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Real Property - Breached APS
MORE CASES
Part 2
. The Rosseau Group Inc. v. 2528061 Ontario Inc.
In The Rosseau Group Inc. v. 2528061 Ontario Inc. (Ont CA, 2023) the Court of Appeal consider the typical damage measure for a breached APS, here by the vendor:(i) The Normal Measure of Damages
[62] The normal measure of damages for a failed real estate purchase is the difference between the contract price and the market value of the land on the “assessment date”. The assessment date is usually the date on which the purchase was scheduled to close. Although the court may set a later date if the party seeking damages satisfies certain criteria, the presumption is that damages are to be assessed as of the date of the breach. That presumption is not easily displaced; any deviation from it must be based on legal principle: 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401, 88 D.L.R. (3d) 1 (C.A.), at para. 55, leave to appeal refused (1978) 20 O.R. (2d) 401 (S.C.C.); 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417, 209 D.L.R. (4th) (C.A.), at paras. 41-43; Rougemount Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847, 410 D.L.R. (4th) 509, at para. 50; Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, 161 O.R. (3d) 469, leave to appeal refused, [2022] S.C.C.A. No. 183, at para. 27.
[63] There are several reasons why the normal measure is the presumptive, measure of the innocent party’s damages and is not to be easily displaced.
[64] First, when a purchase contract is performed, the purchaser pays the purchase price on closing and obtains, on the same date, ownership of an asset. Damages are awarded on the principle that the innocent party, as nearly as possible, should be put in the position it would have been in if the contract had been performed. Using, as the measure of damages, the difference between the purchase price and the land’s market value on the closing date puts this principle into effect: 100 Main Street, at paras. 55-56. The market value represents the financial equivalent of the asset itself.
[65] Second, commercial certainty is enhanced by a predictable damages methodology. This court has stated that an early, and predictable, date on which the innocent party’s damages are crystallized promotes efficient behaviour and reduces uncertainty and speculation: Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp. (2004), 2004 CanLII 36051 (ON CA), 246 D.L.R. (4th) 595 (Ont. C.A.), at para. 125, per Laskin J.A. (concurring), leave to appeal refused, [2000] S.C.C.A. No. 658. Although made in the context of a sale of goods, the observation applies equally to the sale of land. . More v. 1362279 Ontario Ltd. (Seiko Homes)
In More v. 1362279 Ontario Ltd. (Seiko Homes) (Ont CA, 2023) the Court of Appeal considers an issue of anticipatory breach in an APS closure:[18] The central issue underlying this appeal is whether the motion judge erred in finding that the appellant was in anticipatory breach of the three APS when it faxed the letter repudiating the transaction just after 5:00 p.m. on October 1. The appellant makes two primary submissions on the appeal.
[19] First, the appellant argues that the motion judge erred in finding that the proper closing time was midnight on October 1, 2020, and therefore, the appellant anticipatorily breached the APS by faxing a letter to Mr. More terminating the transaction shortly after 5:00 p.m. The appellant contends that since the APS contained the “time is of the essence” clause, the timeline for closing was to be strictly enforced and that the respondents repudiated the agreement by failing to deliver the closing funds on the closing day. The appellant also points out that because the Teraview System does not permit transfers to be electronically registered past 5:00 p.m. on any business day, closing funds had to be tendered no later than 5:00 p.m.
[20] I do not accept the appellant’s submission. As to the 5:00 p.m. deadline, the motion judge held that the appellant’s position was contradicted by the DRA Mr. Tomas prepared and delivered to Mr. More, which provided that if the APS was silent on the time of closing, the deadline for “release” of funds from escrow would be 6:00 p.m. on closing day. In any event, the motion judge found that the appellant could not rely on the “time is of the essence” clause since there was no specific time set out in the APS. I see no error in that finding because it is consistent with this court’s observation in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at paras. 31, 35: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.
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[A] “time is of the essence” clause does not serve to impose a time limit but rather dictates the consequences that flow from failing to comply with a time limit stipulated in an agreement. [Emphasis added.] [21] Put differently, 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. This was squarely the situation before the motion judge.
[22] The motion judge also found that the appellant was not entitled to rely on the clause because it was “clearly not willing to close on the agreed date and terminated the transaction prematurely.” In my view, it was open to the motion judge to make those findings and I see no basis for appellate intervention: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, at para. 14, citing Domicile Developments Inc. v. MacTavish (1999) 1999 CanLII 3738 (ON CA), 45 O.R. (3d) 302 (C.A.), at pp. 306-07 (paras. 10-12). In Domicile, this court expressly held that an innocent party must itself be “ready, desirous, prompt and eager” to carry out the agreement in order to take advantage of the “time is of the essence” clause.
[23] Second, the appellant challenges the motion judge’s finding that it acted unreasonably and in bad faith by prematurely cancelling the transaction owing to delays that should have been expected during the pandemic. The motion judge found that although Mr. More had explained the delays and sought an adjustment of the closing date to allow the funds to be delivered to the appellant, the appellant refused to consider that possibility. The motion judge further found that Mr. More was in receipt of the funds and would have personally delivered those funds to Mr. Tomas’ office, if necessary, had Mr. Tomas been responsive to communications. The appellant argues that there is no basis for the motion judge’s finding and highlights that Mr. Tomas continued to monitor his trust account until shortly after midnight going into October 2, and he determined no closing funds had been forwarded by Mr. More.
[24] I see no error in the motion judge’s conclusion that the appellant acted unreasonably and in bad faith. It was open to the motion judge to find, on this record, that purchase transactions would usually be honoured despite minor delays in the delivery of closing funds that the appellant “pounced on” in a “totally unexpected fashion”. The motion judge accepted that during 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.
[25] Nor is it necessary for this court to decide definitively whether, as a matter of law, a purchaser can rely on the fact that their counsel is in receipt of closing funds in order to cure minor delays in delivering the funds to the vendor and/or the vendor’s counsel. In this case, once there was a finding of clear repudiation by the appellant just after 5:00 p.m. on October 1, the fact that the mortgage funds were ultimately delivered the day after the closing date is irrelevant because the innocent parties, namely, the respondents, were relieved of the requirement of tender at that point. As this court held in Di Millo, at para. 49, “when a party by words or conduct communicates a decision not to proceed to closing, the other party is released from any obligation to tender in order to prove he was ready, willing and able to close.”
[26] In sum, the motion judge did not err in finding that the appellant anticipatorily breached the APS before the midnight closing deadline, the “time is of the essence” clause is of no assistance to the appellant, and there is no basis to disturb the motion judge’s finding that the appellant acted unreasonably and in bad faith. I would dismiss the appeal. . Rahbar v. Parvizi
In Rahbar v. Parvizi (Ont CA, 2023) the Court of Appeal considered a residential Agreement of Purchase and Sale (APS) that failed due to the purchaser's financing falling through. The case is interesting for the 'last-minuting' that these situations can create:[2] The appellants, Hamidreza Rahbar and Maryam Esmaeili (“the buyers”), entered into an agreement to purchase a residential property in Waterloo, Ontario (the “APS”). The deal did not close by the agreed time because their financing fell through. The respondents, Ehsan Parvizi and Samin Shokri (“the sellers”), later sold the property to third parties at a higher price and kept the buyers’ deposit monies.
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Analysis of the Issue of Repudiation
[28] As the buyers note, a repudiatory breach does not in itself terminate the contract: Ching v. Pier 27 Toronto Inc., 2021 ONCA 551, 460 D.L.R. (4th) 678, at para. 32. The consequences of a repudiation depend on the election of the innocent party. If the innocent party accepts the repudiation, the contract is terminated. Alternatively, if the innocent party treats the contract as subsisting (i.e., affirms the contract), the contract is not terminated: Ching, at para. 33.
[29] In this case, the application judge found that there was an anticipatory breach: “[t]he anticipatory breach here lay not in the request for an extension but in the communication that the vendor’s financing had fallen through.” The buyers do not challenge this finding. Rather, they dispute what flows from the anticipatory repudiation.
[30] Following the anticipatory repudiation, the sellers could elect to either affirm or disaffirm the contract. The application judge found that they affirmed:[The buyers’ lawyer] wrote at 5:09 PM affirming the contract and stating clearly that the agreement had to close that day in accordance with its terms. [Emphasis added.] [31] As Pepall J.A. noted in Ching, at para. 36, “[a] party who ‘presses for performance’ will be found to have affirmed the contract”.
[32] The effect of the affirmation was to keep the contract “alive” and so the sellers needed to show that they were ready, willing and able to close by the closing deadline or the rule in King v. Urban & Country Transport Ltd. (1973), 1973 CanLII 740 (ON CA), 1 O.R. (2d) 449 (C.A.) would come into play. That rule was explained by Pepall J.A. in Ching, at para. 52:In King v. Urban the purchaser was not in a position to close on the closing date; but the vendor was also in default and not entitled to rely on the time of the essence provision in the contract. Arnup J.A. resolved the stalemate by applying two propositions:
1.When time is of the essence and neither party is ready to close on the agreed date the agreement remains in effect.
2. Either party may reinstate time of the essence by setting a new date for closing and providing reasonable notice to the other party. [Footnote omitted.] [33] Since the sellers needed to show they were ready willing and able to close, the application judge was incorrect in concluding that they did not need to do so. However, this error is of no moment, as the trial judge went on to find that the sellers were, in fact, ready and willing to close.
[34] The buyers submit that the application judge erred in finding that the sellers were ready, willing and able to close by the agreed time, as their lawyers failed to enter into a document registration agreement as required under the APS. They also take issue with what they say were two other deficiencies in the documents tendered by the sellers.
[35] I do not agree with the appellants’ submission that the application judge erred in finding that the sellers were ready, willing and able to close.
[36] The application judge noted that at 5:09 p.m. on the day of closing, after the sellers’ lawyer received the buyers’ request to extend the closing, he advised the buyers that they were ready, willing and able to close as scheduled. As set out above, counsel wrote:[W]e have provided your office with all deliverables pursuant to the [document registration agreement]. Our clients are ready, willing, and able to complete this transaction today. [37] The application judge found that the sellers provided the buyers with their closing documents and the buyers’ lawyer did not object to the documents tendered by the sellers at closing:The [buyers] submit that the [sellers] were themselves not in a position to close on December 15 because they had not sent any tender documents to the [buyers].
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[The sellers’ lawyer] says his firm sent copies of closing documents to [the buyers’ lawyer] by email on December 9, 2021 at 8:11 PM. A further copy was sent on December 15, 2021 at 5:08 PM. … [T]here is no dispute that [the sellers’ lawyer’s] email of 5:09 PM on December 15 was received by [the buyers’ lawyer]. That email confirmed that [the sellers’ lawyer] had provided [the buyers’ lawyer] with all deliverables and that his clients were ready willing and able to close. [The buyers’ lawyer] never contested [the sellers’ lawyer’s] statement that he had provided all deliverables for the closing.… [Emphasis added.] [38] Nor do I accept the buyers’ submission that the sellers were not ready to close because a document registration agreement had not been signed. The application judge concluded on this issue:A second reason for which the [buyers] say the sellers were unable to close is that they had not agreed on a document registration agreement. A document registration agreement is an agreement that addresses closing procedures and the release of documents delivered in escrow for real estate transactions that are closed electronically. The applicants submit that this is a critical document which is negotiated between the parties.
I do not find the [buyers’] argument in this respect persuasive. The [buyers] themselves had not proposed a document registration agreement to [the sellers’ lawyer]. Although [the buyers’ lawyer] thought she had sent one, and stated in her affidavit that she had, she later volunteered that she was mistaken. …
The document registration agreement is, in any event, a non-issue. …The last sentence of clause 11 [of the APS] makes it clear that the parties will be bound by the document registration agreement recommended by the Law Society of Ontario unless they agree otherwise. There was therefore nothing to negotiate. [Emphasis added.] [39] I see no error in the application judge’s consideration of this issue, and his conclusion that the absence of a formally executed document registration agreement was not fatal in this case.
[40] Lastly, the buyers submit that the personal undertaking given by sellers’ counsel to discharge the mortgage on the property was insufficient and deficient and that the sellers’ failure to deliver a direction directing payment to the mortgagee, as required by the APS, disentitled them from terminating the APS. I agree with the sellers that those issues could have been rectified at the time of the transaction had they been raised and are insufficient to now disallow the sellers to terminate the APS.
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[44] From a legal perspective, there were two repudiations and the sellers had an election to make after each repudiation. After the anticipatory repudiation (the first repudiation), the sellers elected to affirm the contract, and as explained, were ready, willing and able to close at the closing deadline. The buyers were unable to close by the closing deadline because they did not have the funds, not because of anything the sellers did. They were in breach when they could not close. The sellers then elected to accept this second repudiation. Counsel for the sellers sent the following email at 6:33 p.m., informing the buyers that they were terminating the agreement:I acknowledge receipt of your correspondence of today’s date, received at 5:12pm, in which you have conveyed your client's request for an extension of the closing date of the above referenced transaction from today (Wednesday, December 15, 2021) to Monday, January 10, 2022. We hereby confirm that we are treating your request for an extension as an anticipatory breach of the Agreement of Purchase and Sale thereby discharging us of the obligation to tender. I also confirm that the time is now past 6:00 pm and, pursuant to the terms of the Agreement of Purchase and Sale as between our respective clients, your clients have failed to provide the closing funds and documents necessary to complete this transaction.
Please be advised that our clients are not in agreement to extend the closing date. Your clients' deposit is therefore forfeited to our clients and the Agreement hereby terminated.
Take notice that our clients will be relisting the property for sale in an effort to mitigate their damages and are hereby reserving their rights in law and equity to seek reimbursement of their damages as against your clients. Please advise your clients to govern themselves accordingly. [Emphasis added.] [45] Out of an obvious sense of caution, counsel for the sellers covered off both repudiations in his letter: the anticipatory repudiation and the repudiation in failing to close by the closing deadline. While anticipatory repudiation was not a proper basis to terminate the APS (given the election to affirm the contract), the mention of anticipatory repudiation in the email did not prejudice the buyers, who were not able to close at the agreed time due to a lack of financing. . Gu v. Nothdurft
In Gu v. Nothdurft (Ont CA, 2023) the Court of Appeal noted the distinction between matters of 'title' and matters of 'conveyance', as they arose in a standard OREA annulment clause:[1] This appeal is centred on the issue of whether paragraph 10 of the Ontario Real Estate Association (“OREA”) standard form Agreement of Purchase and Sale (“APS”) entitled the appellants to treat their contract with the respondents as at an end. ...
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[9] On the summary judgment motion, the appellants relied on paragraph 10 of the OREA standard form APS, commonly referred to as the “annulment clause”. That paragraph provides, in part, that where a written objection is made to title and which “Seller is unable or unwilling to remove … and which Buyer will not waive … [the] Agreement … shall be at an end” and the deposit returned.
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[15] It should be noted that the motion appears to have been argued on the assumption that the writs of execution were either matters of title or matters of conveyance coming within the contemplation of paragraph 10: on the distinction between matters of title and matters of conveyance, and the application of paragraph 10 to each, see the discussion in Chan v. Mangal, 2022 ONSC 2068, at paras. 20-25; 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, 80 C.L.R. (4th) 297, at paras. 113-41; and Anne Warner La Forest, Anger & Honsberger Law of Real Property, 3rd ed. (Toronto: Thomson Reuters Canada, 2021) (loose-leaf updated 2022, release 1), s. 22.12. It is not obvious that paragraph 10 governs this particular requisition, given the vendor’s distinct obligation under the APS to discharge all registered encumbrances (see La Forest, s. 22.8), and the motion judge’s finding that it was within the unilateral power of the vendor to satisfy the writs using the sale proceeds and have the writs discharged from title. However, given how the appeal was argued before us and before the court below, and given our ultimate disposition of the appeal, it is neither necessary nor advisable that we resolve this question. But nothing in these reasons should be taken as an endorsement of the proposition that paragraph 10 governed the respondents’ requisition that the appellants discharge the writs of execution. . Halliday-Shaw v. Grieco
In Halliday-Shaw v. Grieco (Ont CA, 2023) the Court of Appeal, in dismissing an appeal that ordered specific performance of an APS in favour of the purchaser, considered the effect of an APS provision addressing non-resident vendors and the duties it created on a real estate closing:[6] In his reasons, the motion judge quoted the relevant provision from section 17 of the APS, providing that, absent delivery to the buyer of a Clearance Certificate, “if the Seller is a non-resident … the Buyer shall be credited towards the Purchase Price with the amount, if any, necessary for Buyer to pay to the Minister of National Revenue to satisfy Buyer’s liability in respect of tax payable by Seller under the non-residency provisions of the Income Tax Act by reason of this sale.”
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[9] The motion judge’s reasons relating to the holdback requisition are pithy, but complete, accurate as to the operation of s. 116 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), (the “ITA”), and reasonable:On the issue of the holdback, this was a term of section 17 of the APS as set out in section 116 of the Income Tax Act. Absent a Clearance Certificate or other form of comfort from the CRA setting out the appropriate holdback, the purchaser would be at risk of being required to pay 25% of the cost of the property, in this case an additional $505,000.00, a much greater sum than the $8,700.00 the vendor had offered to hold back on the basis of his own calculations and not those of CRA. [10] The motion judge was not required to set out s. 116 of the ITA or analyse its meaning overtly in his decision. It is clear that he considered the provision. Nor was expert evidence or other proof required to show that Mr. Grieco’s tax liability would be more than the 1% he offered to hold back. It was enough to justify the requisition that the Shaws were at risk of having to pay Mr. Grieco’s taxes. The motion judge’s decision that they were at risk was entirely reasonable and supported in the record. We see no error in the motion judge’s finding that holdback requisition was valid. . Nguyen v. Zaza
In Nguyen v. Zaza (Ont CA, 2023) the Court of Appeal considers the contractual privity status of a son (who executed the APS) where a father only subsequently transferred title during the life of the APS:[9] First, the appellant’s submission that the December 19, 2020 agreement of purchase and sale was entered into by Zaza Senior as the seller is based on a factual assertion that is contrary to the findings of the motion judge. The motion judge made a finding of fact that the December 19, 2020 agreement of purchase and sale was entered into by Zaza Junior, not Zaza Senior. We see no basis to interfere with this finding, which is supported on the record before the motion judge.
[10] Second, the appellant’s argument is based on the premise that in order for Zaza Junior to enter into the agreement of purchase and sale on December 19, 2020, title of the property needed to be in his name at that time. This premise is incorrect. In order for a seller to be entitled to the sale price of a property at closing, the seller must be in a position to ensure that good title is conveyed to the purchaser: see 1854329 Ontario Inc. v. Cairo, 2022 ONCA 744, at para. 12. The motion judge found that Zaza Junior carried out all the obligations of the seller contained in the agreement of purchase and sale, including completing renovations to the satisfaction of the appellant which were a condition of the agreement of purchase and sale. She further found that because the property was transferred to his name and that of his wife in January 2021, he was in a position to pass legal title to the appellant on November 15, 2021, had the appellant tendered the purchase price required on closing. . Nguyen v. Zaza
In Nguyen v. Zaza (Ont CA, 2023) the Court of Appeal considered the risk to the purchaser not having financing available on the closing date:[16] The motion judge correctly held that a seller is entitled to refuse an extension of time to close where a buyer seeks an extension because they do not have financing: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, 438 D.L.R. (4th) 566; Domicile Developments Inc. v. MacTavish (1999), 1999 CanLII 3738 (ON CA), 175 D.L.R. (4th) 334 (Ont. C.A.). ... . Nguyen v. Zaza
In Nguyen v. Zaza (Ont CA, 2023) the Court of Appeal stated succinctly the status of a deposit on forfeiture by the payor, here in the context of a real estate APS:[16] ... She also correctly relied on well-established law that in the absence of a specific term in the agreement of purchase and sale for the disposition of the deposit, the deposit is intended as security for the buyer’s performance of the contract, and is forfeited to the seller if the buyer fails to close: Benedetto v. 2453913 Ontario Inc., 2019 ONCA 149, 86 B.L.R. (5th) 1, at paras. 5‑6. . Arista Homes (Richmond Hill) Inc. v. Rahnama
In Arista Homes (Richmond Hill) Inc. v. Rahnama (Ont CA, 2022) the Court of Appeal considered mitigation, here where a purchaser failed to close on an APS:[9] Where a purchaser fails to close a real estate transaction and the vendor takes reasonable steps to sell the property in an arm’s length sale to a third party in mitigation of damages, and there is nothing improvident about the sale, the difference between the two sale prices will be used to calculate the damages: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at para. 41; 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401 (C.A.), at para. 55. In such circumstances, there will be no need for expert evidence: Marshall v. Meirik, 2021 ONSC 1687, at para. 30, aff’d 2022 ONCA 275.
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