Unique Commercial Property for Development

Specific Performance: Dodge v. Magna (SCC 2003)

In this situation Magna International owned a property which it sold subject to the severance of the property. One of the conditions associated with the severance was a requirement to construct a road. The municipality wanted it. Apparently, it was really of no benefit to either Magna or Dodge the purchaser.

Agreement:  July 1999

Property:     4.12 acres serviced undeveloped land

Condition:   Severance approval

Satisfied:     Vaughan requires road to be constructed

OMB:           overturns Vaughan’s requirement

Vendor:       wants to terminate

COA:           7 February 2003, upheld Specific Performance

SCC:           6 November 2003 (leave dismissed)

In July 1999, Magna agreed to sell 4.12 acres of serviced undeveloped land in the City of Vaughan  near Canada’s Wonderland to the respondent, John E. Dodge Holdings Ltd., a hotel builder and manager.

Magna was granted severance approval, but the approval was subject to the condition that Magna construct and dedicate a road extension to the City, if required.

Neither Magna nor Dodge had any need for the road extension, and building it would have been solely for the benefit of the property to the north.

Magna took the position that because of the imposition of this condition, it was entitled to terminate the agreement. Dodge, however, sued and obtained a judgment of specific performance that required Magna to reapply for the severance approval, which had lapsed.

Magna appealed the decree of specific performance but also proceeded with the severance application, including a successful appeal to the Ontario Municipal Board for the removal of the condition that Magna build the road extension.

Magna’s submissions that it was entitled to terminate the agreement based on reasonableness, frustration, or commercial absurdity were unsound and did not provide a basis for disturbing the trial judgment.

Turning to the appeal about the remedy of specific performance, specific performance will be granted only if the plaintiff can demonstrate that the subject property is unique. In order to show that a property is unique, the party seeking specific performance must show that the property has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended. The time when a determination is to be made as to whether a property is unique is the date when an actionable act takes place and the wronged party must decide whether to keep the agreement alive by seeking specific performance or accept the breach and sue for damages.

Here are some specific statements made by the Court:

2. The Remedy of Specific Performance and the Requirement that the Property be Unique.

[37] Given that Magna had no right to terminate the Agreement, Dodge submits that the appropriate relief is specific performance of the Agreement as awarded by Lax J. Magna, however, submits that specific performance of the Agreement is not an appropriate remedy in light of its claim that there were a number of comparable properties available to Dodge in the vicinity.

[38] In Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415, 136 D.L.R. (4th) 1 at para. 22, Sopinka J. observed that specific performance will only be granted if the plaintiff can demonstrate that the subject property is unique in the sense that, “its substitute would not be readily available”. Although Sopinka J. did not elaborate further on this definition, in 1252668 Ontario Inc. v. Wyndham Street Investments Inc., [1999] O.J. No. 3188 (Quicklaw), 27 R.P.R. (3d) 58 (S.C.J.) at para. 23, Justice Lamek stated that he

[does] not consider that the plaintiff has to demonstrate that the Premises are unique in a strict dictionary sense that they are entirely different from any other piece of property.

It is enough, in my view, for the plaintiff to demonstrate that the Premises have a quality that makes them especially suitable for the proposed use and that they cannot be reasonably duplicated elsewhere.

[39] I agree that in order to establish that a property is unique the person seeking the remedy of specific performance must show that the property in question has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended. See also the comments of Low J. in 904060 Ontario Ltd. v. 529566 Ontario Ltd., [1999] O.J. No. 355 (Quicklaw), 89 O.T.C. 112 (Gen. Div.) at para. 14.

[40] The time when a determination is to be made as to whether a property is unique is the date when an actionable act takes place and the wronged party must decide whether to keep the agreement alive by seeking specific performance or accept the breach and sue for damages: Greenforco Holding Corp. v. Yonge-Merton Developments Ltd., [1999] O.J. No. 3232 (Quicklaw) (S.C.J.) at [page318] para. 76. It may also be that in certain cases the date chosen for determining the issue of whether specific performance is appropriate is a later date but the date will not, in any event, occur before the breach has taken place.

[45] The trial judge found that although the comparables from Magna’s expert permitted a hotel to be built, none of them were in as close proximity to Canada’s Wonderland or the Vaughan Mills Centre, a planned [page319] $250 million retail mall to be located directly west of the site. At para. 69 of her reasons she found:

The Magna site offers superior access, visibility, traffic patterns and location to each of the other sites that were under consideration. It also has a C7 commercial zoning designation that is more favourable for ancillary uses such as banquet halls and eating establishments. This was significant for Dodge as the hotel concept it was considering at the time of the contract and later pursued was for a Hilton Garden Inn. This concept does not require full restaurant facilities in the hotel. The ability to have an unrestricted, independent dining facility on the land to accommodate hotel guests, but also to serve patrons in the area, was another distinguishing feature of this site. None of the other sites offered this combination of attractive features at a comparable price.

COMMENT

In this commercial situation, Magna wanted to resile from the contract but the Ontario Court of Appeal confirmed that Specific Performance was in order.

An application to the Supreme Court of Canada was refused on 8 November 2003. This case started out with an Agreement in July 1999, thereby consuming four and one half years of time.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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