Court File and Parties

COURT FILE NO.: CV-21-76939 DATE: March 16, 2023 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jeanne Gatoto, Applicant AND: 5GC Inc., Respondent

BEFORE: MacNeil J.

COUNSEL: Paul Marshall – Lawyer for the Applicant Chris Argiropoulos – Lawyer for the Respondent

HEARD: December 12, 2022

REASONS FOR DECISION

OVERVIEW

[1] The Applicant, Jeanne Gatoto (“Ms. Gatoto”), makes this application seeking an order permitting her to purchase the property municipally known as 15 Beston Drive (“the Property”) pursuant to an option to purchase agreement or, in the alternative, an order that a down payment amount of $25,000.00, plus interest, be returned to her.

[2] The Respondent, 5GC Inc. (“5GC”), opposes the relief sought by Ms. Gatoto and submits that she failed to purchase the Property pursuant to the terms of the option to purchase agreement entered into between the parties and so the agreement has expired and she has forfeited the down payment amount.

[3] The parties filed supporting affidavits and the affiants were cross-examined on those affidavits. Transcripts of the cross-examinations were filed.

[4] Counsel for both parties agreed that, with respect to the French language documents found in the record that have been translated into English, the translations are acceptable and can be relied upon by the Court.

BACKGROUND

[5] Ms. Gatoto has lived at the Property since November 1, 2013.

[6] 5GC is Ms. Gatoto’s landlord. 5GC has five directors and shareholders, David Crozier (“Mr. Crozier”), Laurent Truc (“Mr. Truc”), Ashu Avasthi, Serge Jarlian and Kumar Yarlagadda. Mr. Crozier purchased the Property on behalf of 5GC as an investment property.

[7] On September 24, 2013, the parties entered into an option to purchase agreement (“the Option to Purchase Agreement”), along with a companion lease agreement (“the Lease Agreement”), with respect to the Property.

[8] The Lease Agreement provided for a fixed term whereby Ms. Gatoto agreed to lease the Property for a term of 36 months, commencing on the 1st day of November 2013, and ending on the 31st day of October, 2016. Upon expiration, the Lease Agreement was to become a month-to-month agreement automatically, unless either the tenant or owner notified the other, at least 30 days before expiration, that they did not wish the agreement to continue. The rent was $1,750.00 per month during the term of the lease for the first 24 months; if Ms. Gatoto remained in the Property as a tenant after that period, the rent was to increase in accordance with provincial law.

[9] Pursuant to clause 1 of the Option to Purchase Agreement, Ms. Gatoto was entitled to exercise the option to buy the Property for a fixed price of $303,187.00 up until October 31, 2015, provided that she honoured the terms of the Lease Agreement. She was further entitled to purchase the Property from November 1, 2015 through October 31, 2016 for the fixed price of $318,346.00, as long as she complied with the Lease Agreement.

[10] In addition to permitting payment of an option fee to have the right to purchase the Property during the rental term for a fixed price, the Option to Purchase Agreement also provided for Ms. Gatoto to earn a credit towards the down payment of the Property’s purchase price. The relevant paragraphs read:

2. The Tenants submit the sum of $13,000 made payable to the Landlord on the execution of this option representing a non-refundable option consideration (“Non-refundable Option Consideration”) to be used towards the down payment of the purchase price without interest upon exercise of this option. In the event that the Tenants do not exercise this option or in the event of breach by the Tenants of this option or the Lease Agreement the Non-refundable Option Consideration is forfeited to the Landlord. The Tenants acknowledge that the Non-refundable Option Consideration is an option fee and not a rental deposit.

3. Starting November 1st 2014, for each month that rent is paid per the Lease Agreement, the Tenants will earn a monthly credit (“Monthly Credit”) of $200 towards the down payment of the purchase price of the Property. This credit will accrue to a maximum credit of $4,800 to be used towards the down payment of the purchase price without interest upon exercise of this option. The Tenants acknowledge that rent must be paid on time to earn the monthly credit. In the event that the Tenants do not exercise this option or in the event of breach by the Tenants of this option or the Lease Agreement the Monthly Credit is to be forfeited to the Landlord. The Tenants acknowledge that the Monthly Credit is an option fee [and] is not part of any monthly rent.

[11] The timeline for the Property’s purchase is set out in clause 10 of the Option to Purchase Agreement:

10. The closing of an agreement of purchase and sale between the Landlord and the Tenants entered into pursuant to the exercise of this option must occur within thirty days from the expiration of the Lease Agreement.

[12] The parties agree that Ms. Gatoto paid the sum of $13,000.00 at the time of executing the Option to Purchase Agreement and that she accrued a total amount of $12,000.00 in monthly credits, for a total sum of $25,000.00 to be used towards a down payment on the Property’s purchase price.

[13] In late November 2014, 5GC introduced Ms. Gatoto to C. Lopes of Butler Mortgage in order that she could assist Ms. Gatoto with respect to her mortgage options.

[14] By an email dated December 3, 2014, the parties purported to amend a number of terms of the Option to Purchase Agreement, including specifically the term regarding the earning of monthly credits, as follows:

3. Year 2 and 3 credits change (Nov 1 2014 - Oct 31 2016) On the “Option to Purchase Agreement” on page 2 section 3, the agreement between 5GC and [Ms. Gatoto] specifies that [Ms. Gatoto] will begin to earn monthly credits of $200/month starting Nov 1, 2014 with a max credit of $4800. We are agreeing to change this clause and [Ms. Gatoto] will now earn a monthly credit of $400/month starting Nov 1 2014 through October 31, 2016. This amendment is not “signed by the parties and duly witnessed” as required by clause 15 of the Option to Purchase Agreement.

[15] An email dated May 16, 2016, addressed to Ms. Gatoto from Mr. Truc, shows Mr. Truc asking “Kumar” to provide Ms. Gatoto “with receipts for 2015 rent paid”.

[16] Towards the beginning of August 2016, 5GC reminded Ms. Gatoto of the upcoming expiration of the Option to Purchase Agreement on October 31, 2016. And, on August 4, 2016, 5GC put Ms. Gatoto in touch with M. Zanzini (“Mr. Zanzini”), also of Butler Mortgage, by way of email so that he could assist her with any mortgage application.

[17] On or about August 4, 2016, Ms. Gatoto emailed Mr. Truc asking 5GC (again) for rent receipts. In response, by email sent to Ms. Gatoto dated August 18, 2016, Mr. Truc confirmed the rent amounts paid for 2013, 2014 and 2015. By subsequent email dated August 22, 2016, however, Mr. Truc wrote to Ms. Gatoto advising “I spoke to my accountant again and based on the contract I need to provide you a different sets [sic] of receipts. He misunderstood what I had told him. I will be sending this off to you today and they will cover $1750 for year 1 and $1850 for year 2 and 3”. Three emails were then sent to Ms. Gatoto from Mr. Truc, on August 22nd, as receipts for rent paid for the Property for 2013, 2014 and 2015.

[18] On September 2, 2016, Mr. Zanzini updated 5GC that he had advised Ms. Gatoto that she needed to submit her mortgage application, along with income documents, to process as the Option to Purchase Agreement was ending soon in October 2016.

[19] On September 6, 2016, Ms. Gatoto emailed 5GC stating that her income tax filings had not been completed and explaining the reason why as follows:

Like I made you aware recently, my income tax filings are not yet done. The reason stated by the CRA is that some information was missing in my files, notably rent since I’ve been at this new address. Therefore, I have almost no information to complete in Michael’s form, given that he told me this week is the last week and despite the phone conversation that we had, I don’t think I’ve been understood. I would ask therefore if at all possible, a proposal that could be advantageous to both of us. Either wait until the government does my income taxes for years 2014, 2015 or consider those from previous years if possible or another proposal from you[r] end.

[20] By October 23, 2016, it was clear to 5GC that Ms. Gatoto would not be able to complete the option to purchase by the expiry date of October 31, 2016. As a result, Mr. Truc corresponded with Ms. Gatoto and confirmed 5GC’s offer to extend the Option to Purchase Agreement:

The extension I had offered you back in August or September still stands. We are willing to extend the contract for a year with a new purchase price of $399,600 based on the current value of the home. Since you are looking to purchase the home shortly, what we can offer to help is to prorate the increase each month. If you close on the home in the first month of the extension then you only pay 1/12th of the increased amount between the old price and the new price. In the 2nd month, this will go up to 2/12ths and so on …

Unfortunately, we will not be able to extend the contract for the same amount. You have had 3 years to get your financials ready for this close.

At this point, these are the only 2 options left remaining:

1. You let your option expire which means you do not purchase the home and you forfeit all credit accrued.
2. You sign this extension and close at your leisure by October 31st, 2017 whenever you have your financials finished, your mortgage approval and our lawyers can close on the home. The pricing is clear and you can decide when you want to finalize the transactions once you are ready.

I want to make sure that it is very clear that if I do not receive the signed extension by October 31st to our business address … there will not be an opportunity for another extension. Once the option expires your ability to purchase the home disappears.

If the option expires, you will be able to rent the home on a month to month basis if you wish. That is your legal right.

I’ve attached a copy of the extension agreement for your review and signoff.

Thanks,

Laurent [Truc]

[21] On October 28, 2016, Ms. Gatoto responded to 5GC’s offer to extend the Option to Purchase Agreement alleging that she could not get her tax returns completed because of missing rent receipts which 5GC had not provided to her. She questioned why 5GC was trying to “confiscate” her down-payment monies and advised that she was “not signing anything”.

[22] On October 29, 2016, two days before the Option to Purchase Agreement was to expire, further emails were exchanged by the parties. Among them, Ms. Gatoto wrote to Mr. Truc advising that she had submitted her taxes by April 2016 and reminding him that she had asked him for her rent receipts twice and each time the answer was that 5GC had to speak to its accountant. She stated that 5GC had offered to provide her with an extension. She asked for the return of her deposit so she would go elsewhere. She expressed concern that 5GC would add $82,000 to the purchase price for one additional year’s extension and stated that that was not written in the contract terms. She disputed that the Property was worth $400,000 and alleged that 5GC was “profiting from a problem that, if it had happened in the middle or beginning of the contract, we would have worked it out amicably”. Ms. Gatoto expressed that she would not be forced into signing a new contract.

[23] Following the expiry of the October 31, 2016 option deadline, Ms. Gatoto continued to live at the Property as a tenant pursuant to the Lease Agreement.

[24] Ms. Gatoto retained a lawyer, C. Leduc, who sent correspondence to 5GC on her behalf on July 12, 2017. Mr. Leduc wrote to 5GC explaining that Ms. Gatoto was prepared to pay $318,000.00 for the Property with a $25,000.00 credit off the purchase price to account for payments she had made towards the deposit. Otherwise, Ms. Gatoto was requesting the full $25,000.00 be refunded to her. He stated that Ms. Gatoto was unable to file her income tax returns because she did not receive rent receipts from 5GC and this created difficulties for her in obtaining bank financing. Any delays were caused by 5GC’s “lack of cooperation and … not providing her with necessary documents”. He concluded by stating that Ms. Gatoto had secured financing and wanted to buy the Property, and that she would not hesitate in commencing legal action to ensure that she could buy the home “as previous agreed”.

[25] 5GC’s lawyer, J. Topolski, responded to Mr. Leduc on July 27, 2017 disagreeing that 5GC was responsible for Ms. Gatoto’s situation. 5GC refused to return any monies paid to date and refused to sell the Property on the terms being proposed by Ms. Gatoto. Mr. Topolski stated that 5GC would defend any legal action commenced by Ms. Gatoto.

[26] In or about July 2020, 5GC decided to sell the Property.

[27] On July 22, 2020, Mr. Truc telephoned Ms. Gatoto and asked if she would be interested in purchasing the Property at a fair market value. Ms. Gatoto responded that she would be so interested.

[28] On July 24, 2020, 5GC emailed Ms. Gatoto advising that its real estate agent would list the Property at $499,000.00 but that 5GC was willing to sell the Property to her for $484,000.00 with a closing date of August 31, 2020.

[29] Communications were exchanged between the parties regarding the July 24th offer. On July 27, 2020, Mr. Truc wrote to Ms. Gatoto advising that 5GC was willing to decrease the purchase price of the Property by $25,500.00 and so the price for her to purchase the Property would be $473,500.00.

[30] On July 30th, 2020, in response to an e-mail from Ms. Gatoto sent on July 27th, Mr. Truc advised Ms. Gatoto about a first-time homeowners program and wrote that, if she could get a lender’s mortgage approval, then 5GC would try to work with her to help make the purchase of the Property happen.

[31] By email sent on July 31st, 2020, in response to a communication from Ms. Gatoto, Mr. Truc confirmed 5GC would give Ms. Gatoto credit for the amount of $25,500.00 as a down-payment if she could qualify for a mortgage to purchase the Property for $499,000.00.

[32] By a reply e-mail dated July 31st, Ms. Gatoto questioned the $499,000.00 purchase price and asserted that her $25,500.00 down-payment was “untouchable” and that she would resort to legal action.

[33] On August 6, 2020, Ms. Gatoto communicated with 5GC about the need to “rebuild her credit” and stated that she needed to “wait a bit” before purchasing the Property. The parties subsequently exchanged further communications. 5GC responded that same day by asking how much more time Ms. Gatoto would need to raise her credit score so that she could buy the Property. Ms. Gatoto replied that she would make inquiries and would let 5GC know in two months’ time. 5GC agreed to give her some additional time.

[34] On November 6, 2020, 5GC emailed Ms. Gatoto asking if she was still interested in purchasing the Property and how her credit score was doing. Ms. Gatoto responded that same day that she was “still interested” but that she had little time at the moment to discuss things because of her school commitments. She suggested connecting in December. Mr. Truc agreed to connect with Ms. Gatoto in “early December” and said he would send over some comparable listings so she could see how the market was performing at that time.

[35] Ultimately, Ms. Gatoto did not purchase the Property. She commenced the within application on September 1, 2021.

ISSUES

[36] The following issues are to be determined on this application:

(a) Was 5GC negligent in failing to provide, in a timely manner, rent receipts that complied with the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (“the RTA”)? (b) Does the Option to Purchase Agreement continue to be enforceable given 5GC’s breach of its statutory obligation to provide compliant rent receipts? (c) If not, did the parties intend to be bound by the expired Option to Purchase Agreement? (d) Was the Option to Purchase Agreement renewed in November 2020? (e) In the alternative, should the $25,000.00 be returned to Ms. Gatoto on the basis of unjust enrichment? (f) Should Ms. Gatoto be granted relief from forfeiture of the $25,000.00?

ANALYSIS

(a) Was 5GC negligent in failing to provide, in a timely manner, rent receipts that complied with the RTA?

[37] Section 109(1) of the RTA provides that a landlord shall provide, free of charge to a tenant or former tenant, on request, a receipt for the payment of any rent, rent deposit, arrears of rent or any other amount paid to the landlord.

[38] Section 9 of O. Reg. 516/06 – General made under the RTA (“O. Reg. 516”), sets out the formal requirements for the content of a rent receipt. It reads:

Receipt

9. A document constitutes a receipt for the purposes of section 109 of the Act if it includes, at a minimum,

(a) the address of the rental unit to which the receipt applies; (b) the name of the tenants to whom the receipt applies; (c) the amount and date for each payment received for any rent, rent deposit, arrears of rent, or any other amount paid to the landlord and shall specify what the payment was for; (d) the name of the landlord of the rental unit; and (e) the signature of the landlord or the landlord’s authorized agent.

[39] Section 234 of the RTA provides:

234 A person is guilty of an offence if the person,

(h) fails to provide a tenant or former tenant with a receipt in accordance with section 109;

Position of Ms. Gatoto

[40] Ms. Gatoto submits that she requested rent receipts in or about April or May 2016 but that 5GC only provided her with confirmation of her rent payments on August 22, 2016. She argues that the August 22, 2016 emails do not comply with s. 9 of O. Reg. 516 since they only indicate the rent amount and date of the rent paid, and do not contain the signature or other required information.

[41] Ms. Gatoto argues that 5GC had a statutory duty to provide her with rent receipts that were compliant with the RTA so that she could file her income tax returns and then obtain mortgage financing by October 31, 2016 and, as such, there was a clear duty of care owed by 5GC. She contends that, by failing to provide her with compliant rent receipts from 2013 until 2020, 5GC failed to adhere to an objective standard of care. The resulting damage to her is both the inability to use the initial deposit of $25,000.00 and interest thereon, and the difference between the current market value of the Property and the option price of $318,346.00 under the Option to Purchase Agreement.

Position of 5GC

[42] 5GC maintains that Ms. Gatoto first requested rent receipts in August 2016 and that it provided receipts within 2 weeks of her request.

[43] 5GC further submits that there is no evidence before the court to establish:

a. that the emailed rent receipts were insufficient for Ms. Gatoto’s income tax filing purposes; or b. that she was unsuccessful in applying for a mortgage as a result of the August 22, 2016 emailed rent receipts.

Discussion

[44] In my view, the language of s. 109(1) of the RTA requires a landlord to provide a rent payment receipt only when requested by the tenant or former tenant. I accept that Ms. Gatoto first requested rent receipts in late April 2016 or early May 2016 given the May 16, 2016 email that shows Mr. Truc requesting “Kumar” to provide Ms. Gatoto with receipts for 2015 rent paid.

[45] I find that the emailed rent payment receipts ultimately supplied by 5GC to Ms. Gatoto on August 22, 2016 did not satisfy the minimum requirements set out in s. 9 of O. Reg. 516 since they did not contain her full name as the tenant and did not have a signature of the landlord or its authorized agent.

[46] However, courts have held that a breach of a statutory requirement does not, in and of itself, give rise to a right of action in negligence; it is only evidence of negligence: see R. v. Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205 (S.C.C.), at paras. 37-38. A plaintiff must still prove that the alleged negligence caused the damage complained of and causation must be proved on the balance of probabilities. It is not sufficient to show that the damage was possibly caused by a defendant's breach of the statutory duty.

[47] Based on the record before me, I find that the causal relation between the failure of 5GC to provide compliant rent receipts and Ms. Gatoto’s inability to file her income tax returns for 2014 and 2015 or to obtain mortgage financing was not made out on the evidence.

[48] There is no probative evidence establishing that Canada Revenue Agency refused to accept the August 22, 2016 emails sent by Mr. Truc to Ms. Gatoto confirming the rent amounts she had paid.

[49] There is no evidence before me that Ms. Gatoto ever submitted a mortgage application for consideration.

[50] The evidence establishes that Ms. Gatoto was submitting her income tax filing for 2014 in April 2016. In my view, if Ms. Gatoto had filed her 2014 tax return earlier than April 2016, she would have been aware of the need for rent receipts and could have addressed the situation with 5GC in sufficient time prior to the October 31, 2016 deadline.

[51] I conclude that Ms. Gatoto’s claim in negligence must be dismissed.

(b) Does the Option to Purchase Agreement continue to be enforceable given 5GC’s breach of its statutory obligation to provide compliant rent receipts?

Position of Ms. Gatoto

[52] Ms. Gatoto contends that, without compliant rent receipts, she was unable to complete her income tax return filings. She asserts that this, in turn, meant that she was not able to complete a mortgage financing application in time to meet the October 31, 2016 deadline, as the underlying notices of assessment and tax returns would be required by the mortgage broker to complete the financing for her purchase of the Property.

Position of 5GC

[53] 5GC submits that it provided rent receipts to Ms. Gatoto upon request. It contends that she first asked for receipts on August 4, 2016 and that Mr. Truc provided receipts on August 18, 2016 and then provided corrected receipts on August 22, 2016.

[54] 5GC further submits that the sufficiency of rent receipts is only relevant to matters and proceedings under the RTA and that the RTA only applies to lease agreements, not to option to purchase agreements.

[55] It is the position of 5GC that Ms. Gatoto has not established that it was the August 22, 2016 emailed rent receipts that were the cause of her not obtaining mortgage financing. 5GC contends that it is undisputed that: Ms. Gatoto had a poor credit rating; she did not file her income tax returns in a timely manner; conventional mortgage lenders were not prepared to fund her; and she had no mortgage financing in place in 2016. 5GC also submits that Ms. Gatoto has not established that she has financing and is able to purchase the Property as of the hearing date.

Discussion

[56] For the same reasons discussed above, I find that Ms. Gatoto has not established that it was the failure of 5GC to provide compliant rent receipts that was the cause of her inability to obtain mortgage financing in time to purchase the Property pursuant to the terms and conditions of the Option to Purchase Agreement.

[57] Accordingly, there is nothing to warrant a finding that the Option to Purchase Agreement should continue to be enforceable and I dismiss Ms. Gatoto’s claim in this regard.

(c) If not, did the parties intend to be bound by the expired Option to Purchase Agreement?

Position of Ms. Gatoto

[58] It is the position of Ms. Gatoto that the Option to Purchase Agreement is still a binding contract and that it continues to exist. She relies on clause 5 of the Option to Purchase Agreement that 30 days’ written notice by personal service or by registered mail was required to terminate the Option to Purchase Agreement. Ms. Gatoto submits that there is no evidence of an affidavit of service regarding notice of 5GC’s declaration that the Option to Purchase Agreement was null and void. Therefore, she argues that the contract continues to be binding on 5GC. Ms. Gatoto contends that, since 5GC frustrated her ability to obtain financing and since the Option to Purchase Agreement was never formally cancelled by 5GC, this court should find that it is still a binding contract.

Position of 5GC

[59] It is 5GC’s position that clause 5 of the Option to Purchase Agreement does not apply as suggested by Ms. Gatoto. Rather, the Option to Purchase Agreement reads conjunctively with the Lease Agreement and clause 5 contemplates Ms. Gatoto abandoning the Property/Lease and, in such event, the landlord could give notice to the tenant that they have abandoned the property and provide 30 days’ notice of the lease expiring and that the option to purchase is null.

[60] 5GC argues that, since Ms. Gatoto failed to purchase the Property by the deadline of October 31, 2016, 30 days’ notice was not required because the Option to Purchase Agreement simply expired on the deadline date, as per clause 1 of the Agreement.

[61] 5GC submits that Ms. Gatoto understood that she was to exercise the option to purchase by October 31, 2016, and that it had cautioned her well in advance of that deadline that she needed to get her financial situation and records in order. 5GC contends that there is no evidence before the court that Ms. Gatoto did not understand that October 31, 2016 was the clear deadline.

[62] In the alternative, 5GC submits that the July 27, 2017 correspondence sent by its lawyer to Ms. Gatoto’s lawyer, wherein it refuses to sell the Property on Ms. Gatoto’s proposed terms or to return the down payment amount, can constitute such notice. So, if Ms. Gatoto’s argument is accepted, Ms. Gatoto received the notice she says was needed and the Option to Purchase Agreement terminated 30 days following the July 27th notice.

Discussion

[63] Clause 5 of the Option to Purchase Agreement addresses default. It reads:

5. If the Tenants abandon the Property for any reason whatsoever this option becomes null and void. If default occurs pursuant to the Lease Agreement or the Tenants fail to perform the provisions of the Lease Agreement the Landlord may declare this option null and void by thirty (30) days written notice to that effect personally served upon the Tenants or mailed in a registered letter addressed to the Property and upon the expiration of the time in the said notice the rights and interests hereby created and existing in favour of the Tenants shall forthwith cease and the Tenants shall forfeit the Non-refundable Option Consideration and the Monthly Credit.

[64] I find that clause 5 of the Option to Purchase Agreement has no application in the circumstances. That clause simply gives 5GC the right, should it wish, to declare the Option to Purchase Agreement null and void in the event that Ms. Gatoto defaulted under the Lease Agreement. Clause 5 does not require 5GC to give notice in order for the Option to Purchase Agreement to be considered terminated.

[65] Pursuant to clause 1 of the Option to Purchase Agreement, Ms. Gatoto was required to give 5GC notice in writing 90 days prior to the completion of the term of the Lease Agreement of her intention to purchase the Property. Clause 10 of the Option to Purchase Agreement then required that the closing of an agreement of purchase and sale “entered into pursuant to the exercise of this option must occur within thirty days from the expiration of the Lease Agreement”.

[66] While Ms. Gatoto gave notice of her intention to exercise the option to purchase the Property in a timely manner, no agreement of purchase and sale was entered into between the parties.

[67] By Mr. Truc’s email to Ms. Gatoto, dated October 23, 2016, 5GC offered to extend the Option to Purchase Agreement “for a year with a new purchase price of $399,600 based on the current value of the home”. Ms. Gatoto was given until October 31, 2016 to agree to that extension. The communications from 5GC to Ms. Gatoto were clear that it would consider the Option to Purchase Agreement to be expired if she did not agree to the one-year extension terms. There is nothing in the conduct of the parties that contradicts 5GC’s position in this regard. Ms. Gatoto did not accept the extension offer. As a result, I find that the Option to Purchase Agreement expired on October 31, 2016.

[68] 5GC was entitled to insist on strict compliance with the deadlines set out in the Option to Purchase Agreement. While Ms. Gatoto’s counsel advised 5GC on July 12, 2017 that she had secured financing and wanted to purchase the Property “immediately”, by that time it was too late. The Option to Purchase Agreement was already at an end.

[69] I conclude that the parties did not intend to be bound by the Option to Purchase Agreement after it expired.

(d) Was the Option to Purchase Agreement renewed in November 2020?

[70] I find that the offer from 5GC to Ms. Gatoto in July 2020, which was discussed between the parties again in November 2020, constituted a new offer to sell her the Property. While 5GC was willing to sell the Property to Ms. Gatoto and credit her the amount of $25,500.00 towards the new purchase price, this did not have the effect of extending the Option to Purchase Agreement: see Jesan Real Estate Ltd. v. Doyle, 2020 ONCA 714, at para. 52.

[71] I also find that the new offer in 2020 did not constitute a waiver of the forfeited $25,000.00. Ms. Gatoto did not formally accept the new offer and no deal between the parties was reached.

[72] I conclude that the Option to Purchase Agreement was not renewed in November 2020.

(e) In the alternative, should the $25,000.00 be returned to Ms. Gatoto on the basis of unjust enrichment?

Position of Ms. Gatoto

[73] Ms. Gatoto submits that 5GC will be unjustly enriched if it sells the Property at current market value, which exceeds the Option to Purchase Agreement price, and if it is permitted to keep the $25,000.00 sum. She argues that she will suffer a corresponding deprivation as she was unable to exercise her option to purchase the Property without compliant rent receipts from 5GC and she will lose the $25,000.00 she paid as a down payment. Finally, she argues that 5GC’s enrichment and her corresponding deprivation has occurred in the absence of a juristic reason.

Position of 5GC

[74] 5GC submits that there is a juristic reason for it to retain the $25,000.00 sum since Ms. Gatoto allowed the option to purchase to expire, and the Option to Purchase Agreement clearly stated that the $13,000.00 option fee and the accrued monthly credits would be forfeited if the option was not exercised.

Discussion

[75] The courts apply a threefold test to determine whether an unjust enrichment has taken place. The facts must show: (i) that a party has been enriched; (ii) that another party has suffered a corresponding deprivation; and (iii) an absence of any juristic reason – such as a contract or a law – for the enrichment. That is, it must be unjust for the defendant to retain a benefit made at the plaintiff's expense: see Rothwell v Rothwell (1978), 83 D.L.R. (3d) 289 at 306 (S.C.C.); and Pettkus v Becker (1980), 117 D.L.R. (3d) 257 at 274 (S.C.C.).

[76] In my view, the terms of the Option to Purchase Agreement were clear and unambiguous that, where the option to purchase was not exercised, the $13,000.00 option fee and the monthly credits amount would be forfeited. Ms. Gatoto did not exercise the option in accordance with the terms and conditions of the Option to Purchase Agreement. Accordingly, the $25,000.00 sum is forfeited.

[77] Based on clauses 2 and 3 of the Option to Purchase Agreement, I find that there is a juristic reason for 5GC to retain the $25,000.00 sum. Ms. Gatoto has not made out a case of unjust enrichment.

(f) Should Ms. Gatoto be granted relief from forfeiture of the $25,000.00?

[78] Section 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides: “A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.”

[79] In Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374 (Ont. C.A.), at para. 15, the Ontario Court of Appeal confirmed the two-part test for determining whether relief from forfeiture should be granted, as follows:

1. whether the forfeited deposit was out of all proportion to the damages suffered, and
2. whether it would be unconscionable for the seller to retain the deposit.

[80] The burden is on a purchaser to meet the test and satisfy the court that the relief from forfeiture, which is to be granted sparingly, is appropriate: see Kozel v. Personal Insurance Co., 2014 ONCA 130, at para. 29.

[81] Where a transaction involving the sale of land does not close due to defaults by the purchaser, the general rule is that the seller is entitled to the deposit amount without having to prove damages: Redstone, at paras. 20 and 27.

[82] The Court of Appeal in Redstone stated, at para. 25, “the finding of unconscionability must be an exceptional one, strongly compelled on the facts of the case.” It further explained, at para. 30, that, where there is no gross disproportionality, the court must consider other indicia of unconscionability:

The list of the indicia of unconscionability is never closed, especially since they are context-specific. But the cases suggest several useful factors such as inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach, and the conduct of the parties.

[83] In this case, the following factors are relevant:

a. This was a relatively straightforward transaction. The parties were at arm’s length. There was no significant inequality of bargaining power between them. There was no fiduciary relationship. b. $13,000.00 was paid as the initial option fee under the Option to Purchase Agreement which provides in clause 2 that this fee is non-refundable and will be forfeited if the option to purchase is not exercised. c. Monthly credits totalling $12,000.00 were credited towards a down payment on the purchase price under the Option to Purchase Agreement which provides in clause 3 that the monthly credits are to be forfeited if the option to purchase is not exercised. d. Clause 3 of the Option to Purchase Agreement caps the monthly credits amount at $4,800.00. e. The $25,000.00 sum represents approximately 8% of the agreed-upon purchase price of $318,346.00 set out in the Option to Purchase Agreement. f. 5GC did accommodate Ms. Gatoto by putting her in touch with professionals who could assist her with her mortgage application; by granting her time to improve her credit score; by trying to facilitate Ms. Gatoto securing mortgage financing to close the sale; and by offering to extend the Option to Purchase Agreement. g. There is no evidence to establish that Ms. Gatoto was ever in funds to complete the purchase of the Property at any point in time. h. The failure of Ms. Gatoto to effectively exercise her option to purchase the Property under the Option to Purchase Agreement went to the heart of the contract. i. There is no evidence that 5GC suffered damages, as the value of the Property has undoubtedly increased since 2016.

[84] After considering the relevant factors, in my view, it is not unconscionable for 5GC to retain the $13,000.00 option fee paid by Ms. Gatoto pursuant to clause 2 of the Option to Purchase Agreement. As the Ontario Court of Appeal held in Azzarello v. Shawqi, 2019 ONCA 820, at para. 45:

It is well-established by case law that when a purchaser repudiates the agreement and fails to close the transaction, the deposit is forfeited, without proof of any damage suffered by the vendor: see Tang v. Zhang, 2013 BCCA 52, 359 D.L.R. (4th) 104 (B.C. C.A.), at para. 30, approved by this court in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374 (Ont. C.A.). Where the vendor suffers no loss, the vendor may nevertheless retain the deposit, subject to relief from forfeiture.

[85] In the preamble clauses of the Option to Purchase Agreement, it states that the $13,000.00 amount was paid as an “option fee” to ensure that Ms. Gatoto had “the opportunity to purchase the property at any time during the rental term”, which she did. Clause 2 of the Option to Purchase Agreement clearly states that the amount was non-refundable and that it would be forfeited if Ms. Gatoto did not exercise the option to purchase. I do not see anything in the wording of the Option to Purchase Agreement or in the conduct of 5GC to warrant not holding the parties to the terms of their bargain in this regard. Ms. Gatoto has not given any evidence that she did not understand the terms of the Option to Purchase Agreement nor has she objected to its terms.

[86] However, I am of the view that it would be unconscionable for 5GC to retain the $12,000.00 in monthly credits. By virtue of clause 3 of the Option to Purchase Agreement, the monthly credit amount was to be capped at a maximum of $4,800.00. I find that it is unjust for this sum to have accrued to 2.5 times the original maximum amount, and for Ms. Gatoto to lose this amount, without the Option to Purchase Agreement having been formally modified or amended as per clause 15 of the contract.

[87] Accordingly, Ms. Gatoto is granted relief from the forfeiture of the monthly credits amount paid pursuant to clause 3 of the Option to Purchase Agreement only.

DISPOSITION

[88] Ms. Gatoto’s application is granted, in part.

[89] 5GC shall pay to Ms. Gatoto the monthly credits amount totalling $12,000.00, plus prejudgment interest on this amount commencing November 1, 2016 in accordance with the Courts of Justice Act.

[90] I note that emails from Mr. Truc to Ms. Gatoto in July 2020 indicate that 5GC was willing to credit her $25,500.00 towards reducing the purchase price of the Property. This may have been a typographical error in Mr. Truc’s email. However, if $25,500.00 is in fact the correct amount of the down payment sum, then Ms. Gatoto would be entitled to the additional $500.00 as well.

COSTS

[91] Given that success was divided between the parties, I find that it is fair and reasonable in the circumstances that each party bear their own costs.

MacNEIL J. Released: March 16, 2023