COURT FILE NO.: CV-21-1072
DATE: 20220106
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JAYESH TEJWANI and PUJA SHAH
Applicants
– and –
WASTELL DEVELOPMENTS INC.
Respondent
Rod Refcio, Jimmy N. Ding, for the Applicants/Responding Parties
Jeremy A. Forrest, Meghan A. Harrogate, for the Respondent/Moving Party
HEARD: December 15, 2021
TRANQUILLI J.
Introduction
[1] This application concerns an agreement of purchase and sale for a new build condominium in London, Ontario. The applicants claim the respondent developer improperly terminated the transaction and deprived the applicants of their first home. The applicants allege the respondent refused to extend the closing date and purported to terminate the agreement in order to take advantage of the surge in the real estate market. They claim they are entitled to specific performance.
[2] The respondent claims the applicants failed to close the transaction in accordance with the agreement and that the respondent was entitled to terminate the deal. The respondent contends it is the applicants who are attempting to benefit from an opportunity to “flip” the new build condominium for a profit notwithstanding their failure to close the deal as scheduled.
[3] The merits of these issues will not be determined today but pertain how this application should now proceed. The respondent brings this motion for an order under rule 59.06(2) setting aside the consent order of Nicholson J. dated July 2, 2021 and for an order converting this application into an action pursuant to rule 38.10.
[4] At issue is whether the order should be set aside or varied and whether there is good reason to convert the application into an action.
Overview
[5] The applicants are spouses. They entered into an agreement of purchase and sale of a new build condominium property with the respondent Wastell Developments Inc. in July 2020 (“the Callaway Property”). Wastell agreed to extend the closing date at no cost to the applicants; however, advised there would be no further extensions. The applicants failed to close the transaction as scheduled in May 2021. They asked for another extension. Wastell refused and notified the applicants it had terminated the agreement in accordance with the contract. Wastell re-listed the Callaway Property shortly thereafter at a higher list price than what had been agreed upon a year earlier with the applicants.
[6] The application was issued June 10, 2021.
[7] The applicants seek specific performance of the agreement of purchase and sale of the Callaway Property, damages for breach of contract or damages in equity in the alternative and punitive damages. In her affidavit sworn in support of the application, Ms. Shah stated she and her husband wanted the Callaway Property as their primary residence and had been willing and able to close the transaction. She claimed she and her husband would be extremely prejudiced if the house was sold to a third-party because their position in the housing market was substantially different than when they entered into the agreement of purchase and sale a year earlier.
[8] The application also seeks to register a certificate of pending litigation upon the subject property.
[9] At the first return of the application on July 2, 2021, the parties agreed to a consent order wherein Wastell would not sell the Callaway Property pending further court order or written agreement of the parties. This interim order had the effect of avoiding the need to formally seek a certificate of pending litigation.
[10] About one month later, Wastell then discovered the applicants had also entered into another agreement of purchase and sale for 2436 Black Rail Terrace, London, on August 6, 2020 (“the Black Rail Property”). The applicants entered in this agreement nine days after they had entered into the agreement of purchase and sale for the Callaway Property in July 2020. The applicants closed the transaction for the Black Rail Property on July 30, 2021, following the consent order restraining the sale of the Callaway Property. The respondent immediately raised an objection to the enforceability of the consent order these circumstances.
[11] The parties have now exchanged multiple affidavits. The applicant Ms. Shah was cross-examined on her affidavits on November 3 and December 1, 2021. Two Wastell representatives were cross-examined on November 11, 2021. There is a full day set aside on January 19, 2022 for a full hearing of the application, subject to the disposition of this motion. The court understood from the parties that the current record represents what would go before the court on the application.
Issues
[12] The issues for determination on this motion are:
Could evidence of the Black Rail Property purchase have been discovered sooner with reasonable diligence and might it have altered the order?
Is there good reason to convert the application into an action?
[13] The applicants’ claim for the remedy of specific performance goes to the root of these two issues. The applicants clearly highlight this remedy their application and responding motion materials as their main claim for relief.
[14] The Court of Appeal recently summarized the principles relevant to awarding specific performance in Lucas v. 1858793 Ontario Inc., 2021 ONCA 52. The basic rationale for an order of specific performance of contracts is that damages may not, in the particular case, afford a complete remedy. However, specific performance should not be granted absent evidence that the property is unique to the extent that its substitute would not be readily available: Lucas, supra, at para. 69. Whether specific performance is to be awarded or not is a question that is rooted firmly in the facts of an individual case. Courts typically examine and weigh together three factors: (i) the nature of the property involved; (ii) the related question of the inadequacy of damages as a remedy; and (iii) the behaviour of the parties, having regard to the equitable nature of the remedy. The issue is whether the plaintiff has shown, upon the consideration of all the factors, that the land rather than its monetary equivalent better serves justice between the parties: Lucas, supra at paras. 71, 76.
[15] As it relates to the nature of the property, in assessing whether a property is unique, courts may have regard to a property’s physical attributes, the purchaser’s subjective interests or the circumstances of the underlying transaction: Lucas, supra at para. 73.
Analysis
1. Could evidence of the Black Rail Property purchase have been discovered sooner with reasonable diligence and might it have altered the judgment?
[16] The respondent contends it would not have entered into the consent order restraining it from selling the Callaway Property had it known the applicants had purchased the Black Rail Property. The respondent would have contested the motion for a certificate of pending litigation. The purchase of the Black Rail Property questions the basis for the applicants’ claim as to the “uniqueness” of the Callaway Property, their entitlement to specific performance and the consequent need to prevent a sale pending disposition of this proceeding. However, the respondent only found out about the Black Rail Property after entering into the consent order.
[17] The applicants submit there is no basis on which to conclude Justice Nicholson would not have signed the consent order had he known of the Black Rail Property purchase. Similarly, there is no basis on which to set aside an agreement bargained between the parties that was not allegedly secured by fraud, duress or undue influence.
[18] The applicant raised and argued the point that the respondent incorrectly cited rule 59.06(1) in its motion materials. However, there is no doubt from review of both parties’ materials that both appreciate the issue is whether the respondent is entitled to relief by way of setting aside or varying the order under rule 59.06(2)(a) due to non-disclosure of information about the purchase of the Black Rail Property.
[19] I agree that a court should very rarely pick and choose what part or parts of a consent order may be reworded or otherwise excused from enforcement: Waller v. Brown, 2021 ONSC 7178 at paras. 16-18. I am satisfied that this is one of those rare occasions where it is just and appropriate to do so.
[20] I accept that information as to the applicants’ acquisition of the Black Rail Property was relevant to the respondent’s decision to enter into the consent order restraining it from selling the Callaway Property. In her affidavit sworn June 8, 2021 in support of the application, Ms. Shah claimed that without the closing of the Callaway Property transaction, the applicants would be unable to enter the housing market given the market changes in the past year. However, it is clear the applicants had, in fact, already entered into another housing transaction. This is relevant to the applicants’ claim for specific performance and the corresponding request for a certificate of pending litigation. My holding that this information was relevant to the circumstances of the consent order is not to be taken as determinative of the merits of either the claim for a certificate of pending litigation or the remedy of specific performance.
[21] I also make no finding as to whether the purchase of the Black Rail Property was concealed from the respondent by fraud or whether it is newly-discovered information by the respondent. There is conflicting evidence from Ms. Shah’s cross-examinations as to why this information was not disclosed. In any event, for the purposes of this motion, I find there was no basis on which this information could have been discovered by the respondent with reasonable diligence before it agreed to the consent order: Hall v. Powers, [2005] O.J. No. 2739 at para 12.
[22] In my view, this issue can be dealt with in an expedient manner that does not prejudice either party at this interim stage. In argument it appeared that both parties would be amenable to an order that would allow Justice Nicholson’s order to continue pending argument and disposition of a rule 42 motion regarding a certificate of pending of litigation. I will fashion an order at the conclusion of these reasons.
2. Is there good reason to convert the application into an action?
[23] The respondent submits there are matters in dispute that go beyond interpretation of the contract. The applicants’ evidence is incomplete and inconsistent. The respondent points to delayed disclosure of the Black Trail Property closing documents as one example. They submit the cross-examination of the applicant Ms. Shah reveals numerous material discrepancies relevant to the disposition of this proceeding. These include: the applicants’ plans for the purchase of the Callaway Property, the applicants’ reasons to seek the extension of the closing date on the Callaway Property and the delayed disclosure as well as conflicting reasons for her failure to disclose the purchase of the Black Trail Property.
[24] The applicants submit the proceeding simply relates to the circumstances of the respondent’s termination of the contract. The agreement of purchase and sale was a standard form document and industry driven. All relevant communications were by written notice. The issue is the whether the respondent was obligated to close the transaction with the applicants. While there may be factual disputes, none are of a material nature that would prevent the court from resolving the conflict on the written record. Conversion of the application into an action is disproportionate to the issues in dispute.
[25] While the applicants have a prima facie right to choose their originating process by way of application if so authorized by the Rules or a statute, the court maintains the right to convert the application into an action for good reason: Przysuski v. City Optical Holdings Inc., 2013 ONSC 5709 at para. 12.
[26] An application should be used when there is no matter in dispute and when the issues to be determined do not go beyond the interpretation of a document. A good reason to convert an application into an action is when the judge who will hear the matter cannot make a proper determination of the issues on the application record. When issues of credibility are involved the matter should proceed by way of action: Przysuski, supra at paras. 5 – 9.
[27] The respondent raised a number of factual disputes which may not amount to the “materiality” that justifies converting the application into an action. For example, the conflicting evidence as to the rationale for the applicants’ request for the extension arguably may not, on its own, rise to the level of materiality.
[28] However, I am satisfied the interests of justice and procedural fairness require that this matter be converted into an action. There are material facts in dispute and credibility issues which go to the core of the claims and the remedies sought. For example, the alleged “uniqueness” of the Callaway Property to the applicants, and the behaviour of the parties must be assessed by the court in order to determine whether the plaintiff has established entitlement to the remedy of specific performance. The record makes it clear that these issues are subject to a credibility assessment. There is conflicting evidence on the written record that are of a nature that require a trial.
[29] For example, the respondent submits the applicants intended to assign the transaction at a profit, as evidenced by inquiries their real estate agent made of the respondent in March 2021. The realtor stated in her email inquiry to Wastell that the applicants had found a detached home that they were considering moving into.
[30] In contrast, in her first affidavit sworn in support of the application, Ms. Shah deposed the applicants intended to use the Callaway Property as their primary residence. There is no mention of the Black Rail Property or the applicants’ previous inquiries about the Callaway Property assignment.
[31] In her subsequent affidavit of November 19, 2021, sworn in response to this motion, Ms. Shah deposed that in 2020, her spouse’s parents had planned to relocate to London from India. The applicants decided to buy the Black Rail Property for Mr. Tejwani’s parents to live in. Plans began to change in March 2021 when Mr. Tejwani’s parents became ill with symptoms of COVID-19 and the applicants planned to travel to India. Ms. Shah deposed that the applicants therefore asked their real estate agent to make inquiries of Wastell about assigning the Callaway Property and “to seek the necessary permissions and fully disclose the information about the potential purchase of the independent detached home.” The applicants then decided not to travel to India because Mr. Tejwani’s parents’ health improved in May 2021 and so the applicants also decided not to pursue an assignment. However, the respondent’s termination of the Callaway Property transaction allegedly forced the applicants to live in the Black Rail Property and forced Mr. Tejwani’s parents to remain in India against their wishes.
[32] Although Ms. Shah has been cross-examined on this evidence for the purpose of the motion, the affidavit relies upon hearsay assertions. There has been no direct evidence from Mr. Tejwani or the realtor who they instructed to make inquiries about the assignment. Other issues that remain to be tested are the applicants’ ability to close on the scheduled date. Again, the evidence on the application record is incomplete. Determining credibility of a deponent to resolve material facts in dispute that may affect the result is beyond the proper role of an application judge: Przysuski, supra at para. 16.
[33] Furthermore, the claims for damages in equity and punitive damages will require the full evidentiary record of an action. The nature of the conduct entitling a party to punitive damages and the assessment of a punitive damage award involves issues of credibility and are of a nature which requires a trial: Przysuski, supra at para. 13. The current record also makes it unlikely that an application judge will be able to assess damages without more. There are material facts regarding the damages assessment and the alternative claim for damages in equity.
[34] For the reasons set forth, I order as follows:
This application is converted into an action. The applicants shall be the plaintiffs and the respondent shall be the defendant;
The plaintiffs shall deliver a statement of claim within 15 days from today’s date;
The defendant shall deliver its pleadings within 10 days after receiving the plaintiff’s statement of claim;
All cross-examinations on affidavits conducted to date shall be deemed to form part of the examinations for discovery and the cross-examination transcripts shall be treated as part of the discovery transcripts in this action. Further examinations for discovery of the parties may be conducted in supplement to the questions already asked and answered.
The application scheduled for a special appointment on January 19, 2022 is vacated.
Paragraph 2 of the order of Nicholson J. dated July 2, 2021 is struck;
Paragraph 6 of this order is held in abeyance pending the disposition of a Rule 42 motion for a certificate of pending litigation, to be brought by the plaintiff;
The Rule 42 motion shall be made initially returnable within 30 days of the date of these reasons, subject to the discretion of the judge scheduling the motion;
[35] If the parties are unable to agree on costs, then Wastell is to provide written cost submissions within 10 days of the date of these reasons and the applicants Ms. Shah and Mr. Tejwani within 7 days thereafter. Submissions shall be no more than three pages, including a costs outline.
Justice K. Tranquilli
Released: January 6, 2022
COURT FILE NO.: CV-21-1072
DATE: 20220106
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JAYESH TEJWANI and PUJA SHAH
Applicants
– and –
WASTELL DEVELOPMENTS INC.
Respondent
REASONS FOR JUDGMENT
Tranquilli J.
Released: January 6, 2022