Court File and Parties
COURT FILE NO.: CV-18-274-00SR
DATE: 2023/02/09
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Gary Howard and Julia Niblett, Plaintiffs
AND
1880485 Ontario Inc., o/a Above All Building, 1324789 Ontario Inc. and Magenta Waterfront Development Corporation, Defendants
BEFORE: Madam Justice Robyn M. Ryan Bell
COUNSEL: J. Michael Hickey, for the Plaintiffs/Responding Parties
Denise Sayer, for the Defendant Magenta Waterfront Development Corporation/ Moving Party
No one appearing for 1880485 Ontario Inc. or 1324789 Ontario Inc.
HEARD: December 13, 2022
ENDORSEMENT
Overview
[1] The plaintiffs registered a notice of purchaser’s lien against property owned by Magenta Waterfront Development Corporation and 1324789 Ontario Inc. Under an interim agreement between the plaintiffs and Magenta, the purchaser’s lien was vacated from title in April 2020 to permit the sale of the property in exchange for monies being paid into trust in the amount claimed by the plaintiffs.
[2] The issue on this motion is whether the plaintiffs were entitled to register the purchaser’s lien. If they were, the monies being held in trust will remain in trust pending final disposition of these proceedings. If not, the monies being held in trust are to be paid out of trust to Magenta.
[3] For the following reasons, I conclude that the plaintiffs were not entitled to register the purchaser’s lien under s. 71 of the Land Titles Act.[^1] Accordingly, the monies held in trust under the interim agreement are to be paid to Magenta.
Facts
[4] The essential facts are not in dispute.
[5] The plaintiffs entered into an agreement of purchase and sale with 1880485 Ontario Inc. o/a Above All Building on February 27, 2015. Pursuant to the agreement, Above All agreed to sell to the plaintiffs Lot 15 Applewood Lane, South Frontenac, and to construct a home on Lot 15 for a purchase price of $794,000. At the time of the plaintiffs’ agreement with Above All, Magenta and 132 Ontario were the registered owners of Lot 15.
[6] On July 13, 2015, Above All entered into an agreement of purchase and sale to purchase Lot 15 from Magenta and 132 Ontario. Above All, Magenta, and 132 Ontario had also entered into a development agreement under which Above All would purchase a number of residential lots, including Lot 15, from Magenta and 132 Ontario, so that Above All could design and construct homes on the lots for purchasers. The development agreement provided that Magenta and 132 Ontario would transfer title to the residential lots to Above All once final condominium approval was received from the Township of South Frontenac.
[7] In accordance with their agreement with Above All, the plaintiffs paid deposits in the total amount of $118,800.25 to Above All, including monies for upgrades and extras. Their agreement provided a First Tentative Occupancy Date of November 30, 2015 and an Outside Occupancy Date of March 29, 2017, following which the plaintiffs could terminate the agreement if their home was not completed. On termination, the plaintiffs would be entitled to a full refund of all monies paid, including deposits and monies paid for upgrades and extras, plus interest.
[8] Above All did not complete the house by November 30, 2015. Above All and the plaintiffs agreed to extend the closing date to March 31, 2016, then to May 31, 2016, and finally to September 7, 2016.
[9] As at August 3, 2016, only 47 per cent of the house had been completed. The plaintiffs expressed their stress and frustrations to the principals of Magenta and 132 Ontario over the delays in the completion of their house. Although several options were suggested to the plaintiffs to move forward with another builder, there were other issues to be resolved.
[10] The plaintiffs had had enough. On March 30, 2017, the plaintiffs provided notice to Above All that they were terminating their agreement because Above All had failed to complete the home and provide occupancy by the Outside Occupancy Date. The plaintiffs demanded a full refund, with interest, of all monies paid by them toward the purchase price.
[11] On October 25, 2017, a notice of purchaser’s lien in the amount of $118,800.25, equal to the amount of the deposits paid by the plaintiffs to Above All, was registered on title to Lot 15. A new notice of purchaser’s lien was registered on title on October 7, 2019 to reflect the plaintiffs’ recovery of $40,000 on account of deposit monies paid, from Tarion Warranty Corporation.
[12] The sale of Lot 15 was scheduled for April 30, 2020. The parties agreed that Magenta would pay the monies alleged to be owing into trust pursuant to an interim agreement and the plaintiffs would remove the s. 71 notice to permit the sale to be completed. Clauses 9 and 10 of the interim agreement provide:
The Parties agree that the Trust Money [is] being paid into escrow to have the section 71 notice lifted before April 30, 2020 and therefore if the section 71 notice was improperly placed on the Property, the Trust Money should not have been paid into escrow.
The Parties agree that the test as to whether the Trust Money should be paid back to [Magenta] is whether the section 71 notice was properly placed on the Property. If the court holds that the section 71 notice was improperly placed on the Property, the Parties agree that the Trust Money shall be released from escrow and paid back to [Magenta].
The nature of a purchaser’s lien
[13] Section 71(1) of the Land Titles Act provides:
Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles.
[14] A purchaser’s lien is an equitable remedy to protect the amount of the purchaser’s deposit on the land: Langford v. 1734141 Ontario Limited, at para. 19.[^2] The essential nature of a purchaser’s lien is security for monies paid under a binding contract of purchase and sale that gives rise to “equitable title to the land to the extent of [the purchaser’s] payments”: Pan Canadian Mortgage Group III Inc. v. 0859811 B.C. Ltd., at para. 32.[^3] As the British Columbia Court of Appeal in Pan Canadian explained:
Thus the purchaser’s lien developed from the principle that as between the contracting parties, equitable title transferred to the buyer under a contract, but closing – the transfer of legal title – failed. Provided the buyer was not at fault, Equity would not countenance the ‘aggravation’ of his loss by depriving him of the “only means of acquiring the repayment of his money…by following the interest which in respect of that payment of money he had acquired in the estate.” (Rose v. Watson [[1864] 10 H.L.C. 672], at 680.)[^4] [emphasis in original]
[15] The language of s. 7(1) of the Land Titles Act is clear: a person entitled to an unregistered interest in land may protect that interest from being impaired by an act of the registered owner by registering a notice. As stated in Di Castri, The Law of Vendor and Purchaser at §916, “it is payment to the vendor which is the foundation of the purchaser’s claim of lien and elevates him to the position of a secured creditor.”[^5]
The plaintiffs did not provide deposit monies to a vendor of real property
[16] The hurdle faced by the plaintiffs on this motion is they did not pay deposit monies to a vendor of real property. There was no contract between the plaintiffs and Magenta and 132 Ontario. The plaintiffs’ agreement was with, and their deposit monies were paid to, Above All, who was contracted to construct the home. Above All was not, at the time of its agreement with the plaintiffs, the owner of Lot 15. Above All was required to buy Lot 15 from Magenta and 132 Ontario before the lot could be transferred to the plaintiffs.
[17] In an effort to get over this hurdle, the plaintiffs submit that the deposit monies they paid to Above All added value to the property, creating a tangible financial benefit to Magenta and 132 Ontario, the owners of the property. However, the uncontroverted evidence on this motion is that after Above All abandoned the project and breached its agreement with the plaintiffs, Magenta and 132 Ontario, the registered owners of Lot 15, incurred costs to remedy Above All’s faulty workmanship and to complete the house. Magenta and 132 Ontario also incurred carrying costs until the house on Lot 15 was sold on April 30, 2020. Ultimately, Magenta and 132 Ontario incurred a loss in completing and selling the house.
[18] The plaintiffs’ position is that Magenta and 132 Ontario are responsible for Above All’s default on its agreement with the plaintiffs. The plaintiffs argue that Magenta and 132 Ontario failed to provide construction financing and to transfer Lot 15 to Above All in accordance with the development agreement and their agreement of purchase of purchase and sale with Above All, thereby precipitating Above All’s default. The plaintiffs say that had Magenta and 132 Ontario not breached their agreements with Above All, Above All would have been able to sell Lot 15 to the plaintiffs.
[19] I would not give effect to the plaintiffs’ submission. It appears for the first time in their factum on the motion. It is not pleaded in the statement of claim. It is contradicted by the evidence in the record. Finally, this proposition was not put to Gary Marshall, the principal of Magenta, on cross-examination.
[20] The plaintiffs’ payments to Above All did not give rise to an equitable title or interest in the land because Above All was not the registered owner of the property.
A second hurdle: the plaintiffs’ agreement with Above All
[21] The plaintiffs face a second hurdle: in their agreement with Above All, they expressly agreed that no interest in land was created unless Above All met certain conditions. Clause 5 of the plaintiffs’ agreement with Above All provides:
- Construction Approvals
This agreement shall be effective to create an interest in the property only if the seller complies with the subdivision control provisions of the planning act by completion and seller covenants to proceed diligently at this expense to obtain any necessary consent by completion.
[22] Under clause 5, it was Above All that was required to comply with the subdivision control provisions of the Planning Act. On the uncontroverted evidence of Mr. Marshall, this did not happen. Instead, it was Magenta and 132 Ontario – the registered owners – that obtained final plan registration for Lot 15 and the other lots on Applewood Lane on June 4, 2016. Above All never completed the construction of the plaintiffs’ home, having effectively abandoned the job in August 2016. The agreement of purchase and sale between Above All, Magenta, and 132 Ontario was never completed.
[23] An equitable remedy such as a purchaser’s lien may be excluded or modified by agreement of the parties: Counsel Holdings Canada Ltd. v. Chanel Club Ltd.;[^6] Firm Capital Mortgage Fund Inc. v. 2012241 Ontario Ltd.;[^7] Pan Canadian, at paras. 46-50. In Counsel Holdings, the Court of Appeal rejected the argument that a subordination clause in the parties’ agreement did not apply to a purchaser’s lien: “[t]he purchasers’ claim to their deposits clearly arose under the purchase agreements and any rights flowing therefrom are subject to the terms of those agreements, including the subrogation clause.”[^8]
[24] In Pan Canadian, the purchasers had entered into two separate agreements with a company, Lallico, that did not own the proposed townhouse development or the land upon which the proposed development was located. The purchasers paid substantial sums to Lallico which they believed was acting on behalf of the owners of the land. The purchasers sought to enforce purchasers’ liens over the proposed development after it failed. Similar to the case at bar, in Pan Canadian, the purchasers did not have binding contracts for the purchase and sale of real property with the owners of the property and the purchasers had expressly disclaimed that the contract gave rise to an interest in land. Justice Newbury, writing for the majority of the British Columbia Court of Appeal,[^9] concluded, “it is clear no transfer of equitable title, or of an equitable interest, took place or was intended to take place by means of the Agreements in this case – even if one assumes [Lallico] had the authority to bind the vendor.”
[25] The same is true in this case. No transfer of an equitable interest in Lot 15 took place and no transfer of an interest in land was intended to take place until such time as Above All met the stipulated conditions.
[26] Clause 20 of the agreement of purchase and sale between the plaintiffs and Above All does not assist the plaintiffs. Clause 20 provides:
- No registration
The Purchaser acknowledges that the registration against title of the land of any notice or caution or other reference to this agreement other than the agreement for sale of registration of his or her interest in the land is likely to cause inconvenience and prejudice to the Vendor for example, by impeding financing. If any such registration occurs, the Vendor may terminate this agreement forthwith. Further the Purchaser hereby irrevocably consents to a court order removing such registration and agrees to pay all cost[s] of obtaining it
[27] Clause 20 provides that if a notice of interest in land is registered against title, the vendor may terminate the agreement. I agree with Magenta that clause 20 did not give the plaintiffs a right to register a purchaser’s lien after their agreement with Above All was terminated.
Magenta and 132 Ontario did not act in concert with Above All
[28] The plaintiffs seek to distinguish Pan Canadian on the basis that, in that case, Lallico did not have a development agreement or a binding agreement of purchase and sale creating an interest in the land which Lallico could transfer to the purchasers. In the case at bar, there was a development agreement and an agreement of purchase and sale between Above All as purchaser and Magenta and 132 Ontario as vendors. The plaintiffs submit that this is evidence that Above All, Magenta, and 132 Ontario were acting in concert to transfer Lot 15 to the plaintiffs. The plaintiffs further argue that if I am not satisfied the record is sufficient to establish the defendants were acting in concert, then Magenta’s motion is premature: Pan Canadian, at paras. 52, 53, and 62.
[29] I do not accept the plaintiffs’ submission for two reasons.
[30] First, there is no allegation in the statement of claim that the defendants were acting in concert to transfer Lot 15 to the plaintiffs. There is no allegation that Above All was acting as agent for Magenta and 132 Ontario in its dealings with the plaintiffs.
[31] Second, it is insufficient for the plaintiffs to believe that Above All was acting as agent for Magenta and 132 Ontario or that Above All, Magenta, and 132 Ontario were acting in concert. In the absence of express authority to act as agent, the primary focus must be on the acts or conduct of the purported principal: Pan Canadian, at para. 53. However, Mr. Marshall was not cross-examined on acts or conduct relevant to allegations of agency or acting in concert.
Conclusion
[32] For these reasons, Magenta’s motion is granted. As the plaintiffs were not entitled to register the purchaser’s lien on Lot 15, the monies currently being held in trust shall be paid to Magenta in accordance with the terms of the interim agreement.
[33] In the event the parties are unable to agree on costs of the motion, they may provide their submissions in writing. Costs submissions shall not exceed three pages. Magenta is to provide its submissions by February 23, 2023. The plaintiffs are to provide their responding submissions by March 9, 2023. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
Madam Justice Robyn M. Ryan Bell
Date: February 9, 2023
COURT FILE NO.: CV-18-274-00SR
DATE: 2023/02/09
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Gary Howard and Julia Niblett, Plaintiffs
AND
1880485 Ontario Inc., o/a Above All Building, 1324789 Ontario Inc. and Magenta Waterfront Development Corporation, Defendants
COUNSEL: J. Michael Hickey, for the Plaintiffs/Responding Parties
Denise Sayer, for the Defendant Magenta Waterfront Development Corporation/ Moving Party
No one appearing for 1880485 Ontario Inc. or 1324789 Ontario Inc.
ENDORSEMENT
Justice Ryan Bell
Released: February 9, 2023
[^1]: R.S.O. 1990, c. L.5. [^2]: 2008 CanLII 67413. [^3]: 2014 BCCA 113. [^4]: Pan Canadian, at para. 32. See also Paul Perell and Bruce Edgell, Remedies in the Sale of Land, 2nd ed. (Toronto: Butterworths, 1998), as cited in Langford, at para. 13. [^5]: (3rd ed., looseleaf). [^6]: (1999), 1999 CanLII 1653 (ON CA), 43 O.R. (3d) 319 (C.A.). [^7]: 2012 ONSC 4816. [^8]: Counsel Holdings, at p. 320. [^9]: Justice Chiasson concurring in the result.