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Good afternoon.

Please find below our summaries of the civil decisions of the Court of Appeal for the week of November 9, 2020.

Jesan Real Estate Ltd. v. Doyle deals with relief from forfeiture of deposits in respect of a “rent to own” occupancy agreement in the residential tenancy context. The tenant, who was self-represented on the appeal, arguably failed to properly exercise his option to purchase the property in accordance with the terms of the notice provisions in the agreement and, as a result, risked losing $35,000 in deposits. The owner/landlord brought an application for a declaration that occupancy agreement was null and void, and that the deposits paid had been forfeited. The landlord also sought a writ of possession to evict the tenant and his family.

The application judge found that the notice provisions to exercise the option contained in the occupancy agreement were ambiguous and that the tenant had substantially complied with them, and therefore had validly exercised the option to purchase the property. However, applying the common law of contract and the law of relief from forfeiture, the Court of Appeal reversed this decision, finding that the option to purchase had not been properly exercised. The Court only granted relief from forfeiture in respect of $2,625 of the total of $35,000 in deposits paid. There would appear to be no legislative protection of residential tenants who enter into “rent to own” agreements.

Regarding the landlord’s request for a writ of possession, the Court found that the landlord’s attempt in the occupancy agreement to contract out of the Residential Tenancies Act was void. The tenant was therefore entitled to the protections of the Residential Tenancies Act, and the Court refused to issue a writ of possession to the landlord. That aspect of the case was referred to the Landlord and Tenant Board, which has exclusive jurisdiction to deal with residential tenancies.

It seems to me that these types of “rent to own” agreements in the residential tenancy context have the potential to be predatory and to be open to abuse, particularly in the current economic environment in which the barrier to first-time home ownership is so high. Perhaps it would be advisable for the legislature to consider regulating the terms of such agreements, whether by way of amendments to the Residential Tenancies Act, the Consumer Protection Act or the introduction of some new piece of legislation.

Other topics covered this week included family law (marriage contracts and access/contempt), the enforcement of settlements, and vexatious litigants.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Jonas v Pacitto, 2020 ONCA 727

Keywords: Family Law, Marriage Contracts, Setting Aside ,Spousal Support, Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), Family Law Act, R.S.O. 1990, c. F.3, s. 34(4), Spousal Support Guidelines, s.6, Federal Child Support Guidelines, SOR/97-175, s.19(1)(e), Dougherty v. Dougherty, 2008 ONCA 302, Miglin v. Miglin, 2003 SCC 24, Scheel v. Henkelman (2001), 52 O.R. (3d) 1 (C.A.), Rados v. Rados, 2019 ONCA 627, Ballanger v. Ballanger, 2020 ONCA 626, Slongo v. Slongo, 2017 ONCA 272

Kearns v Canadian Tire Corporation, 2020 ONCA 709

Keywords: Contracts, , Interpretation, Settlements, Consensus Ad Idem, Unilateral Mistake, Fraud, Wrongful Dismissal, Employment Law, Wrongful Dismissal, Civil Procedure, Summary Judgment, Rules of Civil Procedure, Rules 20.04(2.1) and (2.2), Oliveri v. Sherman, 2007 ONCA 491, Alampi v. Swartz (1964), 43 D.L.R. (2d) 11 (Ont. C.A.), Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

L v Ontario Civilian Police Commission, 2020 ONCA 720

Keywords: Civil Procedure, Vexatious Litigants, Frivolous, Vexatious, Abuse of Process, Rules of Civil Procedure, Rule 2.1, Gao v Ontario (workplace Safety and Insurance Board), 2014 ONSC 6974, Scaduto v The Law Society of Upper Canada, 2015 ONCA 0733, R v Cunningham, 2010 SCC 10, R v 974649 Ontario Inc., 2001 SCC 81, Jonsson v Lymer, 2020 ABCA 167

Gagnon v Martyniuk, 2020 ONCA 708

Keywords: Family Law, Custody and Access, Civil Procedure, Contempt, Fresh Evidence, Family Law Rules, O. Reg 114/99, r.31(5), Les Services aux Enfants et Adultes de Prescott-Russell v. N.G. (2006), 82 O.R. (3d) 669 (C.A.), Godard v. Godard, 2015 ONCA 568, Hefkey v. Hefkey, 2013 ONCA 44

Jesan Real Estate Ltd. v Doyle, 2020 ONCA 714

Keywords: Contracts, Interpretation, Standard of Review, Real Property, Residential Tenancies, Occupancy Agreements, Rent to Own, Options to Purchase, Sufficiency of Notice, Bilateral Contracts, Substantial Non-Performance, Unilateral Contracts, Strict Performance, Time of the Essence, Deposits, Relief from Forfeiture, Unconscionability, Residential Tenancies Act, 2006, S.O. 2006, c. 17, ss. 3(1), s. 4, Sail Labrador Ltd. v. Navimar Corp., [1999] 1 S.C.R. 265, Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, Fuller v. Aphria Inc., 2020 ONCA 403, Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, leave to appeal to S.C.C. refused, 38247, Ju v. Tahmasebi, 2020 ONCA 383, Azzarello v. Shawqi, 2019 ONCA 820, Stockloser v. Johnson, [1954] 1 Q.B. 476 (Eng. C.A.), Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, Matthews v. Algoma Timberlakes Corp., 2010 ONCA 468, leave to appeal refused, [2010] S.C.C.A. No. 369

Short Civil Decisions

Jog v Bank of Montreal, 2020 ONCA 721

Keywords: Civil Procedure, Summary Judgment, Procedural Fairness, Self-Represented Litigants

Central Lumber Limited v Gentile, 2020 ONCA 719

Keywords: Contracts, Construction Law, Breach of Trust, Costs, Construction Lien Act; R.S.O. 1990, c. C.30, s. 8 and s. 13

Jay-Pee Drycleaners Inc. v 2321324 Ontario Inc., 2020 ONCA 711

Keywords: Civil Procedure, Appeals, Extension of Time


CIVIL DECISIONS

Jonas v Pacitto, 2020 ONCA 727

[Hourigan, Trotter and Jamal JJ.A.]

Counsel:

M. Tubie, for the appellant

B. Tseitlin, for the respondent

Keywords: Family Law, Marriage Contracts, Setting Aside ,Spousal Support, Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), Family Law Act, R.S.O. 1990, c. F.3, s. 34(4), Spousal Support Guidelines, s.6, Federal Child Support Guidelines, SOR/97-175, s.19(1)(e), Dougherty v. Dougherty, 2008 ONCA 302, Miglin v. Miglin, 2003 SCC 24, Scheel v. Henkelman (2001), 52 O.R. (3d) 1 (C.A.), Rados v. Rados, 2019 ONCA 627, Ballanger v. Ballanger, 2020 ONCA 626, Slongo v. Slongo, 2017 ONCA 272

facts:

The parties married in 2003 and separated in 2016. Prior to their marriage, they executed a Marriage Contract (the “Contract”) which provided that, upon dissolution of the marriage, neither party would be entitled to the property of the other, and the appellant waived any right to claim spousal support.

At trial, the parties provided different versions of how the Contract came into existence. The appellant contested the validity of the Contract on the basis that she was vulnerable as a result of a number of factors. The respondent gave a different account and could not recall discussing the Contract with the appellant. He testified that he advised the appellant to get legal advice and to have the Contract translated and signed.

Based on supporting documentation relating to the execution of the Contract, the trial judge determined that the Contract was valid and binding as it applied to the division of property. However, he found that the appellant’s financial circumstances at the time of trial warranted some award of spousal support. He ordered minimal support based on the appellant’s annual income of $15,564, and the respondent’s declared annual income of $24,226 totalling a lump sum payment of $40,000. The appellant appealed, arguing that the Contract should have been invalidated in its entirety and that the trial judge failed to impute further income from the respondent’s rental properties.

issues:

Did the trial judge err:

  1. by failing to invalidate the Contract in its entirety?
  2. in the amount of support awarded?
holding:

Appeal allowed in part.

reasoning:
  1. Did the trial judge err by failing to invalidate the Contract in its entirety?

No. The appellant submitted that she had satisfied the requirements to set aside the Contract in its entirety. She contended that the trial judge failed to give sufficient weight to all relevant considerations. In particular, a combination of factors – including her lack of proficiency in the English language, the lack of independent legal advice, her economic dependency on the respondent, and the prospect of having to return to Hungary – created vulnerabilities that undermined the validity of the Contract. The appellant further submitted that the trial judge failed to take into account the fact that the Contract was not negotiated; instead, it was imposed upon her. Lastly, she contended that the trial judge placed too much weight on the execution documents pertaining to the Contract.

The Court held that the appellant’s position could not succeed based on the trial judge’s findings. He addressed each of the issues raised on appeal and the appellant failed to adduce sufficient evidence to satisfy the burden of proof required to set aside the Contract. Given the competing accounts between the appellant and the respondent, he was required to make credibility findings. The trial judge did not find that the appellant was vulnerable to the extent that it undermined the Contract she had entered into. He found that she made a number of choices, including not to seek legal advice. Although the appellant claimed that the Contract was imposed upon her, there was no evidence that she attempted to negotiate a more favourable arrangement.

The appellant submitted that the trial judge placed too much weight on the documents that pertained to the execution of the Contract. However, the Court found that this amounted to a challenge to the trial judge’s factual findings. A trial judge’s findings of fact, including credibility assessments, are entitled to substantial deference on appeal, especially in family law cases.

2. Did the trial judge err in the amount of the lump sum award?

Yes. The appellant disputed the trial judge’s calculation of the respondent’s income, contending that the trial judge ought to have imputed further income from the respondent’s rental properties. Although appellate courts should afford deference to support orders made by trial judges, the unique circumstances of this case required intervention. Although the appellant had the onus of demonstrating why income should be imputed to the respondent, and in what amount, the respondent was required to make proper disclosure of all sources of income, but failed to do so.

Section 6 of the Spousal Support Guidelines provides that the starting point for determining income for spousal support purposes is the definition of income under the Federal Child Support Guidelines. Section 19(1)(e) of those Guidelines provide that the court may impute income where the “spouse’s property is not reasonably utilized to generate income”. The Court stated that although the imputation of income is discretionary, the facts of this case cried out for this factor to be considered. The Court held that the trial judge erred in his assessment of the amount of spousal support by not at least considering imputing additional income to the respondent. This was a fairly long marriage, of which the appellant worked hard at home while the respondent’s properties increased significantly in value, to nearly $5 million at the time of trial.

The Court noted that the respondent was over 80 years old and may reasonably be able to generate significantly more income from his properties, beyond that included in his declared income of $24,226. The Court also noted the appellant was over 60 years old, and would be in need of support for many years, as she had no real employment prospects and an annual income that was below the poverty line.

Because of the time that had passed between the trial and the hearing of the appeal (almost three years), the Court decided that it was not well-positioned to decide the matter afresh. Accordingly, the Court remitted the case back to the Superior Court of Justice for a focused hearing on the imputation of income to the respondent for the purposes of calculating the award of spousal support. Both parties were ordered to provide that court with current property valuations as well as income statements.


Kearns v Canadian Tire Corporation, Limited, 2020 ONCA 709

[Lauwers, Brown and Nordheimer JJ.A.]

Counsel:

S.F. Gleave, for the appellant

M.A. Fisher, for the respondent

Keywords: Contracts, , Interpretation, Settlements, Consensus Ad Idem, Unilateral Mistake, Fraud, Wrongful Dismissal, Employment Law, Wrongful Dismissal, Civil Procedure, Summary Judgment, Rules of Civil Procedure, Rules 20.04(2.1) and (2.2), Oliveri v. Sherman, 2007 ONCA 491, Alampi v. Swartz (1964), 43 D.L.R. (2d) 11 (Ont. C.A.), Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

facts:

The appellant terminated the employment of the respondent in July 2018. In both July 2018 and September 2018, the appellant made certain termination-related payments to the respondent. In October 2018, the respondent commenced a wrongful dismissal action against the appellant. In November 2018, just prior to the parties attending mediation, the appellant then made a third termination-related payment to the respondent (the “November Payment”).

Mediation was successful, and the minutes of settlement (the “Minutes”) provided that the appellant would pay the respondent $150,000 “in addition to amounts already paid”. However, the representatives of the appellant who attended the mediation were not aware of the November Payment. When those representatives later learned of the November Payment, they sought to deduct the amount from the amount agreed to in the Minutes.

The respondent then brought a motion to enforce the Minutes, which was granted by the motion judge.

issues:
  1. Did the motion judge err in the interpretation of the Minutes?
  2. Did the motion judge err by deciding the matter without a trial?
holding:

Appeal dismissed.

reasoning:

(1) Did the motion judge err in the interpretation of the Minutes?

No. The motion judge applied Olivieri v. Sherman, 2007 ONCA 491, the leading authority on the enforcement of minutes of settlement. In his analysis, the motion judge made five key findings.

First, the Minutes included all terms essential to the formation of a contract. Second, there was no evidence to support the contention that the respondent knew that the appellant was mistaken when it signed the Minutes. Third, the appellant failed to demonstrate that there was fraud or something akin to fraud on the part of the respondent. Fourth, the Minutes constituted a valid and binding contract. Finally, the circumstances did not support the exercise of discretion to decline to enforce the Minutes.

In accordance with these findings, the Court concluded that a number of factors prevented the acceptance of the appellant’s submission that the Minutes resulted from a unilateral mistake that justified their rectification. In order to succeed on such a submission, one must establish that a mistake occurred and there was fraud, or the equivalent of fraud, on the part of the respondent. In other words, the appellant would need to demonstrate that, at the time the agreement was executed, the respondent knew that the appellant misunderstood its significance and did nothing to correct their mistaken understanding (Alampi v. Swartz (1964), 43 D.L.R. (2d) 11 (Ont. C.A.), Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56; 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273).

These factors relied on by the Court included the fact that the November Payment was documented on the payroll records of the appellant, and that the appellant’s representatives who attended the mediation deposed that they had reviewed these records. Also, the appellant’s argument ignored a key principle of contractual interpretation. Namely, it suggested that the motion judge was required to consider the subjective understandings of the appellant’s representatives. The Court rejected this suggestion by applying Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, which stands for the proposition that the only context that need be considered is the objective evidence of the background facts at the time of the contract’s execution.

As a final point, the Court noted that the appellant’s submission contradicted its own statement of issues filed at the mediation. In that document, the appellant acknowledged that it had provided the respondent with “thirty (30) weeks’ pay in lieu of additional notice”, which was an express component of the November Payment. This offered further support to the conclusion that there was no fraud or bad faith on the part of the respondent, i.e. that he must have known that the appellant misunderstood the significance of the Minutes.

(2) Did the motion judge err by deciding the matter without a trial?

No. The Court acknowledged the enhanced powers available to a motion judge on a motion to enforce the minutes of a settlement under Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure. The Court saw no reason to interfere with the motion judge’s conclusions, and that these conclusions sufficiently disposed of the need to consider the enhanced powers available under Rule 20. The Court agreed with the motion judge’s conclusion that the factual record was complete, and that there were no genuine issues of credibility that required a trial.


L v Ontario Civilian Police Commission, 2020 ONCA 720

[Pepall, Benotto and Coroza JJ.A.]

Counsel:

M.S. Dunn, for the intervener the Attorney General of Ontario

No one appearing for the applicant

No one appearing for the respondent

Keywords: Civil Procedure, Vexatious Litigants, Frivolous, Vexatious, Abuse of Process, Rules of Civil Procedure, Rule 2.1, Gao v Ontario (workplace Safety and Insurance Board), 2014 ONSC 6974, Scaduto v The Law Society of Upper Canada, 2015 ONCA 0733, R v Cunningham, 2010 SCC 10, R v 974649 Ontario Inc., 2001 SCC 81, Jonsson v Lymer, 2020 ABCA 167

facts:

This appeal concerned an order dismissing a proceeding pursuant to Rule 2.1.01(1) of the Rules of Civil Procedure. In 2006, members of the Toronto Police service entered the home of the appellant in order to execute a search warrant. The police mistook the appellant’s disabled brother for the appellant and in the course of trying to arrest him, tasered him. The brother was taken to hospital and was later released.

Since these events in 2006, the appellant and his family have embarked on a lengthy course of litigation against the Toronto Police Service, the respondents and several other parties, all without success. In May 2019, the appellant accused a judge of being corrupt and other improprieties, for which he was convicted of contempt. The Superior Court issued a restraining order preventing the appellant from bringing any further proceedings before any court in Ontario (except the Court of Appeal) without the permission of a case management judge.

In December of 2019, the appellant sought to bring his fourth action against the respondent. The request was denied and in February 2020 the appellant’s application for mandamus was also denied on the basis that it was found to be frivolous.

The appellant appealed the order refusing mandamus. In July 2020, the appellant sought to once again bring an action against the respondent, which was once again refused by the case management judge. The Attorney General of Ontario intervened in September 2020 to request that the appellant’s appeal be determined pursuant to Rule 2.1 and that it be dismissed as frivolous, vexatious and an abuse of process.

issues:
  1. Should the appeal be dismissed pursuant to Rule 2.1 of the Rules of Civil Procedure?
holding:

Appeal dismissed

reasoning:

(1) Yes

Rule 2.1 was introduced to help courts deal with an increasingly frequent problem, vexatious and abusive litigants. The rule allows a court to dismiss a proceeding summarily on its own initiative where the proceeding is vexatious, frivolous or otherwise abusive on its face.

The Court of Appeal proceeded to review several articles and decisions on the hallmarks of vexatious litigants, including that they are often self-represented, refuse to stop at all costs, exhaust every right of appeal and always seek leave to appeal when required, make unintelligible arguments, irrelevant submissions and have distinctive writing styles. The articles and jurisprudence also noted the damage these litigants do to the justice system as a whole, in that they increase cost for all parties, bring the administration of justice into disrepute and disproportionately impact court staff, who often receive the brunt of the abuse with little recourse against such litigants.

Two further concerns addressed by the Court were that not all self-represented parties are vexatious, and that even a vexatious litigant may have a legitimate issue for the court to consider.

However, the Court of Appeal found that this was not not such a situation. They found that the appellant exhibited several of the hallmark identifiers of a vexatious litigant and that his appeal was without any prospect of success and was clearly vexatious, frivolous and an abuse of process on its face. The appeal was thus dismissed.

The Court of Appeal then turned its consideration how to balance the need to protect the justice system from vexatious litigants with access to justice concerns. In this case, the appellant, despite a restraining order requiring leave to commence any proceedings, continued to bring proceedings regularly. The Court considered the issue of what further steps could be taken to restrain his behaviour while also allowing him to access the courts if a legitimate cause of action ever arose.

The Court has the ability to determine its own process, even though it is a statutory court (R. v. Cunningham). The Court considered whether to require the appellant to only access the courts through a lawyer in the future. While this practice has been used in other courts, it must be used sparingly, as requiring legal counsel can unduly increase costs and prevent parties from accessing the courts (Jonsson v. Lymer). However, as Chief Justice Strathy remarked in his 2020 Opening of the Courts speech, access to justice requires reinvesting in legal aid, rather than providing litigants with ‘do-it-yourself’ litigation kits. Self-represented litigants inevitably strain judicial resources and increase costs. “In order to be fair, and to avoid unreasonable delay, particularly but not exclusively where the state is a litigant, both parties must have competent legal representation.” (Strathy, CJO – 2020 Opening of the Courts speech)

Ultimately, the Court held that the appellant represented an extreme case that called for exceptional relief. The Court ordered that the appellant cannot interact with the Court of Appeal in any matter arising from the 2006 events except through lawyer.


Gagnon v Martyniuk, 2020 ONCA 708

[Hourigan, Trotter and Jamal JJ.A.]

Counsel:

Z. Tufman and G.A.P. Tufman, for the appellant

Osipov, for the respondent

Keywords: Family Law, Custody and Access, Civil Procedure, Contempt, Fresh Evidence, Family Law Rules, O. Reg 114/99, r.31(5), Les Services aux Enfants et Adultes de Prescott-Russell v. N.G. (2006), 82 O.R. (3d) 669 (C.A.), Godard v. Godard, 2015 ONCA 568, Hefkey v. Hefkey, 2013 ONCA 44

facts:

The parties had three children and were often in conflict over the respondent’s access to the children. Earlier proceedings in July 2010 resulted in a final order. The respondent alleged that the appellant increasingly ignored this order. The respondent commenced a new proceeding in September 2017, seeking increased access to his children. At a case conference in February 2018, McDermot J. made a consent order (“the Order”) that addressed access issues and required the appellant to obtain the respondent’s written consent before she could take the children out of the country. There were compliance issues with this order almost immediately. On a number of occasions, the parenting exchanges of the children did not happen, or they were late. The appellant also took the children out of the country without obtaining the respondent’s written consent.

The respondent initiated contempt proceedings in March 2019. The motion judge found the appellant in contempt for failing to comply with the consent order. She was subsequently sentenced to a non-custodial penalty which required the appellant to participate in a cooperative parenting program or face a fine for non-attendance. The appellant appealed and submitted that the motion judge made errors at both stages of the proceedings. She also brought a motion to adduce fresh evidence.

issues:
  1. Did the motion judge err in making her order?
  2. Should the fresh evidence be accepted?
holding:

Appeal dismissed.

reasoning:

(1) Did the motion judge err in the interpretation of the Minutes?

  1. Did the motion judge err in making her order? No.

The Contempt Finding

The Court held that the motion judge made no error in finding the appellant in contempt. The appellant submitted that the trial judge ought not to have responded to a high conflict family law dispute with a contempt finding. She further submitted that the motion judge should not have conducted the hearing solely on the basis of affidavit evidence. Rather, a trial was necessary to establish contempt beyond a reasonable doubt. Finally, the appellant submitted that the trial judge failed to appreciate that contempt is a remedy of last resort and must be used sparingly. The Court rejected these submissions.

The motion judge carefully instructed herself on the law of contempt and the proof required to make a finding of contempt, as demonstrated by her reasons. Additionally, the Court noted that the motion judge specifically recognized that contempt is a remedy of last resort that must be used sparingly. The appellant submitted that, although the motion judge repeated this principle, she did not give effect to it, and there is no evidence that she considered any alternatives to contempt. However, as the motion judge found, this case involved multiple, wilful breaches of court orders, which she rightly found were flagrant. Accordingly, the Court held that it was within the discretion of the motion judge to resort to contempt as the only appropriate option in this case.

The Penalty Imposed

The Court held that the penalty imposed by the motion judge was reasonable. The appellant argued that ordering her to pay a fine to the respondent when she fails to attend the parenting program in a timely manner was not a proper exercise of discretion. She submitted that this penalty aggravated a highly antagonistic situation, and did not take into consideration the best interests of the children. The Court was not persuaded by this submission.

Rule 31(5) of the Family Law Rules provides judges with wide discretion with respect to penalties for contempt. The motion judge demonstrated great restraint in penalizing the appellant’s flagrant contempt. The fine structure she imposed was designed to compel the appellant to participate in the cooperative parenting program. The order also required the respondent to attend, given that the program was “cooperative” in nature. The fines were meant to avoid wasting the respondent’s time. The Court held that there was nothing about this aspect of the order that could be considered contrary to the best interests of the children.

  1. Should the fresh evidence be accepted?

No. The Court refused to admit the fresh evidence. The fresh evidence mostly related to events that followed the contempt proceedings. The appellant relied on the fresh evidence to demonstrate that there were good reasons why the children did not wish to interact with their father, and that she was always acting in the best interests of her children.

The Court determined that the fresh evidence could have no effect on the motion judge’s contempt findings. The issues raised by the proposed fresh evidence were best addressed in the Superior Court in the context of a Motion to Change the consent order, which motion was currently before that court.


Jesan Real Estate Ltd. v Doyle, 2020 ONCA 714

[Feldman, Fairburn and Nordheimer JJ.A.]

Counsel:

P. Baxi, for the appellant

S.D., acting in person

Keywords: Contracts, Interpretation, Standard of Review, Real Property, Residential Tenancies, Occupancy Agreements, Rent to Own, Options to Purchase, Sufficiency of Notice, Bilateral Contracts, Substantial Non-Performance, Unilateral Contracts, Strict Performance, Time of the Essence, Deposits, Relief from Forfeiture, Unconscionability, Residential Tenancies Act, 2006, S.O. 2006, c. 17, ss. 3(1), s. 4, Sail Labrador Ltd. v. Navimar Corp., [1999] 1 S.C.R. 265, Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, Fuller v. Aphria Inc., 2020 ONCA 403, Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, leave to appeal to S.C.C. refused, 38247, Ju v. Tahmasebi, 2020 ONCA 383, Azzarello v. Shawqi, 2019 ONCA 820, Stockloser v. Johnson, [1954] 1 Q.B. 476 (Eng. C.A.), Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, Matthews v. Algoma Timberlakes Corp., 2010 ONCA 468, leave to appeal refused, [2010] S.C.C.A. No. 369

facts:

The appellant rented a home to the respondent pursuant to an Occupancy Agreement (the “OA”). Related to the OA, the parties also entered into an Option to Purchase Agreement (the “OPA”), whereby the respondent could exercise an option to purchase the property at the end of the rental term. The OPA provided that, as long as the respondent complied with the terms of the OA, he would have the option to purchase the property for the price of $489,000.

The respondent agreed to pay a deposit of $20,000 upon signing the OPA. If the option to purchase was exercised, this deposit would be credited to the purchase price. If the option was not exercised, the deposit would be forfeited. The OPA also provided for a monthly credit of $375 towards the purchase price for each month that the monthly occupancy payment was paid when due. The monthly option credit was similarly non-refundable in the event that the option to purchase was not exercised.

The option to purchase under the OPA was intended to be exercised by way of written notice, provided by registered mail or personal service, accompanied by an additional deposit of $1,000. The OPA also provided for time limits for providing the notice to exercise the option. Further, the OPA contemplated that in the event financing could not be obtained for the purchase, then the OA could be extended for an additional 6-month term.

On February 3, 2017, the respondent’s agent emailed an offer to purchase for the agreed price of $489,000. The $1,000 additional deposit required under the OPA was not included. The appellant refused the offer. The respondent’s agent then advised the respondent to make a second offer for more money, and a second offer was made for $550,000, together with the deposits previously provided for ($20,000, plus $375 from each lease payment that had been made on time, plus adding the $1,000 deposit), plus an additional $500 in order to “round up” the down payment amount to $35,000. The appellant accepted the second offer. However, the respondent ran into difficulties obtaining financing. When the respondent failed to close on the agreed date, his lawyer advised the appellant that the respondent was exercising his right to extend the OPA by 6 months.

The appellant responded by arguing that the February 3 offer sent by email was not valid notice under the OPA, and that in any event the OPA had already expired. The respondent proceeded by registering a caution on the property and continuing to reside there and make monthly rent payments as per the OA.

The appellant commenced this litigation by seeking a declaration that the OA and OPA were null and void, and for leave to issue a writ of possession. The application judge reached the conclusion that the parties continued to be operating under the OPA, and that the appellant failed to comply with its obligation to sell the property for the option price of $489,000.

In reaching this conclusion, the application judge relied on the Supreme Court of Canada decision in Sail Labrador Ltd. v. Navimar Corp., [1999] 1 S.C.R. 265. The application judge found that the OA and OPA constituted a bilateral contract, and that the legal result of this characterization was that only “substantial non-performance” of the terms of the contract by the respondent would be sufficient to disentitle him to performance by the appellant. The application judge defined “substantial non-performance” as requiring a finding that the respondent’s failure in performance substantially deprived the appellant of what it had bargained for.

After reviewing the facts, the application judge concluded none of the alleged breaches of the option conditions amounted to substantial non-performance.

issues:
  1. Was the appellant entitled to reject the exercise of the option to purchase because the notice did not comply with the OPA?
  2. Was the second agreement to purchase the property for $550,000 a new contract or an extension of the OPA?
  3. Is the deposit to be forfeited to the appellant or is the respondent entitled to any relief from forfeiture?
  4. Is the appellant entitled to an order for a writ of possession?
holding:

Appeal allowed.

reasoning:

(1) Was the appellant entitled to reject the exercise of the option to purchase because the notice did not comply with the OPA?

Yes. The Court did not disagree with the application judge’s analysis of Sail, and the enforceability of bilateral contracts as requiring substantial performance (as opposed to unilateral contracts, which require strict performance). However, the Court added in the qualifier mentioned at para. 50 of Sail, which states that the substantial non-performance doctrine is always subject to the express terms of the contract.

Contrary to the application judge’s finding that there were no clauses in the OPA that had the effect of requiring strict performance of the conditions, the Court noted several. Of particular importance to the Court’s reasoning was the inclusion of two non-waiver clauses, as well a “time of the essence clause”.

The standard of review for the interpretation of contracts is set out in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53. While appellate courts are required to be deferential on questions of fact and questions of mixed fact and law, no deference is owed to errors of law. Since the application judge did not take into account the specific clauses in the contract that contradicted her findings, she was found to commit an error of law in her interpretation of the contract (Fuller v. Aphria Inc., 2020 ONCA 403, Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, leave to appeal to S.C.C. refused, 38247).

The Court proceeded to undertake its own analysis of the circumstances in regard to three instances of non-compliance with the OPA: the timing of the notice, the method of delivery, and the $1,000 deposit.

Related to the timing of the notice, the application judge had found that there was some ambiguity under the agreement, as it seemed to provide for both a 60-day and 90-day notice period for exercising the option. The Court acknowledged that this could potentially give rise to ambiguity in some cases. However, in this case, the notice was only given 25 days before the end of the rental term, and therefore no ambiguity existed in fact. Further, the inclusion of the “time of the essence” clause reserved the appellant’s right to insist upon strict compliance.

Regarding the method of delivery, as stated above, the OPA stipulated that notice was to be provided by either registered mail or personal service. The Court acknowledged that no address was provided in the agreement, therefore service by registered mail was not possible. However, the Court maintained that personal service was still possible, and that, had the notice been delivered on time, the respondent could have made the argument that a proof of receipt by email would have constituted personal service.

Lastly, the Court disagreed with the application judge’s finding that the $1,000 could be paid after the OA had expired because of its ambiguous timing requirements. In the Court’s analysis of the agreement, the option was only validly exercised upon receipt of written notice and a $1,000 deposit 60 days prior to the end of the term of the OA. Further, even if the timing was ambiguous, the Court noted that 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). The fact that the respondent did not finally pay the $1,000 deposit required until after the second agreement was reached meant that this could not be payment within a reasonable time.

In sum, the application judge erred by failing to analyze the deficiencies in compliance in the context of the specific contractual requirements of non-waiver and the “time of the essence” provisions. Due to the respondent’s failure to exercise the option in accordance with the requirements of the OPA, the Court concluded that the appellant was entitled to reject the notice of intent.

(2) Was the second agreement to purchase the property for $550,000 a new contract or an extension of the OPA?

The second agreement was a new contract. The fact that the second agreement included a deposit which was comprised of the same components contemplated by the OPA led the application judge to view the parties’ treatment of this deposit as evidence that the OPA remained in effect.

However, once again, the Court found that the application judge failed to consider the entirety of the agreement, specifically the inclusion of an “Expiration of Option” provision in the OPA. This provision stipulated that in the event the option to purchase was not exercised, the agreement expires. Given that the Court already reached the conclusion that the option was not exercised properly in accordance with the terms of the agreement, then the agreement could not possibly be considered to remain in effect. As a result of this finding, the Court concluded that the respondent was not entitled to the 6-month extension provided for in the OPA.

(3) Is the deposit to be forfeited to the appellant or is the respondent entitled to any relief from forfeiture?

The appellant was entitled to retain some of the deposits, but the respondent was also entitled to partial relief from forfeiture. In circumstances where 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. However, this principle is always subject to the court’s ability to grant the equitable remedy of relief from forfeiture (Azzarello v. Shawqi, 2019 ONCA 820). Courts in Ontario follow the same test for relief of forfeiture as prescribed by the English Court of Appeal decision of Stockloser v. Johnson, [1954] 1 Q.B. 476 (Eng. C.A.). First, a court must consider whether the forfeited deposit was out of all proportion to the damages suffered. Second, the court must consider whether it would be unconscionable for the seller to retain the deposit.

In this case, the Court applied Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282 for the proposition that numerous factors, aside from the mere size of the deposit, should be considered as indicia of unconscionability. The Court concluded that certain amounts, namely, the initial $20,000 deposit as well as the monthly credit payments of $375 up to the time of the late attempt to exercise the initial option to purchase, should be forfeited because the agreement that the respondent entered into expressly provided for their forfeiture in the event that the transaction did not close. Therefore, there was no basis for finding unconscionability in respect of those amounts.

However, the Court did find that the respondent ought to be granted relief from forfeiture of the additional deposit funds paid pursuant to the second agreement ($1,500 plus $1,125 in total further monthly credit payments). Critical to this conclusion was the fact that the appellant suffered no loss due to the fact that the value of the property had increased, and the fact that the appellant chose to make no effort to facilitate the respondent securing the financing necessary to close the transaction. In these circumstances, it was unconscionable to allow the appellant to retain those additional deposits.

(4) Is the appellant entitled to an order for a writ of possession?

The Court declined to reach a conclusion on this issue due to the fact that the Landlord and Tenant Board has the exclusive jurisdiction to determine applications between landlords and tenants under the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (the “RTA”). However, the Court did note that the apparent handwritten addition to the OA’s “Applicable Law” provision that “this is not a tenancy under the Landlord and Tenant Act of Ontario” was invalid.

The Court did not comment on the validity of the handwritten addition itself in light of it lacking any accompanying signatures or initials. However, it was mentioned that notwithstanding any such amendment, the OA remains governed by the RTA, as it is not possible to contract out of the provisions of the RTA (ss. 3(1) and s. 4, Matthews v. Algoma Timberlakes Corp., 2010 ONCA 468, leave to appeal refused, [2010] S.C.C.A. No. 369).


SHORT CIVIL DECISIONS

Jog v Bank of Montreal, 2020 ONCA 0721

[Feldman, Simmons and Harvison Young JJ.A.]

Counsel:

C.J., acting in person

McNeill-Keller and J. Lindner, for the respondent

Keywords: Civil Procedure, Summary Judgment, Procedural Fairness, Self-Represented Litigants

Central Lumber Limited v Gentile, 2020 ONCA 719

[Feldman, Simmons and Harvison Young JJ.A.]

Counsel:

L. Akazaki for the appellant, Gentile

Long and L. Kung for the respondents, Central Lumber Limited

Keywords: Contracts, Construction Law, Breach of Trust, Costs, Construction Lien Act; R.S.O. 1990, c. C.30, s. 8 and s. 13

Jay-Pee Drycleaners v 2321324 Ontario Inc., 2020 ONCA 711

[van Rensburg J.A. (Motions Judge)]

Counsel:

Byeongheon (Jay-Pee Drycleaners Inc.) acting for in person

J. Bosada for the moving party/respondent, 2321324 Ontario Inc.

Keywords: Civil Procedure, Appeals, Extension of Time


The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Photo of John Polyzogopoulos John Polyzogopoulos

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with almost two decades of experience handling a wide variety of litigation matters. John assists clients with…

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with almost two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, breach of contract, construction, environmental contamination, product liability, debtor-creditor, insolvency and other business litigation. He also handles professional discipline and professional negligence matters, as well as complex estates and matrimonial litigation. In addition, John represents amateur sports organizations in contentious matters, and advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.