



COURT OF APPEAL FOR ONTARIO

CITATION:
Ching v.
    Pier 27 Toronto Inc., 2021 ONCA 551

DATE: 20210730

DOCKET: C67706

Pepall, Nordheimer and Thorburn JJ.A.

BETWEEN

Yong Kee
    Ching a.k.a. Richard Yong

and
    Margaret Ng Yu Xiu a.k.a. Margaret Ng

Plaintiffs (Appellants)

and

Pier 27 Toronto Inc.

Defendant (Respondent)

David N. Vaillancourt and Jacob Millar, for the
    appellants

Glenn R. Solomon, for the respondent

Heard: February 18, 2021 by video conference

On appeal from the judgment of Justice Mario D. Faieta of
    the Superior Court of Justice, dated October 18, 2019, with reasons reported at
    2019 ONSC 6073, 13 R.P.R. (6th) 306, and from the costs order, dated December
    9, 2019.

Pepall J.A.
:

A.

Introduction

[1]

The appellants appeal from a judgment dismissing their claim for damages
    arising from the breach of an agreement of purchase and sale of a condominium
    and their request for relief from forfeiture of their deposit. For the reasons
    that follow, I would dismiss the appeal.

B.

Facts

[2]

The appellants, Yong Kee Ching a.k.a. Richard Yong, and his wife,
    Margaret Ng Yu Xiu a.k.a. Margaret Ng, decided to move from Singapore to
    Canada following their retirement. The appellants moved to Canada in March 2011,
    having obtained permanent residency status in 2008. While still in Singapore,
    they attended numerous workshops offered by a real estate agent and ultimately
    bought 10 residential properties in British Columbia, Quebec, and Ontario. They
    sold four, maintain four for investment purposes, live in one in B.C., and one
    is in issue in these proceedings.

[3]

The agreement of purchase and sale (the Agreement) in this appeal was
    dated April 23, 2008 and was for a presidential suite located at 39 Queens
    Quay East in Toronto. The vendor was the respondent, Pier 27 Toronto Inc.
[1]
The appellants
    bought the unit for $1,347,000 and also acquired a parking spot for $37,500 and
    a locker for $4,500. The Agreement provided that time was of the essence. After
    signing the Agreement, they provided the respondent with a deposit of $134,700
    and subsequently paid additional sums for a total deposit of
$214,238.85.

[4]

The appellants obtained mortgage financing of $883,200 for the purchase
    from the Canadian Imperial Bank of Commerce.

[5]

The proposed Occupancy Date, also described as the Tentative Occupancy
    Date, as designated in the Agreement, was November 30, 2010, but it was not a
    firm date and simply represented an estimated completion date for the first
    unit in the Pier 27 project rather than the estimated occupancy date for all
    units including that of the appellants.

[6]

On June 9, 2010, the respondents solicitors advised the appellants that
    the respondent was extending the Tentative Occupancy Date for the appellants
    unit to October 18, 2012, a delay just short of 24 months.

[7]

After the appellants moved to Canada on March 15, 2011, they then tried
    to sell the unit or assign the Agreement and contacted a real estate agent for
    that purpose. In their correspondence to the agent, they noted: We would
    prefer to market it on assignment and before the interim or final closing where
    we need not have to make further payments to the unit. They stated that the
    final closing was scheduled for October 18, 2012 and that they had been told
    that there would most likely be a postponement. They listed the unit for sale
    for $1,699,000 on March 27, 2012.

[8]

In 2012, the appellants came to Toronto for the first time and visited
    the Pier 27 Project sales office where they sought assistance in selling
    the unit. They were told that the developer was not permitting assignments.

[9]

Meanwhile, the respondent established October 1, 2013 as the Confirmed Occupancy
    Date. However, this date was to come and go and the respondent ultimately
    extended the date on eight occasions to November 18, 2013, January 30,
    2014, February 14, 2014, March 21, 2014, May 2, 2014, June  27, 2014,
    July 30, 2014, and finally, to August 20, 2014. In the letters, the respondent
    stated that in all other respects, the terms of the Agreement remained unchanged,
    and time would remain of the essence. On each occasion, the respondent provided
    a reason for the new date ranging from construction delays, strikes and extreme
    weather. The appellants did not complain of any of the delays on receipt of the
    notices of extension.

[10]

In
    October 2013, the appellants came from Vancouver and met twice with the
    respondents décor consultant and selected finishes and upgrades for the unit.
    They signed an Order Form dated October 5, 2013 specifying their selections and
    agreeing to pay about $4,200 for the upgrades. The Form included an
    acknowledgement that January 30, 2014 was the Confirmed Occupancy Date subject
    to such further extensions required by the respondent under the Agreement and
    the
Ontario New Home Warranties Plan Act,
R.S.O. 1990, c. O.31
.

[11]

In
    November 2013, CIBC advised the appellants that the cancellation date for their
    mortgage approval was approaching and that updated information and the name of
    their solicitor were required. On December 9, 2013, Mr. Yong confirmed to CIBC
    that they had retained a lawyer, Boris Zayachkowski of the Minden Gross LLP firm,
    for the closing of the unit. He also advised that the builder had extended the
    scheduled Confirmed Occupancy Date a few times already and that provision
    should be made for possible future extensions of the February 14, 2014
    Occupancy Date. Mr. Yong testified that on December 23, 2013, CIBC cancelled
    the mortgage approval. The appellants unsuccessfully applied to other banks for
    mortgage financing.

[12]

Mr.
    Yong testified that with each letter of postponement of the Confirmed Occupancy
    Date, he nonetheless strongly believed that the deal was ongoing and that,
    until they contacted the lawyers, Miller Thomson LLP, he and his wife had to
    honour the Agreement. The last two letters of postponement dated May 16, 2014
    and June 27, 2014 for Confirmed Occupancy Dates of July 30, 2014 and August 20,
    2014, respectively, were sent to the appellants lawyer, Mr. Zayachkowski,
    and to the appellants. Both letters stated that, other than the Confirmed Occupancy
    Dates, in all other respects, the terms of the Agreement remained unchanged and
    time would remain of the essence.

[13]

The
    appellants continued to try and assign the Agreement by contacting many real
    estate agents. On November 29, 2013, Mr. Yong contacted one realtor, another in
    February 2014, another on June 25, 2014, and he would periodically contact
    Shelley Shapiro about assignments. She was described by Ms. Florian, the
    developers director of sales and marketing, as a sales agent who worked at the
    site and sold Pier 27 units, and by Mr. Yong, as the developers appointed
    realtor from Sothebys. The trial judge stated at para. 81 of his reasons that
    Mr. Yong testified that the respondent permitted the assignment somewhere
    near the closing date.
[2]

[14]

On
    July 3, 2014, the appellants received an email from Ms. Shapiro asking when
    they would be taking occupancy and advising that she had someone who she would
    be talking to about their suite. According to Mr. Yong, Ms. Shapiro advised
    that she might have two prospective purchasers, but they wished to view the
    unit before making an offer. He told Ms. Shapiro to arrange a viewing with the
    developer. The appellants offered to pay the respondents cleaning expenses
    associated with such access. They sought and were refused permission by the
    respondent for an inspection. Apparently, there were logistical and liability
    issues associated with permitting purchasers to walk through a partially
    completed 700-unit building.

[15]

On
    August 7, 2014, the appellants new lawyer, Odysseas
Papadimitriou
of Miller Thomson LLP, wrote to the respondents lawyer, Sheldon Spring of
    Goldman, Spring, Kichler & Sanders LLP, stating that he had been retained
    to review and respond to Mr. Springs June 27, 2014 correspondence. He noted
    the numerous extensions of the Confirmed Occupancy Date and that the
    respondents repeated delays and extensions suggested that it had failed to act
    in good faith and to set bona-fide closing date estimates. He asked the
    respondent on a without prejudice basis to advise whether it was agreeable to
    terminating the Agreement and returning all deposits. He stated that he
    believed it was incumbent on the respondent to permit rescission of the
    Agreement.

[16]

On
    August 19, 2014, Mr.
Spring
responded saying that
    the appellants did not have the right to terminate the Agreement.

[17]

The
    appellants did not take possession of the unit on August 20, 2014, and the
    transaction did not close. Mr. Yong said that without mortgage financing, he
    had no funds to pay and thus had no intention of taking occupation of the unit.
    As a result, he instructed Mr.
Zayachkowski
that he
    would seek a litigation lawyer to approach the developer for a return of the
    monies that they had paid to the respondent.

[18]

On
    August 29, 2014, Mr. Papadimitriou again wrote to Mr. Spring asking the respondent
    to reconsider their offer. In addition, he took the position that the
    respondent did not have the right to unilaterally extend the Confirmed Occupancy
    Date beyond the 24 months permitted by the Agreement, and that by failing to
    provide occupancy by November 30, 2012, the respondent had breached the
    Agreement thereby entitling the appellants to terminate the Agreement with a
    return of deposits. Absent an amicable resolution, the appellants lawyer had
    instructions to commence a claim against the respondent.

[19]

Mr.
    Spring responded on September 3, 2014. He stated that the appellants were in
    default of the Agreement as they had failed to complete the transaction on
    August 20, 2014 but as a courtesy and without prejudice, the respondent would
    permit the appellants to complete the transaction on September 8, 2014. He
    confirmed that the unit was ready for occupancy on August 20, 2014.

[20]

The
    appellants did not take possession on September 8, 2014. On September 9, Mr.
    Spring wrote to Mr. Papadimitriou advising that the Agreement was terminated
    due to the appellants failure to complete the transaction on August 20,
    2014.

[21]

The
    appellants did not tender on July 30, 2014, the date set in the May 16, 2014
    notice, or on August 20, 2014, the new date set in the June 27, 2014 notice.
    The respondent kept the deposit funds paid by the appellants.

[22]

The
    appellants brought an action for breach of the Agreement and sought return of
    their deposit of $214,238.85, the increase in value of the unit as of the date
    the Agreement was terminated, and punitive damages of $100,000 for dishonest
    performance of the Agreement. In the alternative, they sought relief from
    forfeiture of their deposit.

[23]

The
    respondent subsequently sold the unit in 2016. The parties agreed that $93,000
    represented the increase in value of the unit as of August 7, 2014.

C.

Trial Judges Decision

[24]

The
    trial judge found that the respondent breached the Agreement by extending the
    Confirmed Occupancy Date pursuant to notices dated May 16, 2013, November 1,
    2013, December 13, 2013, May 16, 2014 and June 27, 2014. The June 27, 2014
    notice established August 20, 2014 as the Confirmed Occupancy Date. He reasoned
    that there was nothing in the Agreement that permitted the respondent to
    arbitrarily extend the Confirmed Occupancy Date absent certain defined
    circumstances or a cause beyond the respondents control. Neither of these had
    arisen and he rejected the respondents submission that the causes of the
    extensions were beyond its control. The finding that the respondent breached
    the Agreement by extending the Confirmed Occupancy Date is not in issue on this
    appeal. He also found that the appellants terminated the Agreement on August 7, 2014.
    The parties do not take issue with this finding either. Furthermore, it is
    consistent with the parties agreement fixing the increase in value of the
    condominium as of the date of termination, namely August 7, 2014.

[25]

The
    trial judge concluded that the issue of whether the respondent was dishonest in
    its performance of the Agreement was moot but addressed it nonetheless, finding
    that the respondent had conducted itself honestly. He also made findings of
    credibility against the appellants, describing them as often being
    argumentative, overstated, and inconsistent.

[26]

The
    trial judge then considered whether the appellants had accepted the
    respondents repudiation of the Agreement. He set out the governing legal
    principles as described in
Ali v. O-Two Medical Technologies Inc.
,
    2013 ONCA 733, 118 O.R. (3d) 321,

at para. 24:

Once the counterparty shows its intention not
    to be bound by the contract, the innocent party has a choice. The innocent
    party may accept the breach and elect to sue immediately for damages  in which
    case, the innocent party must
clearly and
    unequivocally accept the repudiation to terminate the contract
:

Brown
, at para. 45. Alternatively,
    the innocent party may choose to treat the contract as subsisting, continue to
    press for performance and bring the action only when the promised performance
    fails to materialize; by choosing this option, however, the innocent party is
    also bound to accept performance if the repudiating party decides to carry out
    its obligations: S.M. Waddams,
The Law of Contracts
, 6th ed. (Toronto: Canada Law Book 2010), at para. 621.

[27]

He
    recognized that in the face of the respondents breach, the appellants could
    accept the breach and sue for damages, but
they had to
    clearly and unequivocally accept the repudiation to terminate the Agreement
.
    He found that they had not. Rather, they had continued to press for
    performance. He stated at para. 104 of his reasons:

However, the [appellants] continued to press
    for performance of the [Agreement] after
each
of the five extensions of
    the Confirmed Occupancy Date. Rather than treat the [Agreement] as at an end,
    the [appellants] attended the [respondent]s office to select finishes and
    upgrades for the Pier 27 Unit in October, 2013. Further, the [appellants]
    attempted to assign the Pier 27 Unit on many occasions through numerous real
    estate agents from November, 2013 until July, 2014. In July, 2014 the
    [appellants] sought and were refused permission by the [respondent] to have two
    prospective purchasers inspect the Pier 27 Unit. [Emphasis added.]

[28]

The
    trial judge was accordingly satisfied that the appellants had treated the
    Agreement as subsisting. Exercising his discretion, and considering all of the
    circumstances, he also declined to grant relief from forfeiture.

D.

Grounds of Appeal

[29]

The
    appellants raise four grounds of appeal. They submit that the trial judge
    erred:

(i)

in his repudiation analysis: (a) in considering irrelevant factors
    to conclude that the appellants had affirmed the Agreement, and (b) in failing
    to consider the appellants lack of knowledge of the facts and their legal
    rights to terminate the Agreement;

(ii)

in his quantification of damages;

(iii)

by failing to grant relief from forfeiture of the deposit; and

(iv)

in his assessment of costs.

[30]

The
    respondent contests the appellants submissions, arguing that it was only when
    it became clear that they could not assign the unit at a profit and it would be
    necessary to close the purchase that the appellants decided the respondent had
    repudiated the Agreement.

E.

Analysis

(1)

No
Acceptance of Respondents Repudiation

(a)

General
Principles

[31]

In
    considering the issue of repudiation, it is helpful to address the governing
    principles.

[32]

As
    noted by Cronk J.A. in
Brown v. Belleville (City)
,
2013
    ONCA 148,
114 O.R. (3d) 561, at para. 42, a repudiatory breach does not,
    in itself, terminate the contract. If the non-repudiating or innocent party
[3]
does not accept the
    repudiation, then the repudiation has no legal effect. In his text,
The Law
    of Contract in Canada
, 6th ed. (Toronto: Carswell, 2011), Professor Gerald
    Fridman explains as follows, at p. 595:

From the time that this kind of termination was recognized, it
    was accepted that there could be no such thing as
unilateral
repudiation. Just as the
    making of a contract requires the joint participation of both parties, an
    offeror and an acceptor, so the discharge of a contract, even where the
    discharge is by repudiation, in advance of the time for performance, also
    requires the conformity and acquiescence of
both
parties. [Emphasis in original.]

[33]

Accordingly,
    the consequences of a repudiation are stated to depend on the election made by
    the innocent party. If the innocent party accepts the repudiation, the contract
    is terminated (sometimes referred to as disaffirmation). Alternatively, the
    innocent party may treat the contract as subsisting (sometimes referred to as
    affirmation). See
Guarantee Co. of North America v. Gordon Capital Corp.
,
    [1999] 3 S.C.R. 423, at para. 40.

(i)

Disaffirmation (Acceptance of the Repudiation of a Contract)

[34]

In
Brown
, at para. 45, Cronk J.A. explained that:

[T]he election to disaffirm the contract must
    be clearly and unequivocally communicated to the repudiating party within a
    reasonable time. Communication of the election to disaffirm or terminate the
    contract may be accomplished directly, by either oral or written words, or may
    be inferred from the conduct of the innocent party in the particular
    circumstances of the case. [Citation omitted.]

[35]

Thus,
    the acceptance of the repudiation must be clearly and unequivocally communicated.
    That communication must be within a reasonable time. And, the communication may
    be express or inferred from conduct. The contract is terminated if the innocent
    party accepts the repudiation.

(ii)

Affirmation (Treating the Contract as Subsisting)

[36]

A
    failure to accept a repudiation does not necessarily mean that the innocent
    party has affirmed the contract. As with disaffirmation, the affirmation may be
    express or inferred from conduct. A party who presses for performance will be
    found to have affirmed the contract:
Ali
, at para. 24
.
The test is an objective one  what
    would a repudiating party reasonably understand from the words or conduct of
    the innocent party. For instance, in
Dosanjh v. Liang
, 2015 BCCA 18,
380 D.L.R. (4th) 137,
Mr. Dosanjhs lawyer sent a letter that
    Mr. Dosanjh was ready, willing and able to complete the transaction on the
    scheduled date. The British Columbia Court of Appeal noted that the letter was
    not consistent with an acceptance of repudiation, and the court concluded that
    Mr. Dosanjh had made an election to affirm the contract.

[37]

The
    court in
Dosanjh
also stated that [a] court will not find that an
    innocent party has affirmed a contract in the absence of
clear
evidence leading it to that
    conclusion: at para. 35 (emphasis added). This is the flip side of the rule
    that the election to disaffirm a contract must be clear and unequivocal.
    However, what then does a court do if the innocent party does not clearly
    disaffirm the contract and does not clearly affirm the contract? This question
    is particularly vexing given that, as discussed, a repudiation does not
    terminate the contract. In my view, rather than asking whether the evidence is
    clear, the proper question to ask is whether, in the circumstances of the
    case, a person in the shoes of the repudiating party reasonably would have
    understood that the innocent party was electing to keep the contract alive
    until the date of performance.

[38]

This
    approach is also consistent with the Supreme Courts commentary in
Gordon
    Capital
. In that case, the court suggests that something less than
    actively pressing for performance may amount to affirmation of the contract.
    At para. 40, the court notes that [i]f [the innocent party]
treats the contract as still being in full force and
    effect
, the contract remains in being for the future on both
    sides (emphasis added). I read this as saying that conduct consistent with
    the contract still being in force may amount to affirmation, whether or not it
    can be said that the innocent party actively pressed for performance.

(iii)

The Middle Way

[39]

An
    innocent party need not make its election immediately and may be given a
    reasonable period of time to decide whether to affirm the contract or accept
    the repudiation:
Dosanjh,
at para. 37;
Abraham v. Coblenz Holdings
    Ltd.
, 2013 BCCA 512, 53 B.C.L.R. (5th) 94, at para. 28; and
Canada Egg
    Products Ltd. v. Canadian Doughnut Co. Ltd.
, [1955] S.C.R. 398, at p. 407.
    As stated in
Dosanjh
, at para. 37, at least until that reasonable
    period of time has elapsed, a court should be slow to treat equivocal
    statements or acts as affirmations of the contract.

[40]

A leading text (Hugh Beale, ed.,
Chitty
    on Contracts
, 33rd ed. (London, UK:
    Sweet & Maxwell, 2018))
puts it this way, at para. 24-002:

There is a sense in which there is a middle way open to the
    innocent party in that he is given a period of time in which to make up his
    mind whether he is going to affirm the contract or terminate. This point was
    well-expressed by Rix L.J. in
Stocznia Gdanska SA v. Latvian Shipping Co.
    (No. 2)
when he stated: In my judgment, there is of course a middle
    ground between acceptance of repudiation and affirmation of the contract, and
    that is the period when the innocent party is making up his mind what to do. If
    he does nothing for too long, there may come a time when the law will treat him
    as having affirmed. If he maintains the contract in being for the moment, while
    reserving his right to treat it as repudiated if his contract partner persists
    in his repudiation, then he has not yet elected. As long as the contract
    remains alive, the innocent party runs the risk that a merely anticipatory
    repudiatory breach, a thing writ in water until acceptance, can be overtaken
    by another event which prejudices the innocent partys rights under the
    contractsuch as frustration or even his own breach. He also runs the risk, if
    that is the right word, that the party in repudiation will resume performance
    of the contract and thus end any continuing right in the innocent party to
    elect to accept the former repudiation as terminating the contract. [Citations
    omitted.]

[41]

Depending
    on the circumstances, inaction may be read either as a failure to elect or
    affirmation of the contract. For instance, in his text,
The Law of
    Contracts,
2nd ed. (Toronto: Irwin Law, 2012), Professor John D. McCamus
    states, at pp. 703-4:

[A] mere failure to communicate an election to disaffirm to the
    repudiating party will not preclude a subsequent election to disaffirm unless
    the passage of time has resulted in significant prejudice to the repudiating
    party or, in the circumstances, the silence of the innocent party is reasonably
    interpreted as evidence of a decision to affirm the agreement.

(b)

Application of Principles

[42]

As
    mentioned, the trial judge found that the respondent breached the Agreement by
    extending the Confirmed Occupancy Date. The last breach occurred on June 27,
    2014, which had extended the Confirmed Occupancy Date from July 30, 2014
    to August 20, 2014. He also found that the appellants treated the Agreement as
    subsisting and terminated it on August 7, 2014. There is no suggestion that the
    appellants accepted the repudiation at any time prior to August 7, 2014.

[43]

This
    appeal turns on whether the trial judge erred in finding that the appellants
    affirmed the Agreement, or put differently, treated it as subsisting.

[44]

At
    the time of the breach by the respondent on June 27, 2014, the appellants had various
    alternatives available to them including:

(i)

treating
    the Agreement as subsisting and insisting on closing on July 30, 2014
    or implicitly or expressly agreeing to close on the new closing date of August
    20, 2014;

(ii)

accepting
    the repudiation which would put the Agreement at an end and would release the
    appellants from closing on July 30, 2014; or

(iii)

doing
    nothing and taking a reasonable time to consider their options. However, as
    stated in
Chitty,
if the innocent parties do nothing for too long, the
    law may treat them as having affirmed the contract.

[45]

The
    appellants submit that the trial judge erred in treating the individual
    repudiations cumulatively rather than separately. As a result, he conflated the
    appellants conduct to ascertain whether they had pressed for performance when
    instead, he should have relied on evidence of their conduct following the last
    repudiation by the respondent.

[46]

I
    do not agree with this submission. It is the case that each time the respondent
    committed an act that amounted to a repudiation, the appellants were entitled
    to affirm the Agreement and treat it as subsisting or accept the repudiation.
    Just because they had previously affirmed the Agreement following the
    respondents acts of repudiation did not mean that they were disentitled from
    accepting the latest repudiation on June 27, 2014: see
Dosanjh
, at
    para. 42.

[47]

However,
    the trial judges discussion of the appellants conduct before and after June
    27, 2014 must be considered in context. Before the trial judge, the appellants
    argued that the Agreement had been breached on each of the occasions that the
    trial judge addressed, that is, with each notice of extension.
This was for the most part consistent with their fresh as
    amended statement of claim.
He accordingly commenced his analysis of this
    issue by asking whether any of the respondents extensions of the Confirmed Occupancy
    Date constituted a breach of the Agreement. He then proceeded to discuss the
    appellants conduct that succeeded each of the breaches. I see nothing wrong in
    this approach and it explains why he addressed all of the notices of extension
    and not just that of June 27, 2014.

[48]

Second,
    he did not treat the repudiations cumulatively nor did he conflate the
    appellants conduct. Rather, he addressed each of the repudiations and
    culminated with a discussion of the final repudiation. This is evident from the
    language he used at para. 104 of his reasons: the appellants continued to
    press for performance of the [Agreement] after
each
of
the five extensions of the
    Confirmed Occupancy Date (emphasis added). It is also evident from his
    reliance on post-June 27, 2014 conduct to sustain his conclusion. This conduct
    included attempting to assign the unit in July 2014 and seeking and being
    refused permission from the respondent to have two prospective purchasers
    inspect the unit. Although not relied upon by the trial judge, the appellants
    also offered to pay for the cleaning of the unit following the inspection and
    Mr. Yong testified that they were open to realtors at that time. Once affirmed,
    there was no additional breach by the respondent that gave rise to an election,
    and therefore the appellants were precluded from relying on their lawyers
    August 7, 2014 letter as constituting clear and unequivocal communication of
    acceptance of the respondents June 27, 2014 repudiation.

[49]

Third,
    none of the appellants conduct is consistent with acceptance of the
    respondents repudiation but is consistent with affirmation of the Agreement.
    Certainly, there was no clear and unequivocal communication of termination
    until at best, August 7, 2014. Even when the appellants counsel wrote the
    August 7, 2014 letter, the language sought permission to rescind the
    Agreement. Moreover, a disaffirmation of the Agreement must be communicated
    within a reasonable time. The last notice of extension of the Confirmed Occupancy
    Date was sent on June 27, 2014, but the correspondence from the
    appellants lawyer terminating the Agreement was sent on August 7, 2014, a week
    after the penultimate closing date of July 30, 2014. By August 7, 2014, the
    appellants conduct was consistent with an affirmation and an agreement to close
    on August 20, 2014. Quite apart from the affirmatory conduct relied upon
    by the trial judge, additionally, the appellants did nothing for too long and
    the trial judge legitimately treated them as having affirmed the Agreement.

[50]

It
    was open to the trial judge to find that the appellants continued to press for
    performance of the Agreement after the June 27, 2014 extension of the Confirmed
    Occupancy Date. Based on the evidence before him, the trial judge made the
    requisite finding of conduct post June 27, 2014 and it was open to him to look
    to the appellants previous conduct to assist in interpreting their later
    behaviour, recognizing as he did that each extension of the Confirmed Occupancy
    Date required affirmation.

[51]

The
    trial judge identified and applied the correct legal test and made no palpable
    and overriding errors in finding that the appellants treated the Agreement as
    subsisting notwithstanding the respondents repudiation of the Agreement. I
    would dismiss this ground of appeal.

[52]

I
    would also add that, though not argued by the parties, even if there was no
    election to affirm and no election to disaffirm, by default, at law, there
    would be no election. Accordingly, on the July 30, 2014, closing date, the
    Agreement continued. Neither party was ready, willing or able to close on that
    date. As such, the rule in
King v. Urban & Country Transport Ltd.
(1973), 1 O.R. (2d) 449 (C.A.) was applicable. This rule was explained in
Domicile
    Developments Inc. v. MacTavish
(1999), 45 O.R. (3d) 302 (C.A.) as follows:

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.]

[53]

In
    the case under appeal, the respondent proposed August 20, 2014, as the new date
    but despite reasonable notice, the appellants did not close. The appellants
    attempt to terminate the Agreement on August 7, 2014 was ineffective because
    there was no repudiation in play that could be accepted at that time. Thus,
    even if there were no affirmation by the appellants, the result would be the
    same.

[54]

In
    conclusion, on any analysis, the first prong of the appellants ground of appeal
    based on repudiation must fail.

(2)

Alleged Lack of Knowledge

[55]

The
    appellants also submit that the trial judge erred in failing to consider that
    the appellants had insufficient knowledge to make an election. They argue that for
    an effective affirmation, the innocent party must have knowledge of both the
    facts and the legal right to choose between affirmation and termination of an
    agreement in the face of a repudiation. They submit that the appellants had
    neither.

[56]

For
    the following reasons, I would not give effect to this ground of appeal.

[57]

First,
    I note that this issue was not referenced in the appellants pleading which may
    explain why it was not expressly addressed by the trial judge.

[58]

Second,
    and more substantively, there can be no question that the appellants had
    knowledge of the underlying facts. All of the extension letters, which clearly described
    the cause and effect of each of the extensions, were sent to the appellants.
    Moreover, it is evident from the appellants evidence at trial that they were
    familiar with the factual state of affairs. As the closing was quickly
    approaching, they were attempting to assign the Agreement and were still open
    to all realtors. Mr. Yong testified that he never told the appellants real
    estate lawyer, Mr. Zayachkowski, how unhappy he was, to get him out, or to get
    his money back. It bears repeating that the appellants were not ingenue real
    estate purchasers. Unquestionably, the appellants had knowledge of the facts
    giving rise to the breaches described in Mr. Papadimitrious letter of August
    7, 2014.

[59]

The appellants also allege that they had no knowledge of
    their legal rights and in support, particularly rely on
Peyman v. Lanjani
,
    [1984] 3 All E.R. 703 (C.A.).

[60]

As
    noted by this court in
Samson v. Lockwood
, [1998] O.J. No. 2471, the
    facts of
Peyman
were unusual in that the plaintiffs lawyer was a party
    to the misrepresentations that grounded the plaintiffs legal rights. In
    addition, the court in
Peyman
relied on
Coastal Estates Pty Ltd.
    v. Melevende
, [1965] V.R. 433 (Austl. (Vic.) (S.C.)), which involved a
    case of fraudulent misrepresentation. In
Samson
, Rosenberg J.A. wrote,
    at para. 51:

In many cases, especially cases of fraudulent
    misrepresentation, it may be that proof of knowledge of the legal right to
    rescind should be a prerequisite to affirmation. However, I cannot accept that
    proof of knowledge of legal rights was necessary in the circumstances of this
    case. By August 1989, Mr. Lockwood was aware of the facts that gave him
    the right to rescind. He had access to any number of lawyers and his own real
    estate agent. He chose not to seek their opinion or advice.

[61]

In
    the case under appeal, the trial judge found that there was no basis in the
    evidence for suggesting that the [respondent] did not conduct itself honestly
    throughout this transaction, and he also found that the respondent believed
    that its extensions of the Confirmed Occupancy Dates were made for reasons
    permitted by the Agreement and the Act. As such, there is no room for the
    appellants to assert any fraudulent misrepresentations.

[62]

Moreover,
    the appellants had access to lawyers and indeed other real estate professionals
    throughout the real estate transaction. By December 9, 2013, they had retained
    Mr. Zayachkowski to act for them and his continued involvement is evident from
    the letters sent to him by the respondent advising of the last two extensions
    of the Confirmed Occupancy Date. Mr. Yong advised Mr. Zayachkowski that
    they were going to seek the assistance of a litigation lawyer to approach the
    developer for a return of the monies they had paid to the respondent and this
    resulted in the August 7, 2014 letter from Mr. Papadimitriou. The appellants
    did not call either lawyer as witnesses at trial.

[63]

As
    in
Samson
, the appellants had the opportunity to ascertain their legal
    rights from professional advisors but, to the extent they may not have had
    knowledge of their legal rights, exhibited total recklessness and indifference
    to the need to inquire into their legal rights. This is so particularly given
    that they had access to their real estate lawyer, Mr. Zayachkowski. Although in
Samson
,
Rosenberg J.A. left open the issue of whether
    affirmation by conduct and something less than recklessness would deprive a
    party of a right to rescind, the principles he articulated are applicable to
    the facts of this case.

[64]

I
    conclude that the trial judge did not err in determining that the appellants
    had affirmed the Agreement. The appellants had knowledge of the underlying
    facts and their affirmation of the Agreement is not rendered ineffective as a
    result of any other legal infirmity.

[65]

For
    these reasons, I would dismiss this component of the appellants first ground
    of appeal. It follows that it is unnecessary to address damages. However, the
    appellants claim relief from forfeiture in the alternative to which I will now
    turn.

(3)

Relief from Forfeiture

[66]

Under
    s. 21 of the Agreement, the deposits paid by the appellants were forfeited to
    the respondent. Among other things, s. 21 provided that the deposits were
    expressly deemed to be deposit monies only and not partial payments.

[67]

In
Azzarello v. Shawqi
, 2019 ONCA 820, 439 D.L.R. (4th) 127, at para. 45,
    leave to appeal refused, [2019] S.C.C.A. No. 521, Feldman J.A. briefly summarized
    the law relating to repudiation and real estate deposits stating:

It is well-established by case law that when a purchaser
    repudiates the agreement and fails to close the transaction, the deposit is
    forfeited, without proof of any damage suffered by the vendor: see
Tang v.
    Zhang
, 2013 BCCA 52, 359 D.L.R. (4th) 104, at para. 30, approved by this
    court in
Redstone Enterprises Ltd., v. Simple Technology Inc.
, 2017
    ONCA 282, 137 O.R. (3d) 374. Where the vendor suffers no loss, the vendor may
    nevertheless retain the deposit, subject to relief from forfeiture.

[68]

Under
    s. 98 of the
Courts of Justice Act
, R.S.O. 1990, c. C.43, a court may
    grant relief against penalties and forfeitures, on such terms as to
    compensation or otherwise as are considered just.

[69]

In
    his reasons, the trial judge described the factors to be considered for the
    purposes of relief from forfeiture as: whether the conduct of the party seeking
    relief from forfeiture was reasonable, whether the object of the right of
    forfeiture was to secure the payment of money, and whether there was a
    substantial disparity between the value of the property forfeited and the
    damage caused by the breach. The property forfeited in this case is of course
    the deposit.

[70]

In
    describing the factors, the trial judge relied on
Scicluna v. Solstice Two
    Limited
, 2018 ONCA 176, 421 D.L.R. (4th) 675, which drew on
Saskatchewan
    River Bungalows Ltd. v. Maritime Life Assurance Co.
, [1994] 2 S.C.R. 490,
    an insurance case.

[71]

Other
    authorities that have examined relief from forfeiture in the context of real
    estate deposits have applied an arguably different test. See for example:
Varajao
    v. Azish
, 2015 ONCA 218;
Redstone Enterprises Ltd. v. Simple
    Technology Inc.
, 2017 ONCA 282, 137 O.R. (3d) 374; and
Azzarello
.
    This test for relief from forfeiture, which is based on the English Court of
    Appeal decision of
Stockloser v. Johnson
, [1954] 1 Q.B. 476 (C.A.
    (Eng.)), poses two questions: (i) is the forfeited deposit out of all
    proportion to the damages suffered; and (ii) would it be unconscionable for the
    vendor to retain the deposit?

[72]

In
Redstone
, this court examined both questions. Lauwers J.A., writing
    for himself, Sharpe and Hourigan JJ.A., referred with approval to the
    five-person panel in
Tang v. Zhang
, 2013 BCCA 52, 359 D.L.R. (4th) 104.
    In
Tang
, the vendor had been able to resell a $2 million property for
    more than the original purchase price and had suffered no loss. Citing the
    principles that underlie a deposit, the British Columbia Court of Appeal
    overturned the relief from forfeiture of the $100,000 deposit granted by the
    trial judge. One such principle identified in
Tang
, and approved by
    Lauwers J.A., was that:

A true deposit is an ancient invention of the law designed to
    motivate contracting parties to carry through with their bargains. Consistent
    with its purpose, a deposit is generally forfeited by a buyer who repudiates
    the contract, and is not dependant on proof of damages by the other party. If
    the contract is performed, the deposit is applied to the purchase price.

[73]

Following
    upon that decision, and mindful of the recognition of the advantages of
    allowing parties to define for themselves the consequences of breach and the
    need for contractual certainty, in
Redstone
, Lauwers J.A. reasoned
    that the fact that the vendor suffered no damages did not in itself render the
    forfeiture of the entire deposit of $750,000 unconscionable. He stated at para.
    25 that the finding of unconscionability must be an exceptional one, strongly
    compelled by the facts of the case and noted, at para. 30, that the list of the
    indicia of unconscionability is never closed. Ultimately, this court concluded
    that the vendor was entitled to retain the full deposit paid by the purchaser
    in the face of no evidence of any damages.

[74]

As
    neither party to this appeal challenged the trial judges description of the
    applicable test, it is unnecessary to determine which test applies. The
    resolution of that issue is best left for another time and another case where
    the subject is fully argued and briefed.

[75]

On
    this appeal, the appellants make two submissions. First, they submit that the trial
    judge failed to consider his own finding that the respondent repudiated the
    Agreement on five separate occasions. I accept that the trial judge did not
    expressly address his earlier finding in this regard. However, the trial judge
    did describe the appellants argument to this effect and, that being so, I do
    not see any reason to conclude that he did not take that finding into account
    in reaching his conclusion on this issue. I also note that the trial judge did
    say that he was considering all the circumstances in reaching his conclusion
    and his summary of the appellants position preceded this statement by a mere
    three paragraphs.

[76]

Second,
    the appellants say that by improperly concluding that almost all of the amount
    of the appellants deposit covered the damages suffered by the respondent, he
    erred in not granting relief from forfeiture.

[77]

I
    do not agree.

[78]

As the Supreme Court stated in
Saskatchewan River
, relief from
    forfeiture is an equitable and discretionary remedy.
Absent a legal or
    palpable and overriding error, it is not for this court to substitute its
    discretion for that of the trial judge. Based on the record before him, he
    reasonably concluded that the respondent incurred expenses of approximately
    $227,544.24 consequent on the appellants breach.
[4]
The trial judge considered these expenses, the quantum of the deposit, and the
    increased proceeds of disposition received by the respondent on the resale of
    the property but chose not to exercise his discretion in favour of the
    appellants. Relief from forfeiture is not simply a mathematical formula; it is
    an exercise of discretion. Although the respondent ultimately may have gained
    approximately $100,000 from the transaction, I am unable to conclude that the
    trial judges refusal to grant relief from forfeiture of the appellants
    deposit was infected with error.

[79]

I
    would also add that the retention of the deposit by the respondent vendor in
    this case is consistent with the objective of a deposit and the prospect of its
    forfeiture as described in
Benedetto v. 2453912 Ontario Inc.
, 2019
    ONCA 149, 86 B.L.R. (5th) 1, at para. 14: a forfeited deposit does not
    constitute damages for breach of contract, but stands as security for the
    performance of the contract. See also
Benedetto
, at paras. 6-7;
Tang
,
    at paras. 20-24, 30.

[80]

However,
    I would add two important caveats to my conclusion on the issue of relief from
    forfeiture. First, it is of significance that the appellants did not challenge
    the quantum of the damages that the respondent said arose from the appellants failure
    to close the transaction nor did they challenge any of the constituent elements
    of the respondents damages. In other words, the appellants did not argue that
    any of these elements should not be considered as proper heads of damage in
    light of the respondents prior breaches.

[81]

Second,
    because the decision on relief from forfeiture is an inherently discretionary
    one based on the specific facts of a particular case, developers who act in a
    manner, such as the respondent did here, by which they do not honour their
    contractual obligations, should not expect that such a favourable outcome will
    necessarily be the result in future cases.

[82]

For
    these reasons, I would not interfere with the trial judges refusal to grant
    relief from forfeiture.

(4)

Costs

[83]

The
    appellants argue that particularly if the respondent is permitted to retain the
    deposit, the costs award of $68,713.62 inclusive of disbursements and tax in
    favour of the respondent should be replaced with no order for costs. In their
    submissions, the appellants rely upon this courts decision in
Payer v.
    Peerless Plating Rack Co.
(1998), 37 O.R. (3d) 781 (C.A.) and argue that
    the respondent obtained a windfall which should have been reflected in the
    costs award.

[84]

Absent
    an error in principle or an award that is plainly wrong, a trial judges
    exercise of discretion in the award of costs is entitled to deference:
Hamilton
    v. Open Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[85]

The
    oral costs reasons given by the trial judge were summary in nature and mainly focused
    on the respondents request for substantial indemnity costs which he properly
    dismissed. He touched upon
Payer
but considered it to be inapplicable
    because in the context of his forfeiture analysis, he had found that the
    respondent had not obtained a windfall.

[86]

Payer

involved claims by an estate against various parties. Due to an inadvertent
    failure to cancel an insurance policy, the company in which the deceased had formerly
    held an interest, but which had no insurable interest, received a windfall upon
    the deceaseds death. Even though the company was successful on the appeal, this
    court concluded that it would be inappropriate for it and the deceaseds former
    business partner to recover any costs on the appeal or the trial because they
    had received a windfall.

[87]

In
    the case under appeal, the conclusion that the respondent did not receive a
    windfall sufficient to invoke relief from forfeiture is not determinative of
    the costs award, and the trial judge erred in principle in treating the finding
    as such. Although not disproportionate or unconscionable for the purposes of
    forfeiture, based on the
Payer
decision, the $100,000 ought not to
    have been disregarded simply due to its characterization in the forfeiture
    analysis. This was an error in principle.

[88]

Although
    the respondent breached the Agreement on five occasions, the appellants lost
    their mortgage approval as a result, and the respondent ultimately earned a net
    profit of approximately $100,000, the respondent was successful in the action
    and arguably should be entitled to its costs. That said, even though this court
    is extremely reluctant to interfere with a trial judges award of costs, in the
    unusual circumstances of this case where the respondent ultimately gained
    approximately $100,000, it is fair and reasonable for the parties to bear their
    own costs of both the trial and the appeal and I would so order.




F.

Disposition

[89]

For
    these reasons, I would dismiss the appeal, grant leave to the appellants to
    appeal the costs award, vacate the costs award of $68,713.62 in favour of the
    respondent, and order the parties to bear their own costs of the trial and the
    appeal.

Released: July 30, 2021 S.E.P.

S.E. Pepall J.A.

I agree. I.V.B. Nordheimer
    J.A.

I agree. Thorburn J.A.





[1]

The developers were Cityzen Development Group and Fernbrook
    Homes.



[2]

In fact, Mr. Yong testified that the developer granted the
    assignment.



[3]

Rather than repeating the
    non-repudiating or innocent party formulation, I will use the words innocent
    party throughout.



[4]
The trial judge calculated the respondents costs as including occupancy fees
    ($82,686.35), a staging fee ($55,223.10), the listing commission ($12,594), and
    the real estate commission on sale ($121,400). To avoid double counting, he
    deducted a notional commission of $38,485.71 plus taxes, which was due to the
    brokerage firm, and a listing commission of $5,873.50 to account for the
    respondents expenses had the appellants closed in August 2014.


