Court File and Parties

COURT FILE NO. CV-22-00000802-0000 DATE: 20230706 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2779991 Ontario Limited Plaintiff – and – Anthony Pyle and Rita Pyle Defendants

Counsel: Adam Marchioni, for the plaintiff Josh Suttner and Jonathan Marun-Batista, for the defendants

Heard: April 28, 2023, by video conference, at Newmarket

S.T. BALE J.:

Overview

[1] The defendants sold a ninety-five-acre rural property to the plaintiff. The property included a 100-year-old farmhouse. Between the date the agreement of purchase and sale was signed and the scheduled date for completion, the farmhouse was destroyed by fire.

[2] The plaintiff then sought an abatement of the purchase price or, alternatively, confirmation that the farmhouse would be re-built prior to closing. In response, the defendants advised that the property had not been insured against the risk of fire, and that they would not agree to re-build the house or to an abatement.

[3] The plaintiff then completed the agreement advising that it was doing so without prejudice and was reserving its right to claim damages for the fire loss.

[4] The defendants now move under rule 21.01(1)(b) to strike out the statement of claim, without leave to amend, on the ground that it discloses no reasonable cause of action.

Background Facts

[5] On April 20, 2020, the defendants entered into an agreement to sell the farm property to 2708825 Ontario Inc., in trust. 2708825 Ontario Inc. then assigned its interest in the agreement to the plaintiff.

[6] The sale was conditional upon the plaintiff conducting due diligence, and in particular, being satisfied that the property was fit for redevelopment, both in terms of zoning approval and economic feasibility. The plaintiff waived the condition on August 5, 2020.

[7] There was a fire at the property on November 4, 2020, as a result of which, the house collapsed and was a total loss.

[8] The plaintiff became aware of the fire in January 2021. It then sought confirmation from the defendants that the property was insured and that the purchase price would be abated to account for the loss; or alternatively, that the house would be re-built prior to closing.

[9] In response, the defendants advised that the property was not insured against the risk of fire, and that they would not agree to an abatement of the purchase price or to re-build the house.

[10] The plaintiff then completed the agreement stating that it was doing so without prejudice and was reserving its right to claim damages from the defendants for the fire loss.

[11] With respect to the parties’ rights in the event of substantial damage to the property pending closing, the agreement of purchase and sale provided as follows:

14. INSURANCE: All buildings on the property and all other things being purchased shall be and remain until completion at the risk of Seller. Pending completion, Seller shall hold all insurance policies, if any, and the proceeds thereof in trust for the parties as their interests may appear and in the event of substantial damage, Buyer may either terminate this Agreement and have all monies paid returned without interest or deduction or else take the proceeds of any insurance and complete the purchase.

[12] The agreement of purchase and sale also contained the following entire agreement clause:

26. AGREEMENT IN WRITING: … This Agreement including any Schedule attached hereto , shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein .

Analysis

[13] In this action, the plaintiffs claim damages for both breach of contract and misrepresentation. On this motion, the defendants argue that neither cause of action is made out on the facts pleaded in the statement of claim.

Breach of contract

[14] The plaintiff alleges the following breaches of the agreement of purchase and sale:

• the defendants’ failure to insure the property against the risk of fire;
• the defendants’ failure to adequately protect the property from the risk of fire;
• the defendants’ refusal to re-build the farmhouse prior to closing; and
• the defendants’ refusal to give an abatement of the purchase price.

Failure to insure

[15] The defendants argue that no provision of the agreement of purchase and sale required them to insure the property. They point out that the agreement provides: “Pending completion, [the defendants] shall hold all insurance policies, if any, and the proceeds thereof, in trust for the parties ….” They argue that the words “if any”, coupled with the absence of any provision requiring them to insure, make it clear that they had no obligation to insure the property against the risk of fire.

[16] The defendants also rely on Wile v. Cook, [1986] 2 S.C.R. 137. The applicable clause in that case provided as follows:

5. All buildings and equipment upon the real property shall be and remain at the risk of the Vendor until closing. Pending completion of the sale, the Vendor will hold all insurance policies and the proceeds thereof in trust for the parties as their interests may appear and in event of damage to the said premises, the Purchaser may either have the proceeds of the insurance and complete the purchase or may cancel the Agreement and have all moneys theretofore paid returned without interest.

[17] At para. 12 of Wile, the court held that the vendor was not required to insure the property:

Clause 5 significantly alleviates the harshness of the common law. Under that provision, the buildings and equipment remain at the risk of the vendor until closing, “and in the event of damages to the said premises, the Purchaser may either have the proceeds of the insurance and complete the purchase, or may cancel the Agreement and [page143] have all moneys theretofore paid returned without interest.” But the clause does not set forth any specific amount of insurance. Indeed, the vendor is under no duty to take out any insurance. All the clause provides for is that if the purchaser elects to go through with the purchase he is entitled to whatever insurance proceeds may be owing. It does not give the purchaser any guarantee that the insurance is necessarily collectible.

[18] The effect of the property remaining at the risk of the vendor is that if there is substantial damage to the property before closing, the vendor may lose the sale. The purchaser will be entitled to terminate the agreement and obtain a return of his or her deposit (and any other money paid to the vendor) – an option that the purchaser would not otherwise have.

[19] The plaintiff argues that the present case may be distinguished from Wile on the basis that the wording in the two clauses is not the same. However, the plaintiff has not identified any material difference between the two clauses. As can be seen, in each case, the clause provides:

• that pending closing, the buildings will be at the risk of the seller;
• that the seller will hold insurance policies and insurance proceeds in trust for the parties as their interests may appear; and
• that in the event of damage to the property, the buyer may either take the insurance proceeds and complete the agreement or terminate the agreement and receive a refund of money paid without interest or deduction.

[20] The plaintiff also argues that in Wile, the court, in interpreting the clause, referred to the common law as it existed in Nova Scotia at the time. However, again, the plaintiff has not identified any material difference between the common law of Nova Scotia and the common law of Ontario in relation to this issue.

[21] The plaintiff also argues that the cases differ because in Wile, the purchaser refused to close as a result of the damage. Again, the plaintiff has not shown how that difference in the two cases makes the interpretation of the clause in Wile inapplicable in the present case.

[22] In support of its position, the plaintiff relies on Pordell v. Crowther Estate, 150 O.R. (3d) 167, 2020 ONSC 1635. In that case, the applicable clause was the same as the one in the present case and the trial judge said as follows, at para. 66:

Clause 14 of the OREA Agreement is intended to protect the purchaser. Not only does it require the vendor to continue to be responsible for insuring the property prior to closing, in the event that there is "substantial damage" the clause gives the purchaser options to terminate the Agreement, or to accept funds or a reduction in the purchase price reflecting the cost of repairs and complete the purchase. Implicitly, the purchaser is also given the option to agree to have repairs made by the vendor prior to closing.

[23] There are a number of difficulties with the plaintiff’s reliance on Pordell.

[24] First, Wile was not referred to in Pordell – presumably it was not brought to the court’s attention. The interpretation of a standard form contract is a question of law: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co, [2016] 2 SCR 23, 2016 SCC 37, at para. 46. Accordingly, given that there is no material difference between the insurance clause in Wile and the one at issue in the present case, the decision in Wile is binding on this court.

[25] Second, the court’s comment in Pordell to the effect that a vendor continues to be responsible for insuring the property until closing is obiter. While it is true that, in Pordell, the vendor’s insurance had lapsed due to extended vacancy, the presence or absence of insurance was not material to the court’s decision. Rather, the court found that the damage was substantial, that the vendor breached the contract by failing to provide the purchaser with an opportunity to inspect the damage, and that the purchaser was therefore entitled to a return of his deposit (as provided for in the insurance clause).

[26] The plaintiff submits that Pordell was followed in Tsui v. Zhuogi, 2021 ONSC 5421, and Zeifman Partners v. Aiello, 2022 ONSC 611, and points out that Tsui was upheld on appeal. The difficulty with this argument is that in neither Tsui nor Zeifman was insurance in issue. In Tsui, the court determined that water damage to the property was substantial and that the purchasers were entitled to rely on the insurance clause to obtain a return of their deposit. In Zeifman, the court determined that water damage to the property was not substantial and that the purchasers were not entitled to rely on the insurance clause to obtain a return of their deposit.

Failure to protect the property from the risk of fire

Refusal to re-build the farmhouse prior to closing

Refusal to give an abatement of the purchase price

[27] A breach of contract claim requires the plaintiff to plead the terms of the contract alleged to have been breached: Lam v. University of Western Ontario Board of Governors, 2015 ONSC 5281, at paras. 19-27. In the present case, the plaintiff has failed to identify any terms of the agreement requiring the defendants to protect the property from the risk of fire, to rebuild the farmhouse or give an abatement of the purchase price. There would appear to be no such terms and given the entire agreement clause, no such terms may be implied. The plaintiff’s demands that the farmhouse be re-built or that the purchase price be abated go far beyond its entitlement under the agreement and amount to a refusal to complete the agreement as written: see Wile, at para. 14.

Misrepresentation

[28] At paragraphs 23 and 24 of the statement of claim, the plaintiff pleads:

23. Further, or in the alternative, Ontario states that the representations made by the Pyles, as described hereinbefore, were untrue, inaccurate, and misleading, and that the representations were made negligently by the Pyles.

24. Further, or in the alternative, Ontario states that the Pyles knew the representations were untrue, inaccurate, and misleading or was wilfully blind to the truth or falsity of the representations.

[29] The representations “described hereinbefore” appear to be those pleaded in paragraphs 6-8 of the statement of claim:

6. The Pyles listed the Premises for sale on or about February 29, 2020. The property was listed publicly on Ontario MLS Multiple Listing Service (the Listing). The Listing represented the Premises to be an approximately 95 Acre property, including a 1.5 storey detached single family home that was tenanted.

7. The Listing provided, inter alia, the following representations with respect to the Premises: a. Detached, 1 ½ Storey, 7 Rms, 3 Bedrooms, 1 Washrms; b. Occupancy: Tenant; c. Kitchens: 1, Fam Rm: N, Basement: None, Fireplace: Y, Heat: Baseboard/Electric, A/C: None, Exterior: Brick; d. Brkage Remks: Property is Tenanted and Requires 24 Hours Notice.

8. The Listing also included and prominently displayed photographs of the house representing the state of the Property

[30] Rule 25.06(8) of the Rules of Civil Procedure provides: “Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars ….” In the present case, the plaintiff has failed to provide particulars of the representations that it alleges were false – which of them were false and in what respect?

[31] The plaintiff claims damages of $539,000 which it says was the Georgina Fire and Rescue Service’s estimate of the property loss. However, the statement of claim does not disclose how the alleged misrepresentations may be said to have caused such loss.

Disposition

[32] For the reasons given, I find that the claim in breach of contract has no reasonable prospect of success. I also find that the statement of claim does not disclose a reasonable cause of action in misrepresentation because of the lack of particulars.

[33] Where a pleading is struck, leave to amend should be granted unless the claim contains a radical defect incapable of being cured by amendment: Dawson v. Baker, 2017 ONSC 6477, at paras. 50-55. In the present case, I am unable to say that the defects are incapable of cure. In the result, the statement of claim will be struck out with leave to amend.

[34] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered to monica.mayer@ontario.ca, no later than August 8, 2023.

“S.T. Bale J.” Released: July 6, 2023