Drag v. Mehta, 2024 ONCA 334 (Court of Appeal)
Facts
Bernard Drag (seller) and Rohit Mehta (buyer) entered into an Agreement of Purchase and Sale (APS) on December 2, 2020 for a home in Caledon priced at $2,470,000, with closing on April 28, 2021.
The APS was conditional on Mehta’s satisfaction with a home inspection, requiring written notice of fulfillment or waiver within five banking days (by December 9, 2020).
Mehta sought a $40,000 price reduction after inspection and sent an amending agreement on December 9 stating the deal was “firm.” Drag’s agent, Tav Schembri, told Mehta’s agent, Shan Ghuman, that Drag was out of town and that the amendment would be signed the next day. Relying on this, Mehta delayed sending formal notice of waiver until the next day, December 10, by email.
Drag later refused to close, claiming the APS became null and void on December 9 since no valid waiver was delivered on time.
Trial Decision (2022 ONSC 4574)
The trial judge found that:
- Schembri misrepresented the situation by implying that timing under the APS would be extended.
- Mehta reasonably relied on this assurance to his detriment, delaying the waiver.
- Drag, through Schembri, breached the duty of honest performance established in Bhasin v. Hrynew (2014 SCC 71).
- Because of this dishonesty, Drag could not rely on the strict timing clause to void the APS.
Remedy: Specific performance of the sale (no price abatement).
Court of Appeal Decision
The Court of Appeal dismissed Drag’s appeal, holding that:
- Schembri’s misrepresentations caused Mehta to delay and compromise his waiver delivery.
- Mehta’s partial suspicion did not negate his reliance; the deception still caused detrimental reliance.
- A party cannot rely on strict contractual timing when they have misled the other party into believing otherwise.
- The remedy of specific performance was appropriate since the APS remained valid.
Result: Appeal dismissed.
Costs: $15,000 awarded to Mehta.
Legal Principles
- Honest performance: Parties must not lie or mislead in performing contracts (Bhasin v. Hrynew).
- Reliance and estoppel: A party who misleads another about timing cannot later enforce strict deadlines (Owen Sound Public Library Board v. Mial Developments Ltd., 1979 ONCA).
- Specific performance: May be granted where the seller’s conduct prevents the buyer from complying with a timing condition in good faith.
Conclusions:
In Drag v. Mehta, the Court reaffirmed that good faith and honesty are essential in real estate transactions. A seller who, through their agent, misleads a buyer about timing cannot later rely on that same timing to void the deal.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com