



COURT OF APPEAL FOR ONTARIO

CITATION: Paterson Veterinary Professional
    Corporation v.

Stilton Corp. Ltd., 2019 ONCA 746

DATE: 20190924

DOCKET: C65863

Paciocco, Harvison Young and
    Jamal JJ.A.

BETWEEN

Paterson Veterinary Professional
    Corporation

Applicant (Respondent)

and

Stilton Corp. Ltd.

Respondent (Appellant)

W. Jaskiewicz, for the appellant

David Fogel, for the respondent

Heard: August 15, 2019

On appeal from the judgment of Justice E. Ria Tzimas of the Superior
    Court of Justice, dated August 21, 2018, with reasons reported at 2018 ONSC
    4952.

Harvison Young J.A.:

A.

Overview

[1]

The appellant, Stilton Corp. Ltd., appeals from
    a judgment which granted the application of the respondent, Paterson Veterinary
    Professional Corporation, for the enforcement of a settlement agreement that
    the parties concluded in 2013.

[2]

Stilton raises three distinct grounds on this
    appeal. First, it submits that the application judge erred in finding that an
    application was an appropriate procedure for enforcing a settlement agreement.
    Second, it submits that the application judge erred in finding that the
    doctrine of frustration was inapplicable in the circumstances of this case.
    Third, it submits that the application judge erred in granting the remedy of specific
    performance.

[3]

For the following reasons, I would dismiss the
    appeal.

B.

Factual Background

[4]

This matter arises out of a long association and
    a shorter history of litigation between veterinarians Dr. James McCleary,
    president and director of Stilton, and Dr. Marjorie Paterson, the sole director
    of Paterson Veterinary. Dr. McCleary began his practice in the 1970s. Dr.
    Paterson joined in the 1980s. The practice operated on Clarkson Road in
    Mississauga (the property). Paterson Veterinary eventually purchased the
    practice (known as the McCleary Animal Hospital) from Stilton through an
    agreement of purchase and sale. Stilton continued to own the property, but the
    agreement of purchase and sale granted Paterson Veterinary a lease of the
    property with an option to purchase. It is this property that is in issue in
    this appeal.

[5]

As a result of a dispute that arose when
    Paterson Veterinary wanted to exercise its option to purchase the property, it
    commenced an action for specific performance and other relief in April 2013. In
    December of that year, the parties settled that action. The settlement
    agreement provided that, following a five-year lease extension, Stilton would
    transfer its title and ownership of the property to Paterson Veterinary and
    Paterson Veterinary would pay the purchase price of $1,250,000 plus HST. The
    action was dismissed pursuant to the settlement agreement.

[6]

Paterson Veterinary continued to lease the
    property, as agreed. As it prepared to complete the contemplated purchase, Dr.
    Paterson was advised on January 26, 2018, through the appellants counsel, that
    Dr. McCleary d[id] not want to sell his property. Stilton refused to close
    the sale of the property on February 1, 2018, despite Paterson Veterinarys
    tender of the executed documents and certified cheques for the purchase price
    and HST.

[7]

Paterson Veterinary applied for specific
    performance of the settlement agreement and for a vesting order. Stilton
    opposed on a number of bases, including that: (1) there were material facts in
    dispute relating to the settlement agreement requiring the application to be
    converted into an action with a full trial, (2) the settlement agreement was no
    longer binding due to the increase in the value of the property, and that (3)
    Paterson Veterinary was not entitled to specific performance. The application
    was granted and is appealed to this court.

C.

Analysis

(1)

Did the application judge err in proceeding by
    way of application?

[8]

Stilton submits that the application judge erred
    by allowing this matter to proceed by way of application. In Stiltons view,
    the application was not properly brought, and proceeding by way of application
    is inappropriate because there are material facts in dispute. I do not accept
    either argument.

[9]

Although the application judge acknowledged that
    Paterson Veterinary had technically erred by failing to refer in its notice of
    application to r. 14.05 of the
Rules of Civil Procedure
, R.R.O. 1990,
    Reg. 194, she held that this oversight could properly be corrected. In her
    view, adding reference to the rule was covered by the phrase such further and
    other remedies as may be appropriate. I see no error in this decision.

[10]

The application judge also held that r.
    14.05(3)(d) and (e) provide for the use of an application in relevant
    circumstances, such as the determination of rights that depend on the
    interpretation of a deed, will, contract or other instrument and the making of
    a declaration of an interest in or charge on land. Rule 14.05(3)(h), as it
    read then, also spoke to the use of an application to obtain relief in respect
    of any matter where it is unlikely that there will be any material facts in
    dispute. Relying on these provisions, she held that the respondents claim
    could proceed by way of application. She did not err in doing so.

[11]

While it is clear that there are matters in
    dispute between these parties, there was, as the application judge concluded,
    no impediment to the courts ability to interpret the legal meaning of the
    [s]ettlement [a]greement and to make a declaration concerning the interest in
    the Clarkson property on the basis of the [s]ettlement [a]greement.

[12]

The appellant argues that the frustration issue
    engaged disputed material facts. I agree with the application judge that it did
    not. Neither party disputed that the value of the property had increased
    significantly since the settlement agreement was concluded. The issues engaged
    included, as she put it: the interpretation of the [s]ettlement [a]greement,
    the assessment of the existence of a breach, and a determination of the
    appropriate remedy for that breach.

[13]

The appellant argues that a request for specific
    performance should not be resolved by way of application. I disagree. Where
    appropriate, specific performance has been granted on applications brought to
    force the sale of real property: see e.g.
Di Millo v. 2099232 Ontario Inc.
,
    2018 ONCA 1051, 430 D.L.R. (4th) 296, leave to appeal to S.C.C. refused, [2019]
    S.C.C.A. No. 55;
THMR Development Inc. v. 1440254 Ontario Ltd.
, 2018
    ONCA 954, 85 B.L.R. (5th) 175;
Sivasubramaniam v. Mohammad
, 2018 ONSC
    3073, 98 R.P.R. (5th) 130, affd 2019 ONCA 242, 100 R.P.R. (5th) 1. In the
    circumstances of this case there are no material facts in dispute that would
    have rendered an application an inappropriate procedural route for determining
    whether to order the equitable remedy sought.

[14]

The application judge therefore did not err in
    allowing this matter to proceed by way of application.

(2)

Did the application judge err in finding that
    the settlement agreement was a valid and enforceable contract?

[15]

Stilton submits that the application judge erred
    in law by rejecting its arguments that the settlement agreement had been
    frustrated as a result of the steep appreciation in real estate prices or was
    ultimately the product of conduct that amounted to economic coercion and
    therefore not enforceable.

[16]

I agree with the application judges analysis on
    this issue. The appellant asks this court to find that the dramatic increase in
    the value of the property since the settlement agreement was negotiated is, in
    and of itself, a frustrating event. I would decline to do so.

[17]

A contract is frustrated when, due to a
    supervening event for which no provision was made by the parties, the
    performance of the contract becomes radically different from that which was
    undertaken:
Naylor Group Inc. v. Ellis-Don Construction Ltd.
,

2001
    SCC 58, [2001] 2 S.C.R. 943, at paras. 53-56. In this case, the price increase was
    not a supervening event that made the performance of the contract radically
    different. Assuming that the lowest initial appraisal exchanged by the parties
    during the settlement negotiation ($945,000) was an accurate estimate of the
    value of the property when the settlement agreement was reached in 2013, and
    that the 2018 appraisal accurately reflects its value ($1,925,000), the value
    of the property approximately doubled over this period. It was fully open to
    the application judge to conclude on these facts that this was insufficient to
    constitute frustration. I agree with her finding that the parties were alive to
    the issue of the propertys value and that they would not have premised their
    agreement on the value of this property staying the same. The price increase
    was significant but not an intervening event that in any way made the
    obligation to transfer the property, at its higher value, radically different.

[18]

As a general proposition, even dramatic price
    changes may be foreseeable and therefore not a suitable basis for a frustration
    claim. Price changes are a risk inherent in any market. This is no doubt why
    frustration claims based on price changes often fail: see e.g.
Holst v.
    Singh
, 2018 ONSC 4220, at para. 6;
642947 Ontario Ltd. v. Fleischer
(1997), 9 R.P.R. (3d) 261 (Ont. C.J.) at para. 97, revd 56 O.R. (3d) 417
    (C.A.). There are strong policy considerations militating against these claims.
    The finality and predictability of contractual relations, as foundational
    principles of our economy, depend on contractual rights weathering the ebbs and
    flows of the market. Certainly, in this case, holding that the increase in
    price over the five-year period frustrated Stiltons obligation to sell the
    property would turn the law of contract on its head by undermining those
    principles. I would reject this ground of appeal.

(3)

Did the application judge err in holding that
    the enforcement of the settlement agreement did not engage the courts
    equitable jurisdiction?

[19]

The application judge erred in finding that the
    existence of a settlement agreement allowed her to order specific performance
    without undertaking an analysis as to whether this was the appropriate remedy.
    I am aware of no authority supporting this approach. To the contrary, in
Veiga
    v. Veiga
, 2013 ONSC 7027, Stinson J. found it necessary for the party
    seeking specific performance of a settlement agreement to establish that it is
    warranted: at para. 43. Similar analysis has been undertaken in analogous cases
    elsewhere in Canada: see e.g.
Beier v. Proper Cat Construction Ltd.
,
    2013 ABQB 351, 564 A.R. 357, at paras. 97-101.

[20]

It was incorrect to say that the appellant had
    agreed to the requested specific performance of the sales transaction in the
    settlement agreement. The settlement agreement is by nature a contract. The
    contractual obligation taken on by the appellant in this settlement agreement
    is distinct from a remedy that may be ordered by the court upon finding that
    this contract has been breached. Even where parties explicitly stipulate in a
    contract that specific performance is preferred, which these parties did not
    do, such stipulations are not binding on the court: Robert J. Sharpe,
Injunctions
    and Specific Performance,
(Toronto: Thomson Reuters, 2012) (loose-leaf
    updated 2018, release 27), at para. 7.730. The application judge was required,
    upon finding the settlement agreement had been breached, to consider whether
    the courts equitable jurisdiction should have been exercised to grant the
    requested remedy of specific performance. With respect, she erred by not doing
    so.

(4)

Is specific performance the appropriate remedy?

[21]

Having determined that the application judge
    erred in failing to determine whether specific performance was an appropriate
    remedy, it is now necessary to undertake this analysis. As in
THMR
    Development
, this court is in as good a position as the application judge
    to deal with this issue because this case was argued on a paper basis: at para.
    21. As already discussed earlier in these reasons, there are no material facts
    in dispute that require a trial on this issue, despite the appellants
    submissions to the contrary.

[22]

Specific performance is a discretionary
    equitable remedy that should be granted where damages cannot afford an
    adequate and just remedy in the circumstances:
Matthew Brady Self Storage
    Corporation v. InStorage Limited Partnership
, 2014 ONCA 858, 125 O.R. (3d)
    121, at para. 29, leave to appeal refused, [2015] S.C.C.A. No. 50. In
    determining whether to exercise this discretion I consider below (1) whether
    the property is unique, (2) whether the respondent remained ready, willing and
    able to close, (3) whether the respondent is disentitled to an equitable remedy
    and (4) whether damages are a suitable and just alternative in this case. For
    the reasons that follow, specific performance was the appropriate remedy.

(1)

Is the property unique?

[23]

The Supreme Court of Canada has held that in the
    case of a breach of a contractual obligation to sell real property, specific
    performance should not be granted as a matter of course absent evidence that
    the property is unique to the extent that its substitute would not be readily
    available:
Semelhago v. Paramadevan
, [1996] 2 S.C.R. 415, at para.
    22. Real property will be unique when it has a quality that cannot be
    replicated elsewhere that relates to the proposed use of the property and makes
    it particularly suitable for the purpose for which it was intended:
John E.
    Dodge Holdings Ltd. v. 805062 Ontario Ltd.
(2001), 56 O.R. (3d) 341
    (S.C.), at para. 73, affd 63 O.R. (3d) 304 (C.A.), leave to appeal refused,
    [2003] S.C.C.A. No. 145.

[24]

In her evidence, Dr. Paterson lists a number of
    features that make the property uniquely suited to Paterson Veterinarys needs
    as the owner of the practice, including that it: (1) is currently set up as a
    veterinary clinic, (2) is a free-standing bungalow building, (3) has 11 parking
    spots, (4) is situated on a quiet street for walking dogs in her preferred
    neighbourhood, and (5) has capacity to board approximately 80 animals. There
    was no evidence as to the number of animals actually boarded or the financial
    significance of boarding to the practice. Dr. McClearys evidence was that the
    clinic had limited ability to board animals, and on cross-examination he
    estimated the capacity at 70 animals. He did not dispute the other
    characteristics highlighted by Dr. Paterson but denied that the property is
    uniquely featured.

[25]

Perhaps most significantly, it is undisputed
    that the clinic has operated out of the property since 1974. In that time,
    goodwill value has been accumulated. This goodwill attaches not only to the
    veterinary practice but also to the property on which it has operated during
    this period. Indeed, it is common ground that in negotiating the sale of the
    practice, Dr. Paterson was adamant that Paterson Veterinary would only buy if
    it was able to eventually purchase the building. Dr. Patersons evidence is
    that ownership of the property is critical to the business, and the
    respondent negotiated accordingly.

[26]

This fact scenario is very similar to that in
The
    One Stop Fireplace Shop Ltd. v. Parigon Industries Inc.
, 2013 ONSC 1562,
    31 R.P.R. (5th) 277. There, a tenant under a commercial lease brought an
    application to compel a landlord to sell the leased premises. On the issue of
    whether the property in question was unique, thereby entitling the tenant to
    specific performance, Nightingale J. found that the property was unique to the
    tenant because they had been operating their business out of the location for
    several years. As the property had accumulated considerable goodwill value to
    the tenant with its customers, it was unique to the tenant: at para. 72. Similarly,
    in this case, the goodwill value attached to the property makes it particularly
    suitable for the purpose of continuing to operate the veterinary practice.

[27]

I would also note the fact that the respondent
    negotiated with the appellant for title in the property not only when it
    purchased the veterinary practice, but also after settling the 2013 litigation.
    The consistency with which Dr. Paterson has pursued legal title in the property
    provides further support for the conclusion that it is uniquely suited to
    Paterson Veterinarys purpose. In addition, despite somewhat bald statements by
    Dr. McCleary on cross-examination that there are other similar or better
    properties nearby, Stilton has not provided specific details of any such
    property, for example, real estate listings of properties for sale.

[28]

Overall then, the respondent has met its burden
    of establishing that the property is unique. The property logically has a
    number of features that make it uniquely suited to the purpose of carrying on a
    veterinary practice that has in fact operated there for decades. Even if the
    physical features could be replicated elsewhere, an alternative location would
    be an inadequate substitute because the goodwill associated with the practice
    is intertwined with
this
property. It is common
    ground that the respondent would not have purchased the practice without the
    option to own the property and has twice negotiated its purchase. As the
    combination of the goodwill and physical features cannot be replicated
    elsewhere and are uniquely suited to the continuation of the veterinary
    practice by the respondent, the property is unique for the purposes of the
Semelhago
analysis.

(2)

Was the respondent ready, willing and able to
    close?

[29]

A party seeking a sale of real estate to be
    specifically performed must remain ready, willing and able to close on the
    purchase of the property:
Silverberg v. 1054384 Ontario Limited
(2008),
    77 R.P.R. (4th) 102 (Ont. S.C.), at para. 110, affd 2009 ONCA 698, 266 O.A.C.
    216.

[30]

Paterson Veterinary was and is clearly ready,
    willing and able to purchase the property as of the date agreed upon in the
    settlement agreement. The closing date set out in the settlement agreement is
    February 1, 2018. On January 26, 2018, Stiltons lawyer wrote to Paterson
    Veterinarys lawyer confirming that he represented Stilton, requesting that any
    further correspondence be directed to him, and expressing that Dr. McCleary did
    not want to sell the property. It is uncontested that on the agreed upon
    closing date a representative of Paterson Veterinary attempted to deliver
    closing documents, including certified trust cheques, to Stiltons lawyer. Dr.
    McClearys evidence is that he instructed his lawyer not to accept any
    documents related to the purchase of the property. It was the refusal of
    Stilton to sell, and not unwillingness or inability on the part of Paterson
    Veterinary that prevented the deal from closing. As in
Silverberg
, at
    para. 112, the commencement of the application for specific performance is
    evidence that Paterson Veterinary continues to be ready, willing and able to
    purchase the property.

(3)

Is the respondent disentitled to equitable
    relief?

[31]

A relevant consideration in deciding whether to
    order specific performance is the behaviour of the parties having regard to the
    equitable nature of the remedy:
Matthew Brady
, at para. 32. Equitable
    relief may be refused if the party seeking relief has been guilty of misconduct
    in relation to the contract that party seeks to enforce:
Silverberg
,
    at para. 120. Here, there are no facts disentitling the respondent to equitable
    relief. Paterson Veterinary has clean hands, there was no delay in bringing
    this application, and no disentitling circumstances were seriously alleged.

[32]

To the contrary, the equities of this case
    clearly favour the respondent. It seeks to enforce a settlement agreement that
    was negotiated between two commercial parties represented by counsel. That
    settlement agreement was itself the product of a lawsuit seeking an agreement
    of purchase and sale concerning this property to be specifically performed. As
    discussed above, Stiltons position that the settlement agreement was not
    enforceable is without merit. The agreement was breached. Dr. McClearys
    evidence is that he felt that the settlement agreement was no longer in full
    force and effect because there had been a dramatic increase in the propertys
    value and that the property is [his] baby. This did not justify Stiltons refusal
    to honour the settlement agreement. Here, the equities clearly favour the
    respondent who seeks to enforce a valid settlement agreement in face of the
    appellants clear breach.

(4)

Are damages a suitable alternative in this case?

[33]

Damages are not a suitable alternative to
    specific performance on the facts of this case. As discussed above, the
    property is uniquely suited to Paterson Veterinarys business and even a
    substantial damages award would not allow it to purchase a readily available
    substitute. Further, the damages caused by Stiltons breach would be difficult
    if not impossible to accurately quantify given the intertwining of the goodwill
    in the business with the goodwill in the property. It would be inequitable to
    force the respondent to engage in this exercise. It had already sued the
    appellant to specifically perform the sale and entered into a valid settlement
    agreement under which the appellant agreed to sell before finding itself in
    court again seeking specific performance of the same sale. As the application
    judge highlighted, there is value in parties being able to rely on settlement
    agreements and thus avoiding a never-ending spiral of litigation. Damages
    would therefore be inadequate and inequitable in the circumstances.

(5)

Conclusion on the appropriate remedy

[34]

Given that the property is unique, that Paterson
    Veterinary was and is willing and able to close the transaction, that there are
    no facts disentitling it to equitable relief, and that damages are not a
    suitable alternative, specific performance is the appropriate remedy.

D.

Disposition

[35]

I would dismiss this appeal. I would order the
    appellant to transfer title to the property pursuant to the settlement
    agreement. The sale must be completed within 30 days of the release of this
    decision, failing which I would order that the property shall vest in the
    respondent upon the respondents performance of its corresponding contractual
    obligations under the settlement agreement, provided such performance occurs
    within 90 days of the release of this decision.

[36]

If the parties have not been able to agree on
    costs, I would order that they file costs outlines, bills of costs along with
    their submissions, not to exceed 5 pages in length, within 10 business days of
    the receipt of this decision.

Released: September 23, 2019

DMP

A.
    Harvison Young J.A.

I
    agree D.M. Paciocco J.A.

I
    agree M. Jamal J.A.


