



COURT OF APPEAL FOR ONTARIO

CITATION: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc.,
    2019 ONCA 700

DATE: 20190910

DOCKET: C66128

Hoy A.C.J.O., Lauwers and Zarnett JJ.A.

BETWEEN

1179
    Hunt Club Inc.

Applicant (Appellant)

and

Ottawa Medical Square Inc. and Abrar
    Mobarak

Respondents (Respondents)

Elliot Birnboim and Michael Crampton, for the appellant

Anne Tardif, for the respondents

Heard: May 8, 2019

On appeal from the order
    of Justice Robyn M. Ryan Bell of the Superior Court of Justice, dated October
    17, 2018, with reasons reported at 2018 ONSC 6200.

Lauwers
    J.A.:

[1]

Ottawa Medical Square Inc., as purchaser, agreed to buy commercial condominium
    units in the Hunt Club project. The transaction did not close. The vendor, 1179
    Hunt Club Road Inc., applied for a declaration that the purchaser had anticipatorily
    breached the agreement of purchase and sale, and that the vendor was entitled to
    retain the deposit, under r. 14.05 of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194.

[2]

The application judge found that the agreement came to an end when both
    parties were unable to close the transaction on the appointed closing date. She
    required the vendor to return the deposit to the purchaser.

[3]

The vendor appealed and asks this court to make the declaration it
    sought, and to find that the respondent, Abrar Mobarak, who signed the
    agreement on behalf of the purchaser, is personally liable for the vendors
    damages as guarantor. The vendor wishes both to retain the deposit and to
    pursue an action for damages for breach of the agreement.

[4]

For the reasons that follow, I would dismiss the appeal.

A.

The Factual Context

[5]

The purchaser was to acquire commercial condominium units in the Hunt
    Club project for $5.6 million under an agreement of purchase and sale dated January
    19, 2015. The deposit was $250,000. Because it was a new project in the course
    of development, the closing date was uncertain. As provided for in the
    agreement, counsel for the vendor, Mr. Vinayagalingam, sent a letter to counsel
    for the purchaser on November 2, 2017 notifying him that the condominium documents
    had been registered, and setting the closing date for the transfer of the
    condominium units as November 28, 2017.

[6]

On November 22, 2017, new counsel for the purchaser, Mr. Presseau, sent
    an email to Mr. Vinayagalingam advising that his firm had just been retained.
    He asked for an extension of the closing date to allow the purchaser to secure
    financing and to accommodate the change in counsel. Mr. Vinayagalingam and Mr.
    Presseau then conversed about the closing date and the basis on which the
    vendor would agree to an extension. Mr. Presseau told Mr. Vinayagalingam that
    the purchaser would not close on November 28, and said to him we both know
    its not closing.

[7]

Litigation counsel for the vendor then sent a letter dated November 24,
    2017 to Mr. Presseau, which stated:

Mr. Vinayagalingam has conveyed to you the terms upon which our
    client would be willing to agree to an extension of the Unit Transfer Date. Your
    client has rejected these terms and in response has provided no concessions, assurances
    or incentive for our client to agree to the requested extension. Given the
    history of this transaction and the numerous concessions already granted to the
    Purchaser to date, our client is not prepared to agree to an extension of the
    Unit Transfer Date. Our instructions are therefore to insist that the close of
    the sale proceed on November 28, 2017, as scheduled, failing which our client
    will pursue all available rights and remedies, while also seeking to mitigate
    its damages.

If the sale does not close on November 28, 2017, your client
    will be in default of its obligations under the Agreement of Purchase and Sale.
    Our instructions are to then take immediate steps to have your clients deposit
    released to the Vendor in accordance with section 26 of the Agreement of
    Purchase and Sale, while our client seeks to mitigate its damages by finding a
    new purchaser.

[8]

However, on November 27, 2017, the vendor learned that the Land Registry
    Office had made an error in assigning parcel identification numbers to the
    condominium project. This problem was remedied late in the day on November 27,
    but it prevented the vendor from registering the remaining condominium
    documents and any transfers of the condominium units on that date. This came
    out distinctly in the evidence of Barry Godfrey, the vendors president. When
    cross-examined on his affidavits, he testified:

Q.  Okay. And as I understand, there was some kind of change to
    the parcel identification numbers that meant that the vendor was in fact unable
    to close on November 28th; correct?

A.  Yes.

Q.  Alright. And that has nothing to do with the purchaser;
    correct? I'll rephrase   

A.  Unless we give them the PINs, they can't take title.

Q.  Right. What I meant was the delay that was caused by the
    change in the PINs, that was not the fault of the purchasers.

A.  Correct.

[9]

Counsel then tussled over whether the lack of PINs meant the
    vendor was not ready, willing and able to close on November 28, the appointed
    date. Counsel instructed Mr. Godfrey not to answer the question, and took the
    question under advisement.

[10]

Counsel for the vendor later responded and answered in writing:

Yes, the Vendor was ready, able and willing to complete the
    transaction on November 28, 2017. On November 27, 2017, Mr. Grégoire [prior
    real estate counsel for the purchaser] was provided with the Statement of
    Adjustments in relation to the sale of the Units. The same day, Mr.
    Vinayagalingams office was advised that there had been an error at the [Land
    Registry Office] at Ottawa with respect to the PINs. That error was resolved
    later that evening.

The only outstanding registration issues on November 28, 2017 were
    the registration of the Shared Facilities Agreement and the Condominium By-Laws.
    At that time, these documents were prepared and ready to be registered. The Vendor
    was clearly in a position to register the Shared Facilities Agreement and the
    By-Laws on November 28, 2017.

Recall that Mr. Pressau [new counsel for the purchaser] advised
    Mr. Vinayagalingam on November 22nd that the sale of the Units would not close
    on the Unit Transfer Date while seeking an extension of same. Mr. Vinayagalingam
    also had received no response to his email enclosing the Statement of
    Adjustments, nor any response to his offices email requesting that the
    Gowlings firm [acting for the purchaser] designate an appropriate recipient of
    the Transfers on the morning of November 28th.

Had the Purchaser indicated (in
    any way) that it had reconsidered, and was ready, willing and able to close on
    November 28, 2017, Mr. Vinayagalingam's office would have registered the Shared
    Facilities Agreement and the By-Laws under the new PINs on that date, prior to
    registering the transfer to the Purchaser. In the event, those outstanding
    documents were in fact registered the next day, November 29, 2017.

B.

The Issues

[11]

There
    are three live issues in this case. First, did the purchaser anticipatorily
    repudiate the agreement? Second, if so, did such repudiation excuse the vendor
    from its obligation to be ready, willing and able to close the transaction on
    the closing date?
Third, d
id the
    guarantee clause in the agreement bind the signatory, Ms. Mobarak, personally?

C.

Analysis

(1)

Did the purchaser anticipatorily repudiate the agreement?

[12]

The application judge found, at para. 27, that Mr. Presseau did
    not anticipatorily repudiate the agreement in the conversation he had with Mr. Vinayagalingam
    on November 22, 2017. She expressed a concern that such an approach would
    automatically equate a partys request for an extension of time within which to
    complete a transaction an anticipatory repudiation of the contract. She
    worried that doing so would impede cooperative discussions between parties
    aimed at completing transactions and avoiding litigation.

[13]

I agree with application judge that a mere request for an
    extension of time would not ordinarily amount to anticipatory repudiation. But
    the conversation did not end there. The purchaser sought the extension of time
    because it did not have the financing to complete the transaction on the
    appointed date. Knowing this, the vendor was entitled to refuse the purchasers
    extension request. The purchaser moved into the state of being in anticipatory
    breach of the agreement when it did not relent in the face of the vendors refusal
    and undertake to close on the appointed date. It is not the request for an
    extension that amounted to the purchasers anticipatory breach, but its refusal
    to close on the appointed date when the vendor refused the extension as it was
    entitled to do. In my view the application judge erred in concluding that the
    purchaser did not anticipatorily repudiate the agreement.

(2)

Did the purchasers repudiation excuse the vendor from its obligation to
    be ready, willing and able to close the transaction on the closing date?

[14]

This issue requires consideration of the judgment of this court
    in
Domicile Developments Inc. v. MacTavish
(1999), 45 O.R. (3d) 302 (C.A.).
    At pp. 306-307 (paras. 10-12), Laskin J.A. said:

Because Domicile's rejection of MacTavish's anticipatory
    repudiation kept the agreement alive, time remained of the essence. A time is
    of the essence provision means that on the closing date an innocent party may
    treat the contract as ended and sue the defaulting party for damages or it may
    keep the contract alive and sue for specific performance or damages. In order
    to take advantage of a time of the essence provision the innocent party must
    itself be ready, desirous, prompt and eager to carry out the agreement.
    Domicile could not satisfy this requirement on the closing date. Because it had
    not yet substantially completed construction of the house it could not carry
    out the agreement. Equally MacTavish could not rely on the time of the essence
    provision to end the agreement. A time of the essence provision can be raised
    as a defence only by a party who is ready, willing and able to close on the
    agreed date and MacTavish was not ready, willing and able to close on September
    15, 1995.

Therefore, on the closing date neither Domicile nor MacTavish
    was entitled to enforce or end the agreement. A similar situation arose in
King
    v. Urban & Country Transport Ltd.
(1974), 1 O.R. (2d) 449, 40 D.L.R.
    (3d) 641, a decision of this court relied on by Binks J. 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 (at pp. 454-56):

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.

An important corollary of Arnup
    J.A.'s second proposition is that a party who is not ready to close on the
    agreed date and who subsequently terminates the transaction without having set
    a new closing date and without having reinstated time of the essence will
    itself breach or repudiate the agreement.

[15]

The
    application judge addressed
Domicile Developments
,

at para. 33.
    She noted that if the purchaser did anticipatorily repudiate the agreement, then
    the vendor, as the innocent party, was put to an election: it could accept the
    repudiation and sue for damages or it could reject the repudiation and insist
    on performance of the contract.

[16]

In applying
Domicile Developments
, the application judge
    found, at para. 34, that the vendor had made its election in its counsels
    November 24 letter, and expressly rejected the repudiation and insisted on
    performance of the agreement. Accordingly, the rejection of the purchasers
    anticipatory repudiation kept the agreement of purchase and sale alive, [and]
    time remained of the essence. In her view: In order to take advantage of a
    time of the essence provision, the innocent party must itself be ready,
    desirous, prompt and eager to carry out the agreement (
Domicile
    Developments
at para. 10).

[17]

The application judge then considered whether the vendor was in a
    position to close the transaction on November 28, 2017, the closing date set by
    the vendor. She assessed the evidence, particularly the written answer of
    counsel to the question taken under advisement in Mr. Godfreys
    cross-examination. She rejected the assertion that the vendor would have registered
    the Shared Facilities Agreement and condominium by-laws on November 28, 2017 if
    the purchaser had indicated it was ready, willing and able to close: at paras. 39-40.

[18]

The application judge gave three
    reasons for rejecting the evidence. First, she stated at para. 40: 
It
    is clearly contentious. Pursuant to r. 39.01(5) of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194, this evidence cannot be provided on
    information and belief. Second, she added: More importantly, it lacks
    credibility as it contradicts the evidence provided by Mr. Godfrey in his
    affidavit.

[19]

Third,
    as noted in paras. 41 and 42, the vendors position that November 28 was the
    proper closing date contradicted an email by Mr. Vinayagalingam on November 30
    invoking s. 36 of the agreement to close on November 30 electronically, and the
    position taken by counsel for the vendor at the cross-examination of Mr.
    Godfrey that specified November 30 as the date on which the purchaser failed to
    close. The application judge stated that it was too late for the vendor to
    now assert that the date of [the purchasers] breach was November 28, 2017 in
    an effort to avoid the consequences of its own inability to close the
    transaction on November 28, 2017.

[20]

I
    note that Mr. Godfreys answer to the question taken under advisement, to the
    effect that the vendor would have registered the Shared Facilities Agreement
    and condominium by-laws on November 28, 2017, really concedes that on that day it
    was not actually ready to close.

[21]

If
    the vendor had simply refused to accept the purchasers repudiation, it would
    have been open to the vendor on November 28, 2017 to tender or to set a new
    closing date.
Domicile Developments
states that when time is of the
    essence and neither party is ready to close on the agreed date, the agreement
    remains in effect. By contrast, here the vendor not only refused to accept the
    repudiation but insisted that the transaction close on November 28, specifying
    the consequences if that did not occur, including the immediate pursuit of
    legal remedies. The application judge concluded that, in light of that
    insistence, because the vendor was not ready on November 28, the agreement came
    to an end. She relied on
Kwon v. Cooper
(1996), 89 O.A.C. 239 (C.A.),
    leave to appeal refused, [1996] S.C.C.A. No. 142, where the vendors insistence
    that the closing occur on the scheduled date and its threat to claim damages if
    that did not occur, given its own subsequent failure to be ready, willing and
    able to close as scheduled, resulted in the contract coming to an end. In such
    a situation the vendor could not rely on
King v. Urban & Country
    Transport Ltd
. to maintain that the agreement continued in effect and to
    set a new closing date.

[22]

I
    agree with the application judges analysis.

[23]

Having
    refused to accept the purchasers repudiation of the agreement, and having
    insisted on perfection in the purchasers performance, the vendor was required
    to render perfection in its own performance and it did not. The vendors
    failure to tender on November 28, 2017 was fatal. This strict approach is not
    unusual in the law, in view of the maxim he who seeks equity must do equity, or
    in life, where the proverbial caution that he who lives by the sword dies by
    the sword. Both resonate.

[24]

I
    do not agree, however, with the application judges approach to the evidence of
    Mr. Godfrey on one point. His evidence, given via counsels answer to a
    question taken under advisement, was that the vendor would have been ready,
    willing and able to close on November 28, 2017 if the purchaser had indicated
    it was ready to close. In my view, an answer to an undertaking has the same
    character as the basic document to which it relates, in this case Mr. Godfreys
    affidavit. The application judge invoked r. 39.01(5) of the
Rules
to
    assert that counsels answer, which constitutes evidence, cannot be provided
    on information and belief because it is clearly contentious

[25]

The
    difficulty with the application judges approach is that r. 14.05 permits an
    application for a declaration in relation to an agreement of purchase and sale,
    as in this case. However, if a factual controversy that is real, relevant and
    material emerges, and could affect the outcome of the case, then the
    controversy must be resolved before the decision can be justly rendered. In my
    view it is not open to an application judge to sidestep an issue on the basis
    that it has become controversial. The method of resolution in applications is
    usually the trial of an issue, which can be as short and efficient as the
    application judge directs. In the spirit of
Hryniak v. Mauldin
, 2014
    SCC 7, [2014] 1 S.C.R. 87, it would be most efficient if the application judge
    remained seized of the matter.

[26]

In
    this case, the issue is not whether the vendor could have been ready to close
    on November 28, 2017, but that it was not ready to close on that date, a date
    on which it insisted. Hence the controversy was not material.

[27]

The appellant argues that its
    failure to register
the Shared Facilities Agreement and condominium
    by-laws on November 28, 2017 amounted to a
curable
    imperfection/defect that could have been
easily cured the next day.

The appellant cites in support

Time Development Group Inc. (In trust) v. Bitton
,

2018 ONSC 4384, 98 R.P.R. (5th) 308,

but that was a case involving an imperfect tender
    where the vendor remained capable of closing on the scheduled date
.
Having set the
    date, here the vendor did not trouble itself to tender, and in fact could not
    have tendered because on that day it was incapable of transferring title.

[28]

I
    therefore agree with the application judge that, since the agreement terminated
    on November 28, 2017 because of the inability of both parties to close, the
    purchaser is entitled to the return of the deposit.

(3)

Did the guarantee clause in the agreement bind the signatory, Ms.
    Mobarak, personally?

[29]

The
    appellant argues that Ms. Mobarak is liable for damages it suffered from the
    respondents failure to close because the agreement she signed contained a
    guarantee clause that bound her personally.

[30]

Ms.
    Mobarak is the purchasers president, secretary and founding director, although
    Mr. Godfrey admitted that he did not know this at the time that the agreement
    of purchase and sale was signed in January 2015. Her signature appears on the
    first page of the agreement of purchase and sale, where she signs for the
    purchaser. The vendor relies on the guarantee in s. 41(b) of the agreement,
    which is buried in thick text on p. 9. It provides:

Where the Purchaser is a
    corporation, or where the Purchaser is buying in trust for a corporation to be
    incorporated, the execution of this Agreement by the principal or principals of
    such corporation, or by the person named as the Purchaser in trust for a
    corporation to be incorporated, as the case may be, shall be deemed and
    construed to constitute the personal guarantee of such person or persons so
    signing with respect to the obligations of the Purchaser herein.

[31]

There
    is no other indication in the agreement that the signatory is signing a
    guarantee in her personal capacity.

[32]

As
    a result of the purchasers failure to waive the financing condition in its
    favour in the original agreement of purchase and sale, the agreement of
    purchase and sale became null and void. The parties reinstated the agreement subject
    to the terms and conditions set out in a reinstatement and amending agreement
    made as of April 30, 2015. The agreement was specifically revived without any
    conditions in favour of the purchaser. Although she signed it for the
    purchaser, Ms. Mobarak was not personally a party to that agreement and it does
    not refer to a personal guarantee.

[33]

The
    application judge found that, reading the agreement of purchase and sale
    agreement as a whole and considering the surrounding circumstances, the
    agreement was ambiguous as to whether the parties intended s. 41(b) to be a
    personal guarantee on the part of Ms. Mobarak. Applying the contra proferentem
    rule, the application judge found that s. 41(b) does not amount to a personal
    guarantee given by Ms. Mobarark. She also concluded that, if it had amounted to
    a valid guarantee, then Ms. Mobaraks obligations were discharged when the
    agreement of purchase and sale came to an end as result of the purchasers
    failure to waive the financing condition. She was not a party to the new
    agreement, it did not refer to the guarantee, and it varied the risks under the
    agreement by deleting the condition in favour of the purchaser.

[34]

I
    largely agree with the application judges reasoning. The guarantee clause is
    an artfully designed trap for the unwary, the validity of which must be closely
    considered by the court: see Kevin McGuinness,
The Law of Guarantee
,
    3rd ed. (Markham: LexisNexis Canada, 2013), at p. 365, s. 7.88.

D.

Disposition

[35]

I
    would dismiss the appeal, with costs payable by the appellant to the respondent
    in the amount of $10,000 all-inclusive, as agreed.

RELEASED: A.H. September 10, 2019

P. Lauwers J.A.

I agree. Alexandra Hoy
    A.C.J.O.

I agree. B. Zarnett
    J.A.


