Reasons for Judgment

Introduction

[1] The plaintiffs were the owners of property located at 2587 Taunton Road, Bowmanville, Ontario (“the Property”). The plaintiffs entered into an Agreement of Purchase and Sale (“the Taunton APS”) to sell the Property to the defendant FRP Inc. The action has been discontinued against Defendant Kelly Greenway Bruce who were solicitors for plaintiffs. I will therefore refer to FRP Inc. as “the defendant”.

[2] The Taunton APS was not completed. The plaintiffs allege that the defendant breached the Taunton APS. The defendant takes the position that the Taunton APS expired because conditions had not been fulfilled or waived.

[3] Both parties move for summary judgment, the plaintiffs are seeking damages for the breach of the Taunton APS and the defendant is seeking the return of the deposit. The parties agree that this is an appropriate case to be decided by a motion for summary judgment and I am satisfied that it is a proper case to do so.

Facts

[4] The evidence in this case consists of three affidavits, one by Bertus Nieuwenhuis on behalf of the plaintiffs, one by Harvey Ambrose and another by Tonino Peticca on behalf of the defendants. None of the three deponents were cross-examined.

[5] In June 2017, Ambrose contacted the plaintiffs and inquired if they were interested in selling the Property. The plaintiffs advised Ambrose that they would consider selling the Property depending on the purchase price. Ambrose prepared and submitted a Letter of Intent to the plaintiffs. The Letter of Intent specified a purchase price of $3,000,000, and a provision for the plaintiffs to continue to reside at the Property for two years after the completion of the sale. The plaintiffs agreed to sell the Property to the defendant.

[6] Because the defendant had not retained legal counsel, it was agreed that the plaintiffs’ lawyer would prepare the Taunton APS, based on the Letter of Intent. After the Taunton APS was prepared, the parties discussed the terms of the Taunton APS and some minor changes were made. The parties met at the offices of the plaintiffs’ lawyer on August 23, 2017 and executed the Taunton APS.

[7] The Taunton APS provided for a purchase price of $3,000,000 with a deposit of $175,000 payable to the plaintiffs’ solicitors. The Taunton APS was scheduled to close on September 29, 2017.

[8] The Taunton APS was conditional, for three banking days, on the approval of its terms by the plaintiffs’ solicitor (“the Approval Condition”). The Approval Condition was included for the benefit of the plaintiffs and could be waived by them. The Approval Condition stated that unless notice was given that the condition had been fulfilled, the Taunton APS would be null and void. No notice of the fulfillment of this condition was given nor was notice of waiver given.

[9] The Taunton APS was also conditional on the plaintiffs and the defendant entering into a lease agreement pursuant to the Residential Tenancies Act entitling the plaintiffs to the exclusive use, occupation and enjoyment of the residence located on the Property for a period of two years following closing (“the Lease Condition”). No lease was prepared or signed, and the Lease Condition was never waived. The Taunton APS was not conditional on the defendant obtaining financing to purchase the Property.

[10] The Nieuwenhuis affidavit states that it was important for the plaintiffs to be allowed to reside at the Property for two years after closing to ensure a smooth transition to their new residential property. The plaintiffs state that Ambrose was agreeable to the Lease Condition so the plaintiffs could assist with the landfill site. Ambrose stated in his affidavit that it was important to the defendant that the terms of the lease be negotiated because the Property “was strewn with derelict vehicles and machinery and the barn was full of junk” and the plaintiffs had to develop a plan to clean up the Property.

[11] The Taunton APS contained the following provision entitled “Time Limits”:

Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein may be extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically authorized in that regard.

[12] Pursuant to an Agreement of Purchase and Sale dated August 8, 2017, the plaintiffs agreed to purchase a residential property in Bancroft, Ontario (“the Bancroft APS”). The completion date of the Bancroft APS was October 20, 2017. The Bancroft APS was conditional until August 31, 2017 on the plaintiffs selling the Property.

[13] On September 17, 2017, the parties agreed to extend the closing of the Taunton APS to October 6, 2017. At the time of extending the completion date of the Taunton APS, the plaintiffs advised Ambrose that they had entered into the Bancroft APS, with a closing date of October 20, 2017. The plaintiffs advised Ambrose that they required the funds from the sale of the Property to complete the Bancroft APS. Ambrose assured the plaintiffs that any costs incurred by the plaintiffs would be reimbursed and they would not be “out of pocket”.

[14] On October 3, 2017, the defendant retained counsel to represent it in connection with the Taunton APS. In an email dated October 3, 2017, the solicitor for the defendant suggested to the plaintiffs’ solicitor that the plaintiffs agree to a vendor take back mortgage (“VTB”). The plaintiffs’ solicitor responded the following day declining the suggestion of a VTB. By way of an email dated October 5, 2017, the solicitor for the plaintiffs asked the solicitor for the defendant how long an extension of the closing would be reasonable to allow the defendant to arrange financing, and the defendant’s solicitor responded the same day suggesting a 30-to-60-day extension. The defendant’s solicitor also mentioned that the Taunton APS was conditional on a residential lease being signed and that some time would be required to negotiate the terms of the lease “satisfactory to both [parties]”.

[15] The Taunton APS did not close on October 6, 2017. Neither party tendered.

[16] Subsequent to October 6, 2017, the parties continued to communicate on a regular basis. Ambrose assured the plaintiffs that they had nothing to worry about and he would reimburse the plaintiffs any money they were out of pocket during the hiatus period.

[17] On October 6, 2017, the plaintiffs’ lawyer wrote to the defendant’s lawyer indicating he had been advised that the parties had agreed to extend the closing to October 13. On the same day the defendant’s solicitor sent an email to the plaintiffs’ solicitor advising that he did not have “a copy of the Notice of Fulfillment of Condition or Waiver for the seller’s lawyer’s review of the Agreement”. He also said that if a Fulfillment or Waiver had not been done “we need to deal with that”.

[18] On October 11, the plaintiffs’ lawyer sent an email to the defendant’s lawyer advising he understood that the parties had agreed to extend the closing to October 16. The defendant’s lawyer’s response included an inquiry: “Is there actually a live agreement between these guys?”.

[19] No amendment to the Taunton APS extending the closing date to October 13 or 16 was signed.

[20] On October 23, the defendant’s solicitor wrote to the plaintiffs’ solicitor with some suggestions for terms that would allow the transaction to continue. He also suggested that if terms could not be agreed upon, they could accept that an impasse had been reached and the deposit returned to the defendant. The plaintiffs’ solicitor answered this email on October 25 and stated that he would review the email with the plaintiffs and “advise”.

[21] Between November 2017 and September 2018, the parties met occasionally to discuss the sale of the Property. In early September 2018, the defendant requested the return of the deposit. Emails were exchanged between the lawyers about whether the deposit would continue to be held in trust by the plaintiffs’ solicitor, sent to the defendant’s solicitor to be held in trust or paid into court. No agreement was reached.

[22] A new Agreement of Purchase and Sale was prepared dated September 13, 2018 (“the Second APS”). The plaintiffs state the Second APS was prepared by the defendant’s solicitor whereas the defendant states that it was prepared by the plaintiffs’ solicitor and forwarded to the defendant’s lawyer. There are several minor differences between the version of the Second APS contained in the plaintiffs’ Motion Record and the version contained in the defendant’s Responding Motion Record. I suspect that the explanation for the differences in the wording of the Second APS is because both solicitors had a hand in drafting it. In any event, nothing turns on the differences in wording because the Second APS was never executed.

[23] On September 17, 2020, the plaintiffs entered into an Agreement of Purchase and Sale to sell the Property to a third party for $1,300,000. The transaction closed on November 6, 2020.

Liability

[24] The following facts are not in dispute:

a) the Taunton APS was a binding agreement after it was signed by the parties;

b) the Taunton APS was not conditional upon the defendant arranging financing;

c) the Taunton APS contained the Approval Condition;

d) if the Approval Condition was not fulfilled the Taunton APS would be null and void and the deposit would be returned to the defendant;

e) the Approval Condition was for the plaintiffs’ benefit and could be waived by them;

f) notice of fulfillment or waiver of the Approval Condition was never given;

g) the Taunton APS contained the Lease Condition;

h) no form of lease was ever prepared or executed;

i) the Lease Condition was never waived;

j) the Taunton APS was originally scheduled to close on September 29, 2017;

k) the completion date of the Taunton APS was extended to October 6, 2017;

l) the Taunton APS was not completed on October 6, 2017;

m) there was some discussion about extending the closing date of the Taunton APS to October 13 or 16, 2017 but no written agreement to extend the closing date was executed; and

n) neither party tendered on October 6, 2017.

[25] It is the position of the plaintiffs that the defendant breached the Taunton APS by failing to close on October 6, 2017. The plaintiffs say the reason for the defendant failing to close the transaction was its inability to obtain financing. The Taunton APS was not conditional on the defendant obtaining financing.

[26] It is the defendant’s position that the Taunton APS was subject to two conditions, neither of which were ever fulfilled or waived. The extended completion date, October 6, 2017, passed with neither party tendering. Therefore, the Taunton APS became null and void. The parties continued to negotiate for the sale of the Property but no agreement was ever reached and neither party attempted to re-instate the Taunton APS by making time of the essence.

[27] A solicitor’s review condition similar to the Approval Condition was the subject of the decision in Bell v. Bisaillon, [2025] O.J. No. 2976. In that case, notice that the condition had been fulfilled or waived was not given by the date specified in the agreement of purchase and sale. However, it was held that the condition had been waived by the conduct of the vendor.

[28] In my view the Approval Condition could only be waived by the plaintiffs. The Approval Condition stated that it was included for the benefit of the plaintiffs and could be waived by them. Although there was no formal written waiver of the Approval Condition given, it was implicitly given when the parties agreed on September 17 to extend the closing to October 6, 2017. The date of the amendment is more than three banking days after the Taunton APS was signed. It would make no sense for the plaintiffs to sign an amendment to the Taunton APS to extend the closing date when it was null and void. I conclude that the amendment was signed because the plaintiffs’ solicitor had approved the terms of the Taunton APS even though no Notice of Fulfillment or Waiver had been given. Conversely, it would not make sense for the defendant to sign the amendment if it assumed that the Taunton APS was null and void because the plaintiffs had not given notice that the Approval Condition had been satisfied or waived.

[29] I have concluded that the Lease Condition was important to both parties. It was important to the plaintiffs that they be allowed to continue to reside at the Property for a period of two years from the closing date. The evidence of the defendant is that the Lease Condition was important to it because the plaintiffs needed to develop a plan to clean up the Property. This evidence was not challenged. The Lease Condition was never satisfied.

[30] The date for completion of the Taunton APS was October 6, 2017. On that date, neither party was in a position to close. The plaintiffs had not prepared a deed. The defendant did not have funds to close. Neither party had prepared a draft lease as required by the Lease Condition. Not surprisingly, neither party tendered. From the exchange of emails between the solicitors it appears that there was some discussion about extending the closing date to October 13, or 16 but there was no written agreement extending the closing date to a date after October 6.

[31] In King v. Urban & Country Transport Ltd., [1973] O.J. No. 2181, the Court of Appeal stated that when neither party is ready, willing and able to complete the transaction on the closing date, and neither party tenders, the contract is not at an end (para. 20). When both parties let the closing date pass without attempting to complete the transaction, and one party wishes to reinstate time as of the essence, it is necessary to serve notice to the other party, fixing a new date for closing, which must be reasonable (King para. 25). That did not happen in this case. The parties continued to discuss and negotiate terms that would allow the Taunton APS to move forward but neither party ever gave notice that time of the essence was being reinstated and a new date for closing set. As a result, the Taunton APS came to an end.

[32] In Domicile Developments Inc. v. MacTavish, [1999] O.J. No. 1998, the Court of Appeal relied on King, in a case where the purchaser was in breach of the agreement of purchase and sale but the vendor was not ready, willing and able to close on the scheduled date, and failed to tender. The vendor did not give notice to the purchaser that time of the essence was being reinstated when it was in a position to close. It was held that the vendor was not entitled to damages against the purchaser who had clearly stated his intention not to complete the transaction. At paragraph 13, the Court stated:

[Vendor] did not give [purchaser] reasonable notice of a new closing date. Instead it unilaterally ended the agreement by selling to a third party and seeking damages from [purchaser]. Because it did not reinstate time of the essence by setting a new closing date, [vendor] was not entitled to end its agreement with [purchaser]. Therefore, in failing to give [purchaser] an opportunity to close the transaction after [the original closing date], [vendor] itself breached the agreement. Because of [vendor]'s breach, [purchaser] could no longer be held liable.

[33] The recent case of Malka v. Racz, 2022 ONSC 1362, [2022] O.J. No. 994 is factually similar to the present case. In that case neither party was ready, willing and able to complete the transaction on the closing date and neither party tendered. Also, neither party took steps to restore time of the essence. It was held that neither party was entitled to enforce the agreement (para. 72). At paragraph 74, Perrell, J. stated:

In circumstances in which there has been mutual breaches of the agreement of purchase and sale and neither party is in a position to close on the date fixed for closing with time of the essence, and neither party restores time of the essence, the agreement is treated as abandoned and the purchaser is entitled to a return of the deposit. This law is the law applicable to the circumstances of the immediate case.

[34] The above passage from Malka is equally applicable to the present situation.

[35] I therefore conclude that the Taunton APS was abandoned and became null and void. The plaintiffs are not entitled to damages because the defendant did not breach the contract. The defendant is entitled to the return of its deposit.

Damages

[36] Although I have concluded that the defendant did not breach the Taunton APS, I will address the damages claimed by the plaintiffs.

[37] The defendant made no submissions, written or oral about the plaintiffs’ claim for damages.

[38] The general principle relating to the assessment of the damages in a failed real estate transaction is that the vendor is entitled to be put in the position it would have been in if the contract had been performed, so far as money can do it and that the normal measure of such damages is the contract price less the market price of the land (100 Main Street Ltd. v. W.B. Sullivan Construction Ltd., [1978] O.J. No. 3448 at para 53 (Ont. CA)).

[39] There is no evidence as to the market value of the Property as at October 6, 2017. There is evidence that the defendant submitted the Second APS in September 2018 with a purchase price of $2,300,000. The plaintiffs did not accept the Second APS but it does show that the defendant thought the Property had decreased in value by $700,000. The Property was eventually sold in September 2020 for $1,300,000. The plaintiffs rely on this as being the market value of the Property and therefore their damages on the resale of the property amount to $1,700,000.

[40] There is very little evidence about what occurred between October 6, 2017 and September 2020 other than the parties continued to negotiate until September 2018 when the Second APS presented but was never executed. There is no evidence about what, if any, steps the plaintiffs took between September 2018 and the ultimate sale of the Property in September 2020. The plaintiffs rely on the case of Bang v. Sebastion, [2018] O.J. No. 5388 as support for their position that the measure of damages arising out of a failed real estate transaction in a falling market is the difference in price between the original sale price and the ultimate re-sale price. However, in Bang the vendor re-listed the property for sale the day following the date for the closing of the original sale, there were several open houses, and the purchase price was gradually reduced as interested buyers failed to materialize. On the facts it was held that the re-sale price was the appropriate measure of damages. In the present case there is a complete absence of evidence about the efforts made by the plaintiffs to market and sell the Property after September, 2018.

[41] I therefore fix the plaintiffs’ loss on the re-sale of the Property at $700,000 being the difference between the sale price in the Taunton APS and proposed sale price in the Second APS.

[42] There was no evidence presented about the expenses incurred by the plaintiffs in maintaining the Property following the extended closing date in the Taunton APS. The plaintiffs rely on assurances made to them by Ambrose that they would not be “out of pocket” if the Taunton APS failed to close. Based on this assurance, the plaintiffs claim damages related to the purchase of the Bancroft property.

[43] I do not find that the assurance by Ambrose that the plaintiffs would not be “out of pocket” to be a legal guarantee that the defendant would make good any losses suffered by the plaintiffs arising out of a decision to complete the Bancroft APS notwithstanding the failure to close the Taunton APS.

[44] I therefore conclude that the plaintiffs’ damages are limited to $700,000 if I had found the defendant breached the Taunton APS.

Conclusion

[45] The plaintiffs’ motion for summary judgment is dismissed. Accordingly, the defendant is entitled to the return of the deposit. There will be judgment directing the payment of the deposit of $175,000 plus any accrued interest to the defendant.

Costs

[46] The parties are encouraged to resolve the issue of costs.

[47] If the parties are unable to agree on costs, they may make written submissions. Written submissions are to be limited to three pages exclusive of a Bill of Costs, Costs Outline and any relevant Offers to Settle and are to be filed electronically on Case Centre and delivered electronically to my attention to mona.goodwin@ontario.ca and Kitchener.SCJJA@ontario.ca. The defendant’s submissions are to be submitted within 20 days of the release of these Reasons. The plaintiffs’ submissions are to be submitted within 40 days of the release of these Reasons. If written submissions are not submitted within 45 days of the release of these Reasons, it will be assumed that the issue of costs has been resolved and the file will be closed.

G.E. Taylor

Released: July 22, 2025