting party has “no general duty to subordinate their interest to that of the party in the law as it stands.”¹¹

50Further, the Court indicated:

Requiring a party to speak up in service of the requirements of good faith where nothing in the parties contractual relationship brings a duty to do so could be understood to confer an unbargained-for benefit on the other that would stand outside the usual compass of contractual justice. Yet where the failure to speak out amounts to active dishonesty in a manner directly related to the performance of the contract, a wrong has been committed and correcting it does not serve to confer a benefit on the party who has been wronged.¹²

51I agree with the submissions of the applicants. There was evidence provided that indicate the applicants breached any duty to act honestly. There is no evidence, in my view, that indicates that the applicants lied or acted actively dishonest. The terms of the APS are clear. These respondents had the onus of waiving the two conditions, not the applicants. As already mentioned, these respondents could have waived the conditions and hoped to negotiate the concerns of chattels and repairs, the “to do list”, afterwards. For whatever reason, they chose not to do so. To find otherwise is, in my view, conferring an unbargained benefit to these respondents, a benefit that is outside the terms of the bargain, the APS.

52Consequently, I do not accept the argument of these respondents that the applicants breached their duty to act in good faith in their contractual relation.

Disposition

53Accordingly, I repeat the relief granted as set out in my Endorsement dated May 27, 2021:

1. A declaration that the Agreement of Purchase and Sale between the applicants, as vendors and the respondents, Sreedhar Reddy Nellipudi and Prem Sheela Nellipudi as purchasers dated March 17, 2017 regarding the property municipally known as 7348 Highway 35, Coboconk, Ontario (the APS) is null and void;

2. An Order discharging the Notice (Purchaser’s Lien) registered on May 3, 2021 as Instrument Number KL 176619 against the lands and premises municipally known as 7348 Highway 35, Coboconk, Ontario, more particularly described as,

PIN 63113-0476 LT

PT LT 4 CON 11 LAXTON; PT SHORE RDAL LAXTON

IN FRONT LT 4 CON 11 CLOSED BY L2732 AS IN R408748; KAWARTHA LAKES

3. An order that the deposit paid in the amount of $100,000 pursuant to the terms of the APS presently held by the respondent, Kawartha Waterfront Realty Inc. be paid to these respondents forthwith.

54On the issue of costs, if the parties cannot agree on costs, the applicants to serve and file their submissions on costs within 14 days from the date of this Decision, and these respondents will have 14 days thereafter to serve and file their submissions. The submissions to be no more than three pages, double spaced, exclusive of any cost outline, case law and offers to settle. There is no right to reply. Submissions are to be filed with the Court. If no submissions are received within the time period set out herein, an order will be made that there will be no costs.

Justice P.W. Sutherland

Released: June 1, 2021

LINDSAY FILE NO.: CV-21-70

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Andrew Stephen Fenyes and Joanne Marie Cain

Applicants

– and –

Sreedhar Reddy Nellipudi, Prem Sheela Nellipudi and Kawartha Waterfront Realty Inc.

Respondents

Footnotes

1. 1CV-21-1834-00 commenced May 14, 2021.
2. 21991 CanLII 2734, (1991), 79 DLR (4th) 97 (Ont. CA)
3. 3[2020] O.J No. 5577 at paras. 20-23.
4. 4[2009] O.J. No. 4179, 2009 ONCA 709, 2009 OREG para. 58,764 at para. 43.
5. 5Supra, note 2, at p. 18.
6. 62017 ONCA 70
7. 7Langford v. 1734141 Ontario Lid. 2008 CanLII 67413 (ONSC), at paras 12, 13 and 19; Alves v. De Souza, [2018 O.J. No 435 at para. 29.
8. 8Ibid
9. 9C.M. Callow Inc. v. Zollinger, 2020 SCC 45, [2020] SCJ No.45 at paras. 3, 90 and 91.
10. 10Exhibit G to the Affidavit of Sreedhar Reddy Nellipudi dated May 18, 2021 being an email from Andrew Fenyes to David Donais dated April 2, 2021 at 12:32 p.m.
11. 11Supra, note 9, at para. 81
12. 12Ibid.