



COURT OF APPEAL FOR ONTARIO

CITATION: Jesan Real Estate Ltd. v. Doyle, 2020 ONCA 714

DATE: 20201110

DOCKET: C67768

Feldman, Fairburn and Nordheimer JJ.A.

BETWEEN

Jesan Real Estate Ltd.

Applicant (Appellant)

and

Sean Doyle
, John Koutsoukos, Deena
    Koutsoukos and Anthy Koutsoukos

Respondents (
Respondent
)

Pathik Baxi, for the appellant

Sean Doyle, acting in person

Heard: in writing

On appeal from the judgment of Justice M.J. Lucille Shaw
    of the Superior Court of Justice dated November 6, 2019, with reasons reported
    at 2019 ONSC 6448.

Feldman J.A.:

[1]

The appellant, Jesan Real Estate Ltd. (Jesan), rented a home to the
    respondents pursuant to a written Occupancy Agreement (OA). The parties also
    entered into a written Option to Purchase Agreement (OPA) whereby the
    respondents could elect to purchase the property at the end of the term for a
    fixed price on defined conditions. One of the respondents, Sean Doyle,
    purported to exercise the option but the attempted exercise was rejected by Jesan.
    Mr. Doyle and Jesan then entered into an agreement to purchase the property for
    a higher price, but Mr. Doyle did not complete the purchase on the date set for
    closing. Mr. Doyle and the other respondents remained in the premises as
    renters.

[2]

Jesan brought an application seeking the following relief: an order that
    the OA and the OPA are null and void; leave to issue a writ of possession; an
    order that the deposit paid in respect of the agreement of purchase and sale be
    forfeited. Only Mr. Doyle responded to the application. The remaining named
    respondents, who are all members of Mr. Doyles family, did not participate in
    the hearing.

[3]

The application judge dismissed Jesans application without addressing
    the status of the uncompleted agreement of purchase and sale and the tenancy. I
    would allow the appeal, set aside the order and address the result as set out
    below.

Background facts

[4]

Through the agency of Wayne Muir, a real estate agent acting for all
    parties, Jesan, acting through Mr. Khan, and the respondents entered into the
    OA in respect of 25 Napa Valley Crescent on February 17, 2014 for a term of 36
    months beginning March 31, 2014 and ending on February 28, 2017. The monthly
    rent was $2515. On the same day they also entered into the OPA. The intent was
    that the respondents would rent with a view to purchasing the property.

[5]

Under the OPA, the respondents, described as the Occupant, were granted
    the option to purchase the property at the end of the occupancy agreement, so
    long as the Occupant complies with all conditions of the Occupancy Agreement,
    and, as long as the Occupant is not in default (all outlined in the Occupancy
    Agreement) for the Purchase Price of$489,000.00 CDN

[6]

A number of the terms of the OPA are reproduced here as they form the
    basis for determining the rights of the parties:

TERMS:



(e) Initial Option
    Deposit will be credited to the Occupant to go toward the down payment upon
    successful Purchase of the property. The Initial deposit is non refundable.
    Should the Occupant not exercise their right to Purchase the property, the
    Occupant shall forfeit this initial deposit in its entirety

(f) Monthly Option
    Payment credit will be credited back to the Occupant to go toward their down
    payment upon successful Agreement to purchase the property. Monthly option
    payment is only credited for months in which payments are made as agreed, on
    time. Monthly payment option credit will be forfeited for the month in which monthly
    payment is not made on time. Should the Occupant not exercise his right to
    purchase the Property, the Occupant forfeits all monthly option payment credits

OPTION DEPOSIT AND
    MONTHLY CREDITS:

Initial Option
    Deposit (Non Refundable) at time of signing of this Agreement $20,000.00 held
    in ReMax Realtron Realty Inc trust account until day of Occupancy when it is to
    be released to the Owner

Second Option Deposit
    (Non Refundable) on date of closing/occupancy   $   0.00

Monthly Option
    Payment Credit (Non Refundable) $375.00

EXERCISE OF OPTION:

The option may be
    exercised 60 days prior to the end of the term of the Occupancy Agreement
    unless mutually agreed to accelerate the Option, but not earlier than 2 years
    and shall be exercised by mailing or personally delivering written notice of
    intent to purchase to the Owner and by an additional deposit in the amount of
    $1,000.00 (CDN) One Thousand Dollars payable in Trust to the Owners Solicitor.

Notice, if mailed, it
    shall be registered mail, to the Owner at the address set forth below and shall
    be deemed to have been given upon the day following the day shown on the post
    office receipt.

In the event the
    option is exercised, the Option Deposit shall be credited back to the Occupant.
    The Monthly Option Payment Credits, if any shall be credited back to the
    Occupant, for each month the Occupancy Payment has been paid when due. If the
    Occupancy fee was late for any month, even for one business day, credit will
    not be given for that month. These funds will only be credited if the option is
    exercised and the sale of the Property closes. In particular, if the option is
    not exercised, the Occupant forfeits and the Owner retains all Option Deposits
    and Credits. If the Occupant is not in breach of contract and the Owner decides
    to terminate the contract, the Option Deposit shall be credited back to the
    Occupant. By exercising the option, the Occupant states that their obligation
    to purchase is unconditional. In particular, the Occupant states that the
    required financing is in place. The Investor hereby acknowledges that the
    Occupant is not in default and that this agreement is firm and binding for

title
    transfer to the Occupant and must abide by this agreement.

EXPIRATION OF OPTION

Notice of Intent to
    purchase may be made at least 90 days before the last day of the term of the
    Occupancy Agreement. If notice is not received and/or the Property is not
    purchased, the Option to Purchase expires. Upon expiration, the owner shall be
    released from all obligations hereunder and all Occupants rights hereunder,
    legal or equitable shall cease.

EXTENSION OF AGREEMENT:

If financing cannot
    be obtained on behalf of the Occupant by the designated mortgage team, and the
    Occupant is not in default, then this Agreement shall continue on a month to
    month basis for an additional (6) six months with no increase in the Occupancy
    payment or change in the Monthly Option Payment Credit. The Purchase Price
    shall however increase at the rate of 0.25% per month. If after these
    additional (6) six months, the Property still has not closed, then the Monthly
    Option Payment Credit can, at the option and absolute full discretion of the
    Owner, be increased. The Purchase Price shall increase at the rate of .3% per
    month.

NOTICES:

Any notice which
    either Party may or is required to give, may be given by mailing the same
    postage prepaid, to Occupant at the Property or to the Owner at the address
    shown below or at such other places as may be designated by the Parties from
    time to time.

TIME:

Time shall be of the
    essence of this Agreement.

[7]

According to the OPA, the option to purchase was conditional on the
    respondents compliance with all the conditions of the OA and not being in
    default. The respondents agreed to pay to the agent an initial non-refundable deposit
    of $20,000 upon signing the OPA, which was to be released to Jesan on the date
    of occupancy. If the option was exercised, the initial deposit would be
    credited to the purchase price as a down payment, together with a non-refundable
    credit of $375 per month. As a result, the amount of $33,500, paid to Jesan by
    the end of the lease term, would be credited to the purchase price as a down
    payment if the option to purchase was exercised. If the option to purchase was
    not exercised, this sum would be forfeited to Jesan.

[8]

The option was to be exercised by registered mail or personal service of
    a written notice of intent to purchase on Jesan and by an additional deposit of
    $1000 payable in trust to Jesans solicitor. The mailing address was not
    included in the agreement. The time limits for exercising the option were set
    out in the OPA.

[9]

On February 3, 2017, Mr. Muir emailed an offer to purchase on behalf of Mr.
    Doyle to Jesan for the agreed price of $489,000. The offer referred to a down
    payment of $35,000. However, the further $1000 called for in the OPA was not
    included. Jesan refused to agree to the offer. The application judge found that
    Mr. Khan did not communicate at that time that the offer did not comply with
    the OPA, but discussed with Mr. Muir the fact that the property was worth a lot
    more than the option price. Mr. Muir advised Mr. Doyle to make an offer for
    more money in order to avoid litigation. Mr. Muir prepared a second offer to
    purchase which was signed by Mr. Doyle on March 1 and by Mr. Khan on behalf of Jesan
    on March 7, 2017. The offer was for $550,000, again with $35,000 as the down payment
    and with the same closing date as the first offer, March 31. Mr. Doyle sent a
    bank draft on March 3 to Jesan for $1500 re RTO Final Payment, with RTO
    meaning rent to own.

[10]

Following
    acceptance of the second offer, Jesan asked for and received from Mr. Doyle three
    payments of $375 each because the rent had been late three times over the term,
    and the OPA provided that late payments would not count toward the down
    payment.

[11]

Mr.
    Doyle had difficulty arranging financing to close the transaction. Some of the
    other respondents contacted Jesan and advised that Mr. Doyle wanted to add a
    family member as a purchaser to facilitate financing.  Jesan refused to amend
    and relied on the time of the essence provision of the agreement of purchase
    and sale.

[12]

Mr.
    Doyle failed to close on March 31. Instead, on that same day, Mr. Doyles
    lawyer advised Jesan by letter that Mr. Doyle was exercising his right to
    extend the OPA by six months because he was still arranging financing. The
    letter alleged that Mr. Doyles inability to close was due to Jesan breaching
    the OPA and increasing the purchase price to $550,000.

[13]

In
    response, Jesans lawyer took the position that the February 3 email was not a
    valid notice of exercising the option to purchase because of a number of non-compliances
    including: it was not delivered personally or by registered mail; it did not
    enclose the $1000 deposit; and it was not delivered within 60 days prior to the
    end of the term of the OA. The letter also stated that the OA term ended on
    February 28 and that the OPA had expired. In response, Mr. Doyle registered a
    caution on the property and continued to reside there and pay monthly rent of $2515.

[14]

As
    indicated above, this litigation was commenced by Jesan seeking a declaration
    that the OA and OPA were null and void and for leave to issue a writ of
    possession. The respondents did not file a cross-application seeking any relief
    such as specific performance or relief from forfeiture.

Findings by the application judge

[15]

The
    evidence on the application consisted of an affidavit of Mr. Khan, an affidavit
    of Mr. Doyle, and the transcripts of the cross-examinations on those affidavits
    together with the answers to undertakings. The application judge explained that
    there was conflicting evidence on issues such as whether Mr. Doyle first
    notified Jesan in December 2016 that he wanted to purchase the property, and
    whether Jesan communicated in February after the February 3 email with no
    deposit that Mr. Doyle was in breach of the OPA.

[16]

The
    application judge found that Mr. Doyle first notified Jesan of his intention to
    exercise the option on February 3, 2017. She also found that Jesan first notified
    Mr. Doyle by letter dated April 18, 2017, after the second agreement failed to
    close, that his purported exercise of the option to purchase breached the OPA.

[17]

Relying
    on the Supreme Court of Canada decision in
Sail Labrador Ltd. v. Navimar
    Corp.
, [1999] 1 S.C.R. 265 (S.C.C.), the application judge found that the OA
    and the OPA constituted a bilateral contract, and that the legal result of that
    characterization was that only substantial non-performance of the terms of
    the contract by Mr. Doyle would be sufficient to disentitle him to performance
    by Jesan. The application judge defined substantial non-performance as
    requiring a finding that Mr. Doyles failure in performance substantially
    deprived Jesan of what was bargained for.

[18]

The
    application judge considered the effect of the time is of the essence clause,
    and found, based on the parties conduct during the term of the lease, that they
    did not intend time to be of the essence, or, at the very least, that Jesan
    acquiesced to delayed payments on multiple occasions. As examples, the
    application judge identified: the $20,000 deposit was not paid when the
    respondents took possession, but after, contrary to the OPA, and Jesan accepted
    late lease payments by etransfer made more than 120 hours after a cheque was
    returned for insufficient funds, which was not in accordance with the OA. The
    application judge concluded that by acquiescing to late occupancy payments and
    a late deposit, Jesan had waived the time of the essence requirement, and could
    not rely on the time of the essence provision of the OPA.

[19]

The
    application judge also noted, applying
Sail
at para. 50, that in this
    bilateral agreement, there was no provision requiring strict performance that
    would preclude the application of the substantial non-performance doctrine. She
    then concluded that Mr. Doyle had substantially complied with the option
    exercise terms and therefore, with the OPA. She added that if she was in error
    and the OPA was a unilateral contract, then any non-performance by Mr. Doyle
    was
de minimis
and did not amount to a fundamental breach.

[20]

The
    application judge specifically addressed each of the three alleged breaches of
    the option conditions and found that each one did not amount to substantial
    non-performance:

1)

The requirement to pay
    an extra $1000 deposit did not specifically say it had to be paid at the same
    time the option was exercised. Mr. Doyle paid it on March 3, 2017 as part of
    the bank draft of $1500 following the agreement on the second offer and it was
    accepted by Jesan.

2)

Mr. Doyle could not strictly
    comply with the requirement to serve the notice of exercising the option by
    mail because no address for service was included in the agreement. The email
    notice gave functionally clear and unambiguous notice to Jesan with no
    disadvantage to it. Also, email was not specifically prohibited by the OPA or
    OA.

3)

The notice served on
    February 3 was not out of time. There was ambiguity because the OPA provided
    for both 60 days and 90 days notice, and used the word may rather than must.
    Because of the ambiguity, there was no requirement for strict compliance. It
    was enough for Jesan to receive notice of Mr. Doyles intention to exercise the
    option prior to the end of the term of the OA.

[21]

The
    application judge concluded that Jesan did not accept the first offer, not
    because of any breach of the OPA in exercising the option to purchase, but
    because the price was too low. She concluded that the parties were still operating
    under the OPA because:  1) Mr. Doyle paid  $1125 on March 27 to make up the
    down payment because the three late rental payments  under the OA did not count
    toward the down payment under the OPA; and 2) Mr. Doyle paid the $1500 deposit
    to satisfy the OPA requirement for a further $1000 deposit upon exercise of the
    option to purchase.

[22]

Based
    on these findings, the application judge concluded that she did not have to address
    whether Mr. Doyle was in breach of the March agreement of purchase and sale based
    on the second offer, whether he had forfeited the $35,000 deposit, or whether
    he was entitled to an extension of the March 31 closing date. Instead, she
    found that Jesan failed to comply with its obligation to sell the property for
    the option price of $489,000 and dismissed the application.

Issues

[23]

This
    appeal raises four issues:

1.

Was Jesan
    entitled to reject the exercise of the option by Mr. Doyle because his notice
    did not comply with the OPA?

2.

Was the second
    agreement a new contract or an extension of the OPA?

3.

Is the deposit
    of $35,000 to be forfeited to Jesan or is Mr. Doyle entitled to any relief from
    forfeiture?

4.

Is Jesan
    entitled to an order for a writ of possession?

Analysis

Issue 1: Was Jesan entitled to reject the exercise of the
    option by Mr. Doyle because his notice did not comply with the OPA?

[24]

The
    respondents purported to exercise their option to purchase the leased premises,
    contained in the OPA, by way of an email to Jesan on February 3, 2017.  The OPA
    required the option to be exercised by mail or personal service, and that it be
    exercised 60 days before the end date of the OA which was February 28, 2017, or
    up to two years before that date. It also required a further $1000 deposit.

[25]

When
    Jesan did not accept the exercise of the option at the option price of $489,000,
    Mr. Doyle agreed with Jesan to purchase the leased property for the price of $550,000,
    but with the same terms as contained in the OPA regarding crediting of the initial
    down payment of $20,000, plus $375 from each lease payment that had been made on
    time, plus adding the $1000 deposit plus an additional $500 in order to round up
    the down payment amount to $35,000.

[26]

Mr.
    Doyle failed to close the transaction on the closing date of March 31, 2017. He
    has remained in the premises paying the same rent as before.

[27]

Because
    the contract is an option to purchase, the application judge referred to the
    decision of the Supreme Court of Canada in
Sail
, where the court
    explained that while an option is often viewed as a unilateral contract where
    the conditions for exercise must be strictly complied with, if the option is
    closely linked with another contract between the parties, then it is a
    bilateral contract which requires only substantial performance of the
    conditions to be enforceable. However, the substantial non-performance doctrine
    is always subject to the express terms of the contract. In
Sail
,
at
    para. 50, the court explained:

Having found that the option in the present case is a clause of
    the bilateral charter party, it must next be determined whether the parties
    have expressly provided for literal and strict enforcement of any or all of the
    terms of this contract. Courts will generally give effect to the parties
    intentions by upholding any clear contractual provisions which provide that the
    breach of a certain term, no matter how slight, will justify rescission of the
    entire contract by the non-offending party [Waddams, pp. 400-401; Treitel, pp.
    694-95;
Lombard North Central plc v. Butterwort
, [1987] Q.B. 527 (Eng.
    C.A.) ]. If the parties have made no such provisions, the bilateral nature of
    the contract in the present case will require that this Court apply the
    substantial non-performance doctrine.

[28]

Therefore,
    if the OPA is part of a bilateral agreement, to which the doctrine of substantial
    non-performance would generally apply, in order to assess whether Mr. Doyles non-compliance
    with the requirements for exercising the option amounted to a breach of the OPA
    that allowed Jesan to reject the exercise of the option, the court was required
    to read the OPA to determine its requirements and whether there are any
    provisions that speak to strict performance of the contract, or, conversely,
    that allow for some leeway in performance of the contractual obligations.

[29]

The
    application judge found that the OPA was part of a bilateral contract with the
    OA, and that there was no provision of the contract that required strict
    performance of its terms. I agree that the OPA is linked to the OA and that the
    OPA is part of a bilateral contract. However, by finding that no clause in the
    agreement had the effect of requiring strict performance of the conditions of
    exercise of the option, the application judge failed to address a number of specific
    clauses in the OPA that speak to the requirement for strict compliance.

[30]

For
    example, two clauses in the agreement govern the operation of the monthly option
    credit toward the down payment. The first is under the heading Terms
    subparagraph (f) which provides:

(f) Monthly Option Payment credit will be credited back to the
    Occupant to go toward their down payment upon successful Agreement to purchase
    the property. Monthly option payment is only credited for months in which
    payments are made as agreed, on time. Monthly payment option credit will be
    forfeited for the month in which monthly payment is not made on time. Should
    the Occupant not exercise his right to purchase the Property, the Occupant
    forfeits all monthly option payment credits.

[31]

The
    second is under the heading Exercise of Option:

In the event the option is exercised, the Option Deposit shall
    be credited back to the Occupant. The Monthly Option Payment Credits, if any
    shall be credited back to the Occupant, for each month the Occupancy Payment
    has been paid when due.
If the Occupancy fee was late for any month, even
    for one business day, credit will not be given for that month
. [Emphasis
    added].

[32]

These
    two provisions make it clear that the monthly option payment of $375.00 would
    only be credited toward the down payment for each month that the rent was paid
    on time, and that it would not be credited even if payment was late by only a
    day. It is indisputable that these provisions speak to strict performance of
    the monthly credit provision.

[33]

Other
    clauses that also speak to the requirement for strict performance are the two waiver
    clauses, the time of the essence clause, the entire agreement clause and the severability
    clause. I will set out the two waiver clauses and the time of the essence
    clause here:

WAIVER OF CONTRACTUAL RIGHT: The failure of either party to
    enforce any provision of this Agreement will not be construed as a waiver or
    limitation of that Partys right to subsequently enforce and compel strict
    compliance with every provision of this agreement.

WAIVERS: No failure of the Owner to enforce any term hereof
    shall be deemed a waiver, nor shall any acceptance of partial payment of
    monthly Occupancy payment be deemed a waiver of Owners right to full amount of
    refund.

TIME: Time shall be of the essence of this Agreement.

[34]

While
    the application judge briefly discussed the time is of the essence clause in
    the OPA, she concluded that Jesan waived the right to enforce it because it had
    accepted some late lease payments under the OA and the late $20,000 deposit. In
    reaching the conclusion that Jesan had waived its right to insist on strict
    compliance with time requirements in the OPA, the application judge failed to give
    effect to the two waiver provisions above.

[35]

While
    the standard of review for the interpretation of contracts set out in
Creston
    Moly Corp. v. Sattva Capital Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, is
    deferential on issues of fact as well as on the factual aspect of questions of
    mixed fact and law, the failure to read a disputed contract as a whole is a
    question of law:
Sattva
, at paras. 53, 63-64. Since the application
    judge did not consider the specific clauses in the contract which contradict
    her findings, and there is no indication that she took them into account when
    interpreting the contract, she committed an error of law and no deference is
    owed on appeal:
Fuller v. Aphria Inc.
, 2020 ONCA 403, at para. 50;
Thunder
    Bay (City) v. Canadian National Railway Company
, 2018 ONCA 517, 424 D.L.R.
    (4th) 588, at para. 46, leave to appeal to S.C.C. refused, 38247 (March 28,
    2019).

[36]

With
    the whole contract in mind, the court must reconsider the three impugned
    instances of non-compliance with the conditions for the notice to exercise the
    option to purchase: 1) the timing; 2) the method of delivery; 3) the $1000
    deposit.

(a)

Timing of the Notice

[37]

The
    OPA provides under Exercise of Option that the option may be exercised 60
    days prior to the end of the term of the [OA] unless mutually agreed to
    accelerate the Option, but not earlier than 2 years. Another provision,
    entitled Expiration of Option, provides that Notice of Intent to purchase
    may be made at least 90 days before the last day of the term of the [OA]. If
    notice is not received and/or the property is not purchased, the Option to
    Purchase expires.

[38]

As
    noted, the OPA also contains a clause that makes time of the essence. A time
    is of the essence clause is engaged where a time limit is stipulated in a
    contract. It means that a time limit in an agreement is essential such that
    breach of the time limit will permit the innocent party to terminate the
    contract.
Di Millo v. 2099232 Ontario Inc.
, 2018 ONCA 1051, 430 D.L.R.
    (4th) 296, at paras. 32-33, leave to appeal refused, [2019] S.C.C.A. No. 55.

[39]

Despite
    the timing requirements, and the time of the essence clause, the application
    judge concluded that Jesan could not insist on strict compliance with these
    provisions. She concluded that time was not of the essence because Jesan accepted
    some late lease payments and a late deposit and had thereby waived the time of
    the essence requirement. She also found the terms of exercise of the option
    ambiguous on the issue of timing. She noted that the OPA references both a 60
    day and 90 day notice period, and uses the word may rather than must. Accordingly,
    one interpretation, she stated, is that the
earliest
Mr. Doyle
    could exercise the option was 60 days before the end of the OA term, unless the
    parties agreed to an earlier date. [Emphasis added]. She concluded that if
    Jesan had wanted strict timing compliance, it should have drafted the terms in
    an unambiguous and internally consistent way.

[40]

In
    my view, the application judge erred in law by effectively reading out the
    timing requirements of the notice provision. Jesan was entitled to insist on
    strict compliance with the timely notice requirements of the OPA.

[41]

First,
    Jesan did not waive the time of the essence clause by accepting a late deposit
    and some late lease payments by etransfer. The application judges conclusion
    to that effect ignores the waiver clauses that state that any non-enforcement
    of any right under the contract will not be construed as a waiver of strict
    compliance with the Agreement.

[42]

Second,
    there was no ambiguity in this case. While the agreement contemplates both a 60
    day and a 90 day notice, which in some circumstances could create ambiguity, such
    circumstances did not arise in this case. The notice was given 25 days before the
    end of the lease term.

[43]

The
    use of the word may, rather than must, similarly does not create any
    ambiguity. Mr. Doyle was not required to exercise the option to purchase. But
    if he did, then it had to be exercised at least 60 days prior to the end of the
    OA. Moreover, there is no indication that the parties understood the OPA as
    operating in the manner proffered by the application judge. During
    cross-examination, Mr. Doyle agreed that the OPA required him to exercise his
    option to purchase 60 days prior to the end of the term. He did not suggest
    that his February 3 notice was in time. Rather, he claimed that he in fact had exercised
    the option 60 days prior to the end of the OA term  an assertion the application
    judge considered and rejected in her findings of fact.

[44]

As
    time was of the essence of the agreement and any forgiveness of late payment
    under the OA could not be construed as a waiver of the requirement of strict
    compliance with the time of the essence provision, the notice of exercise of
    the option was not made in a timely manner and was ineffective under the agreement.
    Jesan was entitled to insist on strict compliance with the timing requirements
    in the OPA and treat the OPA as terminated when notice was not provided in
    time. In the context of strict compliance analysis, a notice delivered 35 days
    late was not
de
minimis
.

(b)

Method of Delivery

[45]

The
    Exercise of Option clause required that the notice be delivered by registered
    mail to the address set out in the agreement or by personal service. As no
    address for Jesan was set out on the agreement, service by registered mail in
    compliance with the agreement was not possible. However, there was no
    impediment to personal service. Had the notice by email been delivered on time,
    an argument could have been made that the email constituted substantial
    performance of the contract, if it was proved that the notice came to the
    attention of Jesan. However, because it was delivered out of time, that issue
    need not be finally decided.

(c)

$1000 Deposit

[46]

The
    Exercise of Option clause states that the option is to be exercised by a
    written notice of intent and by an additional deposit in the amount of $1000.00
    (CDN) payable in trust to the owners solicitor. In this case, the amount was
    paid, not as part of the notice of intention to exercise the option, but later
    as part of the agreement of purchase and sale on the second offer. Based on
    what occurred, no deposit was ever paid with the notice of intent.

[47]

I
    disagree with the application judges conclusion that the deposit could be paid
    after the OA had expired because its timing requirement was ambiguous. The Exercise
    of Option clause states that The option may be exercised 60 days prior to the
    end of the term of the [OA]
and shall be exercised
by mailing or
    personally delivering written notice of intent to purchase to the owner
and

by an additional deposit in the amount of $1,000.00 (CDN). [Emphasis
    added]. The option is only exercised upon receipt of written notice of intent
and

a $1000 deposit. Without a deposit paid 60 days before the end of the OA, the
    option to purchase would expire because it had not been properly exercised.

[48]

In
    any event, even if the timing for the deposit payment is ambiguous, Mr. Doyle
    was not entitled to pay the deposit anytime, as the application judges reasons
    imply. When an agreement does not expressly reference a time for performance,
    the law will imply a term that it must be performed within a reasonable time:
Ju
    v. Tahmasebi
, 2020 ONCA 383, 447 D.L.R. (4th) 349, at para. 20;
Di
    Millo
, at para. 38. Here, the $1500 purportedly satisfying the $1000 OPA
    deposit requirement was paid on March 3, 2017, after the expiry of the term of
    the OA. In the circumstances of this case, this could not be payment within a
    reasonable time.

Conclusion: Issue 1

[49]

In
    my view, the application judge erred in law by failing to analyze the
    deficiencies in compliance with the conditions of the exercise of the option in
    the context of the specific contractual requirements of non-waiver and the time
    of the essence provision. She also made a palpable and overriding error by
    finding that the payment of the $1000 deposit satisfied the condition of
    exercise of the option when no deposit of $1000 was paid until a new agreement
    was reached.

[50]

I
    conclude that in light of the failure by Mr. Doyle to exercise the option in
    accordance with the requirements of the OPA, Jesan was entitled to reject the
    notice of intent. Although Jesans motivation for rejecting the notice may well
    have been because of the increase in value of the property, his legal
    entitlement to take that position was justified only by Mr. Doyles failure to
    comply with the OPA in exercising the option to purchase.

Issue 2: Was the second agreement a new contract or an
    extension of the OPA?

[51]

The
    agreement of purchase and sale for $550,000 was entered into following Jesans
    rejection of the notice of exercise of the option. That agreement included a
    deposit of $35,000 which was made up of the same components contemplated by the
    OPA, but with an additional $500. The application judge viewed the parties
    treatment of this deposit as evidence that the OPA was not null and void. Mr.
    Doyle tried to exercise his right under the OPA to a six-month extension of the
    agreement, as if the agreement was made in accordance with and was governed by
    the OPA. By dismissing Jesans application for an order declaring the OPA null
    and void, the application judge appeared to find that the OPA had not been
    terminated.

[52]

However,
    in so concluding, the application judge failed to consider the Expiration of
    Option provision of the OPA, which provides that where the option is not
    exercised, the agreement expires. In this case, Mr. Doyle did not exercise the
    option in accordance with the conditions of the OPA. As a result, the OPA
    expired. The agreement of purchase and sale for $550,000 was a new agreement.
    While it included the same credit for the deposit as Jesan had agreed to in the
    OPA, that did not have the effect of extending the OPA in contradiction to its
    express terms. As a result, Mr. Doyle was not entitled to the six-month
    extension provided in the OPA.

Issue 3: Is the deposit of $35,000 to be forfeited to Jesan or
    is Mr. Doyle entitled to any relief from forfeiture?

[53]

The
    deposit of $35,000 consisted of the $20,000 initially paid in 2014 and referred
    to as the Initial Option Deposit in the OPA; $375 per month for 33 months of
    the lease, plus $375 for three months that had to be made up because of three
    late lease payments that became disqualified for credit under the terms of the
    OPA; plus the $1500 extra deposit paid on March 3, 2017.

[54]

When
    a purchaser fails to close an agreement of purchase and sale, the vendor is
    entitled to retain the deposit regardless of whether he or she suffers a loss,
    subject to the courts ability to grant relief from forfeiture:
Azzarello
    v. Shawqi
, 2019 ONCA 820, 439 D.L.R. (4th) 127, at paras. 45-47,
leave to appeal to S.C.C. refused, 38982 (April 16, 2020):

However, forfeiture is always subject to the
    equitable remedy of relief from forfeiture. Section 98 of the
Courts
    of Justice Act
,
R.S.O. 1990, c.
    C.43, provides that: [a] court may grant relief against penalties and
    forfeitures, on such terms as to compensation or otherwise as are considered
    just. In
Stockloser v. Johnson
, [1954] 1 Q.B.
    476 (Eng. C.A.), the English Court of Appeal set out the two pronged test that
    has been followed in Ontario for applying the relief from forfeiture provision:
    1) whether the forfeited deposit was out of all proportion to the damages
    suffered; and 2) whether it would be unconscionable for the seller to retain
    the deposit:

Redstone

at para. 15

(para. 47).

[55]

In
Redstone Enterprises Ltd. v. Simple Technology Inc.
, 2017 ONCA 282, 137 O.R. (3d) 374, the court stated at para. 25 that the
    finding of unconscionability must be an exceptional one, strongly compelled on
    the facts of the case. Where there is no gross disproportionality in the size
    of the deposit, the court must consider other indicia of unconscionability. The
    list of the indicia of unconscionability is never closed and is context
    specific. Relevant factors include the gravity of the breach and the conduct of
    the parties:
Redstone
, at paras. 29-30.

[56]

In order to consider the question whether forfeiture of the deposit is
    unconscionable, the following facts are relevant:

(a)

$20,000 of the deposit was paid as the initial
    option deposit under the OPA which provides in Term e) that the initial deposit
    is non-refundable and will be forfeited if the right to purchase is not
    exercised;

(b)

the credits of $375/month from the monthly rental
    were also credited to the deposit in accordance with the OPA Term f) which
    provides that if the option is not exercised, then the monthly credits are
    forfeited;

(c)

the amounts paid in March 2017 were the $1500
    deposit and the $1125 to replace three monthly credits for months when the rent
    was paid late;

(d)

Jesan suffered no loss as the value of the property
    had increased;

(e)

Jesan did not try to accommodate Mr. Doyle by
    granting an amendment to help him secure financing, but it is unclear whether
    that would have made any difference to the outcome.

[57]

In
    my view, it is not unconscionable for Jesan to retain the $20,000 initial
    deposit and the 33 monthly credits. These amounts had been paid under the OPA,
    and the respondents had agreed in the OPA that those amounts would be forfeited
    if the option to purchase was not exercised. While this was a new agreement, I
    see no basis for finding unconscionability with respect to those amounts.

[58]

However,
    in the circumstances, it would be unconscionable for Jesan to retain the
    amounts paid in March 2017 to top up the deposit (the $1500 deposit and $1125 monthly
    credit payments), when Jesan suffered no loss and took no steps to try to
    facilitate Mr. Doyle securing financing to close the transaction.

Issue 4: Is Jesan entitled to an order for a writ of
    possession?

[59]

The
    OA provides for a three year lease term ending on February 28, 2017. Under the
    heading Applicable Law, there is a handwritten statement that This is not a
    tenancy under the Landlord and Tenant Act of Ontario. This addition is not
    initialed.

[60]

Regardless
    of the validity or effectiveness of the handwritten addition, the bigger
    problem is that the agreement is, in fact, a residential lease governed by the
Residential
    Tenancies Act
, 2006,
S.O. 2006, c. 17 (
RTA
).
[1]
The
RTA
does not allow contracting out of its provisions: ss.3(1), s.4;
Matthews v. Algoma Timberlakes Corp.
, 2010 ONCA 468, 102 O.R. (3d)
    590, at para. 24, leave to appeal refused, [2010] S.C.C.A. No. 369. Although
    this issue was not addressed by the application judge or referred to by the
    parties in their factums, the provisions of the
RTA
regarding security
    of tenure govern the issue of eviction: see.
RTA
,
Part V. Since
    the Landlord and Tenant Board has exclusive jurisdiction to determine applications
    between landlords and tenants under the
RTA
, Jesan and the respondents
    must have their possessory rights determined before that Board: ss.168(2).

Conclusion

[61]

In
    the result, I would allow the appeal and set aside the order of the application
    judge dismissing Jesans application. I would grant the application for an
    order that the OPA is terminated. I would grant the order for forfeiture of $32,375
    of the deposit to Jesan and order the balance to be paid to Mr. Doyle. I would
    not order a writ of possession as that matter must be addressed by the Landlord
    and Tenant Board if the parties cannot agree. Finally, I would order costs of
    the appeal to Jesan based on its success on the main issue and substantial
    success on the forfeiture issue. If the parties cannot agree on the amount of
    costs, they may each make brief (3 pages) written submissions within four weeks
    of the release of these reasons.

Released: K.F. November 10, 2020

K.
    Feldman J.A.

I
    agree. Fairburn J.A.

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





[1]

The OA states that the premises shall be used as a residence
    and the OPA further confirms that the agreement is first and foremost a residential
    occupancy agreement.


