Varajao v. Azish, 2015 ONCA 218

By Epstein, Pepall and Benotto JJ.A.
Ontario Court of Appeal
Mar 13, 2015

BETWEEN

Michael Varajao

Plaintiff/Defendant by Counterclaim

(Respondent)

and

Samaneh Azish, Mohammad Reza Eskandari Dorostkar

also known as Mohammad Reza Eskandari, and Kingsbury Realty Ltd.

Carrying on business as Royal Lepage Kingsbury Realty

Defendants/Plaintiffs by Counterclaim

(Appellants

Wendy Greenspoon-Soer and David Fenig, for the appellants

Scott Rosen, for the respondent

Heard: March 13, 2015

On appeal from the judgment of Justice Victoria R. Chiappetta of the Superior Court of Justice, dated May 27, 2014.

ENDORSEMENT

[1]           The appellants agreed to purchase a home from the respondent for $2.9 million.  The agreement of purchase and sale set the closing date for Saturday, July 30, 2011 and time was of the essence. The transaction did not close.  The appellants sought return of the $75,000 deposit.  The trial judge found that the appellants had repudiated the agreement and were not entitled to return of the deposit.  She declined to grant relief from forfeiture. 

[2]          Real estate registrations cannot occur in Ontario on Saturdays.  The next business day was August 2, 2011.  Neither party was ready, willing and able to close on July 30, 2011 or on August 2, 2011.

[3]          On August 2, 2011 the solicitors for the appellants and the respondent exchanged correspondence about closing documentation.  There was no suggestion that the agreement was at an end if it did not close that day.  On August 3, 2011 the respondent’s solicitor provided the appellants with a court order which, he asserted, resolved all the title issues. He said the respondent was ready to close and suggested that the closing take place the next day.

[4]          On August 4, 2011, the appellants said they did not want to proceed with the purchase and demanded return of the deposit. The respondent refused to do so and treated the agreement as remaining in force.  The respondent established a new closing date and tendered at that time.

[5]          Following a three day trial, the trial judge concluded that the appellants had repudiated the agreement on August 4, 2011 and therefore had forfeited the deposit. She found as a fact that on July 30, 2011, neither party was ready to complete the transaction.  She found that either party was free to re-instate time of the essence but did not do so.  The trial judge further found that as of August 3, 2011, both parties intended to complete the transaction.  The contract was therefore still alive.

[6]          When the appellants advised the respondent on August 4, 2011 that they did not intend to close the transaction, they repudiated the contract.  The trial judge found that this decision on the part of the appellants did not flow from a lack of information from the respondent or his counsel, but from a decision to resile from the transaction.  The respondent did not accept the repudiation and instead restored the time of the essence by setting a new closing date. The respondent tendered correctly on that date. The deposit was therefore forfeited.

[7]          The trial judge found no evidence of bad faith on the part of the respondent.  Even though the property eventually sold for $3.25 million, she refused to grant relief from forfeiture.

[8]          The appellants submit as follows:

1.    The trial judge erred in finding that they had repudiated the agreement on August 4, 2011.  It was the respondent who repudiated on August 2, 2011 – the date at law when the closing should have taken place.  Time was of the essence and remained of the essence. On August 2, 2011 the respondents were not able to deliver clear title.   Furthermore, the lack of communication from the respondent disentitled the respondent to rely on the contract.

2.    The trial judge erred in refusing to grant relief from forfeiture.

[9]          We reject both submissions.

[10]       The trial judge’s finding that the appellants repudiated the contract on August 4, 2011, was supported by the evidence.  The appellants submit that the respondent’s failure to close on August 2 meant that he, not the appellants, repudiated the contract.  However, the correspondence between the parties on August 2 and 3 demonstrates that each side believed the contract remained in force.  On August 4 the appellants decided not to proceed with the transaction.  This finding of repudiation by the appellants is dispositive of the appeal.

[11]       The trial judge correctly noted that in order to obtain relief from forfeiture the appellants were required to establish that i) the forfeited sum was out of proportion to the damages suffered; and ii) it would be unconscionable for the vendor to retain the money.  Although the respondent did not suffer damages, the trial judge determined that it was not unconscionable for him to retain the deposit.  She considered and rejected the submission that the respondent’s counsel used sharp practice.  We would not interfere with this exercise of discretion on the part of the trial judge.

[12]       The appeal is dismissed with costs payable to the respondent fixed in the amount of $11,500, inclusive of disbursements and HST.

“Gloria Epstein J.A.”

“S.E. Pepall J.A.”

“M.L. Beno