COURT FILE NO.: CV-21-130
DATE: 2023-02-02
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Morning Blood Glory
Plaintiff
– and –
Jonathan Hagey
Defendant
Dennis Touesnard, for the Plaintiff
Timothy J. Law and Assunta Mazzotta, for the Defendant
HEARD: November 16, 18 and 29, 2023
D.A. Broad
Background
(a) Transfer of the cottage and formation of the co-ownership agreement
[1] The plaintiff Morning Glory (“Morning”) and the defendant Jonathan Hagey (“Jonathan”) are brothers. On May 31 2019 their father Don Hagey (“Don”) transferred the family cottage property municipally known as 39 Willow Beach Lane, Simcoe, Ontario (the “cottage” or the “property”) to them as tenants-in-common for nominal consideration.
[2] Coincident with the transfer on May 31 2019 Morning and Jonathan executed a Co-Ownership Agreement (misdated May 18, 2019) in respect of the cottage which contained a buy-sell provision (the “Co-Ownership Agreement – Final Version”). Neither of the parties sought the assistance of a lawyer in the preparation or review of the document.
[3] Paragraph 3 of the Co-Ownership Agreement – Final Version (the “buy-sell provision”) dealt with the conduct of a sale of the interest of one of the parties to the other in the event that one wished to sell or dispose of his share in the cottage. It stated as follows:
- If one co-owner (“selling co-owner”) wishes to sell or dispose of his share in the cottage for what ever (sic) reason the other co-owner (“remaining co-owner”) has two choices:
(i) The selling co-owner shall sell his interest to the cottage to the remaining co-owner on terms agreed between the parties
or
(ii) Buy the remaining co-owner’s share in the cottage on the following terms: If the cottage has been owned 5 years or less the selling co-owner can purchase it for $112,500, if longer than 5 years the purchased (sic) price will be decided by the open market taking into account there will be no real estate broker’s fee.
(b) The dispute
[4] On April 13, 2021, Morning advised Jonathan that he wished to sell his share of the cottage.
[5] Morning and Jonathan were subsequently unable to agree upon terms by which Morning would sell his interest to Jonathan.
[6] Morning thereafter took the position that, since parties could not agree on terms by which he would sell his interest in the cottage to Jonathan under subparagraph 3(i) of the Co-Ownership Agreement – Final Version, Jonathan became obliged to sell his interest to him for $112,500 pursuant to subparagraph 3(ii).
[7] Jonathan took the position that the buy-sell provision of the Co-Ownership Agreement - Final Version did not reflect the true agreement that had been reached between himself and Morning which was reflected in a previous draft of the Co-Ownership Agreement dated May 11, 2019 (the “May 11 Version”), and that the Co-Ownership Agreement – Final Version should be rectified to reflect the true agreement. The buy-sell provision of the May 11 Version which Jonathan endorses as representing the true agreement provided as follows:
If one owner wishes to sell the cottage for what ever (sic) reason the other owner has two choices
A) Sell the cottage with him or B) buy the other persons (sic) half. If the cottage has been owned 5 years or less the other owner can purchase it for $137,500. If longer than 5 years the purchased (sic) price will be decided by the open market.
(c) Applications and referral to trial
[8] By Notice of Application issued May 25, 2021 (the “Morning Application”) Morning made application seeking, inter alia:
(a) a declaration that under the terms of the Co-Ownership Agreement – Final Version Morning has the right to purchase Jonathan’s share in the cottage for the amount of $112,500;
(b) an order for the sale of Jonathan’s share in the cottage to Morning in the amount of $112,500;
[9] By Notice of Application issued June 18, 2021 (the “Jonathan Application”) Jonathan made application seeking, inter alia:
(a) a declaration that the Co-Ownership Agreement – Final Version be rectified to reflect the May 11 Version;
(b) a declaration that under the terms of the agreement between the parties Jonathan has the right to purchase Morning’s share in the cottage for the amount of $137,500;
(c) an order for the sale of Morning’s share in the cottage to Jonathan at a price of $137,500;
[10] On October 12 2021 I ordered and directed, in part, as follows (reported at 2021 ONSC 6711):
(a) the Morning Application and the Jonathan Application shall be consolidated;
(b) the consolidated proceedings shall proceed to trial:
(c) the following directions shall govern the trial of the consolidated proceedings:
(i) the two Notices of Application shall constitute the pleadings in the consolidated proceedings;
(ii) the cross-examinations of the parties conducted to the date of the order shall constitute the examinations for discovery of the parties for the purpose of the trial of the consolidated proceedings; and
(iii) subject to the direction of the trial judge, the affidavits of the parties shall constitute the examinations in chief of the parties at the trial of the consolidated proceedings;
[11] Subsequent to the making of the order on October 12, 2021 Morning amended his Application to claim, in the alternative to his claim to a right to purchase Jonathan’s share for $112,500, (i) an order that the Co-ownership Agreement – Final Version is void as being ambiguous, (ii) an order declaring that the parties were not ad idem with respect to the Agreement and that the Agreement is not enforceable, (iii) an order that the property be sold pursuant to the Partition Act, R.S.O. 1990, C. P.4.
[12] Jonathan amended his Application to seek an order for the sale of Morning’s share in the cottage property to him at a price of $137,500 pursuant to paragraphs 3 and 5 of the Co-Ownership Agreement dealing with the property and/or sharing of expenses..
[13] Paragraph 5.f) of the Co-Ownership Agreement – Final Version provides as follows:
f) if one of the co-owners cannot pay his share of the annual cost for more than one year then the other co-owner has the option of buying out the owner in default under the conditions and values set forth in paragraph 3. The co-owner in default shall be given notice of said default under this paragraph by registered mail or by mail delivered by Fed-Ex.
(d) Summary of the pertinent facts respecting the formation of the Co-Ownership Agreement
[14] The evidence at trial respecting the steps taken by Morning, Jonathan and Don which culminated in the production of the Co-Ownership Agreement - Final Version and its execution by Morning and Jonathan on May 31 2019 may be described as unusual and complex. None of the parties kept track of the various versions of the draft co-ownership agreement that were passed between Morning, Jonathan and Don by email and personally. In my view it is unnecessary to comprehensively review and make factual findings on the totality of the evidence in all of its intricacies to resolve the issues between the parties, as outlined below. The following is a summary of the pertinent evidence which bears on the final determination of the issues.
[15] In 2018 Don informed his three sons Jonathan, Gregor and Morning that he intended to transfer ownership in the cottage to them in equal one-third shares. Jonathan prepared a “Cottage Co-Ownership Memo” (the “Memo”) on or about April 8, 2019 utilizing feedback received from his brothers and from Don and sent it to Don, Gregor and Morning. Don revised the Memo and sent it to Morning and Jonathan on April 23, 2019. Gregor was no longer involved at this point as he had informed Don that he would like to receive his share in cash rather than receive a share of the cottage.
[16] Don added sections to the Memo to deal with issues of a sale by and death of a co-owner and subsequently provided Jonathan and Morning on May 11 2019 with a “Cottage Co-Ownership Agreement” based upon the Memo, as amended by him.
[17] It was Don’s desire that there be a co-ownership agreement in place between Jonathan and Morning to coincide with his transfer of ownership of the cottage to them.
[18] Don, Morning and Jonathan made plans to meet at the cottage on the long weekend of May 18 - 20, 2019 at which time Morning and Jonathan planned to execute the May 11, 2019 co-ownership agreement. As it transpired, Jonathan was unable to attend on the long weekend. However, in order to address Don’s concern that there be a co-ownership agreement in place prior to the transfer, while visiting Don, Jonathan signed the final page of a draft agreement that Don presented to him. The date May 16, 2019 appears opposite Jonathan’s signature. Jonathan believed that Don would arrange for Morning to sign the agreement on the long weekend while he was at the cottage. Morning ultimately did not sign the agreement on the long weekend for reasons which were unrelated to the buy-sell provision but because he wished to make amendments to the agreement relating to the issues of guests, rental of the cottage and testamentary disposition.
[19] Don had previously emailed a copy of the Memo on April 30 2019 to his brother Henry Hagey (“Henry”) for his review. Henry was a retired lawyer. Morning testified that sometime between April 30 and May 11 Don told him by telephone that he had sent the draft agreement to Henry to “take a pass at it.” Jonathan denied that Don told him that he had done this.
[20] Henry did not respond until May 18 2019 when he returned to Don a version of the draft agreement with the language found at para. 3 of the Co-Ownership Agreement - Final Version ultimately signed by the parties on May 31, 2019, save for the price for the transfer of the half share in the buy-sell provision. Don reduced the price from $162,500 to $112,500 to reflect a perceived reduction in the value of the cottage due to recent erosion damage to the shoreline fronting it. In his covering e-mail to Don, Henry stated “pay particular attention to the Buy - Sell paragraph 3, It’s a little convoluted but I think it works.”
[21] Don forwarded the revised draft received from Henry to each of Glory and Jonathan by email.
[22] Morning made revisions to the draft co-ownership agreement received from Henry and inserted revised paragraphs 2 and 6, which he identified by signifying ‘NEW’ and outlining them with asterisks. Paragraph 2 imposed a restriction on transfer or lease of a share in the cottage by one co-owner without the consent of the other, and paragraph 6 restricted the rental of the cottage and dealt with the issue of invited guests. Although the revisions to the buy-sell provision suggested by Henry appeared in the draft as paragraph 3, they were not highlighted in the same fashion that Morning had highlighted his revisions to paragraphs 2 and 6.
[23] Morning forwarded this revised draft to each of Don and Jonathan by email on May 21, 2019. There was no evidence that Jonathan responded to Morning’s email and the attached revised draft, either by email or verbally. Jonathan gave evidence that he did not receive Morning’s email of May 21 2019 attaching the revised draft as he was experiencing problems with his email at the time.
[24] As can be observed by reviewing the two versions, the scheme of the buy-sell provision inserted by Henry into the Co-Ownership Agreement – Final Version differed fundamentally from that found in the May 11 Version.
[25] Jonathan, Morning and Don attended at the office of Don’s lawyer Lee Dudley on May 31, 2019. Mr. Dudley was Don’s lawyer for the purpose of facilitating the transfer of the cottage but was not acting as lawyer for any party in relation to the Co-Ownership Agreement. Don produced the draft Co-Ownership Agreement – Final Version for execution. Morning and Jonathan each executed the Co-Ownership Agreement – Final Version at Mr. Dudley’s office with no discussion between them respecting its terms. Specifically, Morning made no representations about the agreement to Jonathan.
[26] Jonathan stated that he signed the agreement in Mr. Dudley’s office, without reading it, based on his understanding that the document reflected the entirety of the May 11 Version which had been previously agreed to with Morning, subject to minor amendments unrelated to the buy-sell provision made by Morning on May 21, 2019. Specifically, he understood that the buy-sell provision in the agreement he signed was reflective of the provision in the May 11 Version.
[27] Jonathan acknowledged that there was nothing preventing him from reading the Co-ownership Agreement – Final Version before signing it, obtaining legal advice in connection with it before signing it, or asking questions of Morning, Don or Lee Dudley in relation to it, including to check that it did conform to the May 11 Version. However, Jonathan took none of these steps.
[28] Morning testified that he had read the Co-Ownership Agreement - Final Version prior to the May 31 2019 meeting. Don did not explain or mention the changes to the buy-sell provision inserted by Henry to Morning and Jonathan during the meeting. He simply advised Morning and Jonathan to read the document. Morning testified that he did not mention to Jonathan anything about his May 21 2019 email nor the changes to the draft agreement that had been proposed by Henry. No mention of the May 11 Version was made by Morning at the meeting.
[29] Lee Dudley was not asked to review the Co-Ownership Agreement - Final Version and had no recollection of it at trial. Although he acknowledged that, had his input or advice been sought by any of those in attendance, he may possibly have answered some questions as a “customer service,” there was no evidence that anyone asked him any questions about the agreement.
[30] Henry was not called to give evidence at the trial.
Issues
[31] The issues for determination are the following:
Is the buy-sell provision of the Co-Ownership Agreement - Final Version too uncertain or incomplete as to render it enforceable in requiring Jonathan to sell his share of the cottage to Morning for a price of $112,500?
Is Jonathan entitled to rectification of the Co-Ownership Agreement such that Morning is obliged to sell his share of the cottage to Jonathan for a price of $137,500?
Is Morning obliged to sell his share of the cottage to Jonathan for a purchase price of either $112,500 or $137,500 pursuant to paragraph 5.f) of the Co-Ownership Agreement for failure to pay his share of costs relating to the cottage for the 2021 year in the remaining amount of $375.24?
Should the property be ordered to be sold pursuant to the Partition Act?
Issue 1 – Enforceability of the buy-sell provision in the Co-Ownership Agreement – Final Version
[32] In light of Morning’s alternative claim that the Property be sold under the Partition Act, it is appropriate to first consider whether paragraph 3 of the Co-Ownership Agreement - Final Version is unenforceable on the ground of uncertainty.
[33] In order for an agreement to be enforceable, the parties must so express themselves that their meaning can be determined with a reasonable amount of certainty. Where the parties fail to express themselves in such a fashion that their intentions cannot be divined by the court, the agreement will fail for lack of certainty of terms (see McCamus, The Law of Contracts (2005) Irwin Law Inc. at p. 91, citing Scammell and Nephew Ltd. v. Ouston, {1941 A.C. 251 (H.L.))
[34] The first step is to consider the words of the contractual provision broadly and untechnically with due regard to all the just implications, to determine whether it has any definite meaning on which the court can safely act (see Scammell and Nephew at p. 268).
[35] Brown, J.A. summarized the general principles which should guide adjudicators in interpreting a commercial contract in the case of Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007 (Ont. C.A.), rev'd on other grounds, at paras. 65-67 as follows:
The general principles guiding adjudicators about "how" to interpret a commercial contract were summarized in Sattva [2014 SCC 53], at para. 47, and by this court in two 2007 decisions - Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254 (Ont. C.A.), at para. 24, and Dumbrell v. Regional Group of Cos., 2007 ONCA 59, 85 O.R. (3d) 616 (Ont. C.A.), at paras. 52-56. When interpreting a contract, an adjudicator should:
(i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the "cardinal presumption" that they have intended what they have said;
(ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
(iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and
(iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.
[36] In the recent case of Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847 (Ont. C.A.) L.B. Roberts, J.A. succinctly adopted the foregoing statement of the principles governing interpretation of commercial contracts at para 52, as follows,
. . . the basic rules of contract interpretation require the determination of the intention of the parties in accordance with the ordinary and grammatical words they have used, in the context of the entire agreement and the factual matrix known to the parties at the time of the formation of the contract, and in a fashion that corresponds with sound commercial principles and good business sense: Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 77 B.L.R. (5th) 175, at para. 65, rev'd on other grounds, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, 444 D.L.R. (4th) 77.
[37] In the case at bar the buy-sell provision in the Co-Ownership Agreement – Final Version provides that it may be triggered by one of the co-owners “who wishes to sell or dispose of his share in the cottage for what ever (sic) reason” (defined as the “selling co-owner”). The provision does not expressly require the “selling co-owner” to give notice or otherwise communicate to the other co-owner his “wish” to sell or dispose of his share.
[38] The provision states that the “other co-owner” (defined as the “remaining co-owner”) has two choices if the “selling shareholder” develops a “wish to sell or dispose” of his share. The provision does not stipulate when the “choices” come into existence or how long after they come into existence the “remaining co-owner” has to make a choice between the two options. There is no express requirement that the “remaining co-owner” give notice or otherwise communicate his choice to the “selling shareholder.”
[39] The first “choice” conferred on the “remaining co-owner” is set forth at subparagraph (i) as follows:
“The selling co-owner shall sell his interest to (sic) the cottage to the remaining co-owner on terms agreed between the parties.”
[40] In my view, the option conferred on the “remaining co-owner” at subparagraph (i) represents nothing more than an agreement to agree and is therefore not a “choice” which the “remaining co-owner” can claim for himself and enforce against the “selling co-owner.”
[41] In McCamus, The Law of Contracts, the author states at page 102 that “where there remains a fundamental matter that is explicitly said to be subject to negotiation or agreement, the agreement fails for uncertainty.” The author cites the case of Murphy v McSorley, 1929 CanLII 29 (SCC), [1929] S.C.R. 542 in support of his observation that it is well-established that where there is an option to purchase land at a price to be agreed, the agreement is unenforceable.
[42] Given that the “choice” set forth at subparagraph (i) is unenforceable and therefore not a true “choice” the entire buy-sell provision is unenforceable. The stated intent of the provision is clearly to provide the “remaining co-owner” with “two choices” in a situation where the “selling co-owner” “wishes” to sell or dispose of his share.
[43] The Concise Oxford English Dictionary (10th ed., revised) defines “choice” when used as a noun as “a range from which to choose.” There must be more than one option for there to be a “choice.” Subparagraph (ii) cannot therefore stand on its own as the only “choice’ that the “remaining co-owner” has.
[44] Quite apart from the insurmountable problem presented by subparagraph (i) being no more than an agreement to agree, the meaning of subparagraph (ii) appears to be too uncertain to be enforceable.
[45] Subparagraph (ii) on its face provides that the “remaining co-owner,” being the co-owner other than the one who wishes to dispose of his share, has the choice to “buy.” It does not provide for the “remaining co-owner” with a choice to sell or to be required to sell. However, the subparagraph specifies that what the “remaining co-owner” has the choice to buy is the “remaining co-owner’s share in the cottage.”
[46] The phrase “remaining co-owner” was put in brackets in the second line of paragraph 3 as defining the co-owner who had not formed a wish to sell his share. Therefore, on its face, the choice given to the co-owner who did not trigger the operation of the buy-sell provision is to “buy” his own share, which results in an absurdity. A change to the provision is required to remove the absurdity - either by changing “buy” to “sell” or changing “remaining co-owner’s share” to “selling co-owner’s share.”
[47] The sentence that follows “if the cottage has been owned 5 years or less (sic) the selling co-owner can purchase it for $112,500” does not assist in resolving the uncertainty because the provision confers on the “remaining co-owner” (Jonathan in the case at bar) the “choice” to “buy,” not the “selling co-owner” (Morning in the case at bar). Morning advanced no claim for rectification of the co-ownership agreement to change “buy” to “sell” in subparagraph (ii) to support his claim that Jonathan would be obliged to sell his share to him.
[48] However, I find that it is unnecessary to make a final determination on whether subparagraph (ii) is uncertain and unenforceable because, as explained above, subparagraph (i) is unenforceable as constituting an agreement to agree and Jonathan, as the “remaining co-owner,” did not therefore have a “choice.” The buy-sell provision at paragraph 3 of the Co-Ownership Agreement - Final Version is unenforceable.
Issue 2 - Is Jonathan Entitled to Rectification of the Co-ownership Agreement - Final Version?
[49] As stated previously, Jonathan pleaded in his Notice of Application that the May 11 Version “formed the Agreement between the parties with respect to the Cottage Property.” He seeks rectification of the Co-Ownership Agreement – Final Version to have it conform to the May 11 Version.
[50] In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd. ,2002 SCC at paras. 37-41 the Supreme Court of Canada confirmed the preconditions for invoking the remedy of rectification namely (a) the existence and content of a prior oral agreement between the parties that is inconsistent with the written agreement; (b) that the written document does not correspond with the prior oral agreement and permitting the other party to take advantage of the mistake in the written document would be fraud or equivalent to fraud; (c) the precise form in which the written document can be made to express the prior intention of the parties; and (d) all of the requirements on a standard of convincing proof.
[51] At para. 31 of Sylvan the Supreme Court emphasized that, as an equitable remedy, rectification has a very limited and specific purpose namely, to prevent a written document from being used as an engine of fraud or misconduct “equivalent to fraud.”
[52] Rectification has long been available in the case of a mutual mistake, and may be available for unilateral mistake, as is claimed by Jonathan in the case at bar, provided what Binnie, J. characterized as “certain demanding preconditions” are met, as set forth above.
[53] Binnie J. stipulated that what is essential is that at the time of execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not, and the attempt by the defendant to rely on the erroneous written document must amount to fraud or the equivalent of fraud.
[54] Citing Hart v Boutilier, (1916), 1916 CanLII 631 (SCC), 56 D.L.R. 620 (S.C.C.) Binnie, J. stressed that “the power of rectification must be used with great caution” as a relaxed approach to rectification as a substitute for due diligence at the time the document is signed would undermine the confidence of the commercial world in written contracts.
[55] At para. 36 Binnie J. rejected the proposition that the want of due diligence (or negligence) on the plaintiff’s part in failing to review the document prior to executing it is an absolute bar to rectification but agreed that the Court may exercise its discretion to refuse the equitable remedy to such a plaintiff.
[56] At para. 39 Binnie, J. considered what amounts to “fraud or the equivalent of fraud”. He quoted from McLachlin, J.’s (as she then was) decision in First Capital Ltd. v. British Columbia Building Corp, (1989), 1989 CanLII 2868 (BC SC), 43 B.L.R. 29 (B.C.S.C.) where she observed that the phrase refers, not to the tort of deceit or strict fraud in the legal sense, but rather to the broader category of equitable fraud or constructive fraud. She stated at p. 37 that “fraud in this wider sense refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained.” Binnie J. stated that fraud in the “wider sense” is “so infinite in its varieties that the Courts have not attempted to define it” but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken.”
[57] I propose to address at the outset the question of whether, at the time of the execution of the Co-Ownership Agreement-Final Version, Morning’s conduct amounted to fraud or the equivalent of fraud, as Binnie J. stipulated that this element is essential and a precondition to the exercise of the court’s discretion to apply the equitable remedy of rectification.
[58] Jonathan submits that Morning’s reliance on a buy-sell clause which was changed from the clause which Don had earlier created and which was customary in permitting one owner to announce a desire to sell and allowing the other owner to buy, to a buy-sell clause which amounted to a “race to the fastest,” can be considered as an unconscientious taking of advantage by Morning. He supports this submission by pointing to the following evidence:
(a) Morning read and understood Henry’s revised version of the agreement and the change to the buy-sell clause but did not bring that revised version to Jonathan’s attention when he emailed him with his proposed revised version on May 21, 2019, stating in his email “here is the agreement as it was in addition with my proposed amendments.” By highlighting his proposed amendments to paragraphs 2 and 6 and not doing so with respect to paragraph 3 (Henry’s change), he created the impression that there were no other changes from the May 11 version last seen by Jonathan; and
(b) Morning was aware that Jonathan had not responded to his May 21 email in any fashion, despite there having been a continuing correspondence between the parties up to that point. As it transpired Jonathan had lost access to his email (although Jonathan does not assert that Morning was aware of this).
[59] I am unable to accept these submissions.
[60] It is important to observe that in Sylvan not only was the party resisting rectification aware that the written agreement did not reflect the prior oral agreement he also knew that the other party did not, and he chose to permit the other party to sign it in the mistaken belief that it represented the verbal agreement.
[61] It is acknowledged that Binnie, J. observed at para. 50 of Sylvan (quoting Stephen M. Waddams, The Law of Contracts, 4th ed. (Toronto: Canada Law Book, 1999 at p. 342) that the notion of “equivalent to fraud” as distinguished from fraud itself, is often utilized where the court is unwilling to go so far as to find actual knowledge on the side of the party seeking enforcement to support a finding of equivalence to fraud. However, Morning’s conduct must still have amounted to “unfair dealing and unconscionable conduct” at the time that the agreement was executed and that it is unconscientious for him to avail himself of the advantage obtained.
[62] Morning was not asked on cross-examination whether he knew that Jonathan had not read the final version of the agreement that was produced by Don for execution by the two parties. There is no evidence on what Morning knew about Jonathan’s knowledge or lack of knowledge of the terms of the proposed buy-sell provision in Mr. Dudley’s office on May 31, 2019. The case at bar can therefore be distinguished from the facts in Sylvan on this ground.
[63] It is important to note that Jonathan sought to mislead the court with respect to what Morning knew concerning his own lack of knowledge of the buy-sell terms in the agreement that he signed on May 31, 2019. In his Affidavit dated June 18 2021 Jonathan deposed as follows at para. 8:
“On [May 31, 2019] … Morning produced a document and told me it was the same as the May 11, 2019 “Cottage Co-Ownership Agreement” prepared by my father, with some legal words included at the top of the first page. He then asked me to sign it. I did so but did not read it through before signing because I believed and trusted Morning when he told me it was the same as the May 11, 2019 Agreement.”
[64] On cross-examination Jonathan acknowledged the following:
(a) he had no independent recollection of what Morning said to him during the meeting on May 31, 2019;
(b) he did not ask Morning about the version of the agreement that he signed;
(c) Morning did not tell him anything about the version of the agreement that he signed;
(d) he did not ask Morning if the version of the agreement that he signed compared to any earlier version;
(e) Morning did not volunteer or tell him that the version that he signed compared to any earlier version of the agreement;
(f) the version of the agreement that he signed had been brought to the meeting by Don and not by Morning;
(g) Morning did not affirm specifically that the version that was brought to the meeting by Don was the same as the May 11, 2019 cottage co-ownership agreement;
(h) the statement in his affidavit that “Morning told him it was the same as the May 11, 2019 cottage co-ownership agreement prepared by my father” is incorrect and Morning did not say those words to him nor words to that effect.
[65] There was no evidence that Jonathan informed Morning that he had been experiencing difficulty with his emails nor that, in light of those difficulties, he inquired of Morning whether he had sent any emails to him that he might have missed. There was no evidence that Morning was aware that Jonathan had not received his May 21 2019 email enclosing a new version of the co-ownership agreement with revisions.
[66] As noted above, although the lack of due diligence and negligence on the plaintiff’s part in failing to review the document prior to executing it is not an absolute bar to rectification, it is relevant to the question of whether the Court should exercise its discretion to grant the equitable remedy.
[67] In my view Jonathan has failed to demonstrate with convincing proof that Morning’s conduct at the time of execution by the parties of the Co-Ownership Agreement-Final Version amounted to fraud or the equivalent to fraud and I therefore exercise my discretion to deny Jonathan’s claim for rectification.
[68] In doing so, I take into account Jonathan’s lack of due diligence in failing to read the document before executing it, or at least in failing to make inquiries of Morning and Don as to whether they had sent any emails to him with any further revisions to the agreement, knowing that his email had been experiencing problems and hence there was a real possibility that he may have missed email communications from Morning or Don concerning the agreement.
[69] Given the clear direction from the Supreme Court of Canada that “the power of rectification must be used with great caution” I find that this is not a clear and convincing case where the discretion to grant the remedy should be exercised.
[70] Given my finding that fraud or the equivalent to fraud has not been shown on a balance of probabilities to a standard of convincing proof, it is not necessary to consider the remaining elements that must be shown for rectification namely (a) the existence and content of a prior oral agreement between the parties that is inconsistent with the written agreement, (b) that the written document does not correspond with the prior oral agreement and (c) the precise form in which the written document can be made to express the prior intention of the parties.
Issue Three – Should Morning be required to transfer his share in the cottage to Jonathan pursuant to subparagraph 5.f) of the co-ownership agreement for his alleged failure to pay the sum of $375.24 in respect of 2021 cottage expenses?
(a) Pertinent Facts
[71] Paragraph 5 of the Co-Ownership Agreement - Final Version seeks to regulate the sharing of expenses relating to the cottage between Morning and Jonathan. It provides as follows:
(a) the co-owners are to open a joint bank account for the expenses related to the property;
(b) when possible, all documents regarding the property will be shared online;
(c) a property accountant will be chosen by the co-owners at the first meeting of the year. The property accountant does not need to be a professional accountant, but may be a spouse or family member;
(d) an annual budget for all cottage expense will be drawn up and shared equally by the co-owners;
(e) the first six months of estimated expenses shall be deposited into the account at the beginning of each calendar year;
(f) if one of the co-owners cannot pay his share of the annual cost for more than one year then the other co-owner has the option of buying out the owner in default under the conditions & values set forth in paragraph 3. The co-owner in default shall be given notice of said default under this paragraph by registered mail or by mail delivered by Fed-Ex.
[72] The parties are in dispute with respect to the expenses for 2021. Jonathan says that Morning is in default in payment of the sum of $375.24 for that year.
[73] The parties do not dispute that they failed to follow the stipulations of paragraph 5 in their entirety. Specifically, they did not prepare a budget for all cottage expenses for the 2021 year or for any year, did not put money into a joint bank account in 2021 or in any year, and they did not formally appoint a “property accountant.”
[74] In the fall of 2021 (that is after the commencement of the Applications in this proceeding) Jonathan took the position that Morning owed $3,455.24 in respect of his share of expenses for that year. Jonathan’s spouse Emily Kulasa sent a spreadsheet to Morning and his spouse Dana Glory setting forth a calculation to substantiate this claim. She said that she “probably” prepared the spreadsheet in November or December 2021.
[75] On November 11, 2021 Jonathan prepared a Notice of Default to Morning and sent it by Fed-Ex to Morning. The Notice of Default stated as follows:
WHEREAS the property accountant has submitted details of the expenses for the cottage for 2021 to the parties;
AND WHEREAS Morning Glory has failed to pay his share of the annual cost as detailed in the report from the accountant;
AND WHEREAS Morning Glory has failed to pay his share of the annual cost as detailed in the report from the accountant;
YOU ARE HEREBY given notice of your default under paragraph 5.f) of the Agreement by reason of your non-payment of your share of the annual cost;
YOU ARE also hereby given notice of my intention to exercise my rights to buy out your ownership pursuant to paragraph 5.f) and section 3 of the Agreement for $112,500.
[76] Morning paid the sum of $3098 to Jonathan on April 13, 2022 and Jonathan accepted this payment. Emily prepared a revised 2021 spreadsheet which showed the payment of $3098 and $357.24 as “owing to Ek/Jh”
(b) Discussion
[77] The following observations may be made respecting subparagraph 5.f) of the agreement which purports to trigger an obligation of a party in default of payment of his share of the “annual cost” to sell his share of the cottage to the other co-owner:
(a) the provision is triggered if one of the co-owners “cannot” pay his share of the annual cost. On its face, the provision is not triggered if the co-owner “fails” to pay his share of the “annual cost;”
(b) the terms “expenses related to the property” and “annual cost” are not defined;
(c) what is required is that the co-owner “cannot” pay his share of the annual cost for more than one year. The date of commencement of the one-year period is not specified;
(d) there is no method specified for determining a co-owner’s share of the annual cost;
(e) the option of the other co-owner of buying out the owner in default incorporates the “conditions & values” set forth in paragraph 3 of the co-ownership agreement;
(f) the co-owner in default shall be given notice of “said default” by registered mail or Fed-Ex delivery. There is no express requirement that the other co-owner give notice of the exercise of his option to “buy out” the interest of the owner alleged to be in default;
(g) there is no provision specifying any time for payment of the amount alleged by the other co-owner following the receipt of “notice of said default;”
(h) there is no relationship between the “option” price set forth in paragraph 3 and the market value of the share of the co-owner in default during the first five years of ownership of the cottage;
(i) there is no minimum amount alleged to be owing which is required to trigger the option; and
(j) there is no express right given to the co-owner in default to cure his default following the receipt of notice.
[78] In my view, given the severity of the potential impact on a co-owner alleged by the other co-owner to be in default of payment of his share of the “annual cost,” the parties must have understood and agreed that the requirements of paragraph 5.f) should be adhered to strictly by the co-owner invoking them.
[79] The potential severity of the provision on the party alleged to be default may be readily understood by considering the absence of any minimum amount in default to trigger the provision, the lack of any relationship between the option price of $112,500 during the first five years of ownership stipulated in paragraph 3 and the market value of the share of co-owner’s alleged to be in default, and lack of any express ability to cure the default following notice.
[80] The following observations may be made with respect to the Notice of Default delivered by Jonathan:
(a) the first recital stated that the “property accountant” has submitted details of the expenses for 2021. The fact that no “property accountant” was formally selected at a meeting of the co-owners is not in dispute. No such meetings were held;
(b) the second recital stated that Morning has “failed” to pay his share of the annual cost. It does not say that he “cannot” pay as specified in subparagraph 5.f). Moreover, there was no evidence led at trial that Morning was “unable” to pay the amount alleged by Jonathan to be in default. The evidence disclosed that there was a dispute between the parties respecting what types of expenditures came within the phrase “annual cost;”
(c) the amount alleged to be in default was not set forth in the Notice;
(d) the 2021 year had not expired on the date of the Notice. The Notice was sent 50 days prior to the end of the calendar year; and
(e) one year had not elapsed following the end of the 2021 calendar year as required by subparagraph 5.f) for a co-owner to be in default.
[81] In my view Jonathan’s claim that Morning is obliged to transfer his share of the cottage to him for $137,500 as claimed in his Amended Notice of Application at subparagraph 1(c) (or for $112,500 as claimed by counsel for Jonathan in his final submissions and as set forth in the Notice) must fail. Jonathan has not met the requirements of paragraph 5.f) in order to trigger an obligation on Morning to sell his share to him.
[82] I make this finding on the following grounds:
(a) Jonathan has failed to prove that on the date of delivery of the Notice on November 11, 2021 Morning was “unable” to or “could not” pay the amount then claimed by Jonathan in default in the sum of $3,455.24, or that Morning continues to be “unable” to pay the amount currently alleged by Jonathan to be owing for 2021 in the sum of $357.24;
(b) the Notice dated November 11 2021 did not specify the amount alleged by Jonathan that Morning had defaulted in payment;
(c) the Notice recited that Morning had failed to pay his share of the annual cost as detailed in the report from the property accountant when there had been no “property accountant” formally appointed in the manner stipulated by the Co-Ownership Agreement; and
(d) the Notice was delivered by Johnathan to Morning prematurely as it was delivered prior to the end of the 2021 calendar year and prior to expiry of one year following the end of the 2021 calendar year.
[83] In light of these findings it is unnecessary to consider Morning’s arguments that the parties failed to agree on expenses before they were incurred by setting a budget for the 2021 year as required by paragraph 5, or that, at the time of trial, he had paid over $300 more than Jonathan in costs relating to the cottage for the 2022 year to date.
[84] It is also unnecessary to consider whether subparagraph 5.f) of the Co-Ownership Agreement is uncertain and therefore unenforceable, or that it is unenforceable by reason of its incorporating paragraph 3, which has been found in these Reasons to be unenforceable. These grounds were not argued by Morning.
Issue Four – Should the court order the property to be sold pursuant to the Partition Act?
[85] As noted previously, Morning claims in the alternative in his Amended Notice of Application an Order that the Co-Ownership Agreement is void or unenforceable and an Order that the property be sold pursuant to the Partition Act (the “Act”).
[86] Section 2 of the Partition Act provides as follows:
All joint tenants, tenants in common, and coparceners, all doweresses, and parties entitled to dower, tenants by the curtesy, mortgagees or other creditors having liens on, and all parties interested in, to or out of, any land in Ontario, may be compelled to make or suffer partition or sale of the land, or any part thereof, whether the estate is legal and equitable or equitable only.
[87] In the case of Garfella Apartments Inc. v Chouduri, (2010) 2010 ONSC 3413, 102 O.R. (3d) 624 (Div Ct.) Molloy, J., writing for the panel, stated as follows at paras. 20 and 24:
There is a presumptive right to partition under the Act. and failing that, a right to a sale. It is common ground between the parties that partition would effectively result in the creation of a condominium, which is prohibited by law. Once the partition option is eliminated, there is a prima facie right to a sale. The application judge's ruling on that point is correct.
The law on this issue has been clear since the Court of Appeal's decision in Greenbanktree Power Corp. v. Coinamatic Canada Inc. (2004) 2004 CanLII 48652 (ON CA), 193 O.A.C. 204 C.A.)]. The court is only entitled to deny any remedy under the Partition Act in very limited circumstances. In the absence of malice, oppression, vexatious intent or hardship amounting to oppression, Garfella Apartments was entitled to a court-ordered sale of the property. The application judge erred in not applying that test.
[88] Counsel for Jonathan did not in his submissions dispute Morning’s alternate claim for the sale of the property under the Partition Act and cited no authorities contrary to Garfella in his Book of Authorities. Jonathan led no evidence of malice, oppression, vexatious intent or hardship amounting to oppression which would weigh against an order for sale of the property. I find that it is appropriate to order the sale of the property under the Partition Act.
Miscellaneous claim by Jonathan for payment by Morning of certain expenses
[89] Jonathan did not pursue his claims at subparagraphs 1(d) and 1(e) of his Amended Application that Morning pay for 50% of the repair costs to the toilet, deck and grey waterline of the cottage and that these costs be deducted from the amount claimed to be payable to Morning for the Cottage Property. Those claims should therefore be dismissed.
Disposition
[90] In light of the foregoing, it is ordered and adjudged as follows;
The claims at subparagraphs 1(a), 1(b), 1(c), 1(d)(i) and (ii) of the Amended Application of Morning Glory are dismissed;
The claims at subparagraphs 1 (a), 1(b), 1(c), 1 (d), and 1(e) of the Amended Application of Jonathan Hagey are dismissed;
(a) the property described in the parties’ respective Amended Notices of Application shall be listed for sale and sold pursuant to the Partition Act;
(b) either party may return to court on four days’ notice to the other party to seek directions with respect to any issue concerning the sale of the property. I am not seized of the matter for the purpose of giving such directions;
(c) the net sale proceeds of the property shall be divided equally between the parties, subject to any further order of the court.
Costs
[91] Without having the benefit of submissions of counsel it would appear to be appropriate for each party to bear his own costs in light of the divided outcome of the proceeding.
[92] However, if one or both of the parties propose to seek costs, the parties are strongly urged to settle the issue of costs.
[93] Failing settlement, a party seeking costs may deliver submissions on costs within 21 days of the release of these Reasons. The party from whom costs are sought shall have 14 days thereafter to deliver responding submissions. The party seeking costs shall have 7 days thereafter to deliver reply submissions. The initial written submissions on each side shall not exceed four (4) double-spaced typewritten pages, exclusive of Bills of Costs and Offers to Settle. The reply submissions, if any, shall not exceed two (2) such pages.
[94] The cost submissions shall be delivered to the Trial Coordinator at Brantford at the email address utilized for the release of these Reasons.
[95] If the parties are able to resolve the issue of costs, they are directed to advise the court accordingly. Any party choosing not to deliver costs submissions or reply submissions shall similarly advise the court.
[96] If no submissions are received within the times set forth above, the parties shall be deemed to have settled the issue of costs.
D.A. Broad, J.
Released: February 2, 2023
COURT FILE NO.: CV-21-130
DATE: 2023Feb2
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Morning Blood Glory
Plaintiff
– and –
Jonathan Hagey
Defendant
REASONS FOR JUDGMENT
D.A. Broad, SCJ
Released: February 2, 2023