Court File and Parties

COURT FILE NO.: CV-22-00000966-0000 DATE: 2024-06-21 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ivy Zeena Correa and Alwin Correa, Plaintiffs AND: Valstar Homes (Oakville Sixth Line) Inc., Defendant

BEFORE: Kurz J.

COUNSEL: Paul Starkman, Counsel for Plaintiffs William Chalmers, Counsel for Defendant

HEARD: May 14 and 24, 2024

Endorsement

Introduction

[1] The Plaintiffs (the “Purchasers”) move for summary judgment on their claim for damages of $113,000 against the Defendant (“Valstar”). For its part, Valstar has not moved but argues that it too is entitled to summary judgment but the order it is seeking would dismiss this action.

[2] On February 16, 2020, the Purchasers entered into an Agreement of Purchase and Sale with Valstar dated February 16, 2020 (the “APS”) to purchase a newly built home, located at 3403 Post Road, Oakville, Ontario (the “Property”).

[3] The APS set a closing date of “no later than 5:00 p.m. on the 27 day of January, 2021, or any extension or acceleration thereof pursuant to the provisions of this Agreement”. The APS added that “[t]his date may be amended by mutual agreement and/or extended by the Vendor pursuant to Schedule ‘A’”. It also set out other times for certain steps to be taken, as set out below.

[4] Critically, the APS included a “time is of the essence” clause.

[5] On December 2, 2020, Valstar extended the closing date to April 20, 2021. But on that day the Purchasers ran into trouble securing the funds needed for closing. Through counsel, they requested a one-day extension of the closing date. That request was refused by Valstar, which invoked the “time is of the essence” term of the APS.

[6] Ultimately, the Purchasers managed to obtain alternate private financing and to deposit the money required to close into their solicitor’s bank account. He wired those funds to Valstar’s solicitor at 4:52 p.m. but they did not arrive until 5:09 p.m.

[7] The following day, on April 21, 2021, Valstar took the position that the Purchasers had breached the “time is of the essence” term by failing to close on time and that the APS was at an end. Valstar’s counsel said that he would wire back the closing funds he had received.

[8] Later on April 21, 2021, the day after the aborted closing, Valstar offered to “revive” the APS if the Purchasers paid it an added $100,000 plus $13,000 HST. Its solicitor justified the increased price by claiming that the value of the Property had increased “in the neighbourhood of $600,000.00” since the APS had been signed. The Purchasers agreed and closed the transaction. While they now say that they did so “under protest”, the letter from their counsel accepting Valstar’s offer made no reference to a protest.

[9] On May 17, 2022, the Purchasers issued their statement of claim in this action.

Brief Summary of My Decision

[10] For the reasons that follow, I find that there is no genuine issue requiring a trial for the reasons articulated by Valstar, as set out below. Thus, I dismiss the Plaintiff’s motion, grant summary judgment to Valstar and dismiss this action.

Background Facts

[11] The Plaintiffs are spouses. Valstar is a residential home builder and developer.

[12] On February 16, 2020, the parties entered into the APS for the purchase of the Property. Relevant terms of the APS include:

Section 2(a):

the “Closing Date” or “Date of Closing” or “Closing” means no later than 5:00 p.m. on the 27 day of January, 2021, or any extension or acceleration thereof pursuant to the provisions of the Agreement. This date may be amended by mutual agreement and/or extended by the Vendor pursuant to Schedule “A”;

Section 7(w):

the Purchaser agrees to complete this purchase transaction with the Vendor's solicitors no later than 2:00 p.m. on the Closing Date and after 2:00 p.m. the Purchaser shall pay to the Vendor a further sum equal to interest on the balance due on Closing for one day at the Prime Rate or the Canadian Imperial Bank of Commerce as of the Closing Date plus 1.5%. The Statement of Adjustments will provide for the additional days interest and the Purchaser shall pay same on closing. In the event that the transaction closes by 2:00 p.m. the Vendor shall return said interest within a reasonable time post-closing.

Section 21:

This offer, when accepted, shall constitute a binding agreement of purchase and sale. It is agreed and understood that there is no representation warranty, collateral term or condition affecting this Agreement or the Property, or for which the Vendor or the owner of the Lands (or the Agent or any sales representative) can be held responsible in any way, whether they be contained in any sales material, brochure, or alleged against the Agent or any sales representative or agent, other than as expressed herein in writing.

Section 24(a):

In the event that the Purchaser defaults on any of his obligations contained in this Agreement prior to Closing then the Vendor, in addition to any other rights or remedies this Agreement provides, may, at its sole option, unilaterally suspend all of the Purchaser's rights, benefits, and privileges contained herein (including without limitation, the right to make colour and finish selection with respect to the Property as hereinbefore provided or contemplated), and/or unilaterally declare this Agreement to be terminated and of no further force or effect, whereupon all deposit monies theretofore paid, together with all monies paid for Extras or changes to the Property, shall be retained by the Vendor as its liquidated damages and not as a penalty, in addition and without prejudice to any other rights or remedies available to the Vendor at law or in equity. In the event of the termination of this Agreement for any reason or event which is hereinbefore expressly provided or contemplated, then the Purchaser shall be obliged, if applicable, to forthwith vacate the Property, and shall execute such releases and any other documents or assurances as the Vendor may require, in order to confirm that the Purchaser, in accordance with the terms of this Agreement, does not have (nor could be deemed or construed to have) any interest whatsoever in the Property, the Lands and/or this Agreement, and in the event the Purchaser fails or refuses to execute same, the Purchaser hereby appoints the Vendor to be his lawful attorney in order to execute such releases, documents and assurances in the Purchaser's name, place and stead, and in accordance with the provisions of The Powers of Attorney Act and/or the Substitute Decisions Act, as amended, the Purchaser hereby declares that this power of attorney may be exercised by the Vendor during any subsequent legal incapacity on the part of the Purchaser.

Section 25:

Time shall be of the essence of this Agreement in all respects, and any waiver, extension, abridgement or other modification of any time provisions shall not be effective unless made in writing and signed by the parties hereto or by their respective solicitors who are hereby expressly authorized in that regard.

Section 33:

ELECTRONIC REGISTRATION – The closing of the transaction will be completed by electronic registration pursuant to Part III of the Land Registration Reform Act, R.S.O., 1990, Chapter L4 and the Electronic Registration Act, S.O. 1991, Chapter 44, and any amendments thereto. The Vendor and Purchaser irrevocably instruct the said lawyers to be bound by the document registration agreement which is recommended from time to time by the Law Society of Upper Canada (as amended to take into account the provisions of this Agreement). The following terms and conditions shall form part of this Agreement:

(b) The Purchaser shall direct his/her solicitor to execute an agreement as reasonably required by the Vendor’s Solicitor (the “Solicitor Agreement”) establishing the procedure for completion of this Agreement including the Vendor providing its closing documents posted on wsw.convey.ca;

(c) The Purchase and Vendor acknowledge that the delivery of documents and/or money may not occur contemporaneously with the registration of the Transfer/Deed of Land and may be delivered in escrow pursuant to the Solicitor’s Agreement;

(f) Payment of the Purchase Price shall be made by the Purchaser as follows:

(i) By certified cheque or bank draft delivered to the Vendor’s Solicitor no later than 4:45 p.m. on the closing Date subject to the adjustments hereinafter provided or contemplated.

(ii) In the event that the said balance of the Purchase Price is paid by the Purchaser’s Solicitor to the Vendor’s solicitor by “wire transfer” to the Vendor’s Solicitor’s trust account pursuant to the Large Value Transfer System said monies are only paid when they are recorded as received by the Vendor’s Solicitor’s bank and deposited to the Vendor’s Solicitor’s trust account. This must occur no later than 4:45 p.m. on the Closing Date to allow for sufficient time for the transaction to close.

(iii) In the event that the Vendors Solicitors, at its sole discretion, agrees that the balance of the Purchase Price can be paid by “Direct Deposit” to the Vendor’s Solicitors trust account it shall be done in accordance with the Vendor’s Solicitors required procedures which similarly must be completed no later than 4:45 p.m. on the date of closing to allow sufficient time for the transaction to close.

Section 34(c):

The Purchaser shall provide the Vendor and/or the Vendor's Solicitor, that's [sic] within 30 days following receipt of the acceptance of this Agreement, with written confirmation from the Purchaser's lender that the Purchaser has received mortgage approval for the purchase of the Property.

Section 34(d):

In the event that the Purchaser fails to submit the information, evidence and/or documents for approval within the time periods as hereinbefore set forth, and as often as the Vendor or the Vendor's solicitors shall require, or if the information, evidence and/or documentation submitted pursuant to the provisions of this Agreement or any amendment thereto is, in whole or in part, false or misleading, or if the Purchaser fails to disclose any relevant facts pertaining to his financial circumstances or abilities, then the Purchaser shall be deemed to be in default under this Agreement, and the default provisions of this Agreement shall apply. [1]

[13] As set out above, the original closing date was January 27, 2021 at 5:00 p.m. On October 19, 2020, a representative of Valstar wrote to the Purchasers, informing them that Valstar would not be able to close the transaction on the First Tentative Closing Date set out in the APS. The letter set a “Second Tentative Closing Date” of March 3, 2021. On December 2, 2020, a representative of Valstar wrote to the Purchasers, setting a “Firm Closing Date” of April 20, 2021.

[14] There is no dispute that the APS entitled Valstar to unilaterally change those closing dates.

[15] On the Firm Closing Date, April 20, 2021, the Purchasers were having difficulty completing their financing. At 10:29 a.m. that morning, the Purchasers’ solicitor wrote [2] to Valstar’s solicitor, stating that his client’s appraiser was onsite of the Property and being denied entry. At 11:25 a.m. [3], Valstar’s solicitor’s clerk responded that Valstar was unaware of any appraiser being denied entry to the Property. She reiterated the application of the “time is of the essence” term, writing:

Please be advised that this transaction must close by 5:00 today. Today is the closing date. We have standing instructions that our client will not agree to any extensions. Also note the additional charge if closing funds are not received by 2:00.

[16] At 11:51 a.m., the Purchasers’ solicitor wrote that he was looking into the issue of the appraiser’s alleged entry-denial. Without formally requesting an extension of the date to close, he raised the issue of whether an extension would be available and if so, what fees would be charged. He added that his client intended to close that day.

[17] At 12:22 p.m., Valstar’s solicitor replied that his client had “confirmed that an extension to the closing date will not be granted under any circumstances”.

[18] At 2:01 p.m., the Purchasers’ solicitor wrote to Valstar’s solicitor “to officially request an extension of this transaction”. He wrote: “we do not believe that our lender, TD, will be in a position to fund today as a result of the delay in obtaining an appraisal.” He explained the Purchasers’ circumstances, having contracted to sell their home the following week. A failure to close would leave them “effectively homeless”. He nonetheless stated that he believed that the Purchasers would be able to close that day.

[19] The Vendor’s solicitor responded at 2:34 p.m. and again at 2:36 p.m. to the effect that consent to an extension was not his call and that he was awaiting instructions. Then at 2:39 p.m. he sent the Purchasers’ solicitors a “tender letter”, adding that “[w]e are here until 5:00.”

[20] At 2:53 p.m., the Purchasers’ solicitor wrote to express his view of the unreasonableness of a refusal to grant an extension in light of the Purchasers’ circumstances. He asked that Valstar reconsider. At 3:04 p.m., Valstar’s solicitor replied that his client’s instructions remain unchanged.

[21] The Purchasers arranged for alternate private financing when their bank did not approve the mortgage because it lacked a property appraisal. The evidence before me fails to explain why the bank’s appraiser only attended at the Property so close to the time that the transaction was supposed to close.

[22] In any event, the Purchasers secured last-minute alternate financing. At 4:36, the Purchasers’ solicitor wrote to Valstar’s solicitor, stating that:

I have been advised that my client and her broker are depositing private funds into my account. They are in line at the bank. The moment I have those funds in my account, I will wire to you. Is your client agreeable to still close this transaction if funds arrive in your account shortly after 5?

[23] In response, Valstar’s solicitor stated: “I have made the enquiry. The Agreement of Purchase and Sale states ‘no later than 5:00 p.m.’ and those are my current instructions. I don’t expect those instructions to change but I have asked.”

[24] The Purchasers’ solicitor wired the funds to Valstar’s solicitor at 4:52 p.m. However, the funds only arrived at the account of Valstar’s solicitor at 5:09 p.m. At 6:00 p.m., the Purchasers’ solicitor wrote to Valstar’s solicitor, seeking an update or confirmation of an agreement to close, stating:

We wired funds to you prior to 5 pm. You have acknowledged receipt of those funds. We have provided you with all closing documents and we are entirely prepared to close. It is not a question anymore of whether the agreement has been breached. I remind you that your client has an obligation to act in good faith in the course of this transaction. I can tell you, most certainly, that we have acted in good faith and that we have moved heaven and earth today to ensure the completion of this transaction.

Now please, provide me with an update or please acknowledge that you have released the transfer and I will register in the morning. Please also advise if my clients can obtain keys today.

[25] The following morning, Valstar’s solicitor wrote to the Purchasers’ solicitor to say “[t]he Seller's position is unchanged. As the closing funds were not received in our trust account until after 5:00 (5:09 to be exact) their position is as set out in my tender letter. We will wire back the $1,341,409.72 to your office this morning.”

[26] At 1:49 p.m. on April 21, 2021, after further correspondence, Valstar’s solicitor wrote to the Purchasers’ solicitor, making the following proposal:

Our clients position continues to be that your clients are in breach of contract and that they were within their rights to terminate the contract. Time was of the essence. The balance due on closing arrived after 5:00.

Our client is of the view that the subject property could currently be listed for resale in the range of $2.1 million. Your clients purchase price was $1.44 million. The difference is in the neighbourhood of $600,000.00.

On a without prejudice basis, our client is prepared to revive the Agreement of Purchase and Sale and close with your clients upon payment of a revival fee of $100,000.00 plus hst.

If this pre-litigation settlement proposal is of any interest to your clients please advise today, otherwise it is off the table and our clients can litigate the matter.

[27] Later that day, Valstar’s solicitor clarified that it would accept the revival fee in cash or in the form of a six-month vendor takeback mortgage with interest payable at 10% per annum.

[28] The Purchasers accepted Valstar’s offer that day. Their solicitor wrote to Valstar’s solicitor:

My clients have agreed to accept your client's proposal.

I am in funds and will wire it to you shortly. My client has asked me to close this transaction today, if possible, to have keys released to them.

Kindly acknowledge.

[29] The transaction closed the following morning.

Issues

[30] This case raises the following issues:

1. Is this an appropriate case for summary judgment?
2. Was Valstar entitled to treat the APS as terminated at 5:01 p.m. on April 20, 2021?
3. Did Valstar impose an improper penalty in connection with the “revived” APS?
4. Was the “revived” APS entered into by the Purchasers under duress?

Issue No. 1: Is this an appropriate case for summary judgment?

Applicable Authorities Regarding Summary Judgment

[31] This motion is brought under r. 20.01 of the Rules of Civil Procedure. The terms of r. 20.04(2) are mandatory: “[t]he court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence…” [emphasis added]. See also: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 ("Hryniak"), at para. 68 and Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429, 141 O.R. (3d) 81 ("Mega International"), at para. 83.

[32] There will be no genuine issue requiring a trial if the summary judgment process allows the court to reach a fair and just determination on the merits on a motion for summary judgment. That will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to those facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result (see Hryniak, at paras. 49 and 66).

[33] Each party to a motion for summary judgment has an obligation to "...'put its best foot forward' with respect to the existence or non-existence of material issues to be tried" (Ramdial v. Davis (Litigation Guardian of), 2015 ONCA 726, 341 O.A.C. 78, at para. 27, citing Papaschase Indian Band No. 136 v. Canada (A.G.), 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 11).

[34] The onus for proving that there is no genuine issue requiring a trial rests with the moving party. However, in response to the evidence of the moving party, the responding party may not rest on mere allegations or denials in the party's pleadings. That party must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. A self-serving affidavit is not sufficient itself to create a genuine issue requiring a trial in the absence of detailed facts and supporting evidence (see r. 20.02(2) and Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, at para. 31).

[35] In the oft-repeated maxim of Justice Coulter Osborne of the Ontario Court of Appeal, the responding party to a motion for summary judgment must "lead trump or risk losing": 106150 Ontario Ltd. v. Ontario Jockey Club, [1995] O.J. No. 132 (Ont. C.A.), at para. 35. The principle was re affirmed in Ramdial, at para. 28.

[36] The court is entitled to assume that the record before it is complete and that it contains all of the evidence that a party would present if there were a trial: Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada), 2018 ONCA 438, 80 C.C.L.I. (5th) 23 (“Broadgrain Commodities Inc.”), at para. 7, citing Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 111 O.A.C. 201 (C.A.), at para. 17; Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 27, 33-34, aff'd 2014 ONCA 878, leave to appeal to S.C.C. refused, [2015] S.C.C.A. No. 97; and Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 54.

[37] Once the moving party discharges the burden of showing that there is no genuine issue for trial, the onus shifts to the responding party. That party must then provide evidence of specific facts showing that there is a genuine issue requiring a trial: Ramdial, at para. 30. An adverse inference may be drawn from a failure to support the allegations or denials in a party's pleadings: Pearson v. Poulin, 2016 ONSC 3707, at para. 40.

[38] Under r. 20.04(2.1) the court may exercise enhanced powers on the motion in order to determine the presence or absence of a genuine issue requiring a trial, unless it is in the interests of justice to do so at trial. Those enhanced powers allow the court to weigh the evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence. As Paciocco J.A. wrote for the Court of Appeal for Ontario at para. 83 of Mega International, those powers "...are presumptively available to a summary judgment motion judge to use to fairly and justly adjudicate a claim at a motion for summary judgment: Hryniak, at para. 45”.

[39] Nonetheless, the court is not required to resort to those powers to make up for a party's evidentiary shortcomings (see Broadgrain Commodities Inc., at para. 7).

This is an appropriate case for summary judgment

[40] Here, both parties say that this is an appropriate case for summary judgment, albeit for different reasons. The Purchasers say that there is no genuine issue requiring a trial because all of the relevant evidence is already before the court and that if necessary, it can draw the necessary inferences from that evidence. Valstar agrees that this is a proper case for summary judgment in that the same evidence demonstrates that the Purchasers have raised no genuine issue for trial.

[41] I agree with the parties that this is an appropriate case for summary judgment. Further, case law demonstrates that it is open to a motions judge to grant judgment in favour of a party who had not given advance notice of the claim for summary judgment: King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215, 40 R.P.R. (5th) 26, at para. 14; Whalen v. Hillier (2001), 53 O.R. (3d) 550 (C.A.); Gnyś v. Narbutt, 2016 ONSC 2594 (Div. Ct.).

Issue No. 2: Was Valstar entitled to treat the APS as terminated at 5:01 p.m. on April 20, 2021?

[42] The Purchasers argue that Valstar acted in bad faith in refusing to close after receiving the closing funds nine minutes late. Thus the court should not strictly enforce the APS’ “time is of the essence” clause. Valstar responds that it was entirely within its rights to have relied on that clause. Valstar adds that the APS sets out a clear temporal path for a timely closing of the transaction between the parties, which the “time is of the essence” clause implements.

Applicable Authorities Re a “Time is of the Essence” Clause

[43] In 3 Gill Homes Inc. v. 5009796 Ontario Inc. (c.o.b. Kassar Homes), 2024 ONCA 6, at para. 24, the Court of Appeal for Ontario explained the legal meaning of a “time is of the essence” contractual clause as follows:

24 As this court stated in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 31: "A 'time is of the essence' clause is engaged where a time limit is stipulated in a contract. The phrase 'time is of the essence' means that a time limit in an agreement is essential such that breach of the time limit will permit the innocent party to terminate the contract."

[44] The Court of Appeal in 3 Gill Homes upheld two related findings of the application judge below. First, a court could not exercise its residual jurisdiction to relieve against a breach of a “time is of the essence” clause absent “some basis, such as unfair or unjust conduct by the party seeking to enforce the clause” (decision of application judge, referenced at para.14, citing Bowlen v. Digger Excavating (1983) Ltd., 2001 ABCA 214, 97 Alta. L.R. (3d) 41, at para. 24). Referring to Bowlen, the Court of Appeal implied at para. 31 that “some unfair or unjust action on the part of the respondent would have to be apparent on the record” in order to exercise that residual jurisdiction.”

[45] Second, a court has only a limited equitable jurisdiction to rewrite the parties’ bargain regarding time being of the essence. As the application judge wrote:

If the Court were to excuse the default in this case, when would a person in the position of Kassar Homes be permitted to terminate the agreement? One hour after the stipulated time? Two hours? One day? Intervention by the court in the face of contractual language agreed to by capable contracting parties is the beginning of a slippery and precarious slope.

I decline to rewrite the parties' bargain. They could have contractually agreed to a period within which a monetary or other default could have been cured. They did not do so. [Footnote omitted.]

(see: para. 14 of the 3 Gill Homes Court of Appeal decision)

[46] The Court of Appeal found no error in the application judge’s treatment of the “time is of the essence” clause in the agreement between the parties in 3 Gill. It explained at para. 17 that:

17 While the outcome for the respondent was indeed harsh, it was not unconscionable or unfair. The wording of the contract and the warnings provided by the respondent beforehand were clear.

[47] In Deangelis v. Weldan Properties (Haig) Inc., 2017 ONSC 4155, at paras. 35 – 45, Ricchetti J. offered a helpful review of the law as it applies to the enforcement of a “time is of the essence” clause. Among the points made by Ricchetti J. are the following:

1. A party who acts in bad faith cannot rely on a “time is of the essence” clause: paras. 35-36.

2. The Bhasin v. Hrynew, 2014 SCC 71, obligation to act in good faith “does not go so far as to re-write the agreement for the parties. Insisting on compliance with the agreed upon terms of the Agreement is not acting in bad faith”: para. 38.

3. At para. 39, Ricchetti J. adopted this statement regarding the court’s adherence to a “time is of the essence” clause, found in 2260695 Ontario Ltd. v. Invecom Associates Ltd, 2016 ONSC 3327. There, the court found no bad faith in refusing to extend a closing, writing:

   [5] The contract made time of the essence save and except where the parties agreed to a time limit being abridged or extended. Such agreement was to be in writing (clause 14.3). It is generally understood that, when time is made to be of the essence, it means that the limits set are to be strictly adhered to. It is an indication the contract is to be one of specific terms and greater certainty:

   How more clearly could contacting parties make conditions as to the timing of performance essential than by simply saying, time in all respects shall be of the essence of this agreement? In my opinion, the provisions in clauses 21 and 22 of this agreement, drawn as it was by a professional agent of Loblaw and entered into by sophisticated people of business acumen, clearly signaled that any breach of any of the obligations in the agreement calling for performance at a specified time amounted to the breach of an essential element of the contract. That being the case, the law is clear that such breach may be treated by the other party as discharging the agreement and relieving against performance by that other party.

   (1473587 Ontario Inc. v. Jackson, 74 OR (3d) 539, at para. 19)

   and:

   At common law the courts rigidly enforced agreements where time was of the essence.

   (1376273 Ontario Inc. v. Knob Hill Farms Limited, 34 BLR (3d) 95, at para. 89, referring to Coslake v. Till (1826), 1 Russ. 376, 38 E.R. 146).

4. After his review of authorities regarding a “time is of the essence” clause, Ricchetti J. refused to rely on principles of fairness and equity to write an extension of the time to close into the agreement between the parties. In making the decision, Ricchetti J. concluded as follows, at para. 42:

   42 However, in my view, it would be wrong in law to find that insisting on compliance with a term of the agreement, agreed to by both parties with the assistance of counsel, amounts to bad faith depriving a party of the ability to strictly enforce an agreement where time is of the essence. Such a determination would mean that no party could insist on strict compliance of the term of an agreement because to do so would or might amount to bad faith. This would throw the law of contract into chaos by creating uncertainty in the enforcement of contracts.

Undisputed Facts Re the Application of the APS’ “Time is of the Essence” Clause on April 20, 2021

[48] In applying those authorities, to the facts of this case, there is no dispute that:

1. The APS had a “time is of the essence” clause.
2. Despite the fact that the closing funds were wired by the Purchasers’ solicitor at 4:52 p.m. on April 20, 2021, they were not received until 5:09 p.m.
3. Both solicitors understood that the time for closing was by 5:00 p.m. on April 20, 2021. That is why the Purchasers’ counsel requested an extension of the time and/or date for closing a number of times that day and why Valstar consistently took the position that time is of the essence.

Arguments by Counsel Regarding the Clarity of the APS’ Time for Closing

[49] Notwithstanding the uncontested facts above, after reviewing the parties’ evidence and submissions, I wondered whether there may be inconsistencies in the APS regarding the time for closing. I raised that question in light of the fact that Valstar’s December 2, 2020 letter setting the Firm Closing Date on April 20, 2021 offered no time for closing.

[50] Accordingly, I requested that counsel reattend before me to speak to the issue of the clarity of the closing time in the APS and if they wished, file brief supplementary written submissions. During the course of that attendance, I also allowed counsel to provide me with further case references regarding the application of general principles of contractual interpretation to the facts of this case. I have now reviewed all of those written and oral submissions.

[51] Counsel for Valstar pointed to the following provisions of the APS:

1. Para. 2(a) set a Closing Date and time of January 27, 2021 at 5:00 p.m., subject to amendment by the parties or extension by Valstar.
2. Para. 7(w) of the APS actually includes two terms: i. an agreement “to complete this purchase transaction with the Vendor's solicitors no later than 2:00 p.m. on the Closing Date”, and ii. “after 2:00 p.m. the Purchaser shall pay to the Vendor a further sum equal to interest on the balance due on Closing for one day at the Prime Rate or the Canadian Imperial Bank of Commerce as of the Closing Date plus 1.5%”.
3. Para. 33(f) set a 4:45 p.m. time for Valstar to receive the closing funds.

[52] Valstar argues that the various provisions are not contradictory. Rather, they can be read harmoniously by considering two aspects to the closing, the delivery of funds and the actual closing and transfer of title. That would work as follows:

1. Para. 2(a) allowed Valstar to extend the Closing Date, which it did to a Firm Closing Date of April 20, 2021.
2. The closing funds are required to be delivered by 2:00 p.m. on the Closing Date [4] which was April 20, 2021, per para. 7(w).
3. However and also under para. 7(w), if the closing funds are delivered after 2:00 p.m. on the Closing Date, there could still be a closing by 5:00 p.m. but the Purchasers would be required to pay a day’s interest on the closing funds (para. 33(f) contains a mechanism for dealing with that day’s interest);
4. Nonetheless, the closing funds must be received by 4:45 p.m. to, in the words of para. 33(f)(ii) and (iii), “allow for sufficient time for the transaction to close.”
5. But in any event, that closing must take place at 5:00 p.m. on the Closing Date, as both solicitors understood and as set out in their correspondence of April 20, 2021.

[53] Thus, Valstar argues, the absence of a reference to a 5:00 p.m. time for closing in the December 2, 2020 letter extending the Firm Closing Date to April 20, 2021 is irrelevant. The Purchasers were obliged to provide the closing funds by 4:45 on April 20, 2021 per para. 33(f) of the APS. In fact, as set out above, para. 33(f) explains the reason for the 4:45 closing date; i.e. to ensure sufficient time for the funds to be received in order to close the transaction.

[54] In saying this, Valstar relies on the comment of Gillese J.A., writing for the Court of Appeal of Ontario in Maher v. Great Atlantic & Pacific Co. of Canada, 2010 ONCA 415, at para. 43. There, she cited the court’s obligation to attempt to read apparent contractual inconsistencies in a manner that can reasonably give meaning to each provision, stating:

43 The jurisprudence makes it clear that where there are apparent inconsistencies in contractual provisions, the court should attempt to find an interpretation which can reasonably give meaning to each provision. In BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12 at p. 24, La Forest and McLachlin JJ., writing for the majority, stated:

Where there are apparent inconsistencies between different terms of a contract, the court should attempt to find an interpretation which can reasonably give meaning to each of the terms in question. Only if an interpretation giving reasonable consistency to the terms in question cannot be found will the court rule one clause or the other ineffective. In this process, the terms will, if reasonably possible, be reconciled by construing one term as a qualification of the other term. A frequent result of this kind of analysis will be that general terms of a contract will be seen to be qualified by specific terms - or, to put it another way, where there is apparent conflict between a general term and a specific term, the terms may be reconciled by taking the parties to have intended the scope of the general term to not extend to the subject-matter of the specific term. [citations omitted]

[55] For their part, the Purchasers argue that Valstar’s failure to include a closing time in the December 2, 2020 letter means that the “time is of the essence” clause in the APS is inoperative. That is because the actual time is not clearly set out in that letter and the APS sets out various times on the date set for closing, as described above.

[56] In arguing against the strict application of the APS’ “time is of the essence” clause, the Purchasers rely on the decision of the Court of Appeal for Ontario in More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 527 (“More”). In that case, there was a scheduled closing date of October 1, 2020. The agreement did not close because the funds failed to arrive before 5:00 p.m. The funds were delayed by administrative issues in the purchaser’s bank which arose during the pandemic. At 5:11 p.m. the vendor terminated the agreement and returned the purchase price less the deposit. In doing so, it cited a “time is of the essence” clause.

[57] The Court of Appeal upheld the motion judge’s refusal to rely on the “time is of the essence” clause because the agreement between the parties lacked an actual time for closing. The court wrote at para. 21 that “the mere presence of the ‘time is of the essence’ clause is of limited assistance to courts interpreting a contract where the contract is otherwise silent on the deadline to perform the obligations under the contract.”

[58] The Court of Appeal also upheld and relied upon a number of findings by the motion judge, including that:

1. The vendor was not willing to close on October 1, 2011.
2. On the day of closing, the vendor’s solicitor was unresponsive to the purchaser’s solicitor, who would have delivered the funds himself if he were told it was necessary.
3. “[D]uring the pandemic, it was common practice for lawyers to work together to complete the rest of closing steps after the closing of the Teraview System and before midnight on closing day.”

Analysis of the Application of the APS’ “Time is of the Essence” Clause

[59] More is of limited assistance to the Purchasers here. It is a case that was decided on its facts, many of which differ from this one. I agree with counsel for Valstar that the APS here contains a coherent time frame for the provision of funds and closing. Further, Valstar’s solicitor was responsive and actually tendered on the Purchasers’ solicitor on April 20, 2021. Most importantly, both conveyancing solicitors understood that the time for closing was 5:00 p.m., the time at para. 2(a) of the APS (with only the date rescheduled). Further, the late delivery of the funds here was not the fault of a third-party bank’s administrative errors or the pandemic.

[60] I am aware that the Purchasers blame the delay in closing on Valstar; a claim that it strongly denies. The Purchasers claim that Valstar obstructed the appraisal which was a precondition to their obtaining a mortgage from their bank. But there is no credible or even admissible evidence to that effect. The obstruction allegation is found in the April 20, 2021 letter of the Purchasers’ solicitor to Valstar’s solicitor. That letter is attached to affidavit of one of the Purchasers, without the direct evidence of the appraiser. In that form, the letter is double hearsay. It is not admissible evidence regarding the truth of the alleged obstruction: rr. 20.02 (1) and 39.01(4). I note, as stated above, the Purchasers are required to put their “best foot forward” in this motion. Under r. 20.02(1), the court is entitled to draw an adverse inference from the failure of the Purchasers to provide evidence of the person having personal knowledge of the contested facts – i.e., the appraiser.

[61] I add that the Purchasers fail to explain why they were attempting to obtain their mortgage appraisal at so close to closing. They had months between the December 2, 2020 letter of Valstar and the April 21, 2021 Firm Closing Date to arrange their mortgage. Failing to explain that delay, they cannot lay their inability to obtain a last-minute appraisal at the feet of Valstar.

[62] Put another way, they still had not had their financing fully lined up before the 4:45 time for the provision of the funds set out at para. 33(f)(i)(ii) and (iii) of the APS.

[63] In light of all of the above, I accept Valstar’s time frame for the various steps required prior to closing on April 20, 2021. I find that the APS’ “time is of the essence” clause is operative in this case and that the time for closing was no later that 5:00 p.m. on April 20, 2021. Again, that was the understanding of the two conveyancing solicitors that day.

[64] I acknowledge that the Purchasers speak of the unfairness of Valstar’s insistence on the “time is of the essence” clause when we are talking about a tardiness of just a few minutes. But, unlike More, the time for the delivery of funds on the date of closing is set out in a comprehensive manner in the APS. It appears that Valstar was willing to accept the funds up until 5:00 p.m. even though the APS requires the delivery of funds by 4:45 p.m.

[65] I understand that this finding may seem “harsh”, as the Court of Appeal described it in 3 Gil Homes. It was open to Valstar to be more lenient with the Purchasers in light of their circumstances and intent to close on April 20, 2021. But even accepting that to be the case, I cannot find that Valstar acted wrongly by insisting on compliance with a contractual term to which the parties agreed. I see no reason here to rewrite the parties’ bargain.

[66] Thus, I find that the “time is of the essence” clause applies here, that the Purchasers breached it and that the APS was terminated at 5:01 p.m. on April 20, 2021.

Issue No 3: Did Valstar impose an improper Penalty in Connection with the Revived APS?

[67] The Purchasers argue that the $113,000 payment to revive the APS represented Valstar’s imposition of an improper penalty on them. They describe the payment as “extravagant” and “unconscionable” and not a genuine estimate of damages. The Purchasers cite Peachtree II Associates - Dallas L.P. v. 857486 Ontario Ltd. (2005), 76 O.R. (3d) 362 (C.A.), at para. 24, leave to appeal to S.C.C. refused, [2005] S.C.C.A. No. 420. There, Sharpe J.A. summarized the common law doctrine regarding the unenforceability of a penalty clause as follows:

The common law penalty rule involves an assessment of the stipulated remedy clause only at the time the contract is formed. If the stipulated remedy represents a genuine attempt to estimate the damages the innocent party would suffer in the event of a breach, it will be enforced. On the other hand, again to quote Lord Dunedin from [Dunlop Pneumatic Tyre Co. Ltd. v. New Garage & Motor Co. Ltd., [1915] A.C. 79, (H.L.)], at pp. 86-87, "[i]t will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach".

[See also: Assayag-Shneer v. Shneer, 2023 ONCA 14, at para. 37.]

[68] There is a significant problem with the Purchasers’ argument regarding a penalty clause. The term to which they now object, the payment of an added “revival fee” of $100,000 plus HST, was not contained in the APS. Rather, it is found in a new contract into which the parties entered. That new contract effectively revived the terms of the already terminated APS. The new contract included all of the original terms of the APS with two changes: the revival fee of $100,000 plus HST, as well as a new closing date and time. The Purchasers, who were represented by legal counsel, accepted those terms, without objection.

[69] In the circumstances, Valstar was not required to prove damages or a loss of $100,000 in order to justify its revival fee. Rather, it was a payment freely negotiated by the parties, as set out below.

[70] In sum, I do not find that Valstar imposed an improper and unenforceable penalty on the Purchasers.

Issue No 4: Was the Revived APS Entered into by the Purchasers Under Duress?

[71] The test for a finding of economic duress was set out by the Court of Appeal for Ontario in Kawartha Capital Corp. v. 1723766 Ontario Ltd., 2020 ONCA 763, 454 D.L.R. (4th) 553, at para. 11, as follows:

11 For a party to establish economic duress, it must show two things: first, that it was subjected to pressure applied to such an extent that there was no choice but to submit, and second, that the pressure applied was illegitimate. On the first prong of the test, the court considers four factors:

(a) Did the party protest at the time the contract was entered into? (b) Was there an effective alternative course open to the party alleging coercion? (c) Did the party receive independent legal advice? (d) After entering into the contract, did the party take steps to avoid it?

If the party alleging duress satisfies those four factors, it must go on to satisfy the second prong, by showing that the pressure exerted was illegitimate: Techform Products Ltd. v. Wolda (2001), 56 O.R. (3d) 1 (C.A.), at paras. 31-34, leave to appeal refused, [2001] S.C.C.A. No. 603.

[72] The Purchasers argue that Valstar applied illegitimate pressure on them by “threatening them that the APS had been terminated and their $100,000 deposit would be forfeited”. They add that Valstar did that, knowing that they were vulnerable; having sold their own house in a deal scheduled to close the following week. Following the closing of that sale, they would be homeless unless they completed the APS.

[73] Thus, Valstar took advantage of their circumstances to impose illegitimate pressure to accept its onerous revival terms. As a result, they say that the revived APS should be set aside and their $113,000 should be returned to them.

[74] Valstar responds that they were entitled to treat the APS as terminated on April 20, 2021 at 5:01 p.m. due to the Purchasers’ breach of the APS. Regarding the second prong of the test of economic duress, Valstar responds that not all economic pressure constitutes economic duress. It argues that it acted properly in the face of the Purchasers’ breach of the APS. Thus, the Purchasers fail to meet the test in Kawartha Capital.

[75] I agree with Valstar for the reasons that follow.

[76] The Plaintiff, Ivy Zeena Correa, deposes that when she and her husband accepted Valstar’s offer to revive the APS, they did so under protest. However, nothing in the correspondence between the two conveyancing solicitors demonstrates any protest about the new agreement. The only evidence of the alleged “protest” is found in Ms. Correa’s affidavit, sworn more than 2 ½ years after the closing of the “revived” APS. In saying that, I do not deny that the Purchasers objected to Valstar’s position that they breached the APS by delivering their closing funds too late.

[77] The Purchasers say that they had no choice but to accept the offer of a revived APS because they had sold their own home. That deal was scheduled to close the following week. However, they could have refused Valstar’s offer, closed the sale of their home and rented a new home while suing Valstar, if they felt that it acted improperly.

[78] There is no question that the Purchasers received the benefit of independent legal advice as they negotiated the revival of the APS.

[79] After paying the “revival fee”, the Purchasers moved into the Property and did not immediately take steps to void the revived APS. Rather, they sued for damages in this action, over a year later.

[80] Even if I am incorrect and the Purchasers meet the first prong of the test in Kawartha Capital, I do not find that any economic pressure exerted by Valstar on the Purchasers to be illegitimate. The pressure arose from the Purchasers’ own breach of the APS, not any impropriety by Valstar. I have already found that Valstar was entitled to take the position that the APS had been breached and that it was at an end at 5:01 on April 20, 2021. There was no illegitimacy in Valstar relying on its legal rights under the APS.

[81] In sum, the Purchasers have failed to prove sufficient indices of economic duress to set aside the “revived” APS or that there is a genuine issue requiring a trial regarding economic duress.

Conclusion

[82] For the reasons set out above, I find that there is no genuine issue requiring a trial of this action. Thus, I dismiss the Purchasers’ motion for summary judgment but grant summary judgment to Valstar, dismissing this action.

Costs

[83] The parties should attempt to resolve the issue of costs on their own. If they are unable to do so, counsel for Valstar may submit his costs submissions of up to three pages, double-spaced, one-inch margins, plus a bill of costs/costs outline and offers to settle, within 14 days of release of this endorsement. He need not include the authorities upon which he relies so long as they are found in the commonly referenced reporting services (i.e., LexisNexis Quicklaw, or Westlaw) and the relevant paragraph references are included. Counsel for the Purchasers may respond in kind within a further 14 days. No reply submission will be accepted unless I request it. If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and will make no costs order.

Date: June 21, 2024

Footnotes:

[1] Any typographical or syntactic errors in original. [2] All relevant correspondence was by email. [3] Unless stated otherwise, all times cited below were on April 20, 2021. [4] The references in these sub-paragraphs to the Closing Date include the Firm Closing Date.