Legal Blog: Real Estate

Mistake

Espartel Investments Limited v. MTCC 993 2024 Ont CA

Condo corporation had been paying inflated invoices relating to shared electricity since 2006. Its consultant caught the invoicing mistake in 2017 after the condo had paid $730,000 too much. The defendant argued that the condo should have caught the overcharge earlier such that most of it was statute barred. The trial judge held that it was not actually apparent and that a reasonable defendant would not have caught the mistake. The Court of Appeal upheld the decision. The court noted that the fact that the errors were capable of being discovered did not necessarily start the limitations clock. The test is reasonable discoverability, not the mere possibility of discovery. The court ordered the return of the funds, based on unjust enrichment.

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Honest Performance Breach

Bhatnager v. Cresco Labs Inc. 2023 Ont CA

The vendor claimed that the purchaser ought to have informed the vendor of an after-closing occurrence that would have affected the vendor’s entitlement to a post-closing adjustment. Motion judge agreed, but held that purchaser suffered no damages because the evidence showed that, knowing about the problem or not, the purchaser could have done nothing about it. The Court of Appeal dismissed the appeal and stated that a breach of a duty of honest performance (per the SCC in Callow) does not presume a claimant’s damages; the claimant must still prove that there was a lost opportunity that had monetary adverse effects. The Court also held that, on the evidence, that there actually was no breach – because the vendor had told the purchaser of the problem on a timely basis.

Liability for Caution

225753 Ontario Inc. v. Mifsud and Hunt, 2023 Ont SCJ

Mortgagee was selling a property in the exercise of its power of sale. Lawyer acted for a person who was not the owner of the property, but seemingly had some other claim to the property. Lawyer registered a caution. Mortgagee alleged that the caution prevented the mortgagee from closing its sale of the property and sued the lawyer and the claimant under s. 132 of the Land Titles Act. That section makes a person who registers a caution without reasonable cause liable for any damages the caution causes. The judge held that “person” in the section was a claimant, not the lawyer who registers a caution on behalf of a client.

Solicitor-Client Privilege

1824120 Ontario Limited v. Matich 2023 Ont SCJ (Div Ct)

Agreement of purchase and sale had a clause stating that the agreement was conditional on the seller’s lawyer approving the agreement’s terms. The lawyer gave an opinion to the sellers; they refused to waive the condition and the agreement failed. The buyer sued, alleging that the sellers did not exercise the clause reasonably, honestly, and in good faith. The sellers denied the allegations. The buyers then requested the lawyer’s file and opinion letter, arguing that the sellers had impliedly waived privilege. The court refused to grant access to the opinion. The sellers had specifically stated that they did not waive privilege. The court held that the buyer could not allege bad faith and, when the sellers denied the allegation, state that the sellers had waived privilege. The court refused to intervene, even after the buyers alleged that the lawyer did not approve the terms because the seller had received a higher price. The court interpreted the condition and held that nothing in the condition precluded the lawyer from reviewing non-legal terms of the agreement.

Solicitor’s Negligence

Miao v. Bhatia 2022 Ont SCJ

Purchaser retained a lawyer to get him out of a real estate deal. The lawyer tried, but failed, and the deal did not close. The vendor sued and the purchaser, through another lawyer, ultimately settled for $135,000. The judge held that the lawyer never guaranteed success in his negotiations and that he warned the purchaser that his chances of success were low. Further, the lawyer had notes to prove what he had advised. The judge held that the purchaser never had a guarantee of success if he did not close and should have closed. Further, even if the lawyer were negligent, ultimately the purchaser paid less in damages for not closing than he would have paid had he closed.

Resulting Trust

Costa v. Costa 2022 BCSC 704

Husband was given a 2% interest in property because he was co-signer on the mortgage and mortgagee insisted. All funds came from wife and all mortgage and upkeep payments were paid by wife. Wife moved to have husband return his 2% interest; she wanted to re-finance the property without husband’s involvement. Judge granted the order. There was no evidence of any real risk to husband in signing the mortgage; indeed, he had no more than a theoretical prospect of personal liability The judge held that husband provided no consideration and held his interest in trust for wife. The judge also held that husband had been unjustly enriched, wife was deprived, and no juristic reason for the enrichment and deprivation.

Off Title Objections – Contract Interpretation

2651171 Ontario Inc. v. Brey 2022 Ont CA

The clause allowing the purchaser to search for, and object to, work orders and building and zoning use stated that the purchaser had from the earlier of:  alternative (1) (a) the later of 30 days from the requisition date (Oct 16) and (b) 30 days from the date on which the conditions in the agreement were waived (Aug 26), and alternative (2) 5 days before closing (Sep 26) . Closing was scheduled for Oct 1 and the purchaser objected to a zoning problem on Sept 26. The motion judge ignored the (1a) Oct 16 date because, she said, this would yield an absurd result; Oct 16 was after the closing date. She therefore used Aug 26 as the alternative 1 date. Finally she chose Aug 26 as the objection date because it was earlier than the alternative 2 date. The Court of Appeal reversed. Alternative 1 gave a choice of the later of two dates, one of which and the later of which would be Oct 16. This date would then be compared to the alternative 2 Sep 26 date and the earlier date would be chosen. This date for objections was therefore Sep 26 and the purchaser’s objection was timely.

Accelerated Mortgage Interest

First National Financial GP Corporation v. Golden Dragon Ho 10 Inc. 2022 Ont CA

There is no common law right to an acceleration of interest on a debt default. That right is either in the mortgage or it is not. In this case, the court interpreted the mortgage to limit the acceleration clause to situations in which the mortgagor wanted to redeem rather than a situation of default and a mortgage sale of the property.

Real Estate Damages

Akelius Canada Ltd. V. 2436196 Ontario Inc. 2022 Ont CA

Vendor defaulted on an agreement. Purchasers sued for damages; in particular, it claimed the capital gain that the vendor obtained when it re-sold the property two years later. The court held that, in the normal course, the starting point for the assessment of damages for breach of contract is the date of the breach. Unfortunately, that is just starting point and, depending upon the market at the time and other factors, the courts have set other dates for the assessment of damages. In this case, the court held that the assessment of damages should take place as of the breach and not two years later when vendor re-sold the property.

Limitations – Claim Appropriate

Georgian Properties Corporation v. Robins Appleby LLP 2022 Ont CA

A condo had executed debt instruments in favour of the developer. When the debts were due, the condo failed to pay, ultimately attacking the debt instruments as unenforceable. The condo ultimately was successful in its attack. After the decision, the developer commenced an action against its lawyers who drafted the debt instruments. The court held that the condo suffered damages as set out in s.5(1)(a)(i) of the Limitations Act, not when the condo failed to pay the developer according to the debt instruments, but when the judge decided that the debt instruments were invalid. Similarly, commencement of an action was “appropriate” (ss. a(iv)) after the decision was rendered, not when the allegations of invalidity were made.