Icetrading Inc. v. Trayanov (2025 ONCA 793)
The Ontario Court of Appeal has once again emphasized a core principle of real estate and commercial disputes: when parties sign a contract, equity cannot be used to re-write their bargain.
In Icetrading Inc. v. Trayanov, the Court set aside a $285,000 damages award and sharply criticized a motion judge for relying on “equitable fairness” instead of the actual terms of the agreement.
Background: A conditional purchase for an unsevered portion of land
In 2016, Icetrading Inc. acquired a parcel of land in Carleton Place (“the Post Yard”) for a proposed industrial condominium development.
Before the purchase closed, Icetrading and the respondents Vasil Trayanov and Olia Stantcheva entered an agreement relating to “Parcel 6,” an unsevered portion they hoped to buy for $275,000 for their granite business.
Key terms included:
- A $75,000 deposit, refundable only if the respondents demanded repayment after two years.
- Monthly payments of $1,333, treated as rent during year one and credited to the purchase price after that.
- Icetrading was to “proceed expeditiously” with the condominium conversion.
- If conversion wasn’t approved within two years, the respondents’ remedy was limited to reclaiming their $75,000 (upon demand) and vacating within 30 days, without compensation for improvements.
Municipal approval never materialized, although the evidence showed Wally (the principal behind Icetrading) made several attempts and continued pursuing approvals even after the two-year period expired.
The respondents never demanded repayment of their $75,000 and did not vacate. Instead, they registered a Notice of Option to Purchase, sued, and sought an equitable lien for over $200,000 plus improvement costs.
Ontario Superior Court (Motion): Equity over contract
The Motion Judge found:
- Icetrading breached a “duty to act in good faith and take all reasonable steps” to complete the sale.
- Icetrading failed to advise the Buyers sooner that condominium approval was unlikely.
- It would be “inequitable” for Icetrading to retain the benefit of improvements without paying compensation.
The Motion Judge awarded:
- $285,000 in damages
(including $193,500 in improvements, $40,000 in relocation costs, and the $75,000 deposit)
He also ignored the appellants’ counterclaim for fair-market rent after the two-year period.
Ontario Court of Appeal: Contract law first—equity only when appropriate
The Court of Appeal allowed the appeal on three major grounds:
🔹 1. No breach of good faith was proven
The Motion Judge imposed a generalized “duty of good faith” instead of identifying a specific, recognized legal duty as required by Bhasin v. Hrynew.
The Court found several errors:
- No evidence that Wally believed the conversion was futile.
His ongoing efforts showed the opposite. - The Judge relied on events after the two-year deadline, which were irrelevant.
- The Judge improperly faulted Icetrading for not completing a cost-benefit analysis of an alternative development (industrial subdivision) that the contract did not require.
The Court held that the Motion Judge’s factual inferences were palpably wrong.
🔹 2. Unjust enrichment does not apply when a valid contract governs
This was the most significant legal finding.
The Motion Judge shifted from contract analysis to “equity,” awarding restitution for improvements and relocation costs.
The Court of Appeal held:
- Unjust enrichment cannot override a valid contract.
- The agreement explicitly barred recovery for improvements and rent.
- The respondents’ sole remedy was repayment of the $75,000 deposit if demanded, which they never demanded.
Equity cannot be used to “do what the judge thinks is fair” when the parties already allocated risk and remedies.
🔹 3. The Motion Judge failed entirely to address the counterclaim
Icetrading sought market rent of $4,000 per month after the two-year term expired.
The Motion Judge:
- Did not mention the counterclaim.
- Ordered vacant possession, implicitly confirming the contract had ended.
- Provided no legal reasoning whatsoever.
This omission required appellate intervention.
Decision by the Court of Appeal
The Court of Appeal:
- Set aside the $285,000 award.
- Ordered the matter returned for proper determination of the counterclaim (including fair-market rent).
- Confirmed that the respondents must vacate after satisfaction of obligations.
The respondents’ cross-appeal was abandoned.
Considerations
1. Contracts govern, equity does not rewrite bargains
If parties allocate risks and consequences in a commercial contract, those terms will govern, even if the outcome seems harsh.
2. Good faith does not create new obligations
A developer’s duty to “proceed expeditiously” does not require perfect performance, cost-benefit analyses, or pursuit of alternative development pathways.
3. Improvements made in hope of a deal are risky
The respondents made substantial improvements despite knowing approval was uncertain. The contract explicitly barred reimbursement.
4. Counterclaims must be addressed in summary judgment motions
A judge cannot simply ignore half the litigation.
COMMENT
The Court of Appeal’s decision confirms that liability for breach of contract must be grounded in the contract’s terms.
As the Supreme Court of Canada said in Bhasin v Hrynew, good faith merely requires that a party not seek to undermine the other’s legitimate contractual interests in bad faith.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com