



COURT OF APPEAL FOR ONTARIO

CITATION: 2651171 Ontario Inc. v. Brey , 2022
    ONCA 148

DATE: 20220217

DOCKET: C69185

Rouleau, van Rensburg and Roberts
    JJ.A.

BETWEEN

2651171 Ontario Inc.

Plaintiff
(Appellant)

and

Patrick Brey and Grapevine Realty Inc.

Defendants
(Respondents)

J.F. Lalonde and Lauren Benoit, for the
    appellant

Miriam Vale Peters and Matthew
    Miklaucic, for the respondent, Patrick Brey

Michael Swindley, for the respondent, Grapevine
    Realty Inc.

Heard: January 7, 2022 by
    video conference

On appeal from
    the judgment of Justice Sally A. Gomery of the Superior Court of Justice dated March
    1, 2021, with reasons reported at 2021 ONSC 1492.

Roberts J.A.:

Overview

[1]

This appeal concerns the appellants
    failed real estate purchase from the respondent, Patrick Brey, and its claim
    for damages and the return of its $25,000 deposit held by the listing agent, the
    respondent, Grapevine Realty Inc., who took no position on the appeal.

[2]

The narrow issue on appeal is
    whether the motion judge erred in her interpretation of the deadline provisions
    for raising off title objections, which were contained in paragraph 8 of the agreement
    of purchase and sale between the appellant and the respondent Brey, and by
    determining that the deadline for the requisitions at issue was August 26, 2019.

[3]

The appellant submits that
    the motion judge erred by failing to consider paragraph 8 in its entirety. The
    appellant argues that a proper reading of paragraph 8 places the ultimate
    deadline as five days prior to the October 1, 2019 closing date, namely,
    September 26, 2019. As such, the appellants objections were timely and the
    respondent Breys refusal to respond to them allowed the appellant to terminate
    their agreement. The appellant asks that the motion judges judgment be set
    aside and that the appellant be granted judgment with costs.

[4]

The
    respondent Brey submits that the motion judge made no error in her
    interpretation of the agreement and the factual matrix. In the alternative, if
    the appellant is successful on its one ground of appeal, the respondent Brey argues
    that this court must also decide the following: (1) was the appellants objection
    on present use invalid; (2) is the appellant estopped or otherwise barred from claiming
    relief with respect to the present use of the property; and (3) does the
    appellants post-closing conduct affect this appeal?

[5]

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

Background

[6]

The appellants offer to
    purchase the respondent Breys property was accepted in July 2019. The listing
    described the property as a fourplex. The closing date was scheduled for
    October 1, 2019.

[7]

Paragraph 8 sets out the deadline
    for raising objections, as follows:

8. TITLE SEARCH: Buyer shall be allowed until
    6:00 p.m. on the 16 day of September, 2019 (Requisition Date) to examine the
    title to the property at Buyers own expense and until the earlier of: (i)
    thirty days from the later of the Requisition Date or the date on which the
    conditions in this Agreement are fulfilled or otherwise waived or; (ii) five
    days prior to completion, to satisfy Buyer that there are no outstanding work
    orders or deficiency notices affecting the property, and that its present use (Residential
    Fourplex) may be lawfully continued and that the principal building may be
    insured against risk of fire.

[8]

On July 26, 2019, the
    appellant waived conditions pursuant to Schedule A of the agreement of purchase
    and sale. On September 26, 2019, the appellants real estate solicitor received
    a compliance report from the City of Ottawa that could not confirm the lawful use
    of the property as a fourplex. The report noted that [t]here are no building
    permit records to establish a four-unit apartment dwelling, low-rise unit at
    this location. Our building permit records indicate a three-unit dwelling. The
    report also noted that a previous owner had not arranged for all required
    inspections relating to a building permit issued for construction of a rear
    addition. On September 26, 2019, the appellants solicitor wrote to the
    respondent Breys solicitor requisitioning a copy of permits and final inspections
    from the City to confirm that the propertys use could lawfully be continued as
    a fourplex, as well as inspection reports relating to the rear addition. The
    respondent Breys real estate solicitor declined to respond, taking the position
    that the objections were made beyond the deadline provided for in paragraph 8
    of the agreement of purchase and sale.

[9]

The transaction did not
    close on the scheduled October 1, 2019 date. The respondent Brey resold the
    property to another buyer at a lower purchase price. The appellant brought a
    claim for the return of its deposit and damages. The respondent Brey
    counterclaimed for damages incurred because of the failed transaction with the appellant.
    The appellant and the respondent Brey brought competing motions for summary
    judgment before the motion judge.

Summary Judgment

[10]

The motion judge examined
    paragraph 8 of the agreement of purchase and sale that provided for a formula
    to determine the deadline date for making title and off title objections. She determined
    that the deadline for the appellant to make any objections regarding the legal
    use of the property as a fourplex and any outstanding inspections under paragraph
    8 was August 26, 2019. She arrived at this date by rejecting the first date provided
    for under part (i) of the formula, namely, October 16, 2019, to avoid a commercial
    absurdity. She explained in para. 59 of her reasons that: It would be absurd to
    interpret para. 8 as setting a deadline for [the appellant] to raise objections
    that was later than the closing date [October 1, 2019]. By that time, the sale
    would be complete, and title would be transferred.

[11]

Accordingly, the motion
    judge determined that on a plain reading of the section, August 26, 2019, which
    was 30 days from the date that conditions were waived, was the deadline date because
    it was earlier than September 26, the date derived from the formula in (ii). The
    motion judge found that, in accordance with the provisions of paragraph 10 of the
    agreement of purchase and sale, the appellant was deemed to have accepted the
    respondent Breys title because the objections were not raised in time. As a
    result, the motion judge found that the appellant did not have the option of
    refusing to close the purchase without breaching the contract.

[12]

The motion judge concluded
    that her finding of the August 26, 2019 deadline resolved all contractual
    claims between the parties. She dismissed the appellants motion for summary judgment
    and granted judgment to the respondent Brey in the amount of $52,216.65,
    including the appellants $25,000 deposit, plus costs of $50,000, inclusive of
    fees and applicable taxes.

Analysis

(a)

Did the motion judge err in interpretating a standard
    form agreement?

[13]

It is common ground that the
    standard of review of the motion judges interpretation of the parties standard
    form agreement is correctness:
Ledcor Construction Ltd. v. Northbridge
    Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 24.

[14]

For ease of reference, I
    reproduce paragraph 8 of the agreement of purchase and sale, with the relevant requisition
    deadline provisions underlined:

8. TITLE SEARCH:
Buyer
    shall be allowed
until 6:00 p.m. on the 16 day of September, 2019 (Requisition
    Date) to examine the title to the property at Buyers own expense and
until the earlier of: (i) thirty days from the later of the
    Requisition Date or the date on which the conditions in this Agreement are
    fulfilled or otherwise waived or; (ii) five days prior to completion
,
to satisfy Buyer
that there are no outstanding works
    orders or deficiency notices affecting the property, and
that
    its present use (Residential Fourplex) may be lawfully continued
and that
    the principal building may be insured against risk of fire. [Emphasis added.]

[15]

The deadline for making the
    paragraph 8 objections was crucial because of the serious consequences that
    would flow from either meeting or failing to meet the deadline, as provided for
    in paragraph 10 of the agreement of purchase and sale. Paragraph 10 provided
    that if the respondent Brey failed to remove, remedy or satisfy any valid
    objection to title or to any outstanding work order or deficiency notice, or to
    the fact the said present use may not lawfully be continued, which was made
    within the deadline provided for in paragraph 8, the agreement of purchase and
    sale would be at an end and the deposit would be returned to the appellant. However,
    it also stipulated that, [s]ave as to any valid objection so made by such day and
    except for any objection going to the root of the title, [the appellant] shall
    be conclusively deemed to have accepted [the respondent Breys] title to the
    property.

[16]

The motion judge properly
    instructed herself that, as this court directed in
Ventas, Inc. v.
    Sunrise Senior Living Real Estate Investment Trust
, 2007 ONCA 205, 85 O.R.
    (3d) 254, at para. 24, a commercial contract should be interpreted as a whole,
    in a manner that gives meaning to all of its terms and avoids an interpretation
    that would render one or more of its terms ineffective.

[17]

Unfortunately, the motion judge
    failed to follow these directives. By rejecting the October 16, 2019 date in
    part (i) of paragraph 8 as commercially absurd, the motion judge failed to
    consider and give effect to the entirety of the paragraph, as she was required
    to do. When the paragraph is viewed in its entirety, there is nothing
    commercially absurd about the October 16th date. It is merely one factor to
    consider in the entirety of the formula set out in paragraph 8 to determine the
    requisition deadline.

[18]

Paragraph 8 provides for a choice
    between the earlier of two dates under parts (i) and (ii). In properly interpreting
    the entirety of the paragraph, it is necessary first to ascertain the later
    of the two dates provided for in part (i), namely, October 16th (30 days from
    the requisition date of September 16th) and August 26th

(30 days
    from the appellants waiver on July 26th). The later date is October 16th.
    Moving next to part (ii), the date is five days prior to completion (October 1st
    closing date), that is, September 26th. The earlier of October 16th and September
    26th, is September 26th. September 26th is prior to the October 1st closing
    date. When read in its entirety, paragraph 8 does not yield any commercial absurdity.

[19]

September 26, 2019 was the
    correct deadline for the appellant to make the off-title requisitions specified
    in paragraph 8 of the agreement of purchase and sale, including with respect to
    the lawful use of the property as a residential fourplex. The appellant therefore
    made its objections within the deadline provided for under paragraph 8 of the agreement
    of purchase and sale.

(b)

Did the appellant raise a valid objection to the
    legal use of the property?

[20]

As the motion judge
    indicated in her reasons, given her determination of the untimeliness of the
    appellants requisition, it was unnecessary for her to go on and address
    whether the appellants objection was valid and therefore triggered paragraph
    10 of the agreement of purchase and sale, allowing for the termination of the
    agreement of purchase and sale.

[21]

I agree with the respondent
    Breys submission that it is necessary for this court to determine this question.
    This is an appropriate case for this court to exercise its fact-finding powers and
    make a decision that the motion judge could have made, pursuant to ss. 134(1)
    and (4)(a) of the
Courts of Justice Act
, R.S.O. 1990, c. C.43.

[22]

This court can draw
    inferences and make findings of fact as long as they do not contradict findings
    that stand in the court below:
306440 Ontario Ltd. v. 782127 Ontario Ltd. (Alrange
    Container Services)
, 2014 ONCA 548, 384 D.L.R. (4th) 278, at para. 36. As
    this court recently explained in
Carmichael v. GlaxoSmithKline Inc.
,
    2020 ONCA 447, 151 O.R. (3d) 609, at para. 130, leave to appeal refused, [2020]
    S.C.C.A. No. 409, appellate courts are cautious about exercising fact-finding
    powers and will not make findings of fact if this requires the court to assess
    credibility or if the evidentiary basis needed to draw the necessary inferences
    is inadequately developed in the record at first instance (citation omitted). Those
    concerns are not present here.

[23]

Although the motion judge did
    not make any findings on this issue, the record is sufficient to permit us to address
    and determine the question. It does not require the resolution of credibility
    issues. In keeping with the Supreme Courts direction in
Hryniak v. Mauldin
,
    2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49, this courts determination of
    this issue would be a proportionate, more expeditious and less expensive means
    to achieve a just result without working any unfairness to the parties. See
    also
Carmichael
, at paras. 131-133;
Pucci v. The Wawanesa Mutual
    Insurance Company
, 2020 ONCA 265, at paras. 61-62;
Cook v. Joyce
,
    2017 ONCA 49, at paras. 78-81.

[24]

The appellants timely requisition
    raised a legitimate objection as to whether the property could be legally used
    as a fourplex. Whether the continued use of the property as a fourplex was legal
    was a valid concern properly raised by requisition as specifically provided for
    in paragraph 8 of the agreement of purchase and sale:
Brar v. Smith
,
    2014 ONSC 5030, at para. 47;
1418885 Ontario Ltd. v. 2193139
, 2017
    ONSC 3632, at paras. 31-37, revd on other grounds, 2018 ONCA 54, at paras. 8-9.

[25]

This was not a peripheral
    issue. The appellant wished to rent out the property as a commercial investment.
    The respondent Brey described the property in the listing as a fourplex. The
    importance of the legal use of the property is reflected in the provisions of
    paragraphs 8 and 10 that permitted the appellant to raise a valid objection
    concerning the legal use of the property as a residential fourplex and
    terminate the agreement if the objection was not satisfied.

[26]

The uncontroverted evidence from
    the City of Ottawa supports the validity of the appellants objection regarding
    the lawful use of the property as a fourplex. Among other information, the City
    of Ottawas September 26, 2019 Compliance Report advised that conformity of the
    present use of the property as a fourplex could not be verified and noted: There
    are no building permit records to establish a four unit apartment dwelling, low-rise
    use at this location. Our building permit records indicate a three-unit
    dwelling. Moreover, the evidence given by Patrick Edward Kennedy, a City of
    Ottawa Program Manager of Building Inspections for Central East Division, was
    that the present use of the property as a fourplex is not permitted. During the
    cross-examination on his affidavit, Mr. Kennedy confirmed his
    understanding that the permitted use of the property was a three-unit apartment
    dwelling and that he was unaware that the property had been sold as a fourplex.
    He confirmed that a building permit would be required to add a fourth apartment.
    In his second affidavit filed following his cross-examination, Mr. Kennedy deposed
    that he ascertained on a visit to the property with a building inspector that
    there is a fourth apartment and that he advised the current owner that the
    property would have to be returned to a three‑unit apartment building or
    she would have to obtain a building permit for the fourth unit. He also stated
    that an Order to Comply has been issued instructing the owner to submit an
    application and plans and take all steps necessary to obtain a building permit,
    or submit an application and plans and take all steps necessary to return the building
    back to its last known permitted use.

[27]

This evidence was sufficient
    to give rise to a valid objection as to whether the present use of the property
    as a fourplex could be continued. There is no controverting evidence that the property
    can be lawfully used as a fourplex in its present state.

[28]

Paragraph 10 of the
    agreement clearly provides that once a valid objection was raised, the respondent
    Brey had to remove, remedy or satisfy the appellants valid objection. The respondent
    Brey did not do this; rather, he declined to address the appellants objection.

[29]

The respondent Brey having
    failed to remove, remedy or satisfy the appellants valid objection, the
    appellant was entitled to treat the agreement of purchase and sale as at an end
    and did not breach the agreement by failing to close the transaction on October
    1, 2019.

(c)

Estoppel by convention or conduct

[30]

It is not necessary to
    address in detail the other issues raised by the respondent Brey because they
    do not affect the outcome of this appeal.

[31]

First, estoppel by
    convention or conduct has no application here. There is no evidence that the
    appellant at any time waived its rights under paragraphs 8 and 10 of the
    agreement of purchase and sale. On the contrary, the appellant insisted on them,
    treated the agreement as at an end, and refused to close the transaction.

[32]

Second, the respondent Brey submits
    that the appellants conduct in raising the question of the legality of the propertys
    use as a fourplex with Mr. Kennedy during the cross-examination on his affidavits
    was improper and should result in the denial of any remedy. I disagree. There
    was no impropriety in the appellants cross-examination of Mr. Kennedy. It was
    the respondent Brey who filed Mr. Kennedys affidavit evidence. It was entirely
    legitimate for the appellant to cross-examine Mr. Kennedy on the relevant issue
    of the propertys legal use.

[33]

As I explained, once the conditions
    in paragraphs 8 and 10 were triggered, the appellant was entitled to terminate
    the agreement.

Disposition

[34]

I would allow the appeal,
    set aside the judgment of the motion judge, and order the return of the $25,000
    deposit plus accumulated interest to the appellant. As agreed by the parties in
    the event of success on this appeal, the appellant is entitled to damages for
    its expenses incurred in relation to the failed transaction in the amount of
    $4,632.10.

Costs

[35]

I would allow the appellant its
    partial indemnity costs from the respondent Brey in the all-inclusive amount of
    $15,000.

[36]

I would also grant the
    appellant its partial indemnity costs of the motions for summary judgment and
    the action from the respondent Brey. If the parties are unable to agree on the amount,
    I would allow them to make brief written submissions of no more than three pages,
    plus a costs outline and any pertinent offers to settle, within seven days of
    the release of these reasons.

Released: February 17, 2022 P.R.

L.B.
    Roberts J.A.

I
    agree. Paul Rouleau J.A.

I
    agree. K. van Rensburg J.A.


