COURT FILE NO.: CV-21-3999-00
DATE: 2022-06-02
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
VIKRAM CHANDRAN and CHITHRA VIJAYAN
Applicants
- and -
GURKIRAT SINGH PANNU and MANDEEP GILL
Respondents
Harpreet Singh Makkar, for the Applicants
David Milosevic and Arad Moslehi, for the Respondent
HEARD: May 27, 2022, by video-conference, at Brampton, Ontario
Price J.
Reasons For Order
OVERVIEW
[1] In a market of rising house prices, it is a temptation for vendors to skirt the rules governing the sale of a property in order to profit from the increase in their property’s value from the time they entered into their Agreement of Purchase and Sale to the time when their transaction closes. This case illustrates the point.
[2] The respondent, Gurkirat Singh Pannu (“Mr. Pannu”), entered into an Agreement of Purchase and Sale (“the APS”) to buy a pre-construction property from the builder/developer (“the builder”). Mr. Pannu assigned the APS to the applicants. When the value of the property rose, Mr. Pannu amended his APS to substitute his realtor’s wife as the buyer, thereby enabling her, instead of the applicants, to buy the property.
The applicants seek an order directing the substituted buyer to transfer the title of the property to them upon their paying the originally agreed upon purchase price. They additionally seek damages from Mr. Pannu for the loss occasioned to them by his breach of his agreement assigning his Agreement of Purchase and Sale to them. For the reasons that follow, the applicants are entitled to succeed in their application. Even in a rising market, vendors of real estate owe a duty of good faith to purchasers to honour their agreements to sell the property at the price they agreed upon.
BACKGROUND FACTS
[3] On August 5, 2020, Mr. Pannu signed the APS whereby he agreed to buy a pre-construction property at 25 Eberly Woods Drive in Caledon, Ontario from the builder, Poetry Living (Ellis Lane) Ltd. (“the property”) for $1,060,990.00. Mr. Pannu and the builder later agreed to increase the price to $1,078,375.05 to take account of up-grades to the property.
[4] Mr. Pannu is an experienced real estate investor and had sold two other homes in the same vicinity, making a profit of approximately $1,269,600.00 on those sales in the span of two months.
[5] The APS provided for the following payments toward the deposit:
a. Initial deposit of $20,000.00 due with the offer;
b. $20,000.00 due August 27, 2020;
c. Further deposit of $20,000.00 due September 26, 2020;
d. $20,000.00 due October 26, 2020;
e. $20,000.00 due November 25, 2020;
[6] The APS allowed the builder to extend the closing date in certain circumstances without penalty or interest charge. The builder extended the first tentative closing date of September 30, 2021, to January 30, 2022.
[7] The APS contained the following clause with respect to assigning the APS:
ASSIGNMENT
Prior to the Closing Date, the Purchaser covenants and agrees not to … assign this Agreement or any interest therein, or the benefit thereof, to any person without the prior written consent of the Vendor which may be arbitrarily and/or unreasonably withheld or delayed. As a condition of giving its consent, the assignor/transferor and the assignee/transferee will be required to execute and deliver to the Vendor the Vendor’s standard form of assignment agreement and to pay to the Vendor on the date of execution and delivery of the assignment agreement the Vendor’s administration and processing fee of $5,000.00 plus Applicable Taxes and the Vendor’s solicitor’s fees in the amount of $550.00 plus Applicable Taxes.
[8] On March 8, 2021, Mr. Pannu signed an Assignment of the APS to the applicants (“the AAPS”).
[9] The AAPS attached the APS as a Schedule and required Mr. Pannu to request the consent of the builder/developer and to pay the fees charged by the builder. The AAPS provided:
The ASSIGNOR shall request the consent of the Developer to this Assignment. The ASSIGNOR agrees to pay any assignment fees charged by the Developer and its solicitors if any, to obtain the consent of the Developer to the assignment plus any applicable taxes. In the event the Developer refuses to provide written consent to the assignment, then this Assignment of Agreement of Purchase and Sale shall become null and void and all deposit monies shall be returned in full to the ASSIGNEE without any deduction.
[Emphasis added]
[10] The AAPS provided that the applicants would pay $1,360,100.00 to Mr. Pannu, beginning with a deposit of $41,000.00 to Royal LePage Flower City Realty, Brokerage, to be held in trust pending completion or other termination of the AAPS.
[11] The applicants paid the $41,000.00 deposit, which is currently being held in trust by Royal LePage Flower City Realty, Brokerage.
[12] On March 15, 2021, and March 18, 2021, the parties signed two amendments to the AAPS. The first increased the time for fulfilling conditions in the AAPS from 5 banking days to 8 banking days. The second deleted the conditions on the Assignment and confirmed that the balance that the applicants were required to pay to Mr. Pannu on final closing of the AAPS would be $1,340,724.95.
[13] On March 19, 2021, the builder wrote to Mr. Pannu informing him that construction on the property had begun. Approximately two and a half months later, the builder notified Mr. Pannu that he had encountered unforeseen delays in the construction due to the COVID-19 pandemic. As a result, the Closing Date was extended to a new Second Tentative Closing Date of November 22, 2021.
[14] After Mr. Pannu and the applicants signed the AAPS, the value of the property increased. According to a Comparative Market Analysis dated March 17, 2022, prepared by the applicants’ realtor, its current value is approximately $1,900,000.00.
[15] Mr. Pannu failed to request the builder’s consent to his assignment of his interest in the APS to the applicants, as required by the AAPS, and did not pay any fee charged by the builder for providing his consent.
[16] Mr. Pannu’s realtor, Harminder Gill (“Mr. Gill”) caused the applicants’ realtor to send their identification documents and mortgage pre-approval to him and/or Mr. Pannu’s lawyer several times, thereby causing the applicants to believe that Mr. Pannu was performing his obligations under the AAPS.
[17] On May 6, 2021, the applicants’ real estate lawyer, Harpreet Khurana, contacted Mr. Pannu’s lawyer, Amandeep Kapila of Aasara Lawyers Professional Corporation, and requested a copy of the builder’s consent to the AAPS. Mr. Kapila sent an evasive reply, in which he stated:
Hi
We’ve got the related documents in this transaction but we’ve not received any specific instructions from the assignor.
We’ll proceed if we r contacted by the assignor. We’ll update you if there is change in situation.
Thanks.
Aman
[18] This response was substantially repeated, on October 19, 2021, when Mr. Kapila wrote to the applicants’ litigation lawyer, Harpreet Singh Makkar:
Dear Mr. Makkar
I looked at the previous emails relating to this matter. We got some documents for this, but were not instructed by the assignors. We have left messages to the realtor but no reply on this. If I get any information on this, I’ll surely update your office.
[19] Mr. Pannu, in his affidavit sworn February 25, 2022, states:
- I verily believe that in July of 2021, Haminder texted the Applicants’ realtor Ankit, advising him that the Builder has increased the Builder Fees under the APS and the initial agreed amount of roughly $5,550 has now increased to $36,500.00 The Builder Fees are what the Applicants and I agreed to, as stipulated under the APS which was appended as Schedule C of the AAPS. Attached hereto as “Exhibit I” is a copy of Harminder’s text message of July 28, 2021 to Ankit.
[20] On July 28, 2021, Mr. Pannu’s realtor, Harminder Gill (“Mr. Gill”), sent a text message to the applicants’ realtor, Ankit Sarhadi (“Mr. Sarhadi”), stating that Mr. Pannu’s lawyer was communicating with the builder, but that Mr. Pannu was not willing to pay the increased fee of $35,999.00 to obtain the builder’s consent to the AAPS.
[21] On October 7, 2021, Mr. Gill forwarded to the applicants’ realtor a screenshot of an e-mail dated July 7, 2021, from the builder’s lawyer to Mr. Kapila, implying that it concerned the assignment of the property to the applicants but, in fact, not identifying what property it related to. Despite requests from the applicants’ realtor, Mr. Gill did not confirm that the e-mail shown in the screenshot related to the property, nor forward the e-mail shown in the screenshot, nor the e-mail to the builder to which the builder’s e-mail purportedly responded.
[22] On October 19, 2021, the applicants’ lawyer, Mr. Makkar, sent a letter to Mr. Pannu’s lawyer, Mr. Kapila, again requesting that Mr. Pannu obtain and provide the builder’s consent to the assignment of the APS to the applicants. In response, Mr. Kapila advised that he had no instructions from his client, Mr. Pannu.
[23] Mr. Pannu claims that he left for India in October 2021 due to illness in his family. He has not identified the date of his departure or the date of his return or provided any evidence of the alleged travel.
[24] Mr. Gill advised the applicants’ realtor that Mr. Pannu may have changed his mind and decided not to proceed with the AAPS, allegedly due to the builder’s demand for an increases fee for providing his consent to the assignment. Mr. Gill asked the applicants’ realtor to obtain a mutual release signed by his clients, which they refused to provide.
[25] Instead of obtaining the builder’s consent to the assignment, Mr. Pannu amended his APS with the builder on November 29, 2021, substituting as buyer his realtor’s wife, Mandeep Gill, who was well aware of the assignment of the APS to the applicants.
[26] Correspondence was exchanged between Mr. Pannu’s real estate lawyer, Mr. Kapila, and the applicants’ litigation lawyer, Mr. Makkar, on December 20, 2021, in which Mr. Kapila advised Mr. Makkar that the APS had been amended, substituting Ms. Gill for Mr. Pannu as the buyer. Mr. Makkar advised Mr. Kapila that Mr. Pannu remained obligated by the AAPS. In response, Mr. Kapila advised Mr. Makkar for the first time that the APS transaction would close the following day, December 21, 2021, on which date, the property would be transferred to Ms. Gill.
[27] In his e-mail dated December 21, 2021, to Mr. Makkar, Mr. Kapila acknowledged that Mr. Pannu had failed to request the builder’s consent to the AAPS. Mr. Kapila stated:
My staff just checked our previous emails and apprised me that we were never instructed by Grukirat to get an assignment in this transaction. In this specific transaction, our office only requested an assignment to the Builder’s lawyer last week after an amendment was executed by the parties without our knowledge and advice. Though we have other transactions in this subdivision and requested assignment in one of those. We will re-check our records and if there is any change we will inform your office.
[Emphasis added]
[28] Instead of applying to the builder for his consent, Mr. Pannu, without the applicants’ knowledge or consent, signed an Amendment of the APS, substituting his realtor’s wife, Mandeep Gill, for himself as buyer. Mr. Kapila acted for Ms. Gill in her purchase of the property, which was completed on December 22, 2021. Ms. Gill thereby became the registered owner of the property.
[29] The applicants were always ready, willing, and able to close the Assignment Agreement, as appears from mortgage approval documents that they obtained from time to time and provided to Mr. Pannu or his realtor. The applicants tendered as exhibits “A” and “C” of Vikram Chandran’s affidavit sworn March 21, 2022, a mortgage pre-approval dated March 17, 2021, and another dated March 10, 2022, which shows that they had the necessary financing throughout.
ISSUES
[30] The Court is asked to determine whether Mr. Pannu breached a duty of good faith owed to the applicants by not taking all reasonable steps to complete his assignment of the Agreement of Purchase and Sale to them.
PARTIES’ POSITIONS
The applicants’ position
[31] The applicants submit that Mr. Pannu failed to request the builder’s consent to the assignment of his interest in the APS and instead amended the APS to enable his realtor’s wife to purchase the property. They submit that Mr. Pannu failed to take all reasonable steps to complete the AAPS and thereby breached his duty of good faith to the applicants.
The respondents’ position
[32] The respondents submit that Mr. Pannu was free to substitute Ms. Gill as purchaser of the property because he had not yet assigned his interest in the APS to the applicants, as the builder/developer had not consented to the assignment. They further submit that Mr. Pannu entered into the AAPS on the basis that the builder’s fee for giving his consent would be $5,550.00, as set out in the APS, which was attached as a Schedule to the AAPS, and that he was under no obligation to obtain the builder’s consent for the higher fee of $35,000.00 that the builder purportedly later demanded.
ANALYSIS AND EVIDENCE
The Jurisprudence
[33] A vendor of property is under a duty to act in good faith and to take all reasonable steps to complete the sale. See Nguyen v. Hu, 2022 ONSC 2666, per Justice Fred Myers, at paras. 61 to 75.
[34] There are no material facts in dispute in the present proceeding that require a trial. If I am mistaken in this, any such dispute does not disentitle the applicants to recovery. See: Niagara Air Bus Inc. v Camerman (H.C.J.), 1989 ONSC 4161.
Findings of Fact
[35] I make the following findings of fact based on the evidence.
a. Mr. Pannu entered into the AAPS with the applicants that required him to request the builder’s consent to the assignment and to pay the builder’s fee for providing his consent.
b. The AAPS was not conditional on the builder charging $5,550.00 for giving his consent to the assignment. If the builder demanded a fee of $35,000.00 for his consent to the assignment, and Mr. Pannu disputed that fee, it was Mr. Pannu’s duty to pay the increased fee or seek a court order relieving him of his obligation to do so. He did neither.
c. The builder’s consent to the assignment was not required prior to its execution. Schedule A of the AAPS explicitly provided for a situation where the builder refused his consent to the assignment.
d. Based on Mr. Pannu’s failure to provide the assurance to the applicants that their real estate lawyer requested, that the e-mail shown in the screenshot that Mr. Gill sent to the applicants’ realtor related to the property, and their failure to provide the e-mail by which Mr. Pannu had requested the builder’s consent, I draw the adverse inference that that e-mail shown in the screenshot did not relate to the property and that Mr. Pannu never requested the builder’s consent.
e. Mr. Pannu’s failure to request the builder’s consent to the AAPS, and his failure to pay the builder’s fee for providing his consent, were breaches of his obligations under the AAPS.
f. If Mr. Pannu left for India in October 2021, seven months after signing the AAPS, he was obliged to have obtained the builder’s consent to the AAPS before he left. See: Nguyen v Hu, supra, at paras. 64 and 67. In fact, Mr. Pannu made no reasonable efforts to obtain the builder’s consent, as is clear from the e-mail from Mr. Kapila to Mr. Makkar dated December 21, 2021, referred to above.
g. Mr. Pannu amended his APS with the builder to substitute Ms. Gill as the purchaser of the property, and thereby further breached the AAPS.
h. Ms. Gill entered into the amended APS knowing that it was in breach of Mr. Pannu’s agreement to assign his interest in the APS to the applicants.
i. The applicants were at all times ready, willing, and able to close the AAPS and the APS, and were deprived of the opportunity to do so solely by reason of the respondents’ having amended the APS by substituting Ms. Gill as the purchaser of the property.
CONCLUSION AND ORDER
[36] Mr. Pannu breached his duty of good faith to the applicants by failing to request the builder’s consent to his assignment of his interest in the APS to the applicants and by failing to pay the builder’s fees for giving his consent.
[37] For the foregoing reasons, it is ordered that:
The respondent, Ms. Gill, holds title to the property in trust for the applicants.
Ms. Gill shall forthwith transfer the title of the property to the applicants, upon their paying the balance of the $1,360,100.00 purchase price that was owed by them under the APS, after applying the deposit paid by them to the broker.
The respondents shall pay to the applicants their costs of this proceeding as agreed upon by the parties or as determined by this Court. If the parties are unable to agree on costs, they shall submit their written arguments, not to exceed 4 pages, and a Costs Outline, together with any relevant Offers to Settle to this Court by June 17, 2022.
Price J.
Released: June 2, 2022
COURT FILE NO.: CV-21-3999-00
DATE: 2022-06-02
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
VIKRAM CHANDRAN and CHITHRA VIJAYAN
Applicants
- and –
GURKIRAT SINGH PANNU and MANDEEP GILL
Respondents
REASONS FOR ORDER
Price J.
Released: June 2, 2022