Fortress Carlyle Peter St. Inc. v. Ricki’s Construction and Painting Inc. (2019 ONCA 866)
In real estate transactions, timing can be everything, but not when one party acts in bad faith. The Ontario Court of Appeal’s decision in Fortress Carlyle Peter St. Inc. v. Ricki’s Construction and Painting Inc. is a sharp reminder that a seller who causes delay cannot later rely on “time being of the essence” to terminate the deal.
Background
Fortress Carlyle Peter St. Inc. (“Fortress”) was assembling lands in downtown Toronto for a condominium development. One of the key parcels was 120 Peter Street, owned by Ricki’s Construction and Painting Inc. (“Ricki’s”).
In 2017, the parties agreed on a sale price of $4.5 million, with a $1 million deposit and closing set for August 13, 2018. The Agreement of Purchase and Sale (APS) required Ricki’s to provide estoppel certificates for all tenants five days before closing.
However, the deal began to unravel when Ricki’s provided an altered estoppel certificate. The change was not minor, it replaced a 90-day termination clause in one lease with vague language stating that termination would be “to be negotiated between the parties.” This alteration was undisclosed to Fortress.
When the correct certificate was finally sent, just one hour before the 6:00 p.m. closing deadline, Fortress requested a brief extension to complete the transfer. Its closing funds arrived in trust at 6:16 p.m., sixteen minutes late. Ricki’s immediately declared Fortress in default, refused to close, and terminated the contract.
The Court Proceedings
Fortress sued for specific performance, arguing that the property was unique and essential to its development project. Both parties moved for summary judgment.
Justice Paul Perell of the Superior Court of Justice ruled in favour of Fortress. He found that Ricki’s had:
- Breached the APS by altering and delaying the estoppel certificate;
- Failed to act in good faith; and
- Lost the right to rely on “time being of the essence.”
Fortress, on the other hand, had acted in good faith and was ready, willing, and able to close, but for the vendor’s misconduct. The court ordered specific performance of the agreement.
The Appeal
Ricki’s appealed, arguing that the judge relied on unpleaded theories of deceit, mishandled the summary judgment process, and misunderstood the evidence. It also tried to introduce fresh evidence alleging that Fortress was financially unable to close.
The Court of Appeal rejected all arguments and upheld the decision.
The Court confirmed that Fortress had properly pleaded bad faith and that the motions judge had correctly applied the law. The alterations to the estoppel certificate were central — they were deliberate, misleading, and undermined the integrity of the transaction.
Because Ricki’s caused the delay and confusion, it could not invoke the “time of the essence” clause to terminate the deal. The minor timing discrepancy in the closing funds was irrelevant in light of Ricki’s own conduct.
The Court also dismissed the motion to introduce new financial evidence, finding it failed the test for fresh evidence. Even if true, it would not have changed the result.
The Legal Principles
This decision reinforces several key principles for real estate professionals and lawyers:
- Good Faith Matters:
A party who acts dishonestly or unfairly cannot rely on “time being of the essence” to escape its obligations. - Estoppel Certificates Are Critical:
Altering or delaying these documents, especially without disclosure, can amount to bad faith and breach of contract. - Specific Performance Remains Available:
Where a property is unique, and the buyer is ready, willing, and able to close but for the seller’s misconduct, specific performance will be granted. - Timing Clauses Are Not Absolute:
“Time is of the essence” applies only to parties who have themselves acted in good faith and without contributing to the delay.
Conclusion
In Fortress Carlyle Peter St. Inc. v. Ricki’s Construction and Painting Inc., the Court of Appeal made it clear: you can’t sabotage a closing and then hide behind the clock.
Bad faith conduct will strip a seller of the protections of strict timing clauses and the Court will enforce the deal through specific performance when fairness demands it.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com