ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FIONA HALLIDAY-SHAW and HAMISH SHAW
A. Huff, for the Plaintiffs
Plaintiffs
- and -
THOMAS GRIECO
A Pantel, for the Defendant
Defendants
HEARD: 16 May 2022
DECISION ON SUMMARY JUDGMENT MOTION
The Honourable Justice J. Krawchenko
Background
1This is a motion for summary judgment stemming from an Agreement of Purchase and Sale (“APS”) for a lakefront property located in Niagara on the Lake (“the Property”) that did not close.
2In their amended Notice of Motion, the Plaintiffs seek the following:
a) A declaration that the APS is valid, binding and enforceable;
b) An Order for specific performance;
c) An Order setting a new closing date within 45 days of the decision of this motion;
d) An Order for damages for out-of-pocket costs as a result of the defendant’s repudiation and/or breach of the APS.
3The Defendant responding party seeks an Order dismissing the Plaintiffs’ motion for summary judgement as well as an Order directing a trial to assess the Defendant’s damages sought in his counterclaim.
Preliminary Question – Is this a case for Summary Judgment
4Rule 20.04(2)(a) provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial.
5In my view, the issue of specific performance of the APS can be determined on the basis of the evidentiary record before the court, allowing me to make the necessary findings of fact and to apply the law in a proportionate and expeditious way which would achieve a just result, there being no genuine issue requiring a trial on the main action.
6The counterclaim was not addressed in this summary judgment motion. As it may result in a set off as against damages claimed by the Plaintiffs, the Plaintiffs claims for damages for alleged out of pocket expenses as well as the counterclaim shall be heard as a mini trial. That mini trial will proceed expeditiously with the Plaintiff and Defendant being allowed a maximum of two hours each, to prosecute their cases to conclusion, including argument and submissions.
Facts
7On 14 March 2021 the Plaintiffs entered into an APS with the Defendant.
8The ultimate sale price of $2,020,000.00 was above asking price. The Plaintiffs paid a $100,000.00 deposit.
9The APS set out an original closing date of 29 June 2021 with a requisition deadline of 14 June 2021.
10The parties agreed to advance the closing date to 10 June 2021.
11The Plaintiffs listed and sold their own home in anticipation of purchasing the subject property.
12In their requisition letter dated 3 June 2021, the Plaintiffs identified a number of issues that required attention. For the purposes of this application, the two that caused the tension between the parties were:
a) the vendor’s status as a non-resident of Canada triggering a hold back from the purchase funds pending the delivery of a clearance certificate, and
b) the lack of legal land access to the Property.
13The Plaintiffs made the following requisitions:
- The Seller of the subject lands is a non-resident of Canada.
REQUIRED: Solicitor’s Undertaking to holdback 25% of the gross sale proceeds in your trust account until such time as you are able to provide my office with a Section 116 Clearance Certificate under the Income Tax Act regarding the vendor being a non-resident of Canada and to undertake to apply for such Certificate as soon as possible and to pay the amount required to obtain it from the above funds held back in your trust account.
- Access to the subject lands is gained by means of a private road described as Lot 38 Plan 348 Niagara; Town of Niagara-on-the-Lake PIN 46366-0123 ( R ). This road is jointly owned by the eighteen property owners who utilize same for access to their properties.
The Seller’s predecessor in title, Kim Shin-Kwon, is the registered owner of the 1/18^th^ interest in this private road.
REQUIRED: A transfer from Kim Shin-Kwon to my clients of his interest in the lands described as PIN 46366-0123 (R ).”1
14On 9 June 2021, one day prior to the scheduled closing, the Vendor responded to the initial letter of requisitions. The Vendor’s official response to the above noted two requisitions was as follows:
The title holder is a non- resident but holds only 1% beneficial interest in land. Please note Trust Declaration between Thomas Grieco and Davie Hao attached hereto. We will be holding back the appropriate funds to obtain a clearance certificate for non-resident taxes applicable and will provide your office with undertaking of the hold back.2
This parcel of land is not mentioned or being sold as per the agreement of purchase and sale. Our client is not the owner of the subject parcel of land; hence it will not be conveyed.”
15Correspondence was exchanged as between counsel following the requisition letter, and response to same appeared to reflect two law offices trying to work through the challenges that had presented themselves.
16On 10 June 2021, counsel for the Vendor wrote to his counterpart acting for the Purchasers and stated that with regards the holdback issue, he had been instructed “ …to take steps to ensure that the Purchasers are relieved in their concerns by contacting Revenue Canada, compliance Certificate department to achieve confirmation of the taxes payable….I will keep you apprised of their response. In the same letter with regards to the road access issue, Vendor’s counsel wrote that he had contacted the Vendor’s title insurer ..Stewart Title and have explained the concerns of your client in that 1) they wish to own the road and 2) that Mr. Kim appears to be interested in conveying the road a reasonable amount of money and 3) this would diminish the insurers costs later on if there was a claim made by a policy owner.” Vendor’s counsel closed his letter setting out that his answers to the two requisitions was valid and that the deal ought to have closed, but “there is no reason not to spend a little more time trying to resolve the anxiety of the purchasers in this deal”.
17Counsel for the parties agreed to extend the closing to Friday 11 June 2021.
18The deal did not close on Friday. The Purchasers suggested an extension to Wednesday 16 June 2021 for closing. The Vendor did not respond to this suggestion.
19On Monday afternoon, 14 June 2021, at 2:54 p.m., Vendor’s counsel communicated the position that:
a) the vendor did not own the road in question, erroneously stated that access to the property was “protected by a policy of insurance” and
b) without providing the purchasers with any official confirmation from the Canada Revenue Agency, purported to make a calculation of non-resident taxes owing of $2,175.00 with a suggested holdback of $8,700.00, notwithstanding the purchaser’s potential liability with respect to the tax payable by the non-resident registered owner in the amount of $505,000.00.
20In this same letter of 14 June 2021, the Vendor communicated a unilateral deadline set for two (2) hours later stating “…we refuse to extend the closing after 5:00P.M. June 14, 2021…”. At 6:10 p.m. that day, the Vendor declared that the Purchasers’ right to close the deal was now terminated. The Purchasers responded to the Vendor on 15 June 2021 advising that they did not accept that the transaction was at an end and wanted to close.
21By 18 June 2021, the Purchasers communicated to the Vendor that they had resolved the road access issue to their satisfaction, repeated the need to make the appropriate non-resident holdback or, in the alternative, provide a clearance certificate and advised that they could close on 24-hours’ notice at any time the following week. The Vendor did not respond.
22The Purchasers were then required to complete the sale of their own home on 23 June 2021 and moved into a short-term rental followed by moving into one of their own rental properties resulting in their claimed “out of pocket” expenses, which will be the subject matter of a mini trial.
The Requisitions
23Both requisitions were validly made, both were significant independent of each other: one relating to title; the other to the practical issue of proper withholding of taxes due.
24On the issue of road access, the purchasers bargained for a property that was to be accessed over a private road. The purchasers legitimately sought legal access to the Property. While the vendor may have had otherwise “good title” to the Property upon which the principal residence sat, he did not have “good title” to the 1/18 share of the private road that ought to have complimented this ownership interests. While title insurance may have provided some solace, an optimum solution would be to address the actual issue and obtain the transfer of the road interest, which appeared to be what the parties were attempting to accomplish as of 10 June 2021.
25On the issue of the holdback, this was a term of section 17 of the APS as set out in section 116 of the Income Tax Act. Absent a Clearance Certificate or other form of comfort from the CRA setting out the appropriate holdback, the purchaser would be at risk of being required to pay 25% of the cost of the property, in this case an additional $505,000.00, a much greater sum than the $8,700.00 the vendor had offered to hold back on the basis of his own calculations and not those of the CRA.
Time is of the Essence
26The APS contains a “time is of the essence” clause permitting a party to terminate the contract when the closing date elapses.
27In the Ontario Court of Appeal decision in King v Urban3 the court addressed “time is of the essence” in a situation where neither party was willing and/or able to complete the transaction on the closing date.
28The rule from King v Urban is that when time is of the essence and neither party is ready to close on the agreed date, the agreement remains in effect. Either party may reinstate time of the essence by setting a new date for closing and providing reasonable notice to the other party.
29Applying this rule to our fact situation, neither Purchasers nor Vendor were ready to close on 10 June 2021 and, in fact, were clearly trying to work out the issues in order to close, which required more time.
30As at the end of the day on 10 June 2021, time was no longer of the essence. Neither party reinstated time as being of the essence by setting a new date for closing and providing reasonable notice of same.
31On the facts and evidence before me, I find that the contract between the Plaintiffs and Defendant continues to be in play, and when this court sets a new closing date, time will, again, be of the essence leading up to that new closing date.
Specific Performance
32On the facts before me, specific performance of the contract is the most appropriate remedy, given the unique characteristics of the subject Property.
33I accept the evidence of the Plaintiffs and that of real estate broker, Michelle Reynolds, that support both an objective and subjective finding of uniqueness of the Property that support specific performance as the appropriate remedy.
Conclusion
34For reason noted above, the court makes the following orders:
(i) This court declares that the Agreement of Purchase and Sale, dated March 14, 2021 (the “APS”) between the Plaintiffs and the Defendant in respect of the property municipally described as 69 Firelane 2 Road, Niagara-on-the Lake, Ontario (the “Property”), legally described below, is valid, binding, and enforceable: LOT 18 PL 348 NIAGARA, PT 1 30R13262; NIAGARA-ON-THELAKE; PIN 46366-0184 (LT)
(ii) This court orders specific performance compelling the Defendant to perform his obligations under the APS;
(iii) This court further orders the setting a new closing date within 45 days of the release of this decision;
(iv) This court orders and directs the vendor’s solicitor to hold back 25% of the sale price pending receipt and delivery to the plaintiffs (either prior to or after closing) of the CRA Clearance Certificate, at which point the requisite taxes shall be paid by the vendor. The balance of funds held in trust after payment to the CRA, if any, shall be paid to the vendor or as the vendor may further direct;
(v) The outstanding claims for damages advanced by the Plaintiffs as well as the counterclaim of the Defendant shall proceed before me by way of a mini trial on terms set out at paragraph 6 of this decision. I will remain seized of this matter.
(vi) The costs of this motion shall be addressed at the conclusion of the mini trial.
Justice J. Krawchenko
Released: June 2, 2022
COURT FILE NO.: CV 21-76578
DATE: 20220601
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FIONA HALLIDAY-SHAW and HAMISH SHAW
Plaintiffs
- and –
THOMAS GRIECO
Defendants
DECISION ON SUMMARY JUDGMENT MOTION
Released: June 2, 2022
The access road referenced has been privately and jointly owned by 18 property owners who required it to access their respective lands. It was not subject to right(s) of way in favour of the Vendor’s lands. The reason why the 1/18 interest in the private roadway was not conveyed at the time the Vendor acquired his title to the Property, remains a mystery, but it appears to have been a conveyancing error. What is important is that absent the transfer of the 1/18^th^ interest set out in the requisition, access would be either be by way of trespass over the roadway or via Lake Ontario.
Footnotes
- The listing agreement specified that access to the Property was by “private road”.
- No evidence was provided as to Mr. Hao’s residency status.
- King v Urban & County Transport Ltd 1973 CanLII 740 (ON CA)