



COURT OF APPEAL FOR ONTARIO

CITATION: Scicluna v. Solstice Two Limited, 2018 ONCA 176

DATE: 20180223

DOCKET: C64074

Doherty, Paciocco and Nordheimer JJ.A.

BETWEEN

Valeria Scicluna

Applicant
(Respondent/ Appellant by cross-appeal)

and

Solstice Two Limited
,
    Northbridge General Insurance Corporation, and Kevin Thatcher and Associates
    Ltd.

Respondents
(
Appellant
/ Respondents by cross-appeal
)

Evan L. Tingley, for the appellant/respondent by
    cross-appeal, Solstice Two Limited

Bradley Phillips, for the respondent/appellant by
    cross-appeal, Valeria Scicluna

Kenneth H. Page, for the respondent by cross-appeal, Kevin
    Thatcher and Associates Ltd.

Heard: February 6, 2018

On appeal from the judgment of Justice Carole J. Brown of
    the Superior Court of Justice, dated June 20, 2017, with reasons reported at
    2017 ONSC 3674.

Paciocco J.A.:

OVERVIEW

[1]

Valeria Scicluna advanced $293,685 for the purchase of a condominium
    unit. When it came time to close, she was unable to pay the remaining $78,315
    because she had lost her job. She therefore breached the amended agreement of
    purchase and sale (AAPS) that was in effect at the time.

[2]

Initially the vendor, Solstice Two Limited (Solstice), showed commendable
    restraint. Even though there was a forfeiture clause in the AAPS, Solstice
    entered into a resale agreement with Ms. Scicluna in which Solstice agreed to
    return to her all but $30,000 of the money she had advanced, if the condominium
    was resold.

[3]

And it was resold for $435,000, significantly more than Ms. Scicluna had
    been obliged to pay. Unfortunately, when Solstice presented Ms. Scicluna with
    the release document before repaying her, she refused to sign. She had misread the
    release, mistakenly believing that she was being asked to let Solstice keep
    $60,000, double what had been provided for in the resale agreement. Ultimately,
    she sued Solstice for the return of $263,685, as agreed in the resale
    agreement.

[4]

Being sued ended Solstices restraint. Solstice decided to invoke the
    forfeiture provision in response to Ms. Sciclunas lawsuit. It wanted all
    $293,685, plus the additional profit it had made on the resale. The application
    judge decided that Solstices new demand for complete forfeiture was grossly
    disproportionate, and she granted Ms. Scicluna relief from forfeiture.

[5]

But the application judge did not give Ms. Scicluna the money. She gave
    it to Keven Thatcher and Associates Ltd. (KTL), the trustee in bankruptcy
    appointed when Ms. Scicluna made an assignment in bankruptcy shortly after
    losing her job.

[6]

In this appeal Solstice argues that the application judge erred in
    granting relief from forfeiture, and in failing to find that both Ms.
    Sciclunas claim and KTLs claim are statute-barred. Meanwhile, Ms. Scicluna claims
    that the application judge erred by giving the money to KTL. She argues that,
    prior to her discharge from bankruptcy, KTL treated her claim against Solstice
    as unrealizable property. She argues that KTL was therefore obliged to return her
    cause of action, and cannot now seek to stand in her place in taking her damage
    award.

[7]

For the reasons below, I would deny both Solstices and Ms. Sciclunas
    appeals. The application judge came to the correct result. KTL should have the
    money claimed by Ms. Scicluna for distribution to Ms. Sciclunas creditors.

BACKGROUND FACTS

[8]

In April 2008, Ms. Scicluna entered into an agreement to purchase a
    condominium from Solstice. The initial closing date was to be more than two
    years later, in September 2010. In the interim, Ms. Scicluna lived in the condominium.

[9]

The initial April 2008 agreement of purchase and sale was twice amended.
    The AAPS ultimately provided for a closing date of May 5, 2011. When that date
    arrived, Ms. Scicluna failed to close as she had lost her job. By then, under
    the terms of the agreements, Ms. Scicluna had advanced $293,685 towards the total
    purchase price of $372,000. Of the $293,685, $20,000 was in Solstices
    immediate possession. The balance was being held by Northbridge General Insurance
    Corporation on behalf of Solstice.

[10]

The
    AAPS provided that if Ms. Scicluna breached the agreement, Solstice was
    entitled to unilaterally declare the AAPS terminated, whereupon all deposit
    monies theretofore paid, together with all monies paid for any extras or
    charges to the Unit, shall be retained by the Vendor as its liquidated damages,
    and not as a penalty

[11]

A
    little over two months after the failed closing date, on July 28, 2011, Ms.
    Scicluna made an assignment into bankruptcy. KTL was appointed as the trustee
    in bankruptcy. Ms. Scicluna did not disclose to KTL that she had $293,685 in funds
    sitting in Solstices hands that she considered to be her own.

[12]

Pursuant
    to the
Bankruptcy and Insolvency Act
, R.S.C. 1985, c. B-3, s. 71 (
BIA
),
    Ms. Scicluna lacked the capacity to enter into agreements relating to her
    property, prior to her discharge. In spite of this, on October 20, 2011, while
    an undischarged bankrupt, Ms. Scicluna purported to enter into a resale
    agreement with Solstice for a return of the deposited money. Under the resale
    agreement, Solstice agreed to repay Ms. Scicluna all but $30,000 of the $293,685
    deposit if the condominium was sold. In April 2012, it sold for $435,000.

[13]

Ms.
    Scicluna then refused to sign the release contemplated by the resale agreement.
    She was under the mistaken belief that the release would entitle Solstice to
    keep an additional $30,000 beyond the $30,000 provided for in the resale
    agreement. Understandably, Solstice would not return the funds without a signed
    release.

[14]

On
    two occasions, while an undischarged bankrupt and without notice to the KTL,
    Ms. Scicluna attempted to sue Solstice for the return of the deposit. The first
    attempt, in 2011, was aborted because she could not secure legal funding. Another
    suit was filed in 2013, but was declared a nullity as Ms. Scicluna lacked the
    capacity to sue as she was an undischarged bankrupt.

[15]

Ms.
    Scicluna was discharged from bankruptcy on February 12, 2014. The trustee in
    bankruptcy, KTL, has yet to be discharged.

[16]

On
    July 6, 2016, Ms. Scicluna brought an application for a declaration that she is
    entitled to the return of $263,685 of the deposit she paid to Solstice, plus
    interest earned on that amount. She claimed the right to rely on the resale
    agreement for the return of this money in spite of her refusal to sign what she
    considered to be an improper release document.

[17]

Solstice
    responded that it was entitled to the money since Ms. Scicluna forfeited it
    after failing to close the condominium purchase. Solstice also argued that, in
    any event, Ms. Sciclunas claim is statute-barred under s. 5 of the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B (
Limitations Act
).

[18]

Ms.
    Scicluna also joined KTL as a party to the application. She contended that her
    right to the money was unaffected by her bankruptcy. She said that KTLs
    failure to take action against Solstice prior to her discharge, or for more
    than two years thereafter, confirms that KTL had decided that this
chose in
    action
was unrealizable property. She claimed that KTL was therefore
    obliged under s. 40 of the
BIA
to return to her the right to sue
    Solstice.

[19]

KTL
    claimed that any money secured by Ms. Scicluna in her application should vest
    in KTL as the trustee in bankruptcy. KTL denied that it had concluded that the
    claim against Solstice was unrealizable property. KTL submitted that it did not
    have a chance to make that determination because of Ms. Sciclunas failure to
    disclose the details about her claim.

[20]

Meanwhile,
    Solstice resisted KTLs claim, arguing that KTLs purported interest was also statute-barred.
    Solstice maintained its position, even if Ms. Sciclunas claim was not discoverable
    by KTL, as the trustee in bankruptcy can stand in no better position than the
    bankrupt.

[21]

On
    June 20, 2017, the application judge released her decision. She did not accept
    the limitations arguments. She relieved Ms. Scicluna from her forfeiture of the
    $263,685, but then awarded the money to KTL as bankruptcy estate property.

ISSUES ON APPEAL

[22]

Solstice
    now appeals, claiming that the application judge erred in: (i) granting relief from
    forfeiture that was not formally sought, (ii) finding that the facts justified
    an order for relief from forfeiture, and (iii) failing to hold Ms. Scicluna and
    KTLs claims  to be statute barred.

[23]

Ms.
    Scicluna has also cross-appealed. She says the application judge erred by ordering
    the return of the deposit to KTL instead of to her under s.40 of the
BIA
.

[24]

I
    would dismiss both appeals.

ANALYSIS

[25]

Although
    the application judge should have responded overtly in her decision to
    Solstices limitation period defence, she was clearly correct to reject it. In my
    view,
Yim v. Talon International Inc.
, 2017 ONCA 267, 137 O.R. (3d)
    184 confirms that Ms. Sciclunas claim is governed by the 10 year limitation
    period in s. 4 of the
Real Property Limitations Act
, R.S.O. 1990, c.
    L.15 (
RPLA
), not by the
Limitations Act
. I reject Solstices
    attempt to distinguish this case based on the factual difference that
Yim
dealt
    with a deposit whereas the forfeited money claimed by Solstice is no longer a
    deposit. The
RPLA
governs actions to recover land, and land is
    defined in s. 1 as including money to be laid out in the purchase of land.
    Ms. Sciclunas application to recover monies advanced in a real estate purchase
    falls under that definition regardless of whether it is properly characterized
    as a deposit.

[26]

In
    finding against Solstice, I do not accept Ms. Sciclunas contention that the deposit
    was not forfeited. That is a difficult argument for Ms. Scicluna to make given
    that she breached the terms of the AAPS that provided for forfeiture in the
    event of breach  especially in light of the fact that Solstice had advised Ms.
    Scicluna that a failure to close would result in forfeiture, and that the funds
    were already under Solstices control.

[27]

In
    my view, even though the deposit was forfeited, the application judge was
    entitled to grant relief from forfeiture, notwithstanding that s. 98 of the
Courts
    of Justice Act
, R.S.O. 1990. c. C.43 was not formally advanced by Ms.
    Scicluna. It was implicit in the application below that Ms. Scicluna was
    seeking relief from forfeiture. Ms. Scicluna was suing for the return of the deposit
    that Solstice claimed was forfeited. A judge has a broad discretion under s. 98
    to grant such relief.

[28]

Moreover,
    relief from forfeiture was the obvious outcome on these facts, even though relief
    from forfeiture is an equitable and purely discretionary remedy:
Saskatchewan
    River Bungalows Ltd. v. Maritime Life Assurance Company
, [1994] 2 S.C.R.
    490, at p. 504; and
Kechnie v. Sun Life Assurance Co. of Canada
, 2016
    ONCA 434, 401 D.L.R. (4th) 620, at paras. 26-28. The appropriate questions to
    consider in deciding whether to award relief from forfeiture were identified
    in
Liscumb v. Provenzano
(1985), 51 O.R. (2d) 129 at p. 137 (S.C.), affirmed
    (1985), 55 O.R. (2d) 404

(C.A.), by McKinlay J. (as she then was):

first, was the conduct of the plaintiff reasonable in the
    circumstances; second, was the object of the right of forfeiture essentially to
    secure the payment of money; and third, was there a substantial disparity
    between the value of the property forfeited and the damage caused the vendor by
    the breach?

[29]

I
    do not accept Solstices position that
Saskatchewan Rivers
holds this
    to be a three part test, requiring satisfaction of each and every part. The
    Supreme Court described these questions as factors, at p. 504 of that
    decision. See also
Kozel v. Personal Insurance Co.
, 2014 ONCA 130, 119
    O.R. (3d) 55, at para. 31. The Supreme Courts readiness to accept the trial
    judges decision to refuse relief based on the unreasonableness of the conduct
    of the plaintiff alone does not intimate that each factor is a condition
    precedent to relief from forfeiture. It signals no more than that a trial
    judge, exercising this equitable and purely discretionary remedy, is entitled
    to refuse relief based on unreasonable conduct alone.

[30]

The
    failure of the application judge to refer overtly to Ms. Sciclunas conduct is
    not, therefore, fatal to her decision. Indeed, the application judge was well
    aware that Ms. Scicluna failed to close the AAPS, and that she refused to sign
    the release agreement. The application judge was also aware that Ms. Scicluna
    did not close the transaction because she lost her job, and that her refusal to
    sign the release agreement was based on a misunderstanding of the meaning of
    the release agreement. This is not a case where Ms. Sciculinas conduct was so
    unreasonable that this court should interfere in the trial judges exercise of
    discretion.

[31]

Indeed,
    in this case the substantial disparity between the value of the property
    forfeited and the damage caused [to Solstice] by the breach is so manifest and
    so grossly disproportionate that relief from forfeiture is patently a correct
    result. This can be said with confidence even without evidence particularizing
    the actual cost to Solstice of Ms. Sciclunas failure to close. This is not a
    case of an ordinary deposit. In the unusual circumstances of this case, Ms.
    Scicluna had advanced close to 80% of the total purchase price, $293,685 on a
    purchase price of $372,000. To compound this, Solstice was able to sell the
    same property that Ms. Scicluna had almost entirely paid for to another purchaser
    for $435,000. Even before the $263,685 that Solstice claims as forfeited money,
    it has, in pocket, $93,000 more than it would have had if Ms. Scicluna had closed
    on the AAPS. This is because of the $30,000 forfeited deposit that Solstice retains
    under the application judges order, and the $63,000 net difference between the
    condominiums original sale price and subsequent resale price. Whatever
    expenses Solstice may have incurred because of Ms. Sciclunas failure to close,
    it is obvious that Solstice is not in a net loss position. If Solstices
    forfeiture claim is accepted, it would have a grossly disproportionate
    windfall. I would not disturb the application judges finding on this issue.

[32]

Nor
    would I disturb the application judges finding that the $263,685 deposit is to
    be paid to KTL as bankruptcy trustee, and administered pursuant to the
BIA
.
    Pursuant to s. 71 of the
BIA
, any right Ms. Scicluna had in the return
    of the deposit is property that vested in the trustee when she was assigned
    into bankruptcy in July 2011. KTL remains undischarged as bankruptcy trustee
    and it has released none of the bankrupts property. The starting point, then,
    is that this money belongs to the trustee, not Ms. Scicluna.

[33]

Nor
    is there a basis for finding that KTL must return this property to Ms.
    Sciculina through the operation of s. 40 of the
BIA
as unrealizable
    property.

[34]

The
    application judge made no palpable and overriding error in finding that KTL was
    not in a position to decide whether to bring an action against Solstice for the
    deposit because of Ms. Sciclunas non-disclosure. KTL was also not in a
    position to determine whether the deposit was unrealizable property.

[35]

This
    case is unlike
Shelson (Re)
(2004),
    70 O.R. (3d) 171 (C.A.),
[2004] O.J. No. 850. There the bankruptcy
    trustee incontrovertibly had knowledge of the existence of the action from
    the outset of the bankruptcy but decided the action was of little value to the
    estate and would not be pursued unless the creditors insisted:
Shelson
,
    at para. 31. Over five years later, long after the discharged bankrupt had been
    carrying the action, the bankruptcy trustee changed its mind and tried to
    assert control over that action. In this case, on the application judges
    findings, Ms. Scicluna did not list her claim to the deposit in her list of
    assets. She also attempted to launch legal proceedings to secure it without the
    trustees knowledge, and was not forthcoming with the trustee about the nature
    of her claim.

[36]

The
    equities of the two cases are not close either. In
Sheldon
,
the discharged bankrupt was lulled into
    the reasonable belief that the trustee was making no claim to the lawsuit. In
    this case, Ms. Scicluna prevented the trustee in bankruptcy from understanding
    the potential of the lawsuit.

[37]

Moreover,
    and more importantly, had Ms. Scicluna signed the release, as she should have,
    the $263,685 would have been paid to her and would have been available for her
    creditors and distributed before her discharge. It does not advance the
    principles of the
BIA
for her to advance, after her discharge, a claim
    that she failed to disclose to KTL and then try to keep the proceeds for
    herself. The application judge was correct in the decision she made.

CONCLUSION

[38]

I
    would therefore dismiss both appeals. As agreed, costs are payable on the
    appeal to KTL, both by Ms. Scicluna and Solstice, in the amount of $5,000 each,
    inclusive of HST and disbursements.

Released: February 23, 2018 (D.D.)

David M. Paciocco J.A.

I agree. Doherty J.A.

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


