COURT OF APPEAL FOR ONTARIO

CITATION: More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 527

DATE: 20230804

DOCKET: C70511

Roberts, Miller and Coroza JJ.A.

BETWEEN

Sewa More, Gurlal Singh Gill and Ravneet Kaur Boparai

Plaintiffs (Respondents)

And

1362279 Ontario Ltd., operating as Seiko Homes

Defendant (Appellant)

Colin P. Stevenson and Wei Jiang, for the appellant

Anthony Di Battista and Simerjot Chahal, for the respondents

Heard: May 3, 2023

On appeal from the judgment of Justice Thomas J. Carey of the Superior Court of Justice, dated February 28, 2022, and from the costs order, dated June 30, 2022.

Coroza J.A.:

INTRODUCTION

[1]          The respondents are purchasers of three adjacent townhomes built and sold by the appellant vendor, 1362279 Ontario Ltd., operating as Seiko Homes. They separately entered into an identical Agreement of Purchase and Sale (“APS”) with the appellant on December 29, 2019, with a closing date scheduled for October 1, 2020.

[2]          The transactions failed to close on October 1 because the appellant’s receipt of the mortgage funds was delayed through no fault of the respondents. At 5:11 p.m., on that day, the appellant’s real estate counsel faxed a letter to the respondents’ real estate counsel terminating the APS.[1] In the subsequent days, the appellant refused to close the transaction, attempted to return the mortgage funds and retained the deposit amounts that the respondents had provided pursuant to the APS.

[3]          The respondents and the appellant brought competing motions for summary judgment. Before the motion judge, the respondents sought specific performance of the three APS and the appellant sought dismissal of the action and forfeiture of the deposits. The appellant claimed that the respondents failed to close on the closing date because of the late delivery of the mortgage funds and thus, it was entitled to terminate the APS. The motion judge determined that there were no genuine issues for trial. He found that the respondents were always ready, willing, and able to close the transactions while the appellant was unwilling to close and acted unreasonably in prematurely terminating the transaction. Accordingly, he granted specific performance to the respondents and dismissed the appellant’s summary judgment motion. He awarded costs to the respondents on a substantial indemnity basis in the amount of $17,500.

[4]          The appellant appeals the summary judgment order in favour of the respondents and the dismissal of its own motion. The appellant also seeks leave to appeal the costs awarded to the respondents.

[5]          For the reasons below, I would not interfere with the motion judge’s decision to grant the respondents’ summary judgment motion and dismiss the appellant’s motion. I would also deny leave to appeal the costs award.[2]

BACKGROUND FACTS

A.           The APS

[6]          The respondents are family friends who planned to retire to Windsor together and live as neighbours for mutual support. According to the respondents, the three adjoining properties built by the appellant were desirable because they were new developments, located side by side, close to major highways and entertainment facilities, and provided for custom specifications at the right price.

[7]          On December 29, 2019, the respondents signed three identical APS. The terms included a purchase price of $369,000. The original closing date was on November 19, 2020, but it was brought forward to October 1, 2020, on the parties’ agreement.

[8]          The APS did not specify the time of closing although it provided the “time is of the essence” clause:

[T]ime shall be in all respects of the essence provided that the time for doing or completing of any matter may be extended or abridged with respect to the Closing Date by [Seiko Homes] unilaterally or otherwise by an agreement in writing signed by [Seiko Homes] and the purchaser by their respective solicitors.

[9]          Upon signing the APS, each respondent paid a $5,000 deposit, with further payments for a total down payment of $25,000.

[10]       The appellant’s real estate counsel, Mr. Tomas, also signed a Document Registration Agreement (the “DRA”) and delivered it to the respondents’ real estate counsel, Mr. More.[3] The DRA provides, “If the purchase agreement does not specify a closing time and a release deadline has not been specifically inserted, the release deadline shall be 6:00 p.m. on the closing date.”

B.           Events Leading Up to the Closing Date

[11]       Two days prior to closing, the respondents were denied the opportunity to fully conduct the Tarion New Home Warranty inspection, which was cut short after 20 minutes. Further, they did not receive a copy of the deficiency list from the appellant despite their request. They then asked to extend the closing date by a few days, but the appellant refused.

[12]       Mr. More also advised the respondents that the appellant had not severed the properties as expected, which was required for proper registration.

[13]       The respondents asserted that they began to question if the appellant was “doing everything in their power forcing [the respondents] to walk away” amidst rising real estate prices. Nevertheless, the parties moved forward with closing.

C.           Issues with the Delivery of the Closing Funds

[14]       On October 1, 2020, the mortgage funds arrived later than expected by the respondents. National Bank, which was forwarding the mortgage funds, acknowledged that it encountered banking delays due to a combination of COVID-19 protocols, fewer staff, reduced hours and end-of-month spike in the volume of transactions.

[15]       Mr. More tried to wire the funds to Mr. Tomas, but his attempt failed. Mr. More was in receipt of the required funds and certified them on the date of closing.

[16]       At around 5:11 p.m., Mr. Tomas faxed a letter to Mr. More’s office terminating the APS and alleging that the respondents were unable or unwilling to close.

[17]       The funds were deposited into Mr. Tomas’ trust account the following morning and a closing date of October 2, 2020, was proposed and if that date was not accepted, the respondents proposed October 6, 2020. In the ensuing days, the appellant refused to close the transaction and attempted to return the mortgage funds, but not the deposit amounts.

ANALYSIS

The Substantive Appeal

[18]       The central issue underlying this appeal is whether the motion judge erred in finding that the appellant was in anticipatory breach of the three APS when it faxed the letter repudiating the transaction just after 5:00 p.m. on October 1. The appellant makes two primary submissions on the appeal.

[19]       First, the appellant argues that the motion judge erred in finding that the proper closing time was midnight on October 1, 2020, and therefore, the appellant anticipatorily breached the APS by faxing a letter to Mr. More terminating the transaction shortly after 5:00 p.m. The appellant contends that since the APS contained the “time is of the essence” clause, the timeline for closing was to be strictly enforced and that the respondents repudiated the agreement by failing to deliver the closing funds on the closing day. The appellant also points out that because the Teraview System does not permit transfers to be electronically registered past 5:00 p.m. on any business day, closing funds had to be tendered no later than 5:00 p.m. 

[20]       I do not accept the appellant’s submission. As to the 5:00 p.m. deadline, the motion judge held that the appellant’s position was contradicted by the DRA Mr. Tomas prepared and delivered to Mr. More, which provided that if the APS was silent on the time of closing, the deadline for “release” of funds from escrow would be 6:00 p.m. on closing day. In any event, the motion judge found that the appellant could not rely on the “time is of the essence” clause since there was no specific time set out in the APS. I see no error in that finding because it is consistent with this court’s observation in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at paras. 31, 35:

A “time is of the essence” clause is engaged where a time limit is stipulated in a contract. The phrase “time is of the essence” means that a time limit in an agreement is essential such that breach of the time limit will permit the innocent party to terminate the contract.

[…]

 [A] “time is of the essence” clause does not serve to impose a time limit but rather dictates the consequences that flow from failing to comply with a time limit stipulated in an agreement. [Emphasis added.]

[21]       Put differently, the mere presence of the “time is of the essence” clause is of limited assistance to courts interpreting a contract where the contract is otherwise silent on the deadline to perform the obligations under the contract. This was squarely the situation before the motion judge.

[22]       The motion judge also found that the appellant was not entitled to rely on the clause because it was “clearly not willing to close on the agreed date and terminated the transaction prematurely.” In my view, it was open to the motion judge to make those findings and I see no basis for appellate intervention: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, at para. 14, citing Domicile Developments Inc. v. MacTavish (1999) 45 O.R. (3d) 302 (C.A.), at pp. 306-07 (paras. 10-12). In Domicile, this court expressly held that an innocent party must itself be “ready, desirous, prompt and eager” to carry out the agreement in order to take advantage of the “time is of the essence” clause.

[23]       Second, the appellant challenges the motion judge’s finding that it acted unreasonably and in bad faith by prematurely cancelling the transaction owing to delays that should have been expected during the pandemic. The motion judge found that although Mr. More had explained the delays and sought an adjustment of the closing date to allow the funds to be delivered to the appellant, the appellant refused to consider that possibility. The motion judge further found that Mr. More was in receipt of the funds and would have personally delivered those funds to Mr. Tomas’ office, if necessary, had Mr. Tomas been responsive to communications. The appellant argues that there is no basis for the motion judge’s finding and highlights that Mr. Tomas continued to monitor his trust account until shortly after midnight going into October 2, and he determined no closing funds had been forwarded by Mr. More.

[24]       I see no error in the motion judge’s conclusion that the appellant acted unreasonably and in bad faith. It was open to the motion judge to find, on this record, that purchase transactions would usually be honoured despite minor delays in the delivery of closing funds that the appellant “pounced on” in a “totally unexpected fashion”. The motion judge accepted that during the pandemic, it was common practice for lawyers to work together to complete the rest of closing steps after the closing of the Teraview System and before midnight on closing day.

[25]       Nor is it necessary for this court to decide definitively whether, as a matter of law, a purchaser can rely on the fact that their counsel is in receipt of closing funds in order to cure minor delays in delivering the funds to the vendor and/or the vendor’s counsel.  In this case, once there was a finding of clear repudiation by the appellant just after 5:00 p.m. on October 1, the fact that the mortgage funds were ultimately delivered the day after the closing date is irrelevant because the innocent parties, namely, the respondents, were relieved of the requirement of tender at that point. As this court held in Di Millo, at para. 49, “when a party by words or conduct communicates a decision not to proceed to closing, the other party is released from any obligation to tender in order to prove he was ready, willing and able to close.”

[26]       In sum, the motion judge did not err in finding that the appellant anticipatorily breached the APS before the midnight closing deadline, the “time is of the essence” clause is of no assistance to the appellant, and there is no basis to disturb the motion judge’s finding that the appellant acted unreasonably and in bad faith. I would dismiss the appeal.

The Costs Appeal

[27]       At the conclusion of the motion, the respondents sought costs on a substantial indemnity basis totalling $41,187, which included partial indemnity costs from the date of commencement of the matter until the date of the first r. 49 offer, followed by substantial indemnity costs to the date of their submissions. They submitted that their cost request was modest as there were three of them, and they took steps to mitigate their costs by hiring one counsel and taking a unified position. For its part, the appellant argued that the results obtained were not better than the r. 49 offer. The appellant submitted its own costs totaling $17,355.37 on a full indemnity basis; $14,135.20 on a substantial indemnity basis; and $9,304.96 on a partial indemnity basis.

[28]       The motion judge granted costs to the respondents on a substantial indemnity basis although he found their proposed quantum to be too high. The motion judge was not satisfied that any substantial increase in preparation by the respondents’ counsel was required due to there being three transactions, as there was use of one counsel and reliance on one affidavit. The motion judge found that the full indemnity costs incurred by the appellant was a reasonable measure of the value of the work done on behalf of the respondents on a substantial indemnity basis. Accordingly, he awarded the respondents $17,500, all-inclusive.

[29]       The appellant argues that it should be granted leave to appeal and the costs award should be set aside because the motion judge erred in principle in granting costs on a substantial indemnity basis “without any rational basis” and because the quantum awarded was “irrational” in the circumstances.

[30]       Appellate courts are deferential to discretionary costs orders made by first instance judges and will intervene only if the judge “has made an error in principle or if the costs award is plainly wrong”: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[31]       The reasons of the motion judge as to costs are brief. Costs are typically payable on a partial indemnity basis unless there are circumstances that justify a higher scale of costs, such as where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties: see Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 29-30; Standard Life Assurance Company v. Elliott (2007), 86 O.R. (3d) 221, at para. 9; Osmani v. Universal Structural Restorations Ltd. et al., 2023 ONSC 1041, at para. 9; and Best v. Lancaster, 2015 ONSC 6269, at para. 142.

[32]       This court has previously stated the test for leave, as follows: “Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court there are ‘strong grounds upon which the appellate court could find that the judge erred in exercising his discretion’”: see Brad-Jay Investments Limited v. Village Developments Limited, 2006 CanLII 42636 (ON CA), at para. 21.

[33]       I am not satisfied that this is one of those “obvious cases”. While brief, the motion judge’s reasons, read functionally, reveal that he accepted the respondents’ argument that an elevated level of costs was required in this case because the appellant had acted unreasonably and in bad faith.

[34]       Ultimately, judges retain the discretion to award reasonable and proportional costs. I see no basis to disturb the amount that the motion judge ultimately awarded to the respondents. $17,500 is a reasonable amount of costs considering that this is less than half of the amount the respondents sought on a substantial indemnity basis before the motion judge.

[35]       I would not grant leave to appeal costs.

CONCLUSION

[36]       For the foregoing reasons, I would dismiss the appeals. Costs are awarded to the respondents for the appeal in the amount of $10,000, all-inclusive.

Released: August 4, 2023 “L.B.R.”

“S. Coroza J.A.”

“I agree. Roberts J.A.”

“I agree. B.W. Miller J.A.”