Specific Performance for Commercial Properties

Dimillo v. 209 (Court of Appeal)

In this case a Developer, De Millo sold some property in an industrial complex to a sophisticated purchaser. The Purchaser 2099232 Ontario Inc. was to build on the property within 30 months. They failed to do so.

The original Agreement of Purchase and Sale provided that the Vendor, Di Millo would have an option to re-purchase the property if the building was not constructed. Di Millo exercised its option, the new owner refused and Di Millo applied to Court for Specific Perfomance.

Here’s an outline of the time periods.

Di Millo sold 2 commercial lots in Bolton, Ontario

Date:           3 April 2012

Price:           $1,160,000

Deposit:      $360,000

VTB:          $800,000

APS:           contained a covenant to build in 30 months of closing

                   If no building, then option to re-purchase in favour of Di Millo

Deadline:     15 March 2015, for construction

Extension:   15 March 2016, for construction

Demand:     6 June 2016, Di Millo’s  solicitors sent letter

Resale:        22 August 2016 to third party, without Di Millo consent

Option:       24 September 2016, original Seller exercised option to re-purchase

Closing:      24 October 2016, closing for the re-purchase

Mortgage:    The original Vendor purchased a $500,000 mortgage on title

                   This mortgage was registered without Di Millo’s consent

Lawsuit:      commenced in October 2016

Application: 6 February 2018

Appeal:       19 December 2018

Further:       23 May 2019, an application for leave to appeal to the Supreme Court of Canada was dismissed, confirming the Ontariop Court of Appeal decision.

The application Court Judge said that tender needed to take place in order for Specific Perfomance to be granted. Consequently, the application was turned down and Di Millo appealed

These are some comments by the Ontario Court of Appeal:

“[44]      The appellant (Di Millo) argues that the application judge erred in law by finding that he was required to tender where it was clear that tender of the purchase price would be futile. He also says he was, in fact, ready, willing and able to close.

[45]      For a party to be entitled to specific performance, the party must show he or she is ready, willing and able to close: Time Development Group Inc. (In trust) v. Bitton2018 ONSC 4384, at para. 53; see also Norfolk v. Aikens (1989), 1989 CanLII 245 (BC CA), 41 B.C.L.R. (2d) 145 (C.A.).

While tender is the best evidence that a party is ready, willing and able to close, tender is not required from an innocent party enforcing his or her contractual rights when the other party has clearly repudiated the agreement or has made it clear that they have no intention of closing the deal….

[48]      The principles around the requirement to tender are summarized succinctly by Perell J. in Time Development Group, at paras. 56-57:

Tender … is not a prerequisite to the innocent party enforcing his or her contractual rights. Tender is not required from an innocent party when the other party has clearly repudiated the agreement. Numerous cases have held that the law does not require what would be a meaningless or futile gesture. Moreover, when there is an anticipatory breach, the innocent party need not wait to the date for performance before commencing proceedings for damages or in the alternative for specific performance of the agreement….

The Court further went on to discuss Specific Performance:

[65]      In Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415, at para. 21, the Supreme Court of Canada stated that “[i]t cannot be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases.” Specific performance should not be granted absent evidence that the property is “unique” or, in other words, that “its substitute would not be readily available”: para. 22. 

[72]      In my view, this case is similar to 11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd. (1997), 1997 CanLII 12181 (ON SC), 36 O.R. (3d) 328 (Gen. Div.), where Lax J. concluded that

… damages were an inadequate remedy and granted an order for specific performance. In Suntract, the purchaser required the subject property to further their goals to develop nearby lands that they owned. The property was considered unique because the purchaser’s plan was to use it to provide access to its development property. Any other property in any other location could hardly be a substitute. The plan could not go forward without the 11 Suntract property.

[73]      Similarly, the land in question is sufficiently unique to satisfy the test in Semelhago, from a subjective and objective standpoint.

There cannot be a substitute property in another location that would meet the goals of the subdivision plan.

It is exactly for the purpose of the subdivision plan that the appellant entered into the option agreement.

The appellant provided the municipality with $400,000 as security, to be released when the subdivision was fully developed.

When the respondent failed to build on the property as he had contracted to do, the appellant could not complete the development of the subdivision. Only specific performance is an adequate remedy in this case.

[74]      In conclusion, the appellant is entitled to specific performance of the option to purchase.

Subsequently, 209 made an application for leave to appeal to the Supreme Court of Canada was dismissed on 23 May 2019 , confirming the Ontario Court of Appeal decision.

COMMENT

The result is clear, Di Millo received the return of the property. It had gone up in value from 2012 to 2019, seven years later. That didn’t matter. It was commercial. That didn’t matter. Specific Performance was the best remedy available.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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