ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DIRECT WATER INC.
Plaintiff
– and –
2592420 ONTARIO INC.
Defendant
Melvyn L. Solmon and Cameron J. Wetmore, for the Plaintiff
John J. Adair and Chris Grisdale, for the Defendant
HEARD: February 23, 24, 25, 28, March 1, 2, 3, 4, 7
Written submissions received May 30, 2022
Carole J. Brown J.
REASONS FOR DECISION
1The plaintiff, Direct Water Inc., brings this action for specific performance of an agreement of purchase and sale (“APS”) of a commercial-industrial property located at 184/188 Limestone Crescent in Toronto (“the Subject Property” or “184/188 Limestone”) with respect to an alleged binding APS and a subsequent repudiation by the defendant.
2The plaintiff, whose principals are Moshe and Meir Cohen, operates a beverage business from 210 Limestone Crescent (“210 Limestone”), adjacent to the Subject Property. The defendant, 2592420 Ontario Inc., whose principals are Dan Mazanik (“Dan”) and Sylvain Nadeau (“Syl”), operates a helical pile foundation business from the Subject Property.
Positions of the Parties
Position of the Plaintiff
3It is the position of the plaintiff that the parties began informal discussions about the sale of the Subject Property in the summer of 2019. The parties had subsequent meetings to discuss terms of a purchase: September 26, for two hours, at which certain terms, including vendor work was discussed; October 24, when a letter of intent (“LOI”) was presented, including, a price of $2,950,000, along with a due diligence date of March 5, 2027, a leaseback provision with base rent of five dollars per square foot and yard storage at $1,250 per month was proposed and vendor work, including fixing a roof, paving the driveway and removing trees. On November 21, the Cohens attended at the defendant’s office, as they had heard nothing since October 24. The parties decided to hold one last meeting to determine whether an agreement could be concluded. Between September and November, there were also numerous telephone discussions and texts, as well as exchanges of documentation regarding the sale of the Subject Property.
4The parties met again on November 25, for over three hours, at which time the essential terms of the agreement were agreed upon and the APS was signed, including memorializing the agreement, including a price of $3,150,000, a leaseback involving a formula for the interior leasing and the rental of $1,250 for the outside yard storage. The due diligence date was also discussed at that meeting. At the November 25 meeting, a side letter was also drafted and signed. It is the position of the plaintiff that this side letter confirmed that the business terms of the agreement were fixed and were not to be changed, and permitted the defendant to have a lawyer review the APS, with legal changes to be proposed within 48 hours. The defendant wanted to conclude the transaction without a real estate agent in order to avoid paying commission.
5It is the position of the plaintiff that the defendant had seller’s remorse and came back with many changes to both the business and legal terms of the agreement, and ultimately repudiated the agreement.
6It is also the plaintiff’s position that the Subject Property was unique and thus, specific performance is the appropriate remedy. The Subject Property was uniquely suited to the plaintiff’s business needs, with sufficient storage capacity, zoning, loading docks and drive-in doors to accommodate 53-foot tractor-trailers, and was located in the neighbourhood, as the business is tied to a route-based customer service.
Position of the Defendant
7It is the position of the defendant that the November 25 APS was not binding and that the side agreement was intended to permit the defendant to show the APS to a lawyer and to propose changes to both legal and business terms of the agreement within 48 hours, which they did.
8It is the position of the defendant that the plaintiff failed to tender.
9It is further the defendant’s position that the property is not unique and specific performance would not be an appropriate remedy.
Proceedings
10The parties have agreed for the purposes of the trial that the APS and side letter form part of one agreement.
11The plaintiff sought an order to permit an amended statement of claim at trial, which is not opposed by the defendant, and was granted.
The Evidence
12A significant amount of documentary evidence was adduced at trial.
13Further, a number of witnesses testified. The following is a summary of the evidence given by the principals for the plaintiff and defendant, which are the most relevant to the issues involved.
Moshe Cohen
14Moshe Cohen is 31 years of age, married, with two young children. He has been in the beverage business with his brother, Meir, since 2012. Their beverage business supplies customers, both corporate and residential, with large bottles placed on water coolers, using a bottling facility north of Barrie, Ontario. They expanded the business to the distribution of coffee, having their own brand of coffee roasted in Montréal, and to the distribution of cold beverages.
15They rented 210 Limestone on what was intended to be a temporary basis. Their lease ended in 2017 and they intended to move to larger premises, where they could expand the business. They leased 210 Limestone for one additional year with the option to renew for two more years, which expired on September 1, 2021. They now rent the premises on a month-to-month basis.
16210 Limestone is too small to accommodate the next steps of their expansion plan, which would include bottling their own water and roasting their own coffee line at their own premises, as well as having a café and showroom. The premises are near a GO station and subway station, with a lot of foot traffic going by the premises on which they could capitalize for the café and showroom.
17For the planned expansion of the business, they would need three docks/bays to run their business efficiently and get trucks unloaded, loaded and ready for efficient delivery to clients. They need bays longer than those at 210 Limestone to accommodate the tractor-trailers they use and have the capacity to close doors for the loading and unloading of the tractor-trailers in the winter. They did not want to install all the equipment that they would need for an expansion in their rented premises at 210 Limestone, as a significant amount of the equipment would not be able to be transferred to the new premises.
18The plaintiff’s business is route-based. They had developed proprietary software to manage the sophisticated routes, service and billing, taking into account the different levels and frequencies of service for various clients.
19They were interested in purchasing the Subject Property, as there would be no destruction in the move of the business; they would not risk losing employees who lived in the area and may not want to move to new premises outside the area in which they were located; it was a route-based business, with custom-based delivery routes developed from 210 Limestone; and the routes were integral to the company and established specifically for 210 Limestone, which was adjacent to the Subject Property, 184/188 Limestone. 184/188 Limestone had three units, one with a separate Hydro metre which would permit a leaseback, as well as room for them to grow into it. The building permitted two to three drive-in doors and room for a bottling facility, roasting facility, showroom and café. It was also near the synagogue, so that Moshe could attend and pray, and was near a large Jewish community with kosher amenities, including kosher pastries that they planned to sell in their coffee shop. The Cohens had a good relationship with the neighbours. The location was close to their mechanics, a gas station they used for filling trucks, and was property they could afford. It was also near their homes and young families.
20From 2016, the Cohens had driven through the area looking for suitable buildings to expand their business. They inquired of family, friends, community acquaintances, the members of their synagogue and reviewed MLS listings. Meir also developed relationships with some real estate agents who dealt with properties in the area. In 2016-2017, they spoke with the then-owner of 184/188 Limestone, Mr. Maxwell, about purchasing his property, but it had a leaseback so that they would not be able to operate the business. In 2017, the defendant purchased the building.
21On September 5, 2019, one of the principals of the defendant, Dan Mazanik, approached Moshe regarding purchasing the Subject Property. He advised that he had a partner, Sylvain Nadeau. They spoke about a price of approximately $2.8 million, which was in the range of market price work that the vendors would do before sale, including installing a new roof, repairing the driveway where their forklift had ruined it, creating parking space in the front of the building and the possibility of the plaintiff taking over the defendant’s mortgage. Dan was motivated to sell.
22In preparation for the meeting to be held September 26, Dan sent to Moshe lists of monthly expenditures, operating costs and building lease documents. He advised that, according to a real estate agent he had consulted, the value of the building was in excess of $200 per square-foot. He further provided information regarding their Bank of Montréal first mortgage with respect to potentially having the plaintiff assume the mortgage, as well as a remediation report regarding environmental issues. He told Moshe to put something on paper if he was serious about a purchase.
23The plaintiff instructed their lawyer, James Botnik, to prepare a draft APS. However, given the onset of the Jewish holidays, and the fact that, as a result of the Jewish holidays, they would not be available to negotiate an APS, an LOI was instead prepared.
24The meeting was held at 7 PM on September 26. The price was discussed at between $2,950,000 and $3 million. A leaseback was discussed at five dollars per square foot, with 25% of the building being leased back. Rent of $1,250 per month was discussed for outdoor storage. They discussed a date for completion of the necessary due diligence, which was proposed in the LOI to be 90 days. The Cohens had to get financing, potentially assume the mortgage and remediate or resolve the environmental issues. No closing date or deposit amount were discussed.
25At the end of the meeting, the LOI was presented. Because Moshe had trouble printing it, Syl left as he had to go somewhere and indicated that the LOI should be given to Dan. The LOI was shown to Dan but not provided to him. Moshe explained that this was because the Jewish holidays were coming up and he could not negotiate during the holidays.
26On October 2, Moshe received two years of financial statements and T2s from Dan. Dan indicated that he would send a list of expectations and stipulations for the offer so that they did not waste time going back and forth with negotiations, but never sent anything. Dan authorized the Bank of Montréal to speak with the Cohens regarding assumption of the defendant’s mortgage.
27James Botnik, counsel for the plaintiff, drafted an offer and forwarded it to Aldo Forgione (“Forgione”), counsel for the defendant.
28After the discussion on October 24, nothing happened. Dan told Moshe that they would need more time as Syl was beginning to give some thought to the situation. There were several telephone discussions between Dan and Moshe. Moshe never understood that Syl was hesitant or not wanting to sell, but respected the request for more time. Meir became impatient and the Cohens went to speak with Dan on November 21. Syl was not there at the time. Dan advised the Cohens that his lawyer, Forgione, had made a good offer for the premises of $3 million, with no repairs and that they were seriously considering the offer.
29The principals for the plaintiff proposed one last meeting to see if a deal could be concluded. The meeting was held on November 25 at Starbucks at 8 AM. Syl was late so they waited until he arrived to start the negotiations. The principals for the plaintiff began the negotiations at $3 million and indicated that the defendant would not have to repair the roof or pave the driveway. The defendant agreed that they would remove the trees and put gravel down for parking at the front of 184/188 Limestone.
30Syl attempted to push the price higher, first to $3,050,000, then to $3,100,000. The defendant justified this price increase by explaining that this is what it would cost them to break the mortgage with the bank.
31The plaintiff’s principals made it clear that they would negotiate and conclude an agreement that day, or the defendant could list the property with an agent, which would mean that the defendant would have to pay commission on the sale. If the defendant wanted the plaintiff to pay market value for the building, they were not willing to offer more favourable rent for a leaseback. As regards a leaseback, no one was able to agree upon what the market rate for a leaseback would be, so a formula was agreed upon. As regards sale of the property, the defendant would avoid payment of any commission as no real estate agent was involved.
32There was a discussion about closing date; the defendant wanted a quicker closing date, while the plaintiff’s principals explained that they required time to do their due diligence and to resolve the environmental issues. The parties finally agreed upon April 30, 2020 as the closing date. The principals for the plaintiff also indicated, orally, that if they could complete their due diligence earlier, they would close earlier.
33A deposit was not discussed and the defendant did not raise it.
34The plaintiff instructed its lawyer, James Botnik, to make the agreed-upon changes. The parties agreed to have the APS printed and signed. The principals for the plaintiff used an office nearby on Alness Street where they proposed to go to print the document and sign it. At the office, Dan and Syl were going in and out, making calls. Dan indicated that he was calling his accountant to ensure that it was a good deal before they signed.
35Four copies of the APS were printed and distributed for the parties to read. Dan read the APS out loud. Syl was asked if he was going to read it and he indicated that he trusted Dan. This made sense to Moshe as Dan was the one who always represented the company. That relationship was similar to his with Meir.
36Dan inquired as to whether they could shorten the closing date, but Moshe explained again that they did not have financing in place and needed to resolve the environmental issues raised by the bank first. Dan and the plaintiff’s principals began to sign. Syl indicated that he would not sign unless the price were raised to $3,150,000. This was finally agreed to. The principals for the plaintiff called their lawyer, James Botnik, to have him revise the APS, but he was not in the office and told them to handwrite it in. They all signed the agreement, shook hands and congratulated each other. They took photos of the four principals’ IDs for purposes of concluding the agreement.
37Moshe inquired of the defendant where they could drop off the deposit, as Forgione was no longer to represent them because he was in a conflict of interest position, given that he had made an offer to purchase the property. Syl indicated that they had not had a lawyer review the APS. Moshe asked if he was looking to have a lawyer negotiate the APS or if he just wanted to make sure the words reflected what they had agreed upon and/or the legal wording was acceptable. Syl indicated that he wanted the lawyer to review it for the legal wording. It was agreed that they would have 48 hours for the lawyer to review it.
38The side agreement indicated that the business terms were final. It further set out the three business terms that had been changed in the November 25 negotiations from the terms agreed upon in October, for ease of reference for the lawyers.
39The side agreement was handwritten by the defendant’s principals. It read:
Re-APS of 188/184 Limestone Crescent, Toronto
– Business terms not to be negotiated any further
– Price is final
– Market rent as per agreed to formula
– Removal of trees and gravel
Seller’s lawyer to review and submit any changes within 48 hours. Aldo Forgione will not be provided this agreement. Both parties to agree to any changes (seller and buyer).
40Dan subsequently called Moshe and indicated that he and Syl were separating their business interests and he wanted to be taken off the lease documents. He also asked if Moshe had a suggestion for a lawyer.
41After the meeting, Dan sent information regarding the property taxes and appraisal to the plaintiff.
42Within the 48 hours provided, the defendant’s new lawyer forwarded correspondence indicating that they wanted numerous changes to the APS, including to the leaseback rent, deposit, closing date and many other things.
43Dan called on December 10 and advised that he thought Syl was trying to get out of the agreement. The plaintiff requested access to the building to do an inspection for purposes of closing, but was refused. The plaintiff requested environmental documents, including the SLRA Phase 1 and 2 Reports for its due diligence with the bank, but never received any.
44A caution was put on the property for which the plaintiff had to pay land transfer tax of $119,015.05.
45In the spring of 2020, Moshe tested positive for COVID-19 and was unable to work or continue the negotiations. He developed complications, including Bell’s Palsy.
46They contacted a mentor, Warren Kimmel, and advised him that they were trying to resolve the issues surrounding the purchase of the Subject Property. They requested, if necessary, bridge financing from him, to which he agreed.
47The defendant attempted to sell the Subject Property in 2021. They listed it for $4.7 million and entered into an agreement for $4.5 million. However, the deal never closed.
Meir Cohen
48Meir Cohen is 33 years of age, married, with a young daughter. He began a window washing business in which he worked for ten years; then, ten years ago, opened the beverage business with his brother, Moshe.
49He described his role in the beverage business as logistics, sales and marketing. He is the “ideas guy” and his brother is the executor of the ideas.
50As regards purchase of the Subject Property, he stated that moving into the building next door takes away all of the uncertainties that could happen with moving. The building has all of the attributes that he had been looking for while trying to expand the beverage business. His property search began around 2010. They had very specific needs including loading docks, access to drive indoors, and docks that would accommodate 53-foot tractor-trailers. He began the search himself but as it became harder to find any suitable properties, he called real estate agents, friends and others regarding any properties that may be available. When 210 Limestone, where they were renting, went up for sale, he became nervous.
51With respect to the defendant’s principals, his relationship with Dan was friendly. He had no relationship with Syl. He met Syl for the first time on September 26, 2019 at the first meeting at which the LOI offer was presented. Syl was in attendance almost to the end of that meeting.
52It looked promising for them to get the building. At the end of the meeting, they indicated that they did not want the LOI, but wanted an offer. Moshe dealt with the offer. An offer was sent from their lawyer, James Botnik, to Forgione on October 24. They heard nothing back. Moshe counselled him to be patient, but after one month of silence, he decided to go over to the defendant’s premises to find out what was happening. He and Moshe went over to 184/188 Limestone and spoke with Dan, as Syl was not there. The meeting was 30 to 60 minutes. Dan told them that Forgione had received their offer and made the defendant a better offer that they were taking seriously. Forgione had offered $3 million with no repairs. It was decided that the parties should have one more meeting to see if they could match Forgione’s offer.
53On November 25, a meeting was held at Starbucks with the four principals in attendance. The principals for the plaintiff told the defendant that dealing with Forgione would be a conflict of interest and that they did not want any offer they made to be shopped around.
54The October 24 offer was used for discussion purposes. The meeting was intense and the plaintiff offered $3,050,000 in exchange for rent. Syl then increased the price to $3.1 million. Dan advised Meir that the increase represented a mortgage prepayment that they would have to make to their bank.
55The deposit was not increased. The closing date was discussed. Dan wanted to close earlier. Moshe said they would need six months to do their due diligence, but would close earlier if they could. Regarding the leaseback, they did not know the market rent, but came up with a mechanism (formula) to calculate rent, upon which they all agreed.
56Syl stated to Meir that they had a deal, but as they were leaving Starbucks, Syl said he wanted $3,150,000, which Meir did not take seriously.
57They went to a nearby office on Alness Street to print the agreement and sign it. Everyone was given a copy of the APS. Dan said that he had to step out to speak with his accountant. Meir did not read the document, as he had the October 24 offer and knew what changes had been made. Syl left the documents for Dan to read and said he trusted Dan. After Moshe and Dan read through the APS, they signed. The documents were circulated to Syl who said he refused to sign unless he got $3,150,000 for the building. Moshe and Meir asked why he was squeezing so hard and he inquired as to whether they were ready to lose the building over $50,000. They agreed to pay the $3,150,000.
58Moshe and Meir contacted James Botnik to change the agreement, but he was out of the office and told them to handwrite and initial the changes.
59Moshe then inquired as to who should be given the deposit. Syl stated that the lawyer had not reviewed the agreement. Meir indicated that Dan had told Meir that the lawyer had reviewed it and had only minor changes. Dan advised that his accountant had taken care of the business terms, and Meir clarified that. Syl said they needed 48 hours for the lawyer to review the legal wording.
60The side agreement was then prepared. Dan wrote the top part and Syl wrote the bottom part. As regards the top part and the three changes that had been made to the APS, Meir told Dan what those changes were and he wrote them down. The contemplated changes were to be limited to legal terms. It was understood that the lawyers were going to review the document and deal with legal terms.
61The parties took photographs of their identification cards to complete the agreement.
62Dan came to advise Meir on December 4 that nothing in the correspondence from Levy Zavet had come from him. Dan said his two issues were the deposit and closing date. Meir had one meeting with Dan on January 27, 2020 and one meeting with Syl, who told Meir that he was stupid to have signed and no longer wanted to sell the property.
63Dan and Meir attempted to convene a meeting on February 1, 2020 to try to resolve the issues rather than go to litigation. However, Syl did not attend. Dan advised that the building had gone up in value and that he wanted more money.
64Subsequently, the defendant listed the building for sale for $4.7 million and had a potential offer for $4.5 million, but did not sell.
Dan Mazanik
65Dan Mazanik is an owner of Techno Metal Post (“TMP”) which is a helical pile deep foundation system. The business is a dealership franchise. TMP buys the product from a central distributor and is allowed to operate in a certain area. TMP is allowed to install the distributor’s materials and has to buy their equipment from the distributor.
66Dan became a franchisee in March 2005. His region was from Orillia to North Bay. He came across Sylvain Nadeau through the distributor who told him that Syl had entered the Toronto market in about 2008. Dan was interested in working in the Toronto area, so joined in a joint venture to expand his area. Syl would have access to Dan’s equipment.
67The business is seasonal, with winter being the slowest season. In September 2019, TMP had cash flow issues. Dan was concerned about them, although Syl was not as concerned. Dan described himself as the administrator and Syl as the salesman. Dan looked at the details while Syl was more high level and involved in sales. Dan had a lower risk tolerance than Syl.
68Dan was considering separating the business and not working with Syl anymore. He wanted to sell the building, split off and each run their own entities. He was hoping to separate the business operations by the end of the year so that he could start his own enterprise as of the new year. In September, Syl had no idea that Dan was considering separating the business.
69Dan first asked Syl if he would be interested in purchasing Dan’s share of the building, but Syl indicated that this was not feasible for him. Dan next went to the Cohens as he knew that they had been in discussions with the previous owners to purchase the building. He indicated that he would be interested in selling the building or his share of the building and the Cohens indicated that it would be more feasible to purchase the entire building. The Cohens were not interested in owning the building with Syl. Syl had no role in the initial discussions with the Cohens, and Dan did not believe that Syl knew he was holding discussions with the Cohens.
70In an attempt to advance discussions on the sale, Dan sent Moshe the survey and mortgage documentation around September 26.
71Regarding the meeting on September 26, Dan’s purpose was to get Syl to the meeting while the Cohens’ purpose was to present a LOI. For Dan, price and closing date were important; the closing date was important for his intention of separating the business and starting his own business in the new year, although Syl did not know that at the time.
72The meeting was held in the late afternoon and Syl indicated that he would have to leave early. He seemed to be there reluctantly, probably because his mindset was not to sell.
73They discussed the price and vendor work, including removal of trees and placement of gravel. Dan cannot recall if closing was discussed. The defendant sent a letter to the plaintiff the next day advising that they would send a list of stipulations or expectations for the offer so that it would only have to be done once and they would not waste time going back and forth. Nothing further was sent.
74Dan was aware of environmental issues with the property, including ground water and soil contamination. It had been dealt with partially in the SLRA Phase 1 Report. Dan wrote to the Bank of Montréal to give permission to their banker to discuss the assumption of their mortgage with Moshe Cohen.
75Between September 26 and October 24, there were not many discussions about sale due to the Jewish holidays. The plaintiff’s lawyer, James Botnik, sent a draft offer to Forgione at the Cohens’ instruction. The parties also received a copy.
76In the LOI, the offered price was $2,950,000 and the closing date was April 30, 2020, which Dan felt was too long a period of time. The due diligence period was to be March 5, 2020. The closing date was his main concern. He was not concerned about the leaseback as he was working toward a separation from Syl.
77Forgione, in his offer to purchase the Subject Property, contacted Dan regarding purchasing his half of the building. Dan did not think it was a viable option, but engaged his accountant. He asked for more time from the plaintiff on the pretense that Syl was beginning to give more thought to the situation. He was trying to work with Syl and to buy time with the Cohens.
78Forgione was amenable to a sale and a leaseback for two years at $10 per square foot for 15,000 ft.² It was believed at that time that the building was worth $3.5 million but required a new roof which would cost between $150,000 and $200,000.
79The plaintiff wanted to meet on November 24. Dan advised Syl of this and indicated that if they waited longer, it sounded as though the Cohens may walk away from the deal. Syl told Dan to let the Cohens know that they should send their best offer and if it were $3 million they should not bother. Dan was agreeable to the $2,950,000, if the plaintiff took over the mortgage. While he did not like the closing date, he testified that he knew there was due diligence that had to be done. He further testified that when they purchased the building, the defendant had a long closing in order to do the due diligence. In that case, they apparently had to pay more deposit.
80Dan did not want any party off the table in case they could play one party off against the other. He was trying to keep Moshe and Meir on ice and to buy time.
81The meeting was held on the morning of November 25 at a Starbucks near the premises. The purchase price was extensively discussed. The leaseback using market rent formula was discussed between the Cohens and Syl. Dan did not have much to say about that. He does not recall any question about deposit, due diligence or the closing date.
82At the meeting, Moshe had said that if there was no deal on that day, the defendant could simply list the property for sale, which would mean that they would have to pay commission. Dan said he felt pressure to sign at the office on Alness Street, as he had a greater interest in selling the Subject Property. Dan and Syl both spoke with the accountant during the meeting, and the accountant said that the deal was okay.
83Syl had also spoken with Grant Goldfarb (“Goldfarb”), a real estate agent, who suggested he request $3.3 million or $3.4 million.
84Dan testified that he did not believe the APS was binding, and believed that everything other than the three bullets in the side agreement was open to review and potential change. However, the APS signed and initialed by all parties stated that “I can confirm this agreement with all changes both typed and written was finally accepted by all parties at 11:48 AM on November 25, 2019”.
85After the November 25 meeting, the lawyers were communicating back and forth and things started to break down. Dan was still providing the Cohens with documentation. He indicated that it was not clear to him whether the deal was binding or not since the lawyers were going back and forth, so he erred on the side of caution and provided the required documentation for the due diligence.
86The business separation was not progressing as Dan had hoped. Syl did not want to sell the building and was not interested in engaging further with the Cohens. Syl began speaking with the real estate agents regarding the value of 184/188 Limestone.
87Chaggares & Bonhomme, CPA (“Chaggares”) was their accountant who advised on business and accounting issues.
Sylvain Nadeau
88From at least August of 2019, TMP was slightly in the red. Dan pressured Syl to collect receivables. Dan and Syl have different risk tolerance levels, which created some stress and friction.
89In September, Syl did not know that Dan was doing research regarding the value of 184/188 Limestone. Syl first became aware when Dan indicated that he was interested in selling the building.
90The September 26 meeting was organized between Dan and the principals for the plaintiff and was held at 7 PM. Syl had not met the plaintiff’s principals at that point. The meeting lasted two hours. He believes that he left the meeting early. He does not remember much about the meeting. He was not in a frame of mind to want to sell the building, so the meeting was a waste of time in his mind. He did not see a LOI.
91Dan indicated that they would compile terms and conditions for the Cohens to construct their offer and wanted Syl’s thoughts. Syl never responded. Selling the building was not a priority.
92He knew that Dan had written to their banker at the Bank of Montréal giving permission to the banker to discuss a possible assumption of the mortgage by the Cohens, but did nothing in response.
93He was not doing any due diligence regarding making a decision about selling the property as he had no interest in selling; however, he wanted to be kept in the loop throughout as he did not want anything to happen without his knowledge. Forgione sent a realtor’s CBRE Q2 regarding the value of industrial space in Toronto which was just over $200 per square foot.
94He does not recall receiving a draft offer on October 24, but is sure that he did. It was not a big event for him.
95As regards the proposal to purchase the Subject Property by Forgione, Syl was not interested as he was in the same mind frame and not interested in selling. He never got into the negotiations in that regard. It is possible that they did discuss some high-level scenarios for selling. Forgione offered $3.1 million with a leaseback of 15,000 ft.² at $10 per square foot for two years. It did not seem like a good deal to him.
96It was about November 14 that Dan advised Syl that he was splitting.
97On November 24, Dan advised that the neighbours wanted to meet to discuss the purchase of 184/188 Limestone, and if the defendant waited any longer it sounded like the plaintiff would walk away from the deal. Syl recalled being reluctant to meet as he was not interested in selling. He responded that they should send their best offer but if it was $3 million maximum they should not bother. Syl went because he knew that Dan had an interest in selling and they were 50/50 partners. This was also out of respect for Dan as he wanted to sell the building and Syl felt a little stuck. He went to the meeting but had no intention of selling that day.
98There were quite a few discussions regarding price; most of Syl’s discussions were regarding price. Syl was driving the price up and they ultimately reached an agreement at $3,150,000. There was no discussion regarding deposit or closing date. The closing date was of greater concern to Dan. Syl also had discussions regarding the leaseback terms, which he had not fully wrapped his head around.
99After denying that he did any due diligence, Syl conceded that he spoke with Goldfarb and that Dan may have told him about the discussions with Chaggares concerning the value of the Subject Property. He said he was always hesitant about selling, but his business partner wanted out and he had to compromise.
100Dan and Syl refused to sign the agreement without having 48 hours to revise it. They wanted to write it into the APS but Moshe suggested writing it on a separate piece of paper and then transferring it to the APS, to which the defendant agreed. Syl does not remember who indicated that certain terms could not be negotiated further, which was fine with him because he had driven up the price. Syl denied that the intent was that the seller’s lawyer would review the legal wording, but not the business terms.
101Syl testified that they signed the side letter before the agreement.
102Syl sent the side letter and agreement to Mike McFarland, a real estate agent and friend, who said the side agreement should have been appended to the agreement as Schedule B. He further indicated that the terms of the APS were not in the defendant’s favour as there was a long conditional period, several seller representations and warranties and the City may not permit the trees to be removed. Syl agreed that it was not a good business deal for him. He then contacted Goldfarb and asked him to suggest a lawyer. Syl confirmed that he sent a text to Goldfarb indicating that he only had tomorrow, “if I want to get out of this deal”.
103He had begun to see the deal as a bad deal for him and saw this as a chance to try to improve it. He wanted to have a larger deposit, quick closing date, a shortened length of due diligence, more favourable leaseback rent and wanted the Cohens to assume all existing tenancies.
104On December 27, there were text exchanges with another real estate agent indicating that the deal was dead and they planned to list the building. By then, the circumstances had changed: Dan and Syl were separating the business. As at November 25, the news that Dan wanted to separate was still fresh. Syl had not wrapped his head around splitting. As time went on, he became more open to it.
105It was recommended that they wait until the caution placed on the property by the Cohens had expired and then they could list the Subject Property and sell it. Syl stated that they were wrong and that the caution could just be renewed, which it was.
106He indicated that he and Dan have now separated the business, although they both continue to own the building.
107In cross-examination, Syl indicated that it was possible that Moshe had done due diligence before November 25, and would have received documents from Dan.
Credibility
108The principals of both the plaintiff and defendant were experienced and shrewd businessmen.
109None of the principals of the parties were completely straightforward in their testimony. The principals of the parties attempted to avoid answering certain questions which could be damaging to their cases in cross-examination. Instead, they attempted to answer around the questions, explain away the questions and situations involved, or simply obfuscate.
110I found the evidence of Moshe and Meir Cohen to be more candid and consistent with the documentary evidence.
111I found Dan Mazanik’s evidence to be fairly straightforward, although somewhat guarded. On some critical issues, he had to change his testimony given in chief when confronted with documentation and other evidence on cross-examination.
112I found the evidence of Syl Nadeau to be of particular concern, in that in previous testimony and affidavits he had stated one thing which would be supportive of his case, whereas he had to concede certain significant issues in cross-examination. In the end, I found his evidence to be problematic and unreliable.
113I have taken this into account in my assessment of evidence and the case.
114Further, the defendant failed to provide documentation that was clearly relevant until trial.
The Factual Matrix
115Based on the evidence, both documentary and viva voce, I find the facts to be as follows.
116The principals of the plaintiff, brothers Moshe and Meir Cohen, had commenced their water distribution business in 2012. Thereafter, they expanded the business to include cold beverage and coffee distribution. Their water was bottled in Barrie, Ontario and their own brand of coffee was roasted in Montréal. They operated their business out of rented premises at 210 Limestone Crescent. in Toronto.
117They had looked for larger premises to purchase in order to expand their business. Their plan was to begin to bottle their water and roast their own brand of coffee in their own premises and create a café and showroom for the foot traffic that went by their premises on a daily basis.
118Their needs were quite specific and they had difficulty locating any suitable premises. The property adjacent to theirs was suitable for their needs. They began negotiations with the then-owner, Mr. Maxwell, but were not able to conclude an agreement suitable to both parties. Mr. Maxwell then sold to Dan Mazanik.
119Dan operated a helical pile foundation business from Orillia to North Bay as a franchisee from March 2005. The franchisor informed him of another franchisee, Sylvain Nadeau, who operated as a franchisee in the Toronto area. The two joined together in a joint venture in about 2008, with Dan Mazanik acting as the administrator and Sylvain Nadeau acting as the sales person. They operated their business from 184/188 Limestone Crescent adjacent to the plaintiff’s leased property.
120By 2015, it was apparent that Dan had a much lower risk tolerance than Syl. Dan wished to separate the business and to operate on his own. He began to look for opportunities to sell the Subject Property. Knowing that the plaintiff had been interested in purchasing his property, he approached Moshe Cohen in August or September to discuss that possibility. At this juncture, Syl was not aware that Dan was discussing the sale of the building; nor was he aware that Dan wished to separate their business venture.
121In order to advance discussions, a meeting was scheduled for September 26. Syl attended, but with reluctance, as he was not interested in selling the premises. The evidence indicates that he was also not able to assume ownership of the premises on his own. At that meeting, there was a discussion about price, removal of trees on the defendant’s property and placement of gravel for a parking area. It is not clear if a closing date was discussed at that meeting.
122The defendant wanted to avoid using a real estate agent in order to avoid paying commission.
123Dan provided information, including a survey and mortgage documentation, to the plaintiff to expedite the process. There had been environmental issues with the property, including ground water and soil contamination, which had been dealt with, in part, by SLRA Phase 1 and 2 Reports. Dan also authorized their bank to speak with the Cohens about the potential assumption of their mortgage.
124Following the September 26 meeting, on October 24, the plaintiff’s lawyer sent a draft offer to the defendant’s lawyer of $2,950,000, closing on April 30, 2020. The due diligence period was to be March 5, 2020. The defendant’s lawyer made a better offer to the defendant, which the defendant took seriously. The plaintiff, hearing nothing, went over to the defendant’s premises to inquire as to the status of the discussions and learned that the defendant was entertaining another offer. The plaintiff suggested another meeting on November 25.
125By November 14, Dan had advised Syl that he wanted to separate the businesses, such that each would operate his business on his own. While Syl was not convinced that this was what they should do, he realized that he needed to compromise, as Dan was intent upon separating.
126The November 25 meeting was held at a Starbucks near their respective premises and it lasted three hours. Syl had previously indicated that if the plaintiff’s best offer was to be $3 million, the plaintiff should not bother. Moshe indicated that if there were no deal arrived at on November 25, the defendant could simply list the property for sale and pay commission to a real estate agent.
127During the course of the negotiations, Syl drove the price up to $3.1 million. There was no increase to the deposit. The closing date was discussed and it was indicated to the defendant that the plaintiff needed six months to do their due diligence, resolve the environmental issues on the property and attempt to assume the defendant’s mortgage. While Dan wanted an earlier closing so that he could effect the separation of his and Syl’s business, his primary concern was to sell the building, which this agreement fulfilled. Further, Dan indicated in his testimony that, due to the due diligence that they had to complete regarding 184/188 Limestone when they purchased the property, the defendant was forced to obtain a longer closing date as well. He therefore agreed to the closing date. Syl was mainly concerned about the price and the leaseback. The leaseback was discussed, which was intended to be used by Syl to continue his business at that address, including a formula for interior rent and a stipulated monthly rental amount for use of the yard for storage. At the end of the negotiations when all terms had been agreed to, Syl indicated that he would not sell unless he obtained $3.15 million, which was finally agreed upon.
128The parties then moved to a private office that the plaintiff sometimes used on Alness Street to print and copy the final document for signature. When the document was printed, and a copy given to each party, Dan read the document out loud and Moshe read the document. Syl indicated that he would not read the document, but trusted Dan, and Meir was familiar with the document. The document was initialed and signed by all parties.
129The evidence indicates that during the course of negotiations, all parties had consulted their lawyers, accountants and/or real estate agents regarding the agreement.
130At the end, Syl indicated that he wanted to have his lawyer review the document, at which point the plaintiff’s principals’ testimony is that they confirmed that this was for a review of the legal terminology only. It was agreed that the lawyer would get back to them with any legal changes within 48 hours and a side agreement was signed to that effect.
The Issues
131The issues to be determined by this Court are as follows:
Was the APS a binding agreement?
What was the effect of the side agreement?
Was the plaintiff required to tender?
In the event that the APS is binding, is specific performance the appropriate remedy?
The Law
Interpretation of Contracts
132For ordinary commercial transactions, a signature objectively manifests acceptance of the terms of the contract. Generally, in a commercial transaction, a party who attaches his or her signature to the contract intends by so doing to acknowledge acquiescence to its terms and the other contracting party enters into the contract on that belief: see Tilden Rent-A-Car Co. v. Clendening (1978), 1978 CanLII 1446 (ON CA), 18 O.R. (2d) 601 (C.A.).
133Where an intention to create a binding contractual relationship has been found, courts will strive to give effect to the agreement and determine the objective intentions of the parties, particularly in commercial contracts: see Canada Square Corp. et al. v. VS Services Limited et al. (1982), 1981 CanLII 1893 (ON CA), 34 O.R. (2d) 250 (C.A.).
134Where possible, words should be understood to give effect to the agreement rather than destroy it or cause it to fail. Where the parties intended to be bound, the court will favour an interpretation of the agreement that is commercially reasonable, and consistent with the overall purpose of the transaction. The meaning to be accorded to the commercial document should be consistent with good business sense and avoid commercial absurdity: see John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003), 2003 CanLII 52131 (ON CA), 63 O.R. (3d) 304 (C.A.).
135The contractual intent of the parties to a written contract is objectively determined by construing the plain and ordinary meaning of the words of the contract in the context of the contract as a whole and the surrounding circumstances (or factual matrix) that existed at the time the contract was made, unless to do so would result in an absurdity: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 47-48, 57-58. See also Athwal v. Black Top Cabs Ltd., 2012 BCCA 107, 30 B.C.L.R. (5th) 17, at para. 42.
136The starting point for interpreting a contract must be the words of the agreement, which should be given their ordinary meaning. The factual matrix in which the agreement was negotiated should be taken into account, as well as the purpose of the agreement: see Athwal; VS Services.
137In interpreting the terms of an agreement, it is required that both the vendor and purchaser must act in good faith and reasonably in furtherance of the overall objective of the transaction in settling any indefinite subsidiary issues, so that the main promise can be enforced: see Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 63. See also C.M. Callow Inc. v. Zollinger, 2020 SCC 45, 452 D.L.R. (4th) 44; 2161907 Alberta Ltd. v. 11180673 Canada Inc., 2021 ONCA 590, 462 D.L.R (4th) 291, at para. 42. If the contract cannot be performed without settlement of an undetermined point, each party will be bound to agree to a reasonable determination of the unsettled point in order that the main promise may be enforced: see VS Services Limited. In this case, the main promise or intention of the agreement was clear and simple. The purpose was for the vendor to sell the property for $3,150,000 to the purchaser and for the purchaser to leaseback 25% of the building to the vendor for one year.
Tender/Repudiation
138Tender is not required of the purchaser where the vendor is in default; particularly where the vendor has repudiated the APS: see Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at paras. 45-49, leave to appeal refused, [2019] S.C.C.A. No. 55; King et al. v. Urban & Country Transport Ltd. et al. (1974), 1973 CanLII 740 (ON CA), 1 O.R. (2d) 449 (Ont. C.A.); Nutzenberger v. Mert, 2021 ONSC 36.
139The Court of Appeal in Bethco Ltd. et al v. Clareco Canada Ltd., 1985 CanLll 2252 (ONCA) stated as follows:
The trial judge, while finding that the vendor “was reluctant to complete the transaction and did everything possible to throw unnecessary hurdles in the path of the purchaser” was “not satisfied that there was an anticipatory breach”. It was not the classic anticipatory breach where one party declines to close at all. Nevertheless, the vendor was in breach of contract on the closing date and was unwilling or unable to close in accordance with the contract at any time. In these circumstances, there was no need for the purchaser to tender at all. It had only to show that it would be able to close in the reasonable future and the trial judge has so found. The vendor, being unable to close, was unable to rely upon the time of the essence clause to rescind the contract. The vendor was in breach of contract and the purchaser was entitled to a remedy.
Damages or Specific Performance
140Where there has been a breach of an APS, it must be determined whether damages or specific performance is the more appropriate remedy.
141The basic rationale for an order for specific performance of contracts is that damages may not, in the particular case, afford a complete remedy. Specific performance should not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available. A party seeking specific performance must establish fair, real and substantial justification by showing that damages would be inadequate to compensate for its loss of the subject property. The plaintiff must show that the land, rather than its monetary equivalent, better serves justice between the parties. This will depend on whether money is an adequate substitute for the plaintiff’s loss and this in turn will depend on whether the subject matter of the contract is generic or unique: see Lucas v. 1858793 Ontario Inc. (Howard Park), 2021 ONCA 52, at paras. 69-71.
142Whether specific performance is to be awarded is therefore a question that is rooted firmly in the facts of an individual case. In determining whether a plaintiff has shown that the land, rather than its monetary equivalent, better serves justice between the parties, courts typically examine and weigh together three factors: (i) the nature of the property involved; (ii) the related question of the inadequacy of damages as a remedy; and (iii) the behaviour of the parties, having regard to the equitable nature of the remedy: Landmark of Thornhill Ltd. v. Jacobson (1995), 1995 CanLII 1004 (ON CA), 25 O.R. (3d) 628 (C.A.) at 636. Whether a property is unique, either by virtue of its nature or the features of the contract for its purchase and sale, operates as only one of several factors the court must consider when determining entitlement to specific performance: see Lucas, at paras. 69-71.
143For purposes of assessing the nature of the property in question, the Court of Appeal in Lucas, at paras 73-75, stated as follows:
In assessing whether a property is unique, courts may have regard to: (a) a property’s physical attributes; (b) the purchaser’s subjective interests, or (c) the circumstances of the underlying transaction. While physical and subjective uniqueness of property will usually be significant in cases where a purchaser – as opposed to a vendor – seeks specific performance, the types of uniqueness are not exclusive and no difference in evidential weight should be given to one form over another: Jeffrey Berryman, The Law of Equitable Remedies, 2nd ed. (Toronto: Irwin Law, 2013), at pp. 355-57.
Uniqueness does not mean singularity or incomparability. Instead, it means that the property has a quality (or qualities) making it especially suitable for the proposed use that cannot be readily duplicated elsewhere: Dodge (S.C.), at para 60. For example, a rising real estate market, particularly where the purchaser’s deposit remains tied up by the vendor, may indicate that the transaction could not have been readily duplicated or that other properties were not readily available at the time of breach within the plaintiff’s price range: Walker v. Jones (2008), 2008 CanLII 47725 (ON SC), 2008 CanLll 47725 (ONSC), 298 D.L.R.(4th) 344 at para. 165; Sivasubramaniam v. Mohammed, 2018 ONSC 3073, 98 R.P.R.(5th) 130, at paras 84 and 92, aff’d 2019 ONCA 242, 100 R.P.R. (5th) 1.
The court should examine the subjective uniqueness of the property from the point of view of the plaintiff at the time of contracting: Dodge (S.C.), at para. 59. The court must also determine objectively whether the plaintiff has demonstrated that the property or the transaction has characteristics that make an award of damages inadequate for that particular plaintiff: Dodge (S.C.), at para. 59; Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at paras. 70-73, leave to appeal refused, [2019] S.C.C.A. No. 55.
144Where the vendor has repudiated the contract, the plaintiff must demonstrate that it is ready, willing and able to close within a reasonable time after the court orders specific performance, if the court determines that specific performance is a more appropriate remedy than damages: see Di Millo; Mondino v. Mondino (2004), 18 R.P.R. (4th) 200 (Ont. S.C.), at paras. 38-42; Silverberg v. 1054384 Ontario Ltd. (2008), 2008 CanLII 59325 (ON SC), 77 R.P.R. (4th) 102 (Ont. S.C.), at paras. 109-110, aff’d 2009 ONCA 698, 84 R.P.R. (4th) 185.
Analysis
145The seminal issues in this action are whether the APS is a binding agreement and how the side agreement is to be interpreted in light of the APS.
Was the APS a binding agreement?
146While the defendant maintains that there was relatively little communication between the parties about sale of the Subject Property between September 26 and November 25, and that the negotiations began in earnest on November 25, the evidence contradicts this position. There were numerous telephone calls, text messages and exchanges of documentation related to the Subject Property, including environmental reports, financial statements, tax returns, mortgage documentation, leases, a survey and the property cost spreadsheet, all provided by Dan to the plaintiff. There were two previous in-person meetings prior to the third November 25 meeting. There was also a LOI as regards the plaintiff’s intention to purchase the property and the first written offer was prepared by the plaintiff’s lawyer and provided to the defendant through the defendant’s lawyer on October 24.
147The October 24 APS offer formed the base from which the parties negotiated and concluded the final agreement one month later on November 25. A few of the terms of the October offer were changed, while the rest remained the same.
148I am satisfied, based on all of the evidence adduced, that the parties continued to talk and discuss the sale of 184/188 Limestone from September through November 25, and concluded the terms of the APS on November 25.
149The parties negotiated the APS over several months without a real estate agent. The parties consulted their respective advisors, including their accountants, real estate agents and lawyers and did their due diligence. While, in examination in chief, Syl indicated that he had not done due diligence, in cross-examination, he conceded that he had indeed consulted a number of advisors as regards sale of the property.
150The evidence indicates that Syl’s concerns were price and a favourable leaseback for him, as he intended to continue his business out of the Subject Property for a time thereafter. Dan’s concern was price and closing, as he intended to separate his business from that of Syl by the end of the year, if possible. Based on the evidence, I am nevertheless satisfied that he agreed to the longer closing, knowing that there were several issues to be dealt with by the plaintiff as regards due diligence, including the environmental issues of soil and groundwater contamination on the Subject Property and the potential assumption of the defendant’s mortgage from the Bank of Montréal. I note as well that, when the defendant purchased 184/188 Limestone, they required a longer closing due to due diligence and environmental issues, which continued to be present. They would likely have had this in the back of their minds when the plaintiff required a longer closing because of the due diligence and environmental issues.
151At the time of the final negotiations on November 25, the factual matrix is as follows:
The property value was approximately $200 per square foot;
The defendant intended to sell the property for what Forgione had offered them; i.e. $3 million;
The purchaser would have 75% of the space for its business operations;
The vendor wanted a leaseback of 25% of the property for one year; an agreement to cooperate was reached in order that the defendant, Syl’s, business operation did not block the purchaser’s business operations;
The vendor was to repair rather than replace the roof (which would have cost $200,000 to replace);
The vendor did not have to pave the back dock area;
Within five days of the signing of the APS, the vendor was to provide the environmental reports Phases 1 and 2 as regards the Subject Property’s outstanding environmental issues; the purchaser was to be given access and inspection rights to the Subject Property for its due diligence for financing in order to assume the vendor’s mortgage;
The vendor received legal advice from Forgione regarding the October 24 offer;
As at November 25, the vendors had had the October 24 offer for one month; the only changes made were to the price, leaseback clause and vendor work to be done;
The vendor knew that the November 25 meeting was likely their last opportunity to sell the property without having to pay a real estate commission of approximately $125,000;
The business terms were discussed and agreed upon at Starbucks; the parties went to the Alness Street office to print and make four copies of the APS; prior to signing, Syl demanded $3,150,000 and “we have a deal”; and
Dan spoke to the vendor’s accountant on November 25, 2019, who told them the deal was okay.
152The final negotiations on November 25 were thoroughly described by the principals of the plaintiff and defendant. It is clear that throughout the negotiations, which extended for over three hours, the parties consulted their respective advisors by telephone and text to ensure that the agreement was to their respective benefits.
153I am satisfied that the principal business terms were discussed and agreed upon, with the exception of deposit. The parties agreed that the business terms regarding the APS included price, deposit, closing date, length of due diligence period, repairs, access (an agreement not to block one another once the leaseback took effect), terms of the leasehold agreement, and assumption of tenancies. These various terms were discussed throughout the period from September through November. The evidence suggests that deposit was not discussed. The evidence further suggests that there was no pushback on deposit from the defendant. The deposit was paid to the defendant’s lawyer, as agreed, upon conclusion of the APS.
154Once the terms had been agreed upon, the parties all went to the Alness Street office with the intention of having the agreement printed, reviewed by all parties and signed. I am satisfied that all parties signed the agreement after having reviewed the agreement and that a binding agreement was thereby concluded. The agreement, with the parties’ signatures, states “I can confirm this agreement with all changes both typed and written was finally accepted by all parties at 11:48 AM on November 25, 2019”.
155While Syl was the only witness to state that the side agreement was signed before the APS, I do not accept that testimony. I find that the APS was signed by all parties prior to the side agreement being raised. After the signing of the APS, Syl indicated that he had not had the opportunity to have his lawyer review the terms of the agreement and wanted the opportunity to do so. Moshe asked Syl whether he wanted to have a lawyer negotiate the APS or simply look at it with respect to the legal wording to determine if the legal wording was appropriate. Syl confirmed that he wanted a lawyer to look at the legal wording.
Side agreement
156The side agreement is set forth at paragraph 39 above. As regards entering into the side agreement, I accept the evidence of Moshe Cohen that once the APS was signed, he inquired to whom the deposit should be directed. At that time, Syl indicated that he had not had the opportunity to have a lawyer look at the terms of the agreement and wanted the opportunity to do so. Moshe asked Syl whether he wanted to have a lawyer negotiate the APS or simply look at it with respect to the legal wording to determine if the legal wording was appropriate. Syl confirmed that he wanted a lawyer to look at the legal wording.
157While the plaintiff interprets the side letter to mean that no business terms are to be renegotiated, the defendant interprets the side letter to mean that all of the business terms in the agreement were open for negotiation, except the three in bullet point. I am of the view that the defendant’s interpretation is commercially absurd. It undermines and removes all meaning from the words “business terms not to be negotiated any further”. Further, it undermines the words in section 23 of Schedule A to the APS, which states: “Upon acceptance this Agreement shall constitute a binding contract of purchase and sale”. I do not find that such an interpretation would give meaning to all of the terms of the agreement. Nor is it consistent with or guided by the overall aim of the transaction. Further, it does not accord with the objective factual matrix that led to the signing of the APS and side agreement by all parties. Nor is it consistent with the parties’ words and behaviour following the signing of the agreement, with Syl and Dan saying “we have a deal” and the parties congratulating one another.
158I find that the side agreement was entered into by the parties on the understanding that the defendant wanted to have a lawyer review the legal terms of the agreement. I am satisfied that the parties did not intend that the lawyer would be reviewing and renegotiating the business terms of the agreement. The defendant had indicated that the business terms had been discussed with their accountant who gave advice on business and accounting issues.
159I note that the side agreement was not a well-drafted agreement and could have been much more clearly written as regards the business terms not being negotiated further. I am of the view that the explanation given by the Cohens that the three terms set forth as bullet points under “Business terms not to be negotiated any further” did, as they testified, indicate those business terms that had been changed from the October 24 LOI and incorporated into the November 25 APS, for ease of reference by the lawyers. I conclude this taking into consideration that the parties entered into the side agreement on the understanding that the defendant simply wanted a lawyer to review the legal wording of the document.
160I accept that explanation that only the legal wording was to be reviewed by the defendant’s lawyers. The parties to the agreement were all astute businessmen, who had negotiated the business terms of the agreement over a period of three months, with the document of October 24 having been prepared by the plaintiff’s lawyer. All parties participated in the negotiation of the various terms. Syl seemed to be the most recalcitrant in terms of concluding the agreement until just prior to the November 25 meeting, when he was advised by Dan that Dan’s definitive intention was to separate their business and have them each go their own way. While Dan negotiated many of the terms, Syl vigorously negotiated the issues of price and leaseback terms.
Was an agreement reached on November 25, 2019
161The agreement entered into specifically states that it is a binding agreement of purchase and sale, and incorporates the side agreement, which also references the APS of the Subject Property. There is nothing in the agreement that indicates or suggests that it would remain an offer or conditional after execution: see Balderson v. Faul, 2014 ABQB 762, 608 A.R. 129, at para. 77.
162A reasonable objective bystander looking at the words chosen, the conduct of the parties and the surrounding circumstances would come to the conclusion that the parties intended to and did reach an agreement: see Gao v. Park, 2021 ONSC 4560, at para. 61.
163Further, the deposit was paid by the plaintiff to the defendant’s lawyer and remained at the time of trial with the defendant’s lawyer: see Harchies Developments Ltd. v. Ewanchuk, 2006 ABQB 672, 64 Alta. L.R. (4th) 314, at paras. 54, 56; Tendances et Concepts Inc. v. Canada, 2011 TCC 141, 2011 G.T.C. 975, at paras. 30, 31.
164I am satisfied on all of the evidence that the parties intended to and did reach an agreement on November 25, 2019 for the sale by the defendant to the plaintiff of 184/188 Limestone.
Was the APS breached by the defendant?
165Following the conclusion of the agreement and side letter, which provided 48 hours for the defendant’s lawyer to review the agreement for legal terms, the defendant’s lawyer, on November 26, demanded over 30 changes to the APS, including changes to the business terms of the APS. The evidence indicates that this was after Syl advised his lawyer that he only had until the next day to get out of the deal.
166By mid-December, after the APS had been signed on November 25, the defendant learned that 184/188 Limestone was increasing in value due to a dearth of similar properties. As a result, the defendant did nothing further to proceed with concluding the agreement. Rather, the defendant continued to orchestrate the termination of the APS.
167Nevertheless, the defendant continued discussions with the plaintiff. It appears from the evidence that the defendant’s intention was to lead the plaintiff on until the caution expired and then list the property for sale at a higher price.
168In August 2020, the defendant listed the property for sale at a price of $4.7 million. On August 6, 2020, the defendant executed an agreement of purchase and sale for $4.5 million, which subsequently failed. On August 20, 2020, the plaintiff’s lawyer wrote to the defendant setting a new closing date for August 31, 2020. The caution was extended on August 25, 2020. On August 31, 2020, the defendant refused to close and again repudiated the APS. As a result, this lawsuit was commenced.
169Based on all of the evidence, I am satisfied that the defendant repudiated the APS.
Remedy
170The applicable legal principles, as set forth in UBS Securities Canada Inc. v Sands Brothers Canada Limited (2009), 2009 ONCA 328, 95 O.R.(3d) 93 at para. 96 are as follows:
When fashioning a remedy for a breach of contract, the object is to place the injured party in the position that he or she would have been had the contract been performed. Typically, damages are ordered. However, where damages are inadequate to compensate an injured party for its losses, specific performance may be ordered. Accordingly, specific performance may be ordered where the subject matter of a bargain is unique or irreplaceable because, in those circumstances, damages may be inadequate.
171Specific performance is an equitable remedy. It is awarded where the property in question is unique to the buyer, and has a quality that cannot be readily duplicated elsewhere. The time to determine whether a property is unique is the date on which the breach takes place. The plaintiff argues that damages will not, in this case, be a complete remedy, and that specific performance is the appropriate remedy for the defendant’s breach. The plaintiff submits that the property is unique, both subjectively and objectively. The uniqueness of the property is to be determined from the date on which the breach took place, in this case, December 15, 2019.
172The plaintiff had been searching for property for over four years prior to the subject agreement. Indeed, the plaintiff had attempted unsuccessfully to purchase 184/188 Limestone prior to the defendant purchasing the property. The property was directly adjacent to the property that the plaintiff was currently leasing. The plaintiff’s business was route-based and sophisticated software had been custom-developed for the plaintiff for purposes of delivery of their goods, regular delivery to their ongoing customers, ordering by customers online and the routing of those deliveries. The specially designed routing program was a foundation of the profitability of their service business. 184/188 Limestone had sufficient space for the plaintiff to fulfil its plans of expansion, including being able to bottle water on site, roast their coffee beans on site, and open a café and showroom. 184/188 Limestone had three interior docks for loading and unloading of their product which were sufficiently long to accommodate the 53-foot tractor-trailers used in their deliveries. At the location, there was sufficient daily foot traffic (they were very close to a GO station and a public transit station) for them to maintain a kosher coffee shop. It was located near amenities such as kosher food, a synagogue nearby so that the principals for the plaintiff could attend and pray on a regular basis, the gas station they used for filling the gas tanks of their trucks and the mechanic they used for their business. It was also a short commute to the homes of the plaintiff’s principals who both had young families. It was near public transportation, including the subway, for their employees. The property was also within their budget.
173Based on the evidence adduced at trial, there was very little in the way of suitable properties available from the fall of 2019 through 2021. Properties with all the unique assets and amenities that they required for their business were essentially not to be found, or not at a price that they could afford. I am satisfied based on all of the evidence, that they searched, without success, for such properties with the unique characteristics that they required. The evidence further indicated that smaller industrial buildings of 15,000 ft.², which is what they sought, with a large land area for large trucks, and at a price that they were able to afford, are in short supply and not available. Thus, no adequate, affordable substitute was readily available at the time to replace the uniqueness of the Subject Property for the plaintiff’s purposes.
174I am satisfied, given all of the evidence, that this was a commercial property that the plaintiff attached particular significance to, given all of the features and qualities above indicated, that made it particularly suitable for the proposed use by the plaintiff. In my view, this evidence, and all of the features of the property described, combined, meet the test of uniqueness contemplated by Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415.
175The defendant argues that damages would be appropriate, should they be found liable.
176Damages in lieu of specific performance are assessed as at the date of trial: see Sivasubramaniam, at paras. 84, 92.
177If the defendant is unable to pay the damages award, then, however accurately the assessment of the plaintiff’s losses may be, the remedy of damages can hardly be described as adequate: Injunctions and Specific Performance, R. J. Sharpe J., Loose leaf edition, Canada Law Book, November 2015, ss. 7,260; UBS Securities Canada Inc., at para. 103.
178In the present case, based on the evidence, I am of the view that damages themselves would not be an adequate remedy. The property was not to be purchased as an investment but rather as an integral part of the plaintiff’s business. The property was unique. The plaintiff has not been able to find any properties that had the features needed and required for the plaintiff’s business. Damages would be difficult to calculate given the dynamic market and limited supply of industrial property at the time. Further, based on the evidence, the defendant does not, in any event, have sufficient funds to pay damages. As the defendant is a single asset company, it would have to sell the property in order to pay damages.
179Based on all of the evidence, I am of the view that the defendant acted in bad faith as regards the APS. The evidence given by Syl Nadeau throughout the proceeding was misleading, as can be seen from the contradictory documentary evidence and from concessions that he had to make in cross-examination. Once the APS had been signed on November 25, Syl Nadeau had his lawyer review the APS, purportedly for purposes of reviewing the legal terminology, but attempted to make 30 changes to the APS, including changes to the business terms. Without prejudice to its position that there was a binding APS, the plaintiff did attempt to respond to the non-essential proposed changes in an attempt to bring the transaction to a close. The plaintiff continued to carry out its due diligence as was its responsibility pursuant to the APS. However, the defendant refused to permit access to the property in order for the plaintiff to undertake its due diligence appraisals and inspections as required for financing and as required for the environmental issues. All of this bespeaks bad faith on the part of the defendant in this commercial transaction.
180On December 18, 2019, the Bank of Montréal approved assignment of the first mortgage which would have permitted the transaction to close more quickly, had the defendant not repudiated.
181In the circumstances of this case, no tender was required as the defendant repudiated the agreement: see Di Millo, at paras. 70-73.
182I am satisfied, based on the evidence, that the plaintiff was ready, willing and able to close. Based on all of the evidence, I am satisfied that the plaintiff has continued to save money to ensure that they are ready, willing and able to close the transaction in the event that specific performance is ordered, which it is. I am further satisfied that the plaintiff arranged for bridge financing, which was available from Mr. Kimmel in the event that it was required: see Bethco Ltd. I am satisfied that these various sources of financing continue to be available. Finally, the Bank of Montréal has indicated that it has approved assumption of the mortgage of the defendant by the plaintiff or will provide mortgage financing upon application.
Conclusion
183In conclusion, the defendant breached the terms of the APS and repudiated the contract. In all of the circumstances of this case, given the evidence, the factual matrix and the law, damages are not a sufficient remedy. I therefore order specific performance of the agreement, with the terms and conditions of the APS to apply, subject to the following:
The closing date will take place within 90 days from the date of this judgment, to close on the earliest available date to the parties acting reasonably, after the purchaser notifies the vendor that the purchaser has the funds to close the transaction;
Normal adjustments for a real estate transaction, subject to the provisions of the APS, but as of the new closing date, apply; this includes accounting for the deposit still held by the defendant’s counsel;
There will be no provision for interest since the date of the closing stipulated in the APS, or since August 31, 2020; and
There is to be an accounting by the plaintiff of all rents paid by the plaintiff for its lease at 210 Limestone from August 31, 2020 to the date of closing and a credit to the plaintiff as an adjustment of the amount due on closing.
184This court will remain seized of the matter for the purposes of any orders or directions that may be required in connection with this sale transaction.
Costs
185It is strongly urged that the parties attempt to settle the matter of costs between them. In the event that they are unable to do so, they are to provide submissions as to costs within 60 days of the release of this judgement, to be limited to no more than three pages, with the bills of costs attached.
C.J. Brown J.
Released: January 31, 2023