Court File and Parties

COURT FILE NO.: CV-19-00625286-0000 and CV-20-00643109-0000 DATE: 20240425

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Naftali Rabinowitz Plaintiff – and – 2528061 Ontario Inc. Defendant

COUNSEL: Eli Karp and Ian Literovich, for the Plaintiff James S.G. Macdonald, for the Defendants

HEARD: January 22-26, 2024

L. Brownstone J.

Introduction

[1] The defendant purchased a parcel of land municipally described as 3728 Mayfield Road in the town of Caledon in 2016 (the “property”). Beginning in September 2017, the plaintiff entered into several agreements of purchase and sale with the defendant in respect of the property. At various times, the negotiations stalled and were resurrected, and on several occasions led to amendments to the original agreement of purchase and sale.

[2] The plaintiff claims there was a valid and existing agreement of purchase and sale that was repudiated by the defendant in June 2019, days before the intended closing. It claims that damages are an inadequate remedy and an order for specific performance should issue. The plaintiff does not seek damages and agrees that if it does not succeed in its claim for specific performance, its claim must be dismissed. The defendant denies there was a valid agreement and, in the alternative, denies specific performance is available to the plaintiff.

[3] The court must determine the following issues: Was there a valid and existing agreement of purchase of sale (“APS”) with a closing date of July 2, 2019? If so, did the vendor repudiate that APS? If so, is the plaintiff entitled to the remedy of specific performance? The defendant brought a counterclaim arising out of the same transaction, which must then be considered.

[4] In addition, the plaintiff brought a separate action seeking repayment under the terms of a mortgage it provided in respect of the property. The defendant acknowledges it owes monies to the plaintiff under the mortgage. It disputes the principal amount owing and disputes the plaintiff’s claim for interest on the principal.

[5] The evidence in chief was adduced by way of affidavit evidence. The facts below are found on the basis of that evidence, the cross-examinations that took place before me, and the documentary evidence, including statements of admitted facts, filed.

Background

[6] The property comprises about 45.7 acres. It is vacant but for a single-story home that is tenanted and that sits on the portion of the property zoned for agricultural use. The remainder of the property is designated as an environmental policy area under a by-law of the town of Caledon. The Toronto and Region Conservation Authority (“TRCA”) has regulatory authority over the property. The number of acres that are potentially developable is an important issue, as will be outlined below.

[7] Mr. Dilip Jain is a director of 2528061 Ontario Inc., the defendant vendor (“252” or the “vendor”). Naftali Rabinowitz (“Naftali”) is the son of Saul Rabinowitz (“Saul”). Naftali entered into the APS and amendments personally “in trust for a company to be incorporated”. He was in his early twenties when the first APS was entered into in September 2017. Saul was an established businessman but had no experience in property development. Saul thought Naftali should learn the property development business, so he connected him with Gil Shcolyar and Boris Golan, both of whom have experience in purchasing and developing properties. A corporation, 2606077 Ontario Corp. (“260”), of which Naftali, Gil Shcolyar, and Boris Golan were directors, was incorporated in November 2017. Naftali and Mr. Shcolyar testified that Naftali entered into the APS and the amendments to the APS for 260.

[8] The vendor was represented throughout the negotiations and various agreements by its real estate agent, Koshy Thomas of Royal Star Realty Inc. The purchaser was represented throughout by Ron Namen, who was first employed by Kingsway Real Estate Inc. and later by IPRO Realty Ltd. Brokerage.

[9] Negotiations between the parties occurred over a period of more than two-and-a-half years, with starts and stops, and resulted in several amendments to the original APS. The amendment that governs the decisions the court must make was made on March 1, 2019. The history of the negotiations and agreements between the parties is required to understand that amendment.

[10] On September 1, 2017, the parties entered into the first APS. The purchase price in that APS was $14,000,000, based on an estimated useable acreage (by useable, the parties meant developable) of 31 acres, and a price per acre of $451,612.90. That APS called for a deposit of $250,000, with the purchaser to provide a further deposit of $750,000 two business days after waiving all conditions.

[11] From the outset, the transaction was structured so that the entire acreage would be transferred, but the purchase price would be based on the number of useable acres, with adjustments to be made post-closing for acreage that was approved to be developed after closing. Both parties acknowledged that technical information and reports were required in order to determine the feasibility of developing the property and the property’s useable acreage. On about September 20, 2017, Schedule A of the first APS was amended to modify the timing and content of the provision of due diligence materials to be delivered by the vendor. The vendor was required to provide a topographical report, a geotechnical report, a geological report, and an environmental report. The parties were to share the cost of those reports.

[12] The reports were provided in about November 2017. The purchaser wanted additional studies to be performed and further information to be received. For this reason, the purchaser, through Mr. Namen, sought to extend the due diligence period. The vendor agreed but sought a loan of $600,000, comprising the release of the $250,000 deposit from trust and a further advance of $350,000. The details of this $600,000 will be dealt with below, in the context of the purchaser’s action for the return of mortgage funds.

[13] On December 19, 2017, the parties amended the APS and extended the conditional period for the purchaser until February 28, 2018. That extension was agreed to in order to allow the purchaser to receive satisfactory reports from Beacon Environmental, SCS Engineers, and Evans Planning. If Beacon was unable to complete its report by February 28, 2018, the purchaser was to so advise the vendor by February 27. The conditional period would then be extended to May 1, 2018 for the purposes of receiving the Beacon report. If the purchaser did not receive a satisfactory environmental report by May 1, 2018, and advised the vendor of this, the APS would terminate. If the purchaser did not provide a waiver before the conditional period expired, the agreement was to automatically terminate and the deposit was to be returned to the purchaser. The purchaser was also permitted to terminate the agreement during the conditional period.

[14] On about February 27, 2018, the purchaser obtained the Beacon report. It stated that the property comprised 2.8 hectares of usable acreage, or about 6.9 acres, not the 31 acres provided for in the APS. The purchaser provided the vendor with the report and extended the closing date. Discussions continued, but the deal was not completed. Both parties agree the deal expired on May 1, 2018.

[15] About six months later, in November 2018, the vendor obtained a preliminary report from its planner who estimated there to be 9.34 useable acres. The parties resumed communications and negotiations and exchanged draft amendments, one that set the useable acreage at 6.98 acres and one at 8 acres. Neither of these amendments was signed.

[16] On February 11, 2019, the vendor signed a draft amendment to the APS. That amendment deleted the purchase price and provided the following instead:

For the purchase of the Property (which includes any Deposits, Payments, and other adjustments that were already paid from the Buyer to the Seller), the Buyer and Seller agree that the Buyer will pay to the Seller $451,612.90 for each use-able Acre of land that has been located and verified by the Buyer Up to The Requisitions Date (the “Current Available Land”). The Buyer shall provide to the Seller evidence of the such ( sic ) usable acres before the closing date.

The parties agree that The Purchase Price shall be prorated according to the following calculation:

Original Purchase Price: $14,000,000.00 Acres: 31 Price per Use-able Acre - $451,612.90 Final Purchase Price: To be determined on the closing date and according to the Current Available Land.

The Buyer and Seller agree that if within Three (3) years from the Closing Date of this agreement the Buyer receives all the necessary approvals allowing the Buyer develop other parts of the Property over and above the original acres paid on the closing (the “Additional Land”), as then the Buyer shall pay the Seller for any acre of the Additional Land according to the above calculation and the payment(s) shall be made as soon as the Additional Land will be available and will be allowed to use by the authorities such as TRCA. This clause shall not merge and shall survive closing.

[17] On the evening of February 28, 2019, and apparently again at 8:57 a.m. on March 1, 2019, Mr. Jain sent the following email to the two agents, Mr. Thomas and Mr. Namen:

Hello Ron

1. the offer is for full 45.71-acre land and only one piece of land.
2. yes, the house on the property is included in the price.
3. yes, the current 6.98 acres is ok, however, if during the next 120 days or until the closing date, we (buyer ans (sic) seller) could receive official approval from the TRCA for more land, the Buyer shall pay to the Seller accordingly on closing.
4. the clause for the three years, the buyer ans (sic) seller hope that buyer can get the necessary approvals for the developments during the coming 3 years after the closing date, however the buyer shall pay for the additional land as soon as receiving the official approval from the TRCA either by the buyer or the seller.
5. for the closing date could be set up to 120 days but can be set to an early date if the buyer needs to close early.
6. The funding agreement between the seller and other landowners will be assigned to the buyer on the closing. thanks. Dilip Kumar Jain.

[18] It appears that the email was again forwarded at 9:33 a.m. on March 1, 2019. At 10:00 a.m. on March 1, 2019, Naftali signed the APS. Later the same day, both Naftali and Mr. Jain executed a further amendment which involved the deletion of, among other things, the conditions described at paragraph 13, above. The amendment also inserted the following regarding the closing date:

CLOSING DATE The closing date shall be [the typewritten ninety (90) is struck out and sixty (60) included in handwriting in its stead] following the execution of this Amendment. [inserted in handwriting and initialed:] Plus optional 60 days up to the buyer The Requisitions Date shall be fifteen (15) days before the closing date.

[19] This provision is followed by content identical to that set out in paragraph 16 above, regarding the purchase price. There was also a term regarding the payment of the real estate commission, which I will discuss further below.

[20] The APS provides that the agreement shall be completed no later than 6:00 p.m. on the closing date. It contains both a “time is of the essence” clause and an “entire agreement” clause, and requires that notices be provided in writing.

Issue One: Was there a valid agreement of purchase and sale with a closing date of July 2, 2019?

[21] The plaintiff claims that he validly exercised his option to extend the closing date for 60 days from April 30, 2019, which, due to holidays, extended the closing to July 2, 2019. The defendant raises six arguments in support of his position that there was no valid APS with a closing date of July 2, 2019. First, he states that the parties did not reach an agreement on useable acreage, which meant they did not reach an agreement on the purchase price. Second, the purchaser did not exercise its option to extend the March 1, 2019 APS, which therefore expired on April 30, 2019. Third, the vendor did not, by his conduct, revive the APS after it expired. Fourth, if the contract was in existence after April 30, 2019, the closing date would have been June 28, 2019 and not July 2, 2019, since June 29 was a Saturday. Fifth, the plaintiff was in breach of the agreement, as he did not deliver a second deposit when it was due. Sixth, the vendor did not receive a new commission agreement signed between the purchaser and the cooperating brokerage. I will address each of these in turn.

i) First, did the parties reach an agreement on useable acreage that would determine the purchase price?

[22] The parties acknowledge that there is no term in the APS or the March 1, 2019 amendment that set out how useable acreage would be established, other than it being verified by the purchaser. The purchaser’s argument is that the parties agreed on 6.98 useable acres and this was evidenced by the email sent by Mr. Jain the morning of March 1, 2018, set out in paragraph 17 above. Immediately following receipt of this email confirming useable acreage, Naftali signed the APS.

[23] Mr. Jain’s evidence was that he was merely copying a document previously sent to him by Mr. Namen, at Mr. Namen’s request. He stated that he did not, by his email, agree to the 6.98 figure. He testified that he told the purchaser at that time that 31 acres was available as useable acreage.

[24] I acknowledge that the language of the email is very close to language contained in Schedule A to an APS amendment proffered by the plaintiff prior to February 11, 2019. However, I reject Mr. Jain’s evidence that when he sent the email above, he was simply sending Mr. Namen a copy of the previous schedule at Mr. Namen’s request because Mr. Namen did not have a copy of it. I do so for the following reasons.

[25] First, it defies logic and common sense that Mr. Jain typed out an email that contained significant content, signed his name to it, and sent it to the purchaser’s agent while these negotiations were coming to a head, without limiting its contents in any way, simply because Mr. Namen needed a copy of it. Mr. Jain did not say, for example, “here is the schedule you asked me for”. He did not say, “this is what you had proposed last time.” He simply sent an email replicating the contents and placed his name at the bottom of it. While he claimed not to understand the contents, I note that he made certain changes to the wording. Instead of 45 acres in paragraph 1, for example, he substituted the exact figure of 45.71. Instead of the Town of Caledon in paragraph 4, he substituted the TRCA, the precise body that would be providing the approval.

[26] Second, even Mr. Jain’s own planners had advised him, a few months before he sent the email, that the useable acreage was 9.34 acres, a far cry from the 31 he maintains he told the purchaser was available on March 1, 2019.

[27] Third, he had proffered an amendment in recent months setting the useable acreage at 8 acres, again, a far cry from the 31 he claimed in his evidence to be asserting on March 1, 2019.

[28] Finally, the suggestion that Mr. Namen asked Mr. Jain to type out the contents of a schedule and email it to him was not put to Mr. Namen in cross-examination. Mr. Namen’s affidavit states the following about receiving the email from Mr. Jain: “That email was sent after a meeting in the Buyer’s planner’s office to discuss the results of the planner’s investigations about the size of the land. In this meeting the planner brought evidence that the 31 acres (as the Seller represented in the original APS) was not correct and presented that the actual available land was around 8 acres. The participants in this meeting were: Naftali Rabinowitz, Gil Shcolyar, Koshy Thomas, Dilip Jain and his partner, the planners, Martin Sharvit, Saul Rabinowitz, and I.” This evidence was unchallenged.

[29] I also reject the vendor’s argument that there could have been no agreement on useable acreage because there is an “entire agreement” clause, which prohibits the court from looking to evidence outside the agreement. Here, the APS was structured such that there was a price per acre. The purchaser was to verify the useable acreage at a future date. The APS itself contemplated the figure being determined separate and apart from the contents of the agreement. It specified the price per acre and contemplated a separate determination of that figure. The APS also provided that the purchase price would be determined on the closing date, since it was possible that more acres would be determined to be useable between the time the agreement was signed and the closing date. The entire agreement clause could not operate to nullify the entire APS which is, in effect, where the vendor’s argument would lead if I were to accept it.

[30] I therefore find that the parties had agreed that 6.98 acres was the amount of useable acreage. This amount could be increased if more acreage was determined to be useable either prior to closing or within three years thereafter. I find that the required certainty on this term existed. The language of the agreement in respect of acreage is not so vague or general as to be uncertain, as was the case in Di Battista v. Di Battista Farms Ltd., 2012 ONCA 721, a case relied on by the vendor. The parties agreed to a price per useable acre. The closing price was to be calculated based on 6.98 useable acres, plus any acreage for which approval was received in the next 120 days or prior to closing. Further payments could be made over the next three years if TRCA approved more acreage for development.

ii) Second, was the option to extend the March 1, 2019 APS for 60 days exercised on or before April 30, 2019?

[31] As noted above, the following was inserted as a term of the agreement on March 1: “The closing date shall be [the typewritten ninety (90) is struck out and sixty (60) included in handwriting in its stead] following the execution of this Amendment. [inserted in handwriting and initialed:] Plus optional 60 days up to the Buyer. The Requisitions Date shall be fifteen (15) days before the closing date.”

[32] As indicated above, the closing time in the agreement was 6:00 p.m. Notice was required to be given in writing.

[33] Sixty days from March 1 was April 30, 2019. On April 29, 2019 at 4:11 p.m., Saul advised Naftali’s agent, Mr. Namen, by email that the purchaser would be extending the closing date for an additional 60 days. That email stated: “Please advise seller that we will be extending the clsong (sic) by additional 60 days as agreed on the amendment attached. Our lawyer will adbise (sic) sellers (sic) lawyer what information we will need prior to closing. Please confirm”.

[34] Mr. Thomas swore in his affidavit that on or about April 29, 2019, he “received a notice” from Mr. Namen. No notice in writing was provided to the vendor or his agent until an email was sent on April 30, 2019 at 9:04 p.m.

[35] In the meantime, on April 30, 2019 at 6:18 p.m., the vendor’s lawyer wrote to the purchaser’s lawyer advising that the transaction was scheduled to close by no later than 6:00 p.m. on April 30. The vendor’s lawyer also advised that 252 was ready, willing, and able to close but the purchaser failed to complete the transaction. The vendor accepted the repudiation and considered the APS to be at an end.

[36] On May 1, 2019, the purchaser’s lawyer responded that the agreement was alive and the closing would occur on July 2, 2019, in accordance with the 60-day extension.

[37] The purchaser takes the position that notice that he was exercising his option to extend the closing date was not required, but that if it was required, it was appropriately given. He takes the position that Saul gave notice advising Mr. Namen of his intention to extend. The purchaser also takes the position that the vendor was not ready, willing, and able to close on April 30, 2019. Since he was not ready, willing, and able to close, he cannot rely on time being of the essence: AgriMarine Holdings Inc. v. Akvatech AS, 2018 ONSC 7768, 90 B.L.R. (5th) 129, at para. 87.

[38] The vendor, relying upon High Tower Homes Corporation v. Stevens, 2014 ONCA 911, 123 O.R. (3d) 81, takes the position that written notice was required and was not validly given, as no notice was provided by 6:00 p.m. as required under the APS. 252 further argues that the purchaser had not taken steps to ready itself for purchase by April 30, 2019. Therefore, the vendor was entitled to, and did, treat the agreement as at an end.

[39] Mr. Jain deposed that he had no trust in dealing with the purchaser as of early April 2019, but that he had his lawyers prepare for the closing. He did not believe the purchaser would be ready or able to close, and he wanted to be in a position to honour the APS. The evidence in cross-examination on whether 252 was ready, willing, and able to close was unclear. Mr. Jain acknowledged that he had not instructed 252’s lawyers to prepare for closing on April 30, but did produce documentation prepared by its lawyers in anticipation of the closing. Those documents did not contain a purchase price. 252 made no efforts to tender on April 30, 2019, and Mr. Jain acknowledged on cross-examination that his lawyers did not send the purchasers any closing documents. He conceded that the purchasers could not have closed because they did not receive documents.

[40] I find that notice was required to be given to the vendor or his agent, not the purchaser’s own agent, and that the vendor did not have to guess whether the purchaser was exercising or had exercised its option to extend the closing: 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., 1993 CarswellOnt 5327 (C.A.) at para. 1. Notice had to be in writing in accordance with the terms of the APS. The only notice in writing that the purchaser was extending the closing date was an email sent on April 30, 2019 at 9:04 p.m.

[41] The APS required the closing to be completed by 6:00 p.m. The purchaser states that the vendor cannot rely on time being of the essence, as he was not ready, willing, and able to close that day. Therefore, the written notice that was provided after 9:00 p.m. suffices.

[42] I find that neither party did much to prepare for closing before April 30. Although there is evidence that the vendor’s counsel prepared some documentation, none of it was requested by, or sent to, the purchaser’s counsel. I accept that the vendor had concluded that the purchaser did not intend to close that day. But the vendor had to show himself ready, willing, and able to close, and I find he did not do so. Indeed, he conceded that the purchaser could not close because he did not provide the purchasers with any closing documents.

[43] I conclude that the vendor was not ready, willing, and able to close and therefore cannot rely on the time is of the essence clause: Silverberg v. 1054384 Ontario Ltd. (2008), 77 R.P.R. (4th) 102 (Ont. S.C.), at para. 104, aff’d 2009 ONCA 698, 266 O.A.C. 216. The purchaser validly extended the closing date by the written notice provided at 9:04 p.m. on April 30, 2019.

[44] In the event my first conclusion is in error, I will consider whether in the alternative the parties, by their conduct, revived the APS after April 30, 2019.

iii) Third, did the parties revive the APS by their conduct?

[45] The purchaser takes the position that if notice was required and not validly delivered, the vendor treated the contract as existing after the April 30, 2019 closing date.

[46] Activity continued in May 2019, as is evidenced by correspondence between the two agents. On May 17, 2021, Mr. Namen forwarded to Mr. Thomas TRCA forms for the vendor’s signature. On May 21, 2019, Mr. Thomas advised Mr. Namen that he had spoken to Mr. Jain and that the vendor’s planner was working with TRCA so that the purchaser did not need to submit a duplicate TRCA application. The email went on to say, “please ask the purchaser to close the deal and The seller will introduce the buyer to the planner. I am forwarding few other reports along with this”. Two days later, Mr. Thomas provided signed forms regarding TRCA and the Bank of Montreal to Mr. Namen, who forwarded them to the purchaser. The APS had contemplated the purchaser taking over the vendor’s Bank of Montreal mortgage on closing, at the purchaser’s option, if the bank agreed.

[47] Mr. Jain attempted to disavow Mr. Thomas’s actions and first denied speaking to Mr. Thomas after April 30, 2019. He denied having signed the Bank of Montreal document and suggested that Mr. Thomas had sent it without his permission. However, he acknowledged on cross-examination that on May 20, 2019, he forwarded to Mr. Thomas a summary of a planning meeting with respect to the property held a few days earlier. He stated that he forwarded that email to Mr. Thomas by mistake. Yet on May 21, 2019, Mr. Jain forwarded another email to Mr. Thomas containing TRCA’s comments from March 4, 2019 about the property. Mr. Thomas had no other dealings with Mr. Jain; Mr. Thomas was working for 252 solely in respect of the sale at issue in these proceedings.

[48] I find that 252 continued to treat the APS as alive during this time. I find that Mr. Jain was in contact with Mr. Thomas about the sale. I reject Mr. Jain’s evidence that he was not in contact with Mr. Thomas during this period, that he “accidentally” sent the emails to Mr. Thomas, and that he did not authorize or sign the Bank of Montreal document that Mr. Thomas forwarded to Mr. Namen. That evidence is contrary to the documentary evidence and to common sense. Mr. Thomas, who was 252’s agent, sent an email to the purchaser’s agent, as set out above, that said, “please ask the purchaser to close the deal and The seller will introduce the buyer to the planner.” It was not suggested to Mr. Thomas that he sent these emails without authorization, and I reject any suggestion that he did so. He was acting as 252’s agent when he sent these documents.

iv) Fourth, would the closing date have been June 28, 2019, and not July 2, 2019, since June 29 was a Saturday?

[49] Because 60 days from April 30, 2019 fell on Saturday, June 29, 2019, the first business day following the 60-day notice period was July 2, 2019. The vendor takes the position that the purchaser had to be ready, willing, and able to close the property on Friday, June 28, 2019. Because the purchaser was not, the APS is at an end.

[50] The purchaser takes the position that it did not have to be, but was, ready, willing, and able to close the transaction on July 2, 2019, the first business day after the closing date. This is consistent with how time is calculated under the Legislation Act, 2006, S.O. 2006, c. 21, Sched. F, s. 89(1). On July 2, 2019, the purchaser’s counsel wrote to the vendor’s counsel advising that the purchaser was ready, willing, and able to close that day, but was not tendering based on the vendor’s advice that he was refusing to close.

[51] The vendor acknowledged that real estate transactions cannot close in Ontario on Saturdays. It cited no authority for the proposition that therefore the purchaser had to be ready, willing, and able to close the day before. I do not accept this argument, which I find was raised after the fact to justify the vendor’s position. On June 24, 2019, the vendor advised that it considered the agreement to be at an end and would not be closing. That was its position whether the closing date was June 28 or July 2, 2019. It never advised the purchaser that the closing would have to occur on June 28, 2019. I do not accept that the closing should have occurred on June 28, 2019 and not July 2, 2019.

v) Fifth, was the plaintiff in breach of the agreement by not delivering a second deposit when it was due?

[52] On June 24, 2019, the vendor’s lawyer wrote to the purchaser’s lawyer and took the position that the purchaser had breached the APS by failing to deliver the second deposit. The vendor took the position that a second deposit of $400,000 was owing. The purchaser takes the position that no further deposit was owing. The purchaser’s argument is that the March 1, 2019 APS amended the previous agreement and deleted the deposit requirement.

[53] In the September APS, the purchaser agreed to pay a second deposit in the amount of $750,000 two business days after waiving all conditions. The December 2017 amendment to the APS provided that the second deposit would be $400,000 instead of $700,000. The purchaser takes the position that the deletion of paragraph 5 in the March 1, 2019 APS deleted the requirement for the second deposit. In the March 1, 2019 APS, there were no conditions in favour of the purchaser left to be waived, so there was nothing tying a remaining deposit to conditions.

[54] All parties agree that the drafting left much to be desired. However, the vendor clearly and candidly agreed on cross-examination that even if he was correct that a second deposit was owing, it could have been paid at any time, even after the date on which his lawyers sent the letters saying the contract had been repudiated by the purchaser for not providing the deposit. He acknowledged on cross-examination that not receiving the deposit by June 24, 2019 was not a valid reason for him not to close the transaction.

[55] I therefore find that the fact that the vendor had not received a $400,000 deposit by the time the June 24 and June 25, 2019 letters were written did not constitute a repudiation of the contract by the purchaser.

vi) Sixth, had the vendor received the new commission agreement contemplated by the amended APS?

[56] The June 24, 2019 letter from the vendor’s counsel also took the position that the purchaser had breached the APS by failing to provide a new commission agreement signed between the purchaser and the cooperating brokerage.

[57] In the original APS, the listing brokerage was to pay fees to the cooperating brokerage. The cooperating brokerage was originally identified as Kingsway, Mr. Namen’s then-brokerage. The March 1, 2019 amendment provided, verbatim, the following:

The Seller agrees and warrants that on the Closing Date of this agreement will pay the Listing Brokerage a Commission as agreed upon between the Seller and the Listing Brokerage/Agent. The Buyer agrees and warrants to take over and pays the commission of the Co-op Buyer/Brokerage on the Closing Date of this agreement. Further this amendment shall be conditional upon the Seller to receive before the Requisitions Date from the Co-op Buyer/Brokerage a new Commission agreement signed between the Buyer and the Co-op Buyer/Brokerage (the “New Commission agreement”) to replace the current and existing commission agreement between the Seller and the Co-op Buyer/Brokerage. Failing to provide such New Commission Agreement shall be the end and this amendment shall be null and void. This clause only could be waved (sic) at the sellers (sic) own discretion.

[58] Around the time of signing the March amendment, Mr. Namen moved from Kingsway to IPRO. He testified that Kingsway was sold to IPRO and that he remained working in the same office and in the same building after the sale.

[59] On March 4, 2019, Mr. Namen provided Mr. Jain and Mr. Thomas with the cooperating brokerage commission agreement he signed with the purchaser on March 1, 2019 in accordance with the amendment. In cross-examination, Mr. Jain acknowledged that he had received the new commission agreement on March 4, 2019 and again on June 12, 2019.

[60] The vendor argues that there is no evidence that the vendor received notice that Mr. Namen had changed brokerages, and that the new commission agreement contemplated in the March amendment had to be with Kingsway. Because the vendor’s obligations to Kingsway would not necessarily be extinguished by the new commission agreement, the purchaser had not fulfilled this obligation. This was a condition precedent to closing.

[61] I do not accept this argument. The only evidence before the court is that Kingsway had been sold to IPRO. Further, the vendor had received the new commission agreement within days of the signing of the March 1, 2019 and the APS requiring it, and again in June 2019. Yet, the first time the vendor raised this as an issue was on June 24, 2019, when the vendor wished to state that the deal was at an end. The commission requirement was for the purchaser to provide a new commission agreement with the cooperating broker, not with Kingsway specifically. The purchaser fulfilled this requirement.

[62] I therefore find that there was a valid APS with a closing date of July 2, 2019.

Issue Two: Did 252 anticipatorily breach the APS on June 24/25, 2019? Did the purchaser have to be ready, willing, and able to close on July 2, 2019? If so, was the purchaser ready, willing, and able to close the transaction?

[63] As set out above, counsel for the vendor sent two letters to counsel for the purchaser, one on June 24, 2019 and one on June 25, 2019. Those letters reiterated the vendor’s position that there had been no valid extension of the March 1 APS on April 30, 2019, a position I have rejected. The vendor also took the position that because the purchaser repudiated the APS and the vendor accepted the repudiation, the vendor had no obligation to tender. The purchaser takes the position that this constitutes an anticipatory breach by the vendor. I agree.

[64] The vendor relied on the failure to provide the Kingsway commission agreement, the $400,000 deposit, and the lack of agreement on useable acreage in support of its position that the agreement had come to an end. I have rejected these arguments for the reasons set out above.

[65] Mr. Jain testified that the reason he changed his mind about the closing and had his counsel send the letter on June 24, 2019 was because he had asked the purchaser for proof of funds, and they had not provided it. This was not a legally legitimate reason to take the position that the deal was at an end. On June 24 and 25, 2019, the vendor clearly advised that it did not intend to be bound by the contract. This would deprive the purchaser of the entire benefit of the contract, and I find that it constitutes an anticipatory repudiation: Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576, 389 D.L.R. (4th) 671, at paras. 42, 43, 48, and 51.

[66] When the purchasers received the letter, they put the vendor on notice that the purchaser reserved all rights under the agreement, including the right to sue for specific performance.

[67] The vendor argues that the purchaser was not ready, willing, and able to close on July 2, 2019, putting the agreement at an end. Mr. Frymer, Mr. Shcolyar’s lawyer, testified that he had funds available from Mr. Shcolyar to close the transaction, but that they were not specifically earmarked for the transaction. Rather, he had funds on hand from his client, Mr. Shcolyar, that he could allocate as necessary. He had been instructed to make financing arrangements to close the purchase of the property in the form of a mortgage loan from one of Mr. Shcolyar’s corporations to Naftali in trust for a corporation to be incorporated. He had no mortgage loan commitment and insufficient information to advance the proceeds and register a mortgage. He had sufficient funds to cover the loan, but it would be a misnomer to say the funds were committed to this purpose.

[68] Mr. Frymer’s evidence was that the funds were ready and available in his firm’s trust account by June 20, 2019, and they continued to be available in the trust account on July 2, 2019. Funds continued to be available at least until the time he swore his affidavit on November 18, 2022. Mr. Shcolyar’s evidence was that funds were available in Mr. Frymer’s account prior to June 27, 2019 and “would have been available on July 2, 2019 had the Seller not anticipatorily breached the APS”.

[69] The purchaser takes the position that given the vendor’s unequivocal repudiation by its June 24 and June 25, 2019 letters, the purchaser did not need to be ready, willing, and able to close on July 2, even though it was in fact ready, willing, and able to do so: Mondino v. Mondino, [2004] O.T.C. 259 (S.C.), at paras. 36-37. The vendor takes the position that the purchaser, since it had communicated that it did not accept the repudiation, had to be ready, willing, and able to close on July 2, and it was not: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, 438 D.L.R. (4th) 566, at paras. 21, 23, and 26.

[70] I conclude that the purchaser had to be ready, willing, and able to close but did not have to tender in circumstances where the vendor had indicated it had no intention of closing the transaction: The Rosseau Group Inc. v. 2528061 Ontario Inc., 2023 ONCA 814, 169 O.R. (3d) 192, at paras. 40-42. Tendering is a manner in which a party can demonstrate it is ready, willing, and able to close a transaction, but is not a necessary precondition to a court finding the party ready, willing, and able: Silverberg, at para. 102.

[71] I find that the purchaser was ready, willing, and able to close the transaction. The funds were available to close the transaction. Mr. Shcolyar’s lawyer had been instructed to prepare the financing documents, although once the purchaser was advised the vendor did not intend to close, the documents were not prepared. The purchaser was sufficiently ready, given that they were one side of a transaction that the vendor had no intention of closing and had provided no documentation to facilitate the closing, to close on July 2, 2019.

Issue Three: Is the purchaser entitled to specific performance?

[72] The purchaser claims he is entitled to specific performance because the property is unique, the terms of the APS were unique, and damages would not be an adequate remedy. The vendor disputes each of these claims, arguing that the purchaser was purchasing a fungible investment property, that the property was being used as a means to shelter funds from being exigible in litigation, and that there is no evidence in support of the contention that the property or the contract was unique, or that damages would be insufficient.

[73] The purchaser acknowledges that whether specific performance is to be awarded is a question rooted firmly in the individual facts of a case. The factors to consider include the nature of the property involved, the related question of the inadequacy of damages as a remedy, and the behaviour of the parties, having regard to the equitable nature of the remedy: Matthew Brady Self Storage Corporation v. InStorage Limited Partnership, 2014 ONCA 858, 125 O.R. (3d) 121, at para. 32. I will consider whether the property is unique, whether the circumstances of the transaction are unique, whether damages are inadequate, and whether the behaviour of the parties bears on the availability of the remedy in this case.

i) The property was not unique

[74] In assessing whether a property is unique, courts will consider such things as the physical attributes of the property, the purchaser’s interests, and the circumstances of the underlying transaction: Lucas v. 1858793 Ontario Inc. (Howard Park), 2021 ONCA 52, 25 R.P.R. (6th) 177, at para. 73. A property does not have to be a singular property to be unique, but it has to have qualities that make it particularly suitable to the plaintiff’s purposes and are difficult to replicate elsewhere: John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001), 56 O.R. (3d) 341 (S.C.), at para. 60, aff’d (2003), 63 O.R. (3d) 304 (C.A.).

[75] In their affidavit evidence, the witnesses for the purchaser each asserted that the property is unique. Naftali, Saul, and Mr. Shcolyar each swore: “The Property fits the investment criteria I require and is unique because of its size, location, and other criteria.”

[76] Their evidence belies this assertion. Naftali’s evidence under cross-examination was that when he and his father discussed getting into the real estate business, they had “no idea” what type of property they wanted to purchase. They simply wanted to get into the field and were not looking for specific types of property. They had no budget, and prior to entering into this APS, they did not tell their real estate agents what they were looking for.

[77] They also swore in identical terms that their intention was always to develop and re-zone the property and sell it as individual lots. Their interest was for the plaintiff to learn about land development. Saul wanted to help Naftali get started; he wanted to make money and help Naftali make money. Saul approached Mr. Golan, who had experience in purchasing and developing properties, to see if he was interested in co-investing with Naftali. Mr. Golan suggested they contact Mr Shcolyar. Saul testified that the group’s intention was to purchase the property, develop it, and sell it off as individual lots. Although the plaintiff’s witnesses differed on how far they would develop the property before trying to re-sell it, they were consistent in their evidence that the plan was to engage in some development.

[78] The vendor argues that Naftali cannot argue the property is unique since he was buying the property in trust for a corporation. I do not accept this argument. The transfer between Naftali and the corporation could have happened at any time. Naftali was one of three directors of the corporation. The evidence demonstrates that his interest in the land was the same as that of the corporation.

[79] The vendor argues that the purchaser intended to purchase the property and flip it. It also theorizes that, as a result of a judgment against Saul in unrelated litigation, Saul needed somewhere to “park his money” so that it would not be exigible. Therefore, the theory goes, Saul fronted the deposit funds to Naftali, who had no experience in or interest in land development. This explains why Saul was the person involved in the negotiations. Since the property was just meant to be a vehicle to shield or invest Saul’s funds, the plaintiff does not meet the test for specific performance.

[80] There is no evidence to support either of these theories. There is no evidence on which to find that the litigation against Saul had anything to do with the advancement of funds for this property. While Saul and Naftali’s evidence in respect of where the purchase price came from was vague and to some degree inconsistent, there is simply no evidence that Saul provided the funds and certainly no evidence that Saul was attempting to shield his funds from execution for judgment in another action.

[81] I accept that the purchasers intended to purchase the property and develop it to some degree.

[82] I do not accept Mr. Shcolyar’s evidence that the property is unique because it is well-suited for future development and requires zoning approval. He purported to offer this “opinion” based on his experience in developing properties around the Greater Toronto Area and correspondence he received in August 2019 from Adam Layton, who he described as “his planner”. Neither Mr. Shcolyar nor Mr. Layton was qualified to provide expert testimony. Mr. Layton’s evidence is also hearsay and was not admitted for the truth of its contents. I place no weight on it. Mr. Shcolyar testified that he relies on technical experts to consult and explain attributes of properties. No such evidence was available in this case.

[83] Nor do I accept Mr. Thomas’s evidence that the property is unique. His evidence in this regard is a statement in his affidavit sworn November 29, 2022 that “there are no similar properties for sale in the area that are listed on MLS, or, to my knowledge, are available for sale.” This does not establish that there were no comparable properties in 2017, 2018, or 2019. Nor does it establish that he tried to find comparable properties. He gave some evidence in cross-examination that nothing was available at the time of the original APS but did not provide any specific evidence of searches he undertook, the parameters or duration of any such search, or people he contacted. Indeed, he was not retained by the purchaser to search; he was the vendor’s listing agent, so there would have been no reason to perform such a search at the relevant time. Nor is there any explanation of what a comparable property would be given that the purchasers acknowledged they were not seeking any specific type of property but were open to opportunities.

[84] I find that the plaintiff has not established that the property is unique on either a subjective or objective basis. I find that it was a potential investment property for the plaintiff, and that it had no attributes that were particularly important or attractive to the purchaser. Courts have been reluctant to order specific performance for investment properties since financial damages can generally compensate for any loss: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 38-44; 2144688 Ontario Ltd. v. 1482241 Ontario Ltd., 2016 ONSC 1475, 69 R.P.R. (5th) 334, at para. 33.

ii) The circumstances of the transaction were not unique

[85] The purchaser relies on the proposition that where a contract is unusual and there is a special character to the transaction itself, it becomes very difficult to assess loss because substitute performance is not available: Matthew Brady, at paras. 36, 39, citing Robert J. Sharpe, Injunctions and Specific Performance, looseleaf (Toronto: Canada Law Book, 2012). The purchaser argues that the structure of the transaction is unique.

[86] There is simply no evidence before the court to support this conclusion. The purchaser relies on an affidavit of Mr. Shcolyar, a real estate developer, which states the following:

Mr. Sharvit [a real estate agent] advised Saul that this was a unique opportunity because the seller owned a 45- acre piece of property but had agreed to calculate the selling price based on the number of acres that were available for development, which was then understood to be 31 acres.

[87] Saul, the father of the plaintiff and the person with day-to-day management of this negotiation, does not recount this conversation. Mr. Sharvit provided no affidavit. I put no weight on Mr. Shcolyar’s double or triple hearsay evidence. Indeed, Mr. Shcolyar does not indicate how he came to know about this alleged conversation between Saul and Mr. Sharvit.

[88] Saul’s affidavit does not purport to rely on information from Mr. Sharvit. Rather, he deposes as follows:

Additionally, the Property is unique because under the APS, as amended by the Third Amendment, the Group is acquiring more land than what is being paid for at the time of purchase and, if the Property is re-zoned and more land becomes available, the Group pays for the newly available land at the time the same becomes available, but do not have to pay for the potentially re-zonable land at the time of the purchase.

[89] Naftali’s and Mr. Shcolyar’s affidavits contain paragraphs identical to this one.

[90] Saul and Naftali both testified they had never been engaged in this type of project before. They are, with respect, in no position to advise whether this is a unique contract. Mr. Shcolyar provides no support for his statement. He does not, for example, indicate that he has been involved in similar projects and has never seen a clause like this. It is simply a bald statement identical in language to that used by Saul and Naftali. Mr. Shcolyar certainly did not behave like a person who was pursuing a unique opportunity. He had very little interest in the transaction or the proceeding. He could not recall very much about the deal, including whether he was brought into the deal before or after the original APS was executed, whether the corporation of which he was a director and shareholder was ever assigned the APS, whether he was a party to the APS, or when the close to $3 million he had advanced the lawyer for closing the deal was returned to him. He could not recall whether Saul or Naftali was a co-director or shareholder of 260. He did not agree with the characterization in Naftali’s affidavit that Naftali had delegated the day-to-day negotiations of the APS to him. Yet in his own affidavit, he swore that he was involved in the day-to-day negotiations of the APS. His bald statement in his affidavit is insufficient to establish the uniqueness of the contract and is belied by the rest of his evidence.

[91] Thus, subjectively, the plaintiff has not demonstrated a particular attachment to the property. Objectively, there is a dearth of evidence to support the plaintiff’s contention that the property or contract was unique, and I find he has not demonstrated that either is unique.

[92] The purchaser has not established that the circumstances of the transaction are unique.

iii) Damages are adequate

[93] The purchaser claims damages would be inadequate not only because the property and the contract are unique, but also, in effect, because he would be unable to realise upon any judgment granting him damages.

[94] The vendor acknowledges that the land at issue in this case is its only asset. The land is the subject of another lawsuit in which a damages award is pending: Rosseau. In that case, 252 was found to have breached an APS. The Court of Appeal upheld the trial judge’s finding that the vendor had breached the agreement but held that the damages had been calculated erroneously. The Court of Appeal sent the matter back for a hearing on damages, to be assessed by measuring the difference between the purchase price and the market value of the lands on the date set for closing.

[95] The purchaser argues that it would be unable to collect any damages once the vendor pays the damages owing to Rosseau in the other action. The difficulty with the purchaser’s argument is that there is no evidence before the court of the current value of the land, the current equity in the land, or the likely amount of the damages that will be ordered in the Rosseau case. Therefore, there is no evidence on which the court could base a conclusion that damages are not an adequate remedy in this case.

[96] The purchaser also claims that damages cannot be calculated because the purchase price depends on how much land would become useable three years after the closing of the APS. Again, there is no evidence before the court to suggest that damages on a contract such as the one at issue here are impossible to calculate.

[97] I find that the plaintiff has not demonstrated that damages are an inadequate remedy. I find that damages would be adequate.

iv) The behaviour of the parties does not favour specific performance

[98] The purchaser argues that the vendor acted in bad faith in repudiating the APS and that, given that specific performance is an equitable remedy, the court should consider this bad faith behaviour and order specific performance.

[99] I agree that the court may review the parties’ behaviour in weighing the equities at play: Paterson Veterinary Professional Corp v. Stilton Corp, 2019 ONCA 746, 438 D.L.R. (4th) 374, at para. 31; Matthew Brady, at para. 32. Bad faith on the part of the vendor may support an order for specific performance: 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, 80 C.L.R. (4th) 297, at para. 170.

[100] In this case, considering the behaviour of both parties, I do not find that the equities favour specific performance. While I have found that the agreement continued to exist with a closing date of July 2, 2024, I do not find that the vendor acted in bad faith. The vendor candidly testified that he had lost faith in the purchaser. While that did not entitle him to get out of the contract, his concern about the purchaser’s intention was not entirely unfounded.

[101] The purchaser did not treat the deal as though it was terribly important to him or as though he was particularly concerned about the transaction. None of those involved on behalf of the plaintiff took any steps toward closing prior to the April 30 deadline. They waited until past the eleventh hour to extend the closing date. They had sparse communication with the vendor. A transaction involves two parties. The purchaser was cavalier and did not display much interest in the property. He took the minimum steps required to keep the deal alive.

[102] I have commented on Mr. Shcolyar’s lack of interest above. I note that Naftali, the plaintiff and named purchaser, could not answer questions about how he and the other two directors of the corporation to which the APS or the property would be assigned were going to fund the purchase price or allocate the purchase price among the three of them. He could not advise whether the APS was ever assigned to the corporation. He did not display much more than a passing interest in the transaction. He had driven by the property once or twice.

[103] That is, there was not such a great gulf between the parties’ actions that the vendor’s repudiation of the agreement amounted to bad faith. Both behaved at various times as though they were hedging their bets. This is not a case in which I would find it just to exercise the equitable jurisdiction of the court to order specific performance.

[104] I therefore dismiss the purchaser’s claim for specific performance. As noted above, the purchaser has not sought damages, and has conceded that if his claim for specific performance fails, his action must be dismissed.

The Counterclaim

[105] As set out above, 252 states that Naftali’s failure to pay the further deposit of $400,000 was a breach of the APS that constituted a repudiation of the agreement. The repudiatory breach damaged 252 by causing the loss of $400,000 in deposits that, although unpaid, should have been forfeited to 252 following the purchaser’s repudiation. 252 claims that sum as damages for breach of contract. 252 also pled that Naftali, by his repudiation of the APS, caused 252 to suffer damages, including the loss of the purchase price, as well as additional expenses and carrying costs relating to the land.

[106] I have found that 252, not Naftali, breached the APS. Mr. Jain acknowledged that the $400,000 deposit was not owing at the time 252 sent the letter advising the agreement was at an end. Given my finding that 252 breached the contract, no damages are owing to it and the counterclaim is dismissed.

The mortgage action

[107] The purchaser is also a mortgagee in respect of the property. It seeks repayment of its mortgage with pre- and post-judgment interest at 12 percent, calculated monthly. The defendant acknowledges that it owes the principal amount of the mortgage. The dispute between the parties is two-fold: What is the principal amount owing? Is interest owing on the principal amount?

i) What is the principal amount owing?

[108] The December 2017 amendment set up the terms of the funds that were to be provided to the vendor and secured by a mortgage. The purchaser was to provide a direction to the vendor’s lawyers to release the $250,000 deposit they were holding in trust under the September APS and to advance a further $350,000, all of which would comprise the loan from the purchaser to the vendor. The vendor was to provide a promissory note and mortgage security in the face amount of $600,000. The term of that mortgage was to be six months, at the end of which it would become due and payable. There was to be no interest payable during the term.

The December amendment to the APS provided that, “The Legal Fees of the Borrower in respect of the Mortgage shall be deducted from the Mortgage Advance and paid by the Seller’s Lawyer directly to the Borrower’s Lawyer acting on the Mortgage, which fees are currently estimated not to exceed $5,000.”

[109] The parties agree that the actual amount advanced by the lender to the borrower was $589,607.51. The lender’s lawyer deducted the difference, just over $10,000, in legal fees from the $600,000.

[110] As noted, the December amendment states that the borrower’s legal fees are to be deducted from the mortgage advance. While noting no opinion evidence was adduced to show that the standard clause in such a contract is that the lender’s, not the borrower’s, fees are to be deducted, the borrower does not dispute that this was the parties’ intention and that this is a “drafting issue”. It argues that the contract would have to be rectified in order to permit the lender’s, not the borrower’s fees, to be deducted.

[111] The mortgage document itself clearly states that the principal amount is $600,000. That is the document governing the payment obligation. If the borrower were of the view that $600,000 was an incorrect amount of the principal owed, it would need to take such action as it deemed appropriate. It has not done so here, instead relying on the text of the December amendment.

[112] Given the mortgage document itself, I find that the December amendment has no bearing on the amount owing. However, if it did have any effect, I would order rectification of that document to state that the lender’s, not the borrower’s, fees were to be deducted from the amount advanced. Rectification is available where a document incorrectly expresses the parties’ true agreement and has been erroneously transcribed. The premise underlying this remedy is that it would be unfair to hold a person to be bound by a transaction they never agreed to: Canada (Attorney General) v. Collins Family Trust, 2022 SCC 26, 471 D.L.R. (4th) 1, at para. 42; Canada (Attorney General) v. Fairmont Hotels Inc, 2016 SCC 56, [2016] 2 S.C.R. 720, at paras. 12, 13. It is not available where a party seeks a different agreement; it is meant for a situation where there is an error in recording the agreement entered into. That is, “rectification aligns the instrument with what the parties agreed to do, and not what, with the benefit of hindsight, they should have agreed to do”: Fairmont Hotels, at para. 19.

[113] In order for the court to rectify on the basis of a common mistake, the moving party must show, on a balance of probabilities, that there was a prior agreement with ascertainable and definite terms; that the agreement was still in effect at the time the instrument was executed; that the instrument fails to accurately record the agreement; and the instrument, if rectified, would carry out the prior agreement: Fairmont Hotels, at para. 38; Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at paras. 37-41.

[114] I am satisfied that the requirements for rectification have been met. The borrower testified that it understood the lender’s fees would be deducted from the advanced funds; his complaint is that he expected the fees to be closer to $5,000 than over $10,000. The mortgage term indicated that at that time, the fees were estimated not to exceed $5,000, but it was clear that was a present estimate subject to change.

[115] I find the principal amount owing under the mortgage is $600,000.

ii) Is there interest owing on the principal amount?

[116] The mortgage was negotiated at the time of the December 2017 amendment to the APS. At that time, it was contemplated that the latest closing date would be May 1, 2018. The amended APS provided that the term for the mortgage would be six months, at the end of which the mortgage would become due and payable. There would be “no interest payable for the Term”.

[117] The resulting mortgage was registered on January 12, 2018, and contains the following relevant terms:

a. The Balance Due Date is 2018/07/10. b. There is no interest rate set out in the “Provisions” section; it reads “Interest Rate XXX”. c. In the section of the mortgage titled “Additional Provisions”, the following is stated: “The Charge is open for pre-payment at any time without notice or bonus. In the event the Chargee purchases the Property from the Chargor the entire amount of the Principal shall be applied towards the purchase price of the Property. The Interest Rate of the Charge shall be 0% until the Balance Due Date on July 10, 2017. Beginning July 10, 2017 the Interest Rate of the Charge shall be 12% calculated monthly, not in advance, until the payment of the Charge in full.”

[118] The parties acknowledge that the additional provisions were presumably drafted by the plaintiff’s lawyer, that the dates set out in the interest provision should bear the balance due date of July 10, 2018, not 2017, and that 252 did not pay any interest between the date of the registration of the mortgage and the balance due date.

[119] The plaintiff claims that he is entitled to interest calculated at a rate of 12 per cent from the maturity date of July 10, 2018. The defendant claims that the provision for interest in the mortgage offends s. 8 of the Interest Act, R.S.C., 1985, c. I-15, and is unenforceable.

[120] Section 8 provides as follows:

8 (1) No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears. (2) Nothing in this section has the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate payable on principal money not in arrears

[121] The substance, not the form, of an impugned clause is what determines whether it violates s. 8. The court is to consider how the impugned term operates and the consequences it produces, not the labels used. If the effect is to impose a higher rate on arrears than on money not in arears, s. 8 will be offended. If the rate increases only by virtue of the passage of time, unrelated to arrears, it will not run afoul of s. 8: Krayzel Corp. v. Equitable Trust Co., 2016 SCC 18, [2016] 1 S.C.R. 273, at para. 25; Alleghe Mortgage Fund Ltd. v. 1988758 Ontario Inc., 2021 ONSC 4887, 157 O.R. (3d) 432 (Div. Ct.).

[122] The plaintiff argues that the provision in the charge in the case at bar had the effect of increasing the mortgage rate on the last date of the mortgage, before the funds were due, so s. 8 is not offended. If the rate increased on July 11, 2018, he concedes the provision would run afoul of s. 8.

[123] The plaintiff acknowledges that this argument requires the court to find that if the vendor had paid the balance of the mortgage on the balance due date, it would have owed one day of interest calculated at 12 per cent.

[124] The plaintiff relies on Patrician Land Corp. Ltd. v. Dillingham Construction Ltd., 1985 ABCA 91, 65 A.R. 220. In that case, the court considered a clause that provided: “Interest shall accrue at the rate of FOURTEEN (14%) Per Cent after maturity and after default.” There, as here, maturity and default coincided.

[125] Stevenson J.A. (as he then was) posed the following question, at para. 7: “Should we read this instrument as if it provided for a nil rate of interest before maturity, and the stipulated rate after maturity, thus offending the Act?” The court answered that question by concluding that the parties had not contracted for a nil interest rate; rather, the transaction contained unspecified provisions for interest. The court reasoned that it was “inconceivable” that in entering into the transaction, the parties did not factor in cost in arriving at its terms: at para. 8. Therefore, the court was unable to conclude that the impugned provision had the effect of increasing the interest component. It found that the clause consequently did not come within the “literal prohibition” of s. 8. In reaching this interpretation, the court stated, “the judicial implementation of an interest free loan gives me considerable pause”: at para. 9. It concluded that it would not read a nil interest rate provision into the mortgage to bring it within s. 8.

[126] The Supreme Court in Krayzel explained that the court in Dillingham reached its conclusion because on the facts before them. Stevenson J.A. found that the effect of the clause was not to impose a higher charge on arrears than that which was imposed on the principal not in arrears.

[127] The difficulty with the plaintiff’s reliance on Dillingham is that the clause in the current case specifically provides that there would be zero per cent interest payable until the balance due date. Such a clause does not have to be read in as was the case in Dillingham; in this case, it is there in black and white.

[128] Indeed, the plaintiff does not expressly argue that the court should be loath to impose a zero percent interest rate. He concedes the court would have to do so if the 12 per cent interest rate was only triggered on July 11, 2018. Rather, he argues that the face of the provision indicates the new interest rate was triggered on, not after, the balance due date, and so did not depend on any arrears being due and owing. Dillingham does not assist with this argument.

[129] The defendant relies on Walia v. 2155982 Ontario Inc., 2020 ONCA 493, 448 D.L.R. (4th) 125. There, the Court of Appeal upheld a motion judge’s finding that a specific provision was invalid, as it violated s. 8. The lender argued before the motion judge and the appeal court that the provision increased the rate only by virtue of the passage of time, not default, and therefore was permissible under s. 8. The impugned provision in that case stated: “The mortgage will become due and payable at the end of the term, failing which or in default of any payment interest rate of interest will be 21% per annum.” The lender argued that the phrase “or in default of any payment” should be struck out and the remaining provision found to be in conformity with s. 8. The motion judge determined that the provision would still violate s. 8 because the increased rate would only be triggered by either non-payment of a monthly payment or non-payment of the principal on the due date. It was not solely the passage of time that triggered the increase. The Court of Appeal agreed. The term plainly provided that the increase was triggered by nonpayment.

[130] The exercise a court undertakes under s. 8 is not one of interpreting whether a provision had an underlying legitimate commercial purpose, which would lead to commercial uncertainty and the arbitrary application of s. 8. Section 8 has a purely results-oriented focus: Krayzel, at para. 32.

[131] In this case, on July 10, 2018, one of three things may have occurred: 1) the balance could have been paid in full; 2) the purchasers would have purchased the property, and the amount of the mortgage would have been credited toward the purchase price; or 3) the mortgage would have come due and not be paid.

[132] I find that in the first two instances, no interest would have been payable. I do not accept the plaintiff’s argument that 12 percent interest would have been payable for the single day of July 10, 2018. I find that the last day of the term was July 10, 2018 and no interest was payable during the term, including its last day. This is consistent with the decision in Walia. The 12 per cent interest rate is only triggered if the mortgage is not repaid on its due date. This distinguishes the case from Alleghe, where the higher interest rate was triggered by the passage of time at the end of the sixth month of the term if the mortgagors did not renew or discharge the mortgage before the final month of the term. In this case, the higher rate is triggered not by the passage of time, but by failure to repay the principal. Interest would start to accrue the next day. Therefore, the provision offends s. 8 of the Interest Act and is invalid.

Disposition

[133] The plaintiff’s claim for specific performance in court file CV-19-00625286-0000 is dismissed. The defendant’s counterclaim is dismissed. The plaintiff is granted judgment in court file number CV-20-00643109-0000 in the amount of $600,000. The CPL on the property shall be discharged.

[134] The parties are encouraged to agree on costs of the trial. Should they be unable to do so, the defendant may provide costs submissions of no more than 5 pages double spaced, along with a costs outline and any offers to settle, within 14 days. The plaintiff shall have 14 days to respond, with the same page limits. There shall be no reply submissions without leave. These submissions may be sent to my judicial assistant at linda.bunoza@ontario.ca.

L. Brownstone J. Released: April 25, 2024