



COURT OF APPEAL FOR ONTARIO

CITATION: Fortress Carlyle Peter St. Inc. v. Rickis
    Construction and Painting Inc., 2019 ONCA 866

DATE: 20191104

DOCKET: C66769

MacPherson, Pepall and Lauwers JJ.A.

BETWEEN

Fortress Carlyle Peter
    St. Inc.

Plaintiff
(Respondent/Responding Party)

and

Rickis Construction and Painting Inc.

Defendant
(Appellant/Moving Party)

Daniel Schwartz and Scott McGrath, for the appellant

Maureen L. Whelton and Neil G. Wilson, for the
    respondent

Heard: October 25, 2019

On appeal from the
    judgment of Justice Paul M. Perell of the Superior Court of Justice, dated March
    6, 2019, with reasons reported at 2019 ONSC 1507.

REASONS FOR DECISION



I.

Introduction

[1]

In 2017, the respondent, Fortress Carlyle Peter St. Inc. (Fortress),
    signed an agreement of purchase and sale (APS) with the appellant, Rickis Construction
    and Painting Inc. (Rickis), to purchase property in Toronto. The transaction
    did not close and Fortress sued Rickis for specific performance. The parties
    brought duelling motions for summary judgment. The motions judge dismissed
    Rickis motion for summary judgment, but granted summary judgment in favour of
    Fortress, and ordered specific performance of the APS. Rickis appeals from
    that order and seeks leave to admit fresh evidence.


II.

Background
    Facts

[2]

Beginning in 2013, Fortress began to assemble properties for a condominium
    project in Toronto. One of the properties it sought to acquire was 120 Peter St.
    (the Property). This Property was owned by Rickis. Fortress and Rickis had
    made numerous attempts to buy and sell the Property, but none of these efforts
    materialized.

[3]

In the summer of 2017, the parties signed a letter of intent (LOI) for
    the sale of the Property for $4.5 million, subject to Fortress reviewing and
    being satisfied with the leases encumbering the Property. The Property was
    encumbered by four leases. One of the tenants was 1730474 Ontario Inc., whose
    principal was Kole Ndreka, the brother of the principal of Rickis, Rick
    Ndreka. A review of that lease revealed that it could be terminated on 90 days
    notice. Having reviewed the four leases, Fortress waived the conditions in the
    LOI and proceeded to sign the APS. Fortress provided a total of $1 million as a
    deposit and the closing date was set for August 13, 2018, at 6:00 p.m.

[4]

The APS provided that estoppel certificates for the tenancies were to be
    provided to Fortress five days prior to closing. Rickis solicitor, Peggy
    Spadafora, advised Fortress solicitor, Emily Lau, that three of the four
    tenants had vacated the property and only 1730474 Ontario Inc. would be
    providing an estoppel certificate.

[5]

On July 30, 2018, Ms. Lau sent Ms. Spadafora a letter enclosing the
    template of the estoppel certificate required. On August 1, 2018, Ms. Spadafora
    sent Rickis, Fortress template. On August 2, 2018, Ms. Lau sent a letter of
    title requisitions for the pending closing. It was sent without prejudice to Fortress
    rights and requested the estoppel certificate on or before closing. Up until
    August 13, 2018, Fortress, through its counsel, made numerous unsuccessful requests
    for the estoppel certificate.

[6]

In the morning of August 13, 2018, Rick Ndreka attended Ms. Spadaforas office
    to sign the vendors closing documents. He returned the estoppel certificate to
    Ms. Spadafora. However, the certificates contents had been altered. The 90 day
    notice to vacate provision had been replaced with a provision stating that the
    termination of the lease was to be negotiated between the parties. Rick
    Ndreka did not advise of this change nor was Ms. Spadafora aware of it.

[7]

Naram Mansour, Fortress principal, called Rick Ndreka that morning
    seeking the estoppel certificate. Mr. Mansour also sought to extend the closing
    date to August 15, 2018 until the certificates were received and reviewed. Mr.
    Ndreka said he would get back to Mr. Mansour later in the day.

[8]

At approximately noon, Ms. Spadaforas office sent Ms. Lau the signed
    copy of the altered estoppel certificate. Ms. Lau reviewed it and wrote to Ms.
    Spadafora advising that the alterations were unsatisfactory. Ms. Lau also advised
    Mr. Mansour of the problem. Mr. Mansour then repeatedly attempted to contact
    Mr. Ndreka about the altered estoppel certificate. Mr. Ndreka said that he
    would contact Mr. Mansour but failed to do so. In the meantime, Mr. Mansour
    also pressed his bank to ensure that the closing funds were deposited into his
    lawyers trust account.

[9]

Close to 5:00 p.m., Ms. Spadafora sent Ms. Lau the correct estoppel
    certificate. At around 5:15 p.m., Ms. Lau contacted Ms. Spadafora requesting an
    extension of the closing until the next morning. Mr. Mansour also attempted to
    contact Mr. Ndreka and later texted him advising him that confirmation of the
    funds being transferred from the bank was imminent.

[10]

At
    6:00 p.m., Ms. Spadafora wrote to Ms. Lau stating that Rickis had delivered
    all necessary closing documents and keys, was ready, willing, and able to close
    the transaction that day, and if closing funds were not received by 6:00 p.m.,
    Rickis would note Fortress in default and the APS would be terminated. Ms.
    Spadafora stated that Rickis was not willing to grant any extensions for the
    transaction.

[11]

At
    6:16 p.m., the bank confirmed that the closing funds had been transferred to
    the trust account, and Ms. Lau forwarded this confirmation to Ms. Spadafora at
    6:19 p.m. Mr. Mansour called Mr. Ndreka at 6:20 p.m. to advise him the funds
    had been wired. Mr. Ndreka stated that the transaction was dead.

[12]

On
    August 21, 2018, Fortress issued a statement of claim against Rickis claiming
    specific performance. As mentioned, it brought a motion for summary judgment
    for such relief on October 31, 2018, and Rickis bought a cross-motion for
    summary judgment seeking an order dismissing Fortress action.

III.

Decision of the Motions Judge

[13]

In
    his reasons, the motions judge confirmed that both parties had taken the
    position that the case was appropriate for summary judgment. He agreed with
    their position. He recognized that there were genuine issues of credibility,
    fact and law, but they did not require a trial, and it was in the interests of
    justice to decide the matter by summary judgment.

[14]

The
    motions judge wrote comprehensive reasons and described the relevant real
    estate legal principles engaged by the case. Before this court, no one takes
    issue with the motions judges description of the applicable legal principles.

[15]

The
    motions judge granted Fortress request for specific performance. He found that
    the Property was critical to Fortress development plans, and as such, Fortress
    had established the uniqueness of the Property, a precondition to an order for
    specific performance.

[16]

The
    motions judge found that Rickis had breached the APS and had failed to act in
    good faith. It had not delivered the estoppel certificate as provided by the
    APS, it had delivered an altered estoppel certificate which also amounted to a
    breach of the APS, and only delivered the suitable estoppel certificate close
    to 5 p.m. on the day of closing. As a result, in these circumstances, Rickis
    was no longer in a position to insist on time being of the essence. As such,
    Rickis was not entitled to terminate the APS and forfeit the deposit even if
    Fortress was offside in meeting the 6:00 p.m. deadline. For Rickis to insist
    on time being of the essence: (i) it had to have shown itself to be ready,
    desirous, prompt, and eager to carry out the APS; and (ii) it could not have been
    the cause of the delay or default in performing the APS. Neither of these
    preconditions was satisfied.

[17]

For
    Fortress part, the motions judge concluded that it had acted in good faith and
    had satisfied the preconditions for a claim for specific performance. Applying
    Justice Catzmans dicta in
Morgan v. Lucky Dog Ltd.
(1987), 45 R.P.R.
    263 (Ont. H.C.J.), the motions judge held that Fortress would have been ready,
    willing, and able to close on August 13, 2018 but for the misconduct of Rickis
    which more than discomfited Fortress. The estoppel certificate was a critical
    factor in Fortress development plans, and the delivery of a proper certificate
    approximately one hour before the scheduled 6:00 p.m. closing precluded Rickis
    from relying on the provision in the APS making time of the essence.

[18]

Alternatively,
    even accepting that both parties were at fault, Rickis still would not have a
    defence to Fortress claim for specific performance. As the motions judge said,
    at para. 107:

In accordance with the major legal principles set out above,
    when both contracting parties breach the contract, the contract remains alive
    with time no longer of the essence but either party may restore time of the
    essence by giving reasonable notice to the other party of a new date for
    performance, which is what occurred in the immediate case when Ms. Lau
    suggested that the transaction close on August 14, 2018.

[19]

Even
    if both parties were at fault, it was reasonable for Fortress to fix August 14,
    2018 for the closing of the transaction. Rickis refused to close, and thus, Fortress
    was entitled to a decree of specific performance.

IV.

Grounds of Appeal

[20]

The
    appellant raises four grounds of appeal. It also seeks to admit fresh evidence to
    establish that Fortress was and is in financial difficulties, and hence was and
    is not ready, willing, and able to close the transaction.

(1)

Legal Theory Relied on by Motions Judge

[21]

Rickis
    submits that the motions judge decided the case on a legal theory that was not
    pleaded or argued. In particular, it argues that the motions judge made
    findings of deceit and fraudulent misrepresentation, and that these causes of
    action were not pleaded or argued. It submits that the appellant was prejudiced
    because it did not know the case it had to meet.

[22]

We
    do not agree with this submission.

[23]

At
    para. 76(c) of his reasons, the motions judge found that Rickis delay, deceit,
    and breach of contract in providing an altered estoppel certificate at noon,
    and its late delivery of the correct estoppel certificate on the day of closing
    meant it could no longer rely on time being of the essence. Its misconduct
    precluded that reliance.

[24]

Dealing
    first with the argument relating to deceit, the statement of claim clearly
    pleaded an absence of good faith and lack of honesty. The cross-examinations
    made it abundantly clear that Fortress was relying on Rickis misconduct to
    argue that time was no longer of the essence. Moreover, Fortress factum also
    made it clear that it was relying on the doctored estoppel certificate as the
    basis for its claim that Rickis had breached the APS and acted in bad faith.
    Indeed, Fortress asserted that providing the doctored estoppel certificate was
    an act of bad faith tantamount to fraud. The theory behind the time not being
    of the essence was fully explored. There was no surprise and no prejudice to
    Rickis.

[25]

In
    any event, to the extent the motions judges analysis referred to deceit, his
    conclusion was not dependent on any such finding. As already discussed,  he
    also relied on the alternative scenario where both parties were at fault for
    breaching the APS, and arrived at the same conclusion that Fortress was
    entitled to a decree of specific performance.

[26]

As
    for fraudulent misrepresentation, the only reference to that claim was in para.
    18 of the motions judges reasons. There he listed the six applicable legal
    principles with which neither party takes issue on appeal.  No reliance was
    placed on that cause of action.

[27]

We
    would not give effect to this ground of appeal.

(2)

Summary Judgment Procedure

[28]

Second,
    Rickis submits that it was incumbent on the motions judge to expressly
    consider whether the expanded summary judgment powers should have been used to
    resolve conflicts in the evidence.  In addition, the motions judge failed to
    address all of the inconsistencies in the parties evidence.

[29]

The
    motions judge was clearly alive to the state of the evidentiary record before
    him. From the outset, the motions judge expressly identified the presence of
    issues of credibility, fact and law, and went on to conclude that a trial was
    unnecessary. He proceeded to provide a detailed analysis of his credibility and
    factual findings, together with his legal reasoning. In these circumstances, it
    was unnecessary to advert to the summary judgment expanded powers rule. He
    implicitly considered that rule and was satisfied that the interests of justice
    were served without resort to the expanded powers. Both parties agreed that the
    case was appropriate for summary judgment and neither counsel asked the motions
    judge to have recourse to the expanded summary judgment powers.

[30]

As
    for the appellants argument that the motions judge failed to resolve all of
    the inconsistencies in the evidence, he was not required to do so. He did
    explain why he accepted the respondents evidence and rejected that of the appellant.
    He dismissed the appellants assertions that the doctored estoppel certificate
    was provided by mistake and that it was based on one of the parties earlier
    transactions. This made no sense given that no estoppel certificates existed in
    the earlier transactions. Moreover, Rickis provided no explanation on why the
    estoppel certificate prepared by Ms. Spadafora using Fortress template and
    which she had emailed to Rickis, had been altered. The motions judge also
    legitimately drew an adverse inference from Rickis failure to call his
    brother, the principal of the tenant, as a witness. Lastly, there were no other
    witnesses or documents that supported Rickis mistake theory.

[31]

As
    for the respondents evidence, the motions judge did wrestle with the issue of
    the availability of funds to close and found in favour of the respondent. He concluded
    that on the morning of August 13, 2018, there was no reason for Mr. Mansour to
    say that money was tight because the respondent had the funds available to be
    wired to close the transaction.

[32]

We
    would not give effect to the appellants submissions with respect to this
    ground of appeal.

(3)

No Palpable and Overriding Errors

[33]

Third,
    the appellant submits that the motions judge ignored or failed to consider key
    evidence and made palpable and overriding errors with respect to the timeline
    of events.

[34]

We
    disagree with these propositions. The errors were minor in nature and had no
    impact on the outcome of the parties dispute.

·

The fact that Ms. Lau suggested in cross-examination that
    Fortress be in funds ahead of time was not a material omission by the motions
    judge. Nothing turned on this fact.

·

The requisition letter was quoted by the motions judge. There was
    no need for him to pursue this line of inquiry given that by its terms, it did
    not amount to waiver. In addition, there must be an unequivocal and conscious
    intention to abandon a right for waiver to be effective. See
Technicore
    Underground Inc. v. Toronto (City)
, 2012 ONCA 597, 296 O.A.C. 218, at
    para. 63. There was none.

·

The motions judge referred to the previous failed transactions. He
    was not obliged to draw any inferences or conclusions from those failures.
    While they provided background detail, nothing turned on them.

·

The motions judge found at para. 62 that: While it would have
    been prudent for Fortress to have already put Brattys LLP in funds, it had the
    money available to be wired to the law firm. The only reason that Fortress
    wished a delay in closing was to confirm that a proper estoppel certificate had
    been delivered.  Money was not the issue. This finding was available to the
    motions judge on the record.

·

While we accept that the motions judge misstated the precise time
    of the banks transmission of funds, it is evident from his reasons read as a
    whole that he understood that the money arrived 16 minutes after 6 p.m.

·

The other timing oversights identified by the appellant were
    minor in nature and of no moment in the ultimate result.

[35]

We
    are not persuaded of the merit of this ground of appeal.

(4)

Nexus Between Bad Faith and Inability to Close

[36]

Fourth,
    the appellant submits that even if Rickis acted in bad faith and was
    deceitful, specific performance was not justified.  Counsel argues that for
    Fortress to successfully obtain an order for specific performance, Fortress had
    to show that: (i) it was ready, willing, and able to close on August 13, 2018;
    (ii) the default was in no way attributable to it; and (iii) it continued to be
    ready, willing, and able to perform the contract. The appellant submits that
    Fortress was not ready, willing, and able to close on the date fixed for
    closing because it needed to have the closing funds by 6:00 p.m. which it did
    not have.

[37]

Again,
    we disagree.

[38]

As
    in
Lucky Dog
, the motions judge concluded that Rickis delay was a
    deliberate tactical decision to discomfit the purchaser, Fortress. The motions
    judge found, at para. 105: Fortress would have been ready, willing and able to
    close on August 13, 2018 but for the misconduct of Rickis Construction which
    more than discomfited Fortress. The estoppel certificate was a critical factor
    in Fortresss development plans, and after the delayed delivery of any
    certificate, the late delivery of a certificate with serious issues, and the
    late delivery of a proper certificate, one hour before the scheduled 6:00 p.m.
    closing, Rickis Construction was precluded from relying on the provision in
    the Agreement of Purchase and Sale making time of the essence.

[39]

The
    motions judge went on to conclude that alternatively, if the legal situation
    was that both parties were at fault, Rickis still did not have a defence to Fortress
    claim for specific performance. This is because when both contracting parties
    breach a contract, the contract remains alive with time no longer being of the
    essence. As the motions judge explained, either party may restore time of the
    essence by giving reasonable notice to the other party of the new date for
    performance. This is precisely what occurred when Ms. Lau suggested that the
    transaction close on August 14, 2018.

[40]

We
    would not give effect to this ground of appeal.

(5)

Fresh Evidence

[41]

Lastly,
    we would not admit the fresh evidence.

[42]

The
    fresh evidence does not meet the test articulated in
Palmer v. The Queen
,
    [1980] 1 S.C.R. 759, at p. 775, and
Sengmueller v. Sengmueller
(1994),
    17 O.R. (3d) 208 (C.A.).

[43]

In
    our view, the fresh evidence, even if believed, could not reasonably, when
    taken with the other evidence adduced, be expected to have affected the result.


V.

Disposition

[44]

For
    these reasons, the motion to admit the fresh evidence is dismissed, as is the
    appeal. If any directions are required to implement the judgment for specific
    performance, they may be sought from the motions judge. The appellant shall pay
    the respondent costs fixed in the amount of $40,000, inclusive of disbursements
    and applicable tax.

J.C. MacPherson J.A.

S.E. Pepall J.A.

P. Lauwers J.A.


