SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-21-77517 DATE: 20220815

RE: 5000933 Ontario Inc., Applicant/Respondent in Counter-Application AND: Khalid Mahmood and Ume Kalsoom, Respondents/Applicants in Counter-Application

BEFORE: MacNeil J.

COUNSEL: C. Neil – Lawyer for the Applicant O. Hoque – Lawyer for the Respondents

HEARD: April 26, 2022 (via Zoom videoconference)

REASONS FOR DECISION

Overview

[1] The Applicant, 5000933 Ontario Inc. (“5000933”), is a builder and vendor of new homes in a residential real estate development in Hamilton. It owns lands that are the subject of an uncompleted real estate transaction involving the Respondents, Khalid Mahmood (“Mr. Mahmood”) and Ume Kalsoom (“Ms. Kalsoom”). 5000933 commenced this application seeking a declaration that the agreement of purchase and sale has been repudiated by Mr. Mahmood and that it is entitled to resell the lands, along with other related relief.

[2] Mr. Mahmood and Ms. Kalsoom are spouses. They oppose the application and have brought a counter-application seeking a declaration that the agreement of purchase and sale remains in full force and effect, a declaration that 5000933 is in breach of the agreement, and an order for specific performance. In the alternative, they seek damages for breach of contract, breach of the duty of good faith and negligent misrepresentation.

Background

[3] On or about September 2, 2020, Mr. Mahmood and Ms. Kalsoom signed an offer to purchase from 5000933 a new home to be built on Lot 1 in the Foothills of Winona development (“the Property”) for the price of $849,900.00, with a proposed closing date of January 19, 2022.

[4] Mr. Mahmood and Ms. Kalsoom subsequently signed another offer, dated September 18, 2020, for the same purchase price but with a closing date of June 15, 2021. On September 29, 2020, this offer was amended to remove Ms. Kalsoom’s name and to insert a new September 30, 2020 irrevocable date.

[5] On September 30, 2020, 5000933 accepted the September 29th offer made by Mr. Mahmood alone as purchaser (“the Agreement”).

[6] The Agreement included the following terms:

a. The purchase price was $849,900.00.

b. The initial deposit was $20,000.00.

c. Upon the waiver of certain conditions by the purchaser, subsequent deposits of (i) 5% of the purchase price less the initial deposit; and (ii) 5% of the purchase price, were due.

d. The balance of the purchase price was due on the closing date, subject to adjustments set out in the Agreement.

[7] Since the Agreement involved the construction of a new home, the Tarion Statement of Critical Dates and Addendum (“the Tarion Addendum”) formed part of the Agreement. It provided for a First Tentative Closing Date of June 15, 2021; a Second Tentative Closing Date that could be as late as October 13, 2021; a Firm Closing Date that could be as late as February 10, 2022; and an Outside Closing Date that could be as late as October 13, 2022. The Statement of Critical Dates also provided that Critical Dates could change, as per section 5 of the Tarion Addendum, if there were unavoidable delays.

[8] On October 10, 2020, the Agreement became binding and unconditional after the deemed waiver of the conditions.

[9] By letter dated March 9, 2021, 5000933 wrote to Mr. Mahmood advising that, as a result of unforeseen construction delays, the new dwelling would not be completed as of the scheduled Closing Date (First Tentative Closing Date) of June 15, 2021. It extended the Closing Date to July 30, 2021, pursuant to the Tarion Addendum and paragraph 2 of the Agreement.

[10] On March 29, 2021, as a result of upgrades requested by Mr. Mahmood, an Amendment to the Agreement was accepted by 5000933 and the purchase price was increased to $867,217.25.

[11] On April 23, 2021, 5000933 sent another letter to Mr. Mahmood advising that, as a result of unforeseen construction delays, the new dwelling would not be completed as of the scheduled Closing Date (Second Tentative Closing Date) of July 30, 2021. It stated that it was exercising its right to extend the Closing Date to August 27, 2021, pursuant to the Tarion Addendum and paragraph 2 of the Agreement.

[12] On August 6, 2021, the purchase price was increased to $879,837.88 following a further request by Mr. Mahmood for extras. He was required to pay a deposit of $4,968.63 regarding same and he provided a cheque, dated August 3, 2021, for this amount. Including this amount, Mr. Mahmood paid to 5000933 deposits totaling $89,958.63 representing approximately 10% of the final purchase price.

[13] By letter dated August 11, 2021, 5000933 notified Mr. Mahmood of an Unavoidable Delay, as defined in the Tarion Addendum, that it attributed to the ongoing COVID-19 pandemic which had resulted in a delay in the availability of kitchen cabinetry.

[14] By letter dated August 20, 2021, 5000933 notified Mr. Mahmood that the Unavoidable Delay had ended, advised that it calculated the Unavoidable Delay Period to be eight (8) days, and set a new Firm Closing Date of September 3, 2021. 5000933 enclosed a revised Statement of Critical Dates reflecting this updated Firm Closing Date.

[15] That same day, August 20, 2021, Mr. Mahmood requested by telephone an extension of the transaction’s closing date to September 10, 2021. 5000933 agreed to close on September 10, 2021. No formal amendment to the Agreement was signed in that regard, however. Instead, the September 10, 2021 closing date was confirmed in emailed correspondence exchanged between the parties’ representatives and lawyers.

[16] On September 8, 2021, Mr. Mahmood’s lawyer wrote to the lawyer for 5000933 to ask for a further extension of the transaction’s closing date to September 17, 2021. By way of emails exchanged on September 9 and 10, 2021, he was advised that 5000933 did not agree to this request and was insisting on the transaction closing on September 10, 2021.

[17] On September 8, 2021, 5000933 submitted by email to the City of Hamilton an occupancy permit application. The inspection took place on September 9, 2021 and an occupancy permit for the new dwelling was issued on September 10, 2021 (“the Occupancy Permit”).

[18] On September 10, 2021, 5000933’s lawyer sent a letter to Mr. Mahmood’s lawyer confirming that the closing date was to be that day, that 5000933 was “ready, willing and able” to complete the transaction, and that its closing documents had been delivered. A copy of the Transfer of the Property as prepared in Teraview was enclosed. 5000933 stated that it had “completed an effective tender of closing deliveries” for the transaction and, unless closing funds were received from Mr. Mahmood by 5:00 PM, he would be in fundamental breach of the Agreement. In that event, the letter indicated that 5000933 would be treating “the Sale Agreement as no longer binding upon it, retaining your client’s deposits, and taking immediate steps to resell the Property and to claim damages from your client in respect of any additional losses suffered as a result of your client’s said breach”.

[19] At some point, an unsigned mortgage commitment letter, dated September 10, 2021, was provided by Mr. Mahmood’s lawyer to 5000933’s lawyer. This mortgage commitment letter did not refer to Mr. Mahmood, however, but only to Ms. Kalsoom who was not a party to the Agreement; it was for a four-month term and the party identified as the lender was an individual, not a financial institution. 5000933 disregarded the letter.

[20] Mr. Mahmood did not tender payment of the balance of the purchase price on September 10, 2021 and the transaction failed to close.

[21] On September 22, 2021, Mr. Mahmood and Ms. Kalsoom caused to be registered a Caution against title to the Property relying on the Agreement. On November 22, 2021, they purported to renew the Caution by registering a second one. These Cautions were removed from title pursuant to the Order of the Honourable Justice Goodman, dated December 20, 2021.

Issues

[22] The primary issues raised in the application and the counter-application are as follows:

a. Did 5000933 breach the Agreement?

b. Are the Respondents entitled to specific performance?

c. Alternatively, are the Respondents entitled to damages?

d. Are the Respondents entitled to a certificate of pending litigation?

e. Did Mr. Mahmood’s failure to close the transaction entitle 5000933 to terminate the Agreement?

f. Is 5000933 able to remarket and relist the Property for sale?

g. Has Mr. Mahmood forfeited his deposit?

Analysis

(a) Did 5000933 breach the Agreement?

[23] It is the Respondents’ position that 5000933 breached the Agreement by failing to set a closing date in accordance with the timeline stipulated in the Statement of Critical Dates and that it acted unilaterally by setting a closing date of August 27, 2021. They submit that, by unilaterally choosing August 27, 2021, 5000933 did not provide a reasonable time for Mr. Mahmood to organize his affairs to complete the closing. The Respondents also argue that 5000933 arbitrarily chose Firm Closing Dates of August 27, September 3 and September 10, 2021 and that these were of no effect since they were not chosen in compliance with the Tarion Addendum. The Respondents submit that 5000933 could not insist on closing on September 10, 2021 as it had acted in bad faith in purporting to provide an extension to the Respondents to that date. It is the Respondents’ position that when 5000933 became aware that the new dwelling was not going to be ready for delivery on July 30, 2021, it was required to set a Delayed Closing Date pursuant to section 3 of the Tarion Addendum. Because 5000933 did not do so, it was in breach of the Agreement as of July 30, 2021. The Respondents contend that subsection 3(c) of the Tarion Addendum operated to set a new Delayed Closing Date of October 28, 2021 which was 90 days after what they say was the “Firm Closing Date of July 30, 2021”.

[24] 5000933 disputes that it breached the Agreement and submits that its extensions of the closing dates were in compliance with the Agreement and the Tarion Addendum.

Closing Dates

[25] Subparagraph 2(a) of the Agreement addresses delays in closing. It reads:

2. (a) Delays in Closing: The Vendor will construct (if not already constructed) and complete upon the property a dwelling (“the dwelling”) of the type indicated above in accordance with the plans and specifications already examined by the Purchaser. If for any reason except the Vendor’s wilful neglect the dwelling is not completed, utilities services are not operative, or the house has not been approved for occupancy where required by any municipal corporation, whether local or regional, having jurisdiction over the property (the “Municipality”) on or before the Closing Date, the Purchaser agrees to grant, and hereby grants, such reasonable extension or extensions of time for completion of the foregoing as may be required by the Vendor, and the Closing Date shall be extended accordingly. … Subject to the foregoing, if this Agreement is terminated in accordance with the provisions of Schedule “F” hereof (the “Tarion Addendum”) as a result of the Vendor’s inability to complete the dwelling for occupancy by the Closing Date, as same may be extended from time to time pursuant to the provisions of the Tarion Addendum, this Agreement shall be null and void and, save and except as specifically provided for in the Tarion Addendum, the Vendor shall not be liable to the Purchaser for any damages arising as a result thereof and shall have no further obligation hereunder. [Emphasis added.]

[26] Section 1 of the Tarion Addendum provides for the setting of critical dates, as follows:

1. Setting Tentative Closing Dates and the Firm Closing Date

(a) Completing Construction Without Delay: The Vendor shall take all reasonable steps to complete construction of the home on the Property and to Close without delay.

(b) First Tentative Closing Date: The Vendor shall identify the First Tentative Closing Date in the Statement of Critical Dates attached to the Addendum at the time the Purchase Agreement is signed.

(c) Second Tentative Closing Date: The Vendor may choose to set a Second Tentative Closing Date that is no later than 120 days after the First Tentative Closing Date. The Vendor shall give written notice of the Second Tentative Closing Date to the Purchaser at least 90 days before the First Tentative Closing Date, or else the First Tentative Closing Date shall for all purposes be the Firm Closing Date.

(d) Firm Closing Date: The Vendor shall set a Firm Closing Date, which can be no later than 120 days after the Second Tentative Closing Date or, if a Second Tentative Closing Date is not set, no later than 120 days after the First Tentative Closing Date. If the Vendor elects not to set a Second Tentative Closing Date, the Vendor shall give written notice of the Firm Closing Date to the Purchaser at least 90 days before the First Tentative Closing Date, or else the First Tentative Closing Date shall for all purposes be the Firm Closing Date. If the Vendor elects to set a Second Tentative Closing Date, the Vendor shall give written notice of the Firm Closing Date to the Purchaser at least 90 days before the Second Tentative Closing Date, or else the Second Tentative Closing Date shall for all purposes be the Firm Closing Date.

(e) Notice: Any notice given by the Vendor under paragraphs (c) and (d) above, must set out the stipulated Critical Date, as applicable. [Emphasis added.]

[27] Section 2 of the Statement of Critical Dates – Delayed Closing Warranty also states that the Vendor – without the Purchaser’s consent – may delay Closing twice by up to 120 days each time by setting a Second Tentative Closing Date and then a Firm Closing Date in accordance with section 1 of the Addendum.

[28] Section 2 of the Tarion Addendum provides three ways by which the Firm Closing Date can be changed:

2. Changing the Firm Closing Date – Three Ways

(a) The Firm Closing Date, once set or deemed to be set in accordance with section 1, can be changed only:

(i) by the Vendor setting a Delayed Closing Date in accordance with section 3;

(ii) by the mutual written agreement of the Vendor and Purchaser in accordance with section 4; or

(iii) as the result of an Unavoidable Delay of which proper written notice is given in accordance with section 5.

(b) If a new Firm Closing Date is set in accordance with section 4 or 5, then the new date is the “Firm Closing Date” for all purposes in this Addendum.

[29] For the following reasons, I am satisfied that 5000933 did not breach the Agreement and/or the Tarion Addendum in changing the closing dates in the manner it did.

[30] First, July 30, 2021 was never identified by 5000933, nor was it deemed by virtue of subsection 1(d) of the Tarion Addendum, to be a Firm Closing Date. While 5000933’s correspondence of March 9, 2021 served to extend the First Tentative Closing Date of June 15, 2021 to a closing date of July 30, 2021, the new date was not called a Firm Closing Date. And, in its subsequent correspondence of April 23, 2021, wherein 5000933 notified Mr. Mahmood that August 27, 2021 was to be the Closing Date, July 30, 2021 was clearly identified as the Second Tentative Closing Date only.

[31] Second, subparagraph 2(a) of the Agreement and subsections 1(c) and (d) of the Tarion Addendum permitted 5000933 to unilaterally set a Second Tentative Closing Date and then a Firm Closing Date. The setting of these Critical Dates by 5000933 fell within the prescribed timelines. In their factum, the Respondents admit that the Tarion Addendum allowed 5000933 to unilaterally give notice setting a Second Tentative Closing Date, and to unilaterally give notice setting a Firm Closing Date if it did not want the Firm Closing Date to occur on the Second Tentative Closing Date.

[32] Third, section 3 of the Tarion Addendum only applies if the Vendor cannot close on the Firm Closing Date and if section 4 (Changing Critical Dates – By Mutual Agreement) and section 5 (Extending Dates – Due to Unavoidable Delay) do not apply. Since 5000933 changed the Firm Closing Date as the result of an Unavoidable Delay in accordance with section 5, section 3 has no application.

Extension due to Unavoidable Delay

[33] It is the Respondents’ position that 5000933 was not entitled to rely on the Unavoidable Delay provisions found in section 5 of the Tarion Addendum or, alternatively, its reliance was not in accordance with that section because 5000933’s August 11, 2021 correspondence did not specify the date when the purported delay commenced, contrary to subsection 5(b); and its August 20, 2021 correspondence did not specify the date when the purported delay concluded, contrary to subsection 5(c). As a result, the Respondents argue that a calculation of the Unavoidable Delay Period was impossible and so these notices were ineffective. They contend that subsection 5(d) of the Tarion Addendum therefore applies and the existing Critical Dates are unchanged and any Delayed Closing Compensation payable under section 7 is payable from the existing Firm Closing Date of August 27, 2021.

[34] Subsection 2(a)(iii) of the Tarion Addendum permitted 5000933 to change the August 27, 2021 Firm Closing Date as the result of an Unavoidable Delay by way of proper written notice given in accordance with section 5. As set out below, I am satisfied that 5000933 complied with section 5.

[35] The term “Unavoidable Delay” is defined in section 12 of the Tarion Addendum to mean “an event which delays Closing which is a strike, fire, explosion, flood, act of God, civil insurrection, act of war, act of terrorism or pandemic, plus any period of delay directly caused by the event, which are beyond the reasonable control of the Vendor and are not caused or contributed to by the fault of the Vendor”. I find that the COVID-19 pandemic and the resulting delay in the delivery of the kitchen cabinetry fall within this definition of Unavoidable Delay and so 5000933 could invoke section 5. The Respondents did not strenuously dispute that the COVID-19 pandemic satisfies this provision.

[36] Section 12 of the Tarion Addendum defines the term “Unavoidable Delay Period” to mean “the number of days between the Purchaser’s receipt of written notice of the commencement of the Unavoidable Delay, as required by subparagraph 5(b), and the date on which the Unavoidable Delay concludes”. The Tarion Addendum does not specify whether the calculation of dates is to be inclusive or exclusive.

[37] I am satisfied that 5000933’s August 11, 2021 notice marked the commencement of the Unavoidable Delay in the circumstances, and that it provided a brief description of the reason for the delay and an estimate of its duration as required. While I agree with the Respondents that 5000933’s August 20, 2021 notice could have more clearly identified the concluding date of the Unavoidable Delay, I am satisfied that the eight-day Unavoidable Delay Period was calculable from the notices delivered as the number of days falling between the dates of the notices themselves, exclusive of those dates. It is apparent that 5000933 then calculated the new Firm Closing Date to be September 3, 2021 by adding the eight-day total to the former closing date of August 27, 2021, inclusively, in accordance with subsection 5(c). Thus, I find that 5000933’s written notice setting the Firm Closing Date to September 3, 2021 was compliant with the provisions of the Tarion Addendum.

[38] In the event that I am wrong in this regard, I am of the view that the Ontario Court of Appeal’s decision in Ingarra v. 301099 Ontario Limited (Previn Court Homes), 2020 ONCA 103, is instructive. In that case, the vendor had appealed from the application judge’s decision finding that it had repudiated the agreement of purchase and sale. One of the issues to be determined by the application judge was whether the agreement between the lawyers, made orally and through the exchange of faxes and emails, to extend the agreed upon firm closing date superseded the provisions set out in the Tarion Addendum. The application judge found that the parties did not have the contractual freedom to set a closing date outside of section 4 of the Addendum. On appeal, however, the Court of Appeal held that the parties were free to set a new closing date outside of the confines of the Tarion Addendum, holding (at para. 19):

First, s. 4 of the Tarion Addendum does not render unenforceable non-compliant amendments. Despite stating that the Addendum sets out "a framework" for altering the Critical dates "which cannot be altered contractually except as set out in this section 4", the last sentence in s. 4(a) provides: "Any amendment not in accordance with this section is voidable at the option of the Purchaser" (emphasis added). A non-compliant amendment altering the closing date is not "invalid" as the application judge found. It is only voidable.

[39] In the present case, there was no evidence that Mr. Mahmood or his lawyer raised any concerns about how the eight-day Unavoidable Delay Period was calculated by 5000933 upon receipt of the August 20, 2021 notice. Mr. Mahmood also did not exercise his right to void the closing date of September 3, 2021 as set by 5000933 therein. Instead, he asked that it be further changed to September 10, 2021, to which 5000933 agreed.

[40] While the Respondents argue that there was no formal written agreement setting out the agreed-upon September 10, 2021 closing date, if Mr. Mahmood objected to the way in which this extension of the closing date was documented or believed it did not comply with section 4 of the Tarion Addendum, he could have voided the date: Ingarra, at paras. 19 and 22. He did not do so.

[41] Accordingly, in keeping with the Court of Appeal’s holding in Ingarra, I find that the parties were free to agree to the new closing date of September 10, 2021 outside the framework of the Tarion Addendum, in the manner they did, and that it was enforceable as the new Firm Closing Date.

[42] While the Respondents argue that they were ready to close the transaction on or about September 17, 2021, there was no documentary evidence before me that Mr. Mahmood was in funds and ready to close on September 10, 2021 or thereafter. The mortgage commitment letter that was provided to 5000933 was in the name of his wife only, who was not a party to the Agreement, and it was unsigned. In the circumstances, it was of no value.

[43] With respect to the email sent by Mr. Mahmood’s lawyer to the lawyer for 5000933 on September 17, 2021 purporting to set another new closing date of October 15, 2021, I find that this was of no import. The Respondents complain that 5000933 did not respond to their proposed October closing date but the evidence indicates there were some limited communications between the parties’ lawyers subsequent to September 17, 2021. In any event, 5000933 had already clearly stated its position that, if the transaction did not close on September 10, 2021, which it did not, it would be treating the Agreement as no longer binding. Moreover, 5000933 had tendered on September 10, 2021 and so there was no obligation on it to consider any further closing dates beyond that point.

Occupancy Permit

[44] The Respondents argue that section 9 of the Tarion Addendum required 5000933 to have delivered an occupancy permit for the new dwelling as of the closing dates of August 27, 2021, and of September 3, 2021 when it purported to grant the extension of the closing date to September 10, 2021. They also submit that since 5000933 did not deliver an occupancy permit to Mr. Mahmood on September 10, 2021, it breached the Tarion Addendum. The Respondents rely on the application judge’s decision at first instance in Ingarra, 2019 ONSC 3347, at para. 44, wherein she held that the unavailability of an occupancy permit “is a serious matter”. They argue that a fair, liberal and purposive interpretation of the Tarion Addendum warrants a finding that 5000933 had an obligation to deliver, on or before closing, an occupancy permit. They submit that there is no dispute that 5000933 never delivered an occupancy permit. (Counsel for the Respondents also relied on the decision in Amatuzio v. 650 Atwater Avenue Ltd., 2020 ONCA 9. But I find that case is distinguishable as it dealt with the purchase of a new condominium unit and, as a result, subsection 9(a) of the Tarion Addendum is worded slightly differently by requiring delivery of an occupancy permit “On or before the Occupancy Date” and not “On or before Closing” as in this case.)

[45] 5000933 disputes the Respondents’ assertions that it breached section 9 of the Tarion Addendum and that it failed to obtain an occupancy permit in a timely manner. 5000933 submits that it had obtained the Occupancy Permit on September 10, 2021 and it was available for delivery if the transaction had closed that day.

[46] Section 9 of the Tarion Addendum sets out the conditions of closing as they relate to the Ontario Building Code. It reads, in part:

9. Ontario Building Code – Conditions of Closing

(a) On or before Closing, the Vendor shall deliver to the Purchaser:

(i) an Occupancy Permit (as defined in paragraph (d)) for the home; or

(ii) if an Occupancy Permit is not required under the Building Code, a signed written confirmation by the Vendor that all conditions of occupancy under the Building Code have been fulfilled and occupancy is permitted under the Building Code.

[47] Section 12 of the Tarion Addendum defines “Closing” to mean “the completion of the sale of the home including transfer of title to the home to the Purchaser” and provides that “Close” has a corresponding meaning. In this case, the transaction was not completed and title to the home was never transferred to the purchaser, Mr. Mahmood. Accordingly, there was no “Closing”.

[48] Since there was no Closing, I find that there was no obligation on the part of 5000933 to have delivered the Occupancy Permit. Thus, there was no breach by 5000933 of section 9 of the Tarion Addendum.

(b) Are the Respondents entitled to specific performance?

[49] As a result of my rulings above, the Respondents have no reasonable claim to an interest in the Property and so they are not entitled to specific performance.

[50] I also accept 5000933’s argument that Mr. Mahmood is contractually prohibited from obtaining specific performance as a remedy by virtue of subparagraph 5(e) of the Agreement which provides that the Purchaser has no interest whatsoever in the Property prior to closing and the Purchaser’s only remedy for breach by the Vendor is a claim for return of the deposit monies, and no claim for specific performance or damages.

(c) Alternatively, are the Respondents entitled to damages?

[51] The Respondents claim damages for breach of contract, breach of the duty of good faith and negligent misrepresentation.

[52] Based on my rulings above that 5000933 did not breach the Agreement or the Tarion Addendum, no award of damages for breach of contract is warranted. Further, subparagraph 5(e) of the Agreement precludes a claim for damages.

[53] The Respondents have not identified any misrepresentations allegedly made by 5000933 nor have they adduced any evidence to support an argument that 5000933 breached a duty of good faith.

[54] Accordingly, I dismiss the Respondents’ alternative claim for damages.

(d) Are the Respondents entitled to a certificate of pending litigation?

[55] In their counter-application, the Respondents seek an order granting them leave to register a certificate of pending litigation (“CPL”) against the Property.

[56] Rule 42.01(1) of the Rules of Civil Procedure provides that a CPL under section 103 of the Courts of Justice Act, R.S.O. 1990, c. C43, may be issued by a registrar only under an order of the court.

[57] The Respondents did not put any caselaw before me regarding this issue. However, I accept and adopt the two-part test as described in Rahbar v. Parvizi, 2022 ONSC 1104, at para. 20, which provides: first, the court must determine whether the plaintiff has a triable claim to an interest in land; second, the court must consider all relevant factors between the parties, including whether damages would be a satisfactory remedy, and balance the interests of the parties in the exercise of discretion regarding whether to grant leave for the issuance of the CPL.

[58] In my view, as a result of my rulings above, the Respondents have no triable claim to an interest in the Property and so they fail to satisfy the first part of the test for a CPL: 1245519 Ontario Ltd. v. Rossi, 2008 6933 (ON SC), at para. 12. Accordingly, I decline to grant them leave to register a CPL.

(e) Did Mr. Mahmood’s failure to close the transaction entitle 5000933 to terminate the Agreement?

[59] Based on the evidence provided, I find that Mr. Mahmood was in breach of the Agreement by failing to close on the agreed closing date of September 10, 2021: see Mikhalenia v. Drakhshan, 2015 ONSC 1048, at paras. 20-21; and Azzarello v. Shawqi, 2018 ONSC 5414, at paras. 32 and 45.

[60] In Ingarra, 2020 ONCA 103, at para. 21, the Court of Appeal held:

Second, s. 10 of the Tarion Addendum addresses “Termination of the Purchase Agreement”. Section 10(e) provides: “Nothing in this Addendum derogates from any right of termination that either the Purchaser or the Vendor may have at law or in equity on the basis of, for example, frustration of contract or fundamental breach of contract.” Since Mr. Ingarra was not in funds to close on the new agreed closing date, it was open to Previn Homes to terminate the agreement of purchase and sale. Doing so was not prohibited by the Tarion Addendum.

[61] I am of the view that the Court of Appeal’s holding in Ingarra applies to the instant case. Since Mr. Mahmood did not close on the agreed closing date, 5000933 was entitled to terminate the Agreement, pursuant to s. 10(e) of the Tarion Addendum. (See also Lakeshore Landmark Development Corp. v. Mondelez Canada Inc., 2016 ONSC 2313, at paras. 44-45.)

[62] I find that subparagraphs 11(a) and 12 of the Agreement also entitled 5000933 to terminate the Agreement upon Mr. Mahmood failing to pay the purchase price and close the transaction on September 10, 2021. The relevant portions of these provisions read:

11. (a) In the event that the Purchaser defaults in any of his obligations contained in this Agreement on or before Closing Date, and fails to remedy such default forthwith, then the Vendor, in addition to (and without prejudice to) any other rights or remedies this Agreement provides or which may otherwise be available to the Vendor at law or in equity, may, at its sole option, unilaterally suspend all of the Purchaser’s rights, benefits and privileges contained herein (including without limitation, the right to make colour and finish selections with respect to the dwelling as hereinbefore provided or contemplated), and/or unilaterally declare this Agreement to be terminated and of no further force or effect, whereupon all deposit monies theretofore paid, together with all monies paid for any extras or changes to the property, shall be retained by the Vendor as its liquidated damages, and not as a penalty. . . .

12. This offer to be read with all changes of gender or number required by the context and when accepted, shall constitute a binding contract of purchase and sale, and time shall, in all respects, be of the essence. Default in payment of any amount payable pursuant to this Agreement on the date or within the time specified, shall constitute substantial default hereunder, and the Vendor shall have the right to terminate this Agreement and forfeit all deposit monies in full. . . . [Emphasis added.]

Registration of the Cautions

[63] On September 22, 2021, the Respondents registered a Caution of an Agreement of Purchase and Sale on title to the Property. 5000933 submits that Mr. Mahmood was prohibited from registering a caution without its written consent until the full amount of the purchase price had been paid. It argues that the registration of the caution against the Property constituted a fundamental breach entitling 5000933 to terminate the Agreement, among other things.

[64] I am of the view that subparagraph 5(e) of the Agreement is clearly worded such that the Respondents’ registration of a caution on title, prior to Mr. Mahmood fully paying the purchase price, constituted a fundamental breach of the contract. Since the purchase price was never fully paid, the Agreement could be terminated by 5000933 as a result.

(f) Is 5000933 able to remarket and relist the Property for sale?

[65] 5000933 has accepted Mr. Mahmood’s repudiation of the Agreement. It wishes to resell the Property and mitigate and assess its damages, including carrying costs, legal costs, and remarketing costs. 5000933 seeks a declaration that it is able to proceed with relisting the Property for sale. It also seeks an order terminating paragraph 3 of the Order made by the Honourable Justice Goodman, dated December 10, 2021, wherein 5000933 was precluded from selling the lands pending further order of the court or an agreement between the parties (“the Non-Disposition Order”).

[66] Where it has been determined that a purchaser has no reasonable claim to an interest in the land, the vendor is free to sell to another purchaser: 1245519 Ontario Ltd., at paras. 14-15.

[67] Given my rulings above, Mr. Mahmood has no reasonable claim to an interest in the Property. Therefore, I hold that the Non-Disposition Order is vacated and that 5000933 is at liberty to remarket and sell the Property to another purchaser.

(g) Has Mr. Mahmood forfeited his deposit?

[68] 5000933 seeks a declaration that the deposit monies paid by Mr. Mahmood are forfeited as a result of his repudiation of the Agreement.

[69] The court in Azzarello v. Shawqi, at paras. 58-59, discussed a vendor’s entitlement to a deposit as follows:

58 In De Palma v. Runnymede Iron & Steel Co., [1950] O.R. 1 (C.A.), at p. 8, the Court of Appeal held that where the sale of land does not close due to a default by the purchaser, the vendor is entitled to the deposit without having to prove actual damages. The purpose of the forfeiture of a deposit is compensation to the disappointed vendor “for the fact that his property was taken off the market for a time as well as for his loss of bargaining power resulting from the revelation of an amount that he would be prepared to accept”: Baker v. Wynter (2006), 49 R.P.R. (4th) 134 (Ont. S.C.), at para. 35, citing Leading Investments Ltd. v. New Forest Investments Ltd., [1986] S.C.R. 70 (S.C.C.), at pp. 86-87.

59 The court must decide whether the parties intended an advance payment to be partial payment or a deposit to be forfeited in the event of non-completion of the transaction: Mikhalenia, at para. 32. The use of the word “deposit” has been interpreted as indicating that the payment was intended to be forfeited in the event of a breach: Mikhalenia, at paras. 32, 35; Iyer v. Pleasant Developments Inc. (2006), 210 O.A.C. 90 (Div. Ct.), at para. 8.

[70] Subparagraphs 11(a) and 12 of the Agreement address the forfeiture of deposit monies and read, in part:

11. (a) In the event that the Purchaser defaults in any of his obligations contained in this Agreement on or before Closing Date, and fails to remedy such default forthwith, then the Vendor, in addition to (and without prejudice to) any other rights or remedies this Agreement provides or which may otherwise be available to the Vendor at law or in equity, may, at its sole option, … unilaterally declare this Agreement to be terminated and of no further force or effect, whereupon all deposit monies theretofore paid, together with all monies paid for any extras or changes to the property, shall be retained by the Vendor as its liquidated damages, and not as a penalty. . . .

12. . . . Default in payment of any amount payable pursuant to this Agreement on the date or within the time specified, shall constitute substantial default hereunder, and the Vendor shall have the right to terminate this Agreement and forfeit all deposit monies in full. Without prejudice to the Vendor’s rights as to forfeiture of deposit money as aforesaid, and in addition thereto, the Vendor shall have the right to recover from the Purchaser all additional costs, losses and damages arising out of default on the part of the Purchaser pursuant to any provision contained in this Agreement. . . .

[71] 5000933 argues that Mr Mahmood’s deposit can be forfeited without it proving any damages and relies on the Ontario Divisional Court decision in Pleasant Developments Inc. v. Iyer and Ramachandran, 210 O.A.C. 90 (Div. Ct.), at paras. 6-8, in support of this position. In that case, the Divisional Court held that the law is clear that a deposit may be forfeited without proof of damages, even in a situation where the vendor resells at a purchase price high enough to compensate for any loss from the first sale. The use of the word “deposit” implies that the payment is intended for forfeiture upon the purchaser’s breach. The Divisional Court also held that “[t]he common law position is that if the agreement is silent and the purchaser defaults, the deposit, by its very nature is forfeited to the vendor” (para. 8). 5000933 argues that, unless an agreement indicates an intention that the deposit is not to be forfeited, a vendor has an implied right to retain it and that, where the agreement of purchase and sale was not completed by reason of a purchaser’s default, a true deposit is lost. While 5000933 submits that Mr. Mahmood is not claiming or seeking relief from forfeiture in the Respondents’ counter-application, 5000933 opposes such a claim if made on the basis that relief from forfeiture is not warranted in the circumstances. 5000933 argues that the deposit is not disproportionate to the purchase price and that courts have allowed parties to retain transaction deposits even when they may not have suffered damages from the failure to close: Azzarello v. Shawqi, at paras. 62-68; and Pleasant Developments, at paras. 11-16.

[72] I find that the monies paid by Mr. Mahmood were all described as deposits in the Agreement and in the amendment made to the Agreement, and that the provisions found in the Agreement are clear that the monies were intended to be a deposit to be forfeited in the event the transaction did not close due to the Purchaser’s default.

[73] However, courts have held that even where an amount paid is characterized as a non-refundable deposit, if the amount of the deposit is out of all proportion to the losses suffered and it would be unconscionable for the vendor to retain the deposit, the court may order that it be returned: see Dovbush v. Mouzitchka, 2016 ONCA 381 (Ont. C.A.), at para. 31; Azzarello v. Shawqi, at paras. 62-65 and 68; Pleasant Developments, at paras. 12-14 and 16; and 1303943 Ontario Inc. v. Dajlan Troka (In Trust), 2019 ONCA 280, at para. 4.

[74] I am of the view that there is insufficient evidence before me to make a finding whether the deposit sum is out of proportion to any loss suffered by 5000933. As a result, I am unable to determine if keeping the deposit would result in a windfall for 5000933 or be unconscionable such that relief from forfeiture should be granted.

[75] 5000933 seeks an order for a summary hearing regarding damages following the resale of the Property. I direct such a hearing and adjourn the determination on the forfeiture of Mr. Mahmood’s deposit monies to the Judge who hears that motion.

Disposition

[76] The Respondents’ counter-application is dismissed.

[77] With respect to 5000933’s application, for the foregoing reasons, I order as follows;

a. A declaration is made that the Agreement was terminated by virtue of the breach of Mr. Mahmood, as purchaser, in failing to close.

b. A declaration is made that 5000933, as vendor, is at liberty to remarket and relist the Property for sale.

c. The Non-Disposition Order is hereby vacated.

d. Following the resale of the Property, there shall be a summary hearing on the issue of 5000933’s damages.

e. The issue of whether Mr. Mahmood’s deposit is forfeited is hereby adjourned to be determined at the summary hearing directed in paragraph 77(d) above.

Costs

[78] I would urge the parties to agree on costs. If they are unable to do so, then costs submissions may be made as follows:

a. By September 6th, 2022, the Applicant shall serve and file its written costs submissions, not to exceed three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers; and

b. The Respondents shall serve and file their responding costs submissions of no more than three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers, by September 20th, 2022; and

c. The Applicant’s reply submissions, if any, are to be served and filed by September 27th, 2022 and are not to exceed two pages.

d. If no submissions are received by September 27th, 2022, the parties will be deemed to have resolved the issue of the costs and costs will not be determined by me.

B. MacNeil J.

MacNEIL J.

Released: August 15, 2022