Legal Blog

Frustration & Specific Performance

FSC (Annex) LP v. Adi 64 Prince Arthur LP 2020 Ont SCJ

Applicant and respondent were partners in a joint venture to develop a property. The applicant held 80% of the joint venture and the respondent held 20% of the joint venture. The parties were unable to work together so that the applicant triggered a shotgun buy-sell provision (i.e. the applicant set the price of the development and the respondent had the option either to sell for its proportionate share of that price or buy the applicant’s proportionate share of that price). The respondent chose to purchase the applicant’s interest, but then refused to close because, it said, the pandemic frustrated its ability to obtain financing. The judge disagreed. Frustration is available only when the obligations change radically and a decline in the value of real estate is not a frustration of those obligations. The judge ordered specific performance of the agreement; damages would not have been a viable remedy. There would have been more litigation over the sale price and, more importantly, the applicant would not have been able to sell its interest without the respondent’s consent. The judge noted that a specific performance award meant that the respondent would be forced to make more meaningful efforts to obtain financing and afforded the court the opportunity to provide flexible and appropriate relief if the respondent were unable to do so.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.