2011 ONSC 1705, 2011 ONSC 1705

Greenway Estate Homes Ltd. v. McDonald et al.; Re/Max Orillia Realty

(1996) Ltd. et al., Third Parties [Indexed as: Greenway Estate Homes Ltd. v. McDonald] 106 O.R. (3d) 335 2011 ONSC 1705 Ontario Superior Court of Justice, Edwards J.

May 30, 2011 Sale of land -- Specific performance -- Abatement -- Agreement of purchase and sale describing acreage of property as "approximately 26 acres" -- Purchaser and/or its agents becoming aware that actual acreage was 23.86 acres -- Sale not closing -- Purchaser bringing action for specific performance with abatement of purchase price -- Action dismissed -- Purchaser not bargaining for purchase of property on basis of price per acre -- Purchaser content with property as it was -- Sale not closing because purchaser's financing fell through -- Purchaser not entitled to abatement.

The plaintiff entered into an agreement to purchase farmland from the defendants for the purpose of a condominium hotel development. The agreement of purchase and sale described the acreage of the property as "approximately 26 acres". In fact, the acreage was 23.86 acres. The sale did not close. The plaintiff brought an action seeking specific performance of the agreement of purchase and sale together with an abatement in the purchase price. The defendants brought a motion for

summary judgment dismissing the action. Held, the motion should be granted. The plaintiff and/or its agents were aware of the actual acreage of the property, and the plaintiff was content with the property. The real reason the sale did not close was the plaintiff's lack of funds. Had the plaintiff truly believed that the acreage was a misrepresentation that was fundamental to the agreement, it should have closed the transaction and sued for damages. The plaintiff did not bargain for the purchase of the property on the basis of a price per acre.

In the absence of a warranty or collateral agreement, where the sale of a specific property is for a lump sum and there is no evidence that the purchaser and vendor bargained on a price per unit of measurement, the purchaser is not entitled to an abatement of purchase price where the actual area was less than the purchaser supposed. Furthermore, the plaintiff failed to make full and frank disclosure when it obtained its certificate of pending litigation. MOTION for

summary judgment dismissing an action. Cases referred to3999581 Canada Inc. v. 1394734 Ontario Inc., [2007] O.J. No. 1570, 2007 ONCA 312 , 282 D.L.R. (4th) 461, 224 O.A.C. 29, 56 R.P.R. (4th) 309, 157 A.C.W.S. (3d) 199 (C.A.), consd Other cases referred to Ainsley v. Hicke Real Estate Ltd., [1975] A.J. No. 27 (S.C.) ; John Beattie Farms Ltd. v. Stevenson Estate, [2004] O.J. No. 1177, [2004] O.T.C. 263, 19 R.P.R. (4th) 303, 129 A.C.W.S. (3d) 834 (S.C.J.) Authorities referred to Perell, Paul M., "Specific Performance with an Abatement", Second Annual Real Estate Law Summit 2005 [page336] David P.

Brannan, for plaintiff. Lionel Gray, for defendants. EDWARDS J.: -- Overview [ 1 ] The plaintiff, Greenway Estate Homes Ltd., was incorporated by Vittorio Vacca ("Vacca") for the purposes of developing land that was purchased from the defendants at premises municipally known as 5655 Rama Road in the Township of Ramara, in the County of Simcoe (the "property"). Vacca is 71 years of age and has been a builder and developer in the Woodbridge area for nearly 40 years. [ 2 ] The owners of the property are the defendants who have farmed the property for many years.

The defendants decided to sell the property to the plaintiff pursuant to an Agreement of Purchase and Sale dated January 21, 2005 (the "First Agreement").

The plaintiff had been looking for a property near Casino Rama that would lend itself to development into a condominium hotel development. [ 3 ] The First Agreement describes the property as follows: Real property: Address: 5655 Rama Road fronting on the East side of Rama Road in the Township of Ramara, County of Simcoe and having a frontage of 265 feet more or less by depth of irregular (approximately 26 acres) more or less and legally described as CN 13 PT LT 27, Ramara Township, County of Simcoe. [ 4 ] The plaintiff in its Statement of Claim seeks specific performance of the Agreement of Purchase and Sale together with an abatement in the purchase price of $67,336.88, which is described as a pro-rated reduction of the purchase price, plus an additional abatement of $20,000 for the cost to modify plans and drawings to reflect the correct acreage of the property.

The Issue [ 5 ] The essential issue in this litigation relates to the question of the description of the property in that the acreage of the property, as it was subsequently discovered was not 26 acres, but rather 23.86 acres. As such, the plaintiff takes the position that there was a shortage of 2.117 acres in the description of the property for which it seeks an abatement. [ 6 ] The defendants brought a motion for

summary judgment before me seeking orders dismissing the plaintiff's claim for all [page337]

relief in the Statement of Claim; vacating the certificate of pending litigation and a declaration that the deposits paid by the plaintiff to the defendants were forfeited to the defendants. The thrust of the defendants' argument before me was to the effect that (

a) the plaintiff knew the true acreage of the property before it submitted a final binding Agreement of Purchase and Sale; (

b) the plaintiff did not have the funds necessary to close the transaction as originally contemplated and it was for that reason alone that the plaintiff sought an abatement of the purchase price; (

c) the plaintiff was happy with what it would have received had it closed the transaction, i.e., the 23.86 acres; (

d) the phrase "approximately 26 acres more or less" was not a misrepresentation and that if it was a misrepresentation, it does not permit a claim for specific performance. [ 7 ] The real issue before the court is whether or not the plaintiff, had it closed, would have received what it bargained for. After careful consideration, I have concluded that the plaintiff would have received what it bargained for. Specifically, the plaintiff would have had transferred into its name the property municipally known as 5655 Rama Road.

The Facts and Chronology [ 8 ] As previously noted, on January 21, 2005, the plaintiff entered into the First Agreement for the purchase of the property. The purchase price was $812,000 with an additional deposit of $5,000 payable to a real estate company. The closing date was scheduled for January 30, 2007. The agreement was conditional until January 30, 2006, upon soil tests, environmental tests and verifying that the land was suitable for the construction of a subdivision. The aforesaid conditions were at the buyer's sole and absolute discretion.

The agreement was also conditional until January 30, 2006, upon draft plan approval and rezoning, again at the buyer's sole and absolute discretion.

A second deposit of $15,000 was to be paid upon receiving a letter from the municipality stating that property had been approved for rezoning. [ 9 ] On January 6, 2006, the parties entered into an amendment to the First Agreement (the "first amendment"), pursuant [page338] to which the conditional period was extended from January 30, 2006 until June 30, 2006. [ 10 ] On June 30, 2006, the parties entered into a second amendment to the First Agreement (the "second amendment"), pursuant to which the parties agreed as follows: (

i) the condition regarding the buyer receiving draft plan approval and rezoning from the property was deleted; (ii) the condition regarding soil tests, environmental test and verifying that the subject land was satisfactory for the construction of subdivision was extended from June 30, 2006 to July 30, 2007; (iii) the completion date was extended from January 30, 2007 to November 30, 2007; (iv) the title search date was extended from January 8, 2007 to November 9, 2007; (

v) the plaintiff agreed to pay the defendants 5 per cent interest on the purchase price, calculated monthly for the term of January 30, 2007 to November 30, 2007 or until closing. A further deposit of $5,000 was paid directly to the defendants. [ 11 ] The plaintiff engaged a surveyor, Charles Strongman, for the purpose of surveying the subject property. A survey was prepared dated June 21, 2006 that showed that the property was 23.86 acres.

It was acknowledged by Vacca that he received a copy of the survey in the summer of 2006, but that it was on a small scale and therefore presumably more difficult to read -- but far from illegible. [ 12 ] The plaintiff engaged the services of an architect, Joseph Battaglia ("Battaglia"), who prepared three site plans of the property over a period July 2006 through November 2007. All three site plans showed the acreage of the property to be 23.86 acres.

There is no dispute that Vacca not only received, but also reviewed, the first site plan prepared by Battaglia, and in fact, there are handwritten notations made by Vacca on the site plan dealing with changes that the local Township and County of Simcoe wanted to have made to the site plan. [ 13 ] The site plan prepared by Battaglia has on the extreme right-hand side notations with a subheading "area summaries" that breaks the property down into various blocks, identified as Block "A" through Block "J" respectively. Each of the particular blocks indicates the total number of acres for that block.

A totalling [page339] of each block's acreage would have drawn to the attention of the reader that the total acreage for the property was 23.86 acres. [ 14 ] In July 2007, Vacca states in his affidavit sworn in opposition to the motion that the defendants had agreed to a third amendment to the First Agreement (the "third amendment"), which Vacca states provided for the following: (

i) all of the conditions were to be deleted; (ii) the completion date was to be extended from November 30, 2007 to May 30, 2008; (iii) the title search date was to be extended from November 9, 2007 to May 16, 2008; (iv) the plaintiff was to provide to the defendants for expenses and maintaining the property until closing the sum of $5,000 in addition to the purchase price; (

v) the plaintiff agreed to pay 5 per cent interest per annum on the outstanding amount due on closing stating August 1, 2007; (vi) the deposits were to be non- refundable. [ 15 ] Subsequent to Vacca's understanding with respect to the third amendment, he was advised by the real estate agents that there were some typographical errors in the third amendment that required signing by the defendants. While Vacca initialled the corrections to the typographical errors, it is Vacca's evidence that the defendants did not initial the corrections and did not accept the additional $5,000 payment for expenses.

A dispute therefore arose with respect to the legal validity of the third amendment and on November 21, 2007 Vacca instructed his solicitors to register a caution against the property's total acreages. [ 16 ] Negotiations then ensued between the parties as a result of which a new Agreement of Purchase and Sale was executed by the defendants on December 11, 2007 and by the plaintiff on December 19, 2007 (the "Final Agreement"). [ 17 ] The Final Agreement became the binding agreement between the parties that was the subject matter of the motion before me. It can be summarized as follows: (

i) the acreage continued to be described as approximately 26 acres more or less and the description of the property was exactly the same as contained in the First Agreement, i.e., 5655 Rama Road; [page340] (ii) the purchase price was $827,000 with a deposit of $30,000; (iii) the completion date was to be May 30, 2008 with a title search date of February 28, 2008; (iv) upon execution, the second amendment [to] the First Agreement and all amendments thereto became null and void save and except that all deposits paid by the plaintiff were to be credited towards them; (

v) the plaintiff would rent the property back to the defendant for 90 days after closing at a rental of $1 per month plus utilities; (vi) the plaintiff agreed to pay to the defendants 5 per cent interest on the sale price of $812,000 less deposits paid for the term from January 30, 2007 to November 30, 2007.

[ 18 ] It is noteworthy that the final agreement was drafted by legal counsel retained by Vacca. It is also particularly noteworthy that plaintiff's counsel on the motion before me conceded that all of Vacca's agents, specifically his experts -- the architect, Joseph Battaglia, and the surveyor, Charles Strongman, all knew that the acreage of the property was 23.86 acres.

Ability of the Plaintiff to Fund the Cost of the Purchase Price [ 19 ] If Vacca and/or his agents knew what the correct acreage was and if the evidence leads one to conclude that Vacca was content with the property, why then did the transaction not close? In that regard, the ability of the plaintiff to fund the costs of the transaction becomes important. Vacca was cross- examined on his affidavit filed in support of the defendants'

summary judgment motion and during the course of that cross-examination Vacca admits that he was not in funds to close the transaction as of the date of closing. In that regard, Vacca seeks to excuse his lack of funding on the basis of his desire to reach a settlement of his demands for an abatement of the purchase price to reflect the reduced acreage of approximately two acres. The plaintiff argues that he had mortgage funding in place.

In that regard, the plaintiff points to an e-mail of July 22, 2008, from his solicitors to Wildwood Capital ("Wildwood"), which it is argued confirms that the plaintiff had a verbal commitment from Wildwood to advance $700,000 (see Exhibit 48). The plaintiff also placed before the court a letter of July 22, 2008 confirming that Wildwood had verbally committed to advance $700,000 to the plaintiff in order to close the subject purchase of May 30, 2008 [page341] (see Exhibit 49).

The aforementioned exhibits were all prepared after litigation was pending and need to be carefully tested in relation to other evidence filed on this motion. [ 20 ] The evidence may suggest that the mortgage commitment letter was backdated by the plaintiff to reflect that he had the necessary financing in place for the scheduled closing date. In that regard, Wildwood had submitted a mortgage commitment letter which is dated June 2, 2008, with a closing date "on or before June 20, 2008" (Exhibit 40). The second agreement called for a closing date of May 30, 2008. This date was never extended by the defendant.

What is particularly troubling in regard to Exhibit 40 is the fact that this document was changed to reflect that it was prepared on May 20, 2008, with a projected closing of May 30, 2008. The changes are handwritten by Vacca. Exhibit 40 was filed by the plaintiff in support of its ex parte motion for a certificate of pending litigation. There is no indication that the reader of Exhibit 40 would have been aware that it had been altered by Vacca and not Wildwood.

I can only conclude Vacca would have been aware of the importance of showing to the court, when he applied ex parte for a certificate of pending litigation, that he was in a position to close the transaction and had funding in place to close.

Subsequent documents prepared in connection with the mortgage commitment with Wildwood make clear that commitment was only confirmed after May 30 in connection with what was then anticipated to be a closing date of June 27, 2008 (see Exhibits 41, 42 and 43). [ 21 ] The defendants argue that the phrase "26 acres more or less" was at most a misrepresentation which would entitle the plaintiff to claim damages, but not permit a claim for specific performance.

In that regard, it is particularly noteworthy that Vacca, when cross- examined on his affidavit filed in support of this motion, admitted that the purchase price for the property was not negotiated on a per acre basis. There is nothing in any of the correspondence between Vacca and his lender, Wildwood, in which Vacca complained of the reduced acreage. In fact, Wildwood, in all of its correspondence in the four months prior to closing, makes clear that Wildwood knew the correct acreage.

I reject out of hand any assertion that Wildwood was holding up the closing of the transaction because of any issue with respect to the declared acreage of the property. [ 22 ] What is clear to me is that without the mortgage financing from Wildwood, the plaintiff could not close the transaction with the defendants. The plaintiff gambled that he could force an abatement of the purchase price and played a game of brinkmanship with the defendant on the eve of closing. The [page342] defendants did not blink. The plaintiff did not have the necessary time to then have in place the mortgage financing from Wildwood.

The plaintiff played a game with high stakes. If he truly believed the acreage was a misrepresentation that was fundamental to the agreement, he should have closed the transaction and sued for damages. The Acreage and Abatement Issue [ 23 ] What is particularly troubling about the plaintiff's position in this matter is the fact that if one accepts Vacca's assertion that he did not know about the true acreage of the property until late January 2008, then why did he wait until essentially the eve of closing to bring it to the attention of the defendants? [ 24 ] Vacca had confirmed to him by his surveyor, C.T.

Strongman, by letter dated February 19, 2008, that the correct acreage was 23.883 acres and not the 26 acres more or less set forth in the Final Agreement. It is not until May 28, 2008 that Vacca, through his counsel, seeks an abatement of the purchase price, due to the discrepancy in the property's acreage (Exhibit 21). In the aforesaid letter of May 28, Vacca's counsel suggests "my client's lender will not advance funds until these impediments are resolved". One of the impediments was the acreage issue.

There is nothing in the mortgage commitment documentation from Wildwood, prepared in or about May 28 (or for that matter at any time), that suggests the acreage issue was a problem from Wildwood's perspective. [ 25 ] No affidavit evidence was filed with the court on the motion before me that confirms Wildwood had any issue with the disclosed acreage of the property and that this was an impediment to the advancing of mortgage funding.

The letter of May 28, 2008 concludes with a statement: Given the complexity of the issue and the unwillingness of my client and my client's lender to complete the transaction, until these issues are resolved, it appears clear that the closing of the transaction should be extended pending resolution. (Emphasis added) [ 26 ] As previously noted, I have no evidence from Wildwood to support the aforementioned assertion.

I am only left to conclude that Vacca was neither forthright with the defendant, nor with this court when the ex parte certificate of pending litigation order was made, in regards to the Wildwood mortgage commitment and the plaintiff's ability to close the transaction. [ 27 ] The plaintiff takes the position that the reduction in the acreage was material and important to him. It is noted that the reduced acreage was a discrepancy of just over 8 per cent of [page343] the total property.

Vacca argues that he did not disclose the discrepancy to the defendants until the eve of closing as he did not believe there would be any issue with an extension of the closing date, given that the defendants could not give him more property than the surveyed acreage of 23.883 acres, i.e., the defendant could not convey "26 acres more or less" as required by the Final Agreement. There can be no doubt, however, that the defendants could convey property municipally described as 5655 Rama Road to the plaintiff.

[ 28 ] The plaintiff argues that the acreage issue was not only an issue for him but also the lender, Wildwood, who, he argues, reduced the mortgage commitment to $700,000 because of the acreage dispute. There is no corroborative evidence from Wildwood with respect to this assertion. The defendants argue that the plaintiff knew the correct acreage of the property prior to completion of the Final Agreement. Certainly, the plaintiff through his agents knew what the correct acreage was. It certainly can be suggested Vacca had available to him the necessary information to appreciate the correct acreage.

Regardless, the defendants argue that Vacca was happy with what he had obtained out of the purchase, i.e., 5655 Rama Road. The acreage of 5655 Rama Road (23.86 acres) was going to produce for him the number of serviceable lots upon which his development plans and financing was based. [ 29 ] The real issue comes down to whether the plaintiff was entitled to insist upon an abatement of the purchase price as a precondition to closing.

The plaintiff argues that a purchaser is entitled to an abatement in two situations: (1) when the vendor wrongfully repudiates the agreement and cannot rely on the termination provision and the purchaser elects to sue for specific performance; (2) where the vendor has failed to perform a precondition of the agreement and cannot rely on the termination provision and the purchaser elects for specific performance. [ 30 ] Reliance is placed on this assertion of the law by the plaintiff on Perell, "Specific Performance with an Abatement", Second Annual Real Estate Law Summit 2005 ("Perell"). [ 31 ] Both parties relied heavily during the course of their argument on Perell, supra.

The defendant argues that the right to an abatement depends upon whether the purchaser has a right to specific performance.

In that regard, the plaintiff argues that a claim for specific performance by a purchaser can only arise when [page344] (1) the vendor repudiates the agreement; or (2) when the vendor breaches a contract term classified as a condition. [ 32 ] In a situation where the vendor's obligation is classified as a breach of warranty or as a representation and not as a promise, then the purchaser is not entitled to a claim for specific performance, but may have a right to rescission or, alternatively, if the elements of the torts of negligent or fraudulent misrepresentation are satisfied, then the purchaser may have a claim for damages: see 3999581 Canada Inc. v. 1394734 Ontario Inc., [2007] O.J.

No. 1570, 2007 ONCA 312 . The Court of Appeal in 3999581 Canada Inc. dealt with a situation where the parties had entered into an agreement of purchase and sale which did not say specifically that the purchase price was calculated on the basis of acreage or square footage, but clearly contemplated that it was being sold with an area of approximately 98,590 square feet. The uncontradicted evidence before the court was to the affect that the purchase price was based on the square footage of the land and its intended use as a townhouse development.

The Court of Appeal also had before it clear evidence that demonstrated that the professed acreage of the property was a significant factor in both parties' decision to acquire the property. [ 33 ] Applying the basic principle that specific performance with an abatement is an equitable remedy, this court therefore has a residual discretion as to whether to grant an abatement or not with specific performance. [ 34 ] Unlike the facts before the Court of Appeal in 3999581 Canada Inc., supra, the evidence before me does not establish that the plaintiff had bargained for the purchase of the property on the basis of a price per acre.

The evidence in my opinion is to the contrary. The assertions of the plaintiff that his lender in this matter (Wildwood) was refusing to advance the funds necessary to close the transaction because of the dispute with respect to the acreage is not made out on the evidence.

In fact, there is no evidence from Wildwood to suggest that the acreage dispute was in any way the cause of the delay in funding the transaction. [ 35 ] The Court of Appeal decision in 3999581 Canada Inc., supra, does not overrule earlier decisions of this and other courts where it has been determined that (in the absence of a warranty or collateral agreement, where the sale of a specific property is for a lump sum and there is no evidence that the purchaser and vendor bargained on a price per unit of measurement) the [page345] purchaser is not entitled to an abatement of purchase price where the actual area was less than the purchaser supposed.

In that regard, reference can be made to the recent decision of Marchand J. in John Beattie Farms Ltd. v. Stevenson Estate, [2004] O.J. No. 1177, 19 R.P.R. (4th) 303 (S.C.J.) , where Marchand J. referred to an earlier decision of Ainsley v. Hicke Real Estate Ltd., [1975] A.J. No. 27 (S.C.) , where Laycraft J. of the Alberta Supreme Court Trial [Division] had relied on a number of much earlier decisions of various jurisdictions.

To the contrary, the decision of the Ontario Court of Appeal in 3999581 Canada Inc., supra, makes clear that specific performance with an abatement was granted because of the uncontradicted evidence that the professed acreage of the subject property was a significant factor in the purchaser's decision to acquire the property and in the calculation of the price the purchaser was willing to pay. [ 36 ] Furthermore, given the equitable nature of the remedy that the plaintiff seeks in this matter, I have come to the conclusion that the plaintiff does not come to this court having made full and frank disclosure to the court with respect to material evidence that was placed before the court when the plaintiff obtained its certificate of pending litigation.

As I have made clear earlier in these reasons, the plaintiff placed before the court evidence with respect to its ability to fund the transaction that, on its face, would leave the motion judge granting the ex parte certificate of pending litigation with the impression that the plaintiff had a mortgage commitment from Wildwood to fund the transaction for closing on May 30. In fact, the mortgage commitment letter was altered by the plaintiff in Vacca's handwriting and this was not disclosed to the court.

As I have already concluded, the plaintiff did not have in place the financial commitment of Wildwood to close the transaction on May 30. [ 37 ] For whatever reason, Vacca believed that he could force an abatement of the purchase price and that his demand in this regard and his request through his counsel for a later closing would be accommodated. The defendant in this case was in a position to close the transaction and to convey to the plaintiff 5655 Rama Road.

The defendant chose not to close the transaction, where the plaintiff should simply have closed the transaction, and had he chosen to do so, then sue for damages on the basis of the alleged misrepresentation with respect to the disclosed acreage of the property. The plaintiff gambled. The plaintiff has lost that gamble. The defendants' motion for

summary judgment is granted. The plaintiff's claim is dismissed and the certificate of pending litigation is vacated. The deposits paid by the plaintiff to the defendants are forfeited. Parties may file [page346] written submission with the court with respect to costs, limited to five pages in length, to be received within 15 days from the date of receipt of these reasons. Motion granted.