McCauley v. McVey et al., [1980] 1 SCR 165

Supreme Court of Canada

McCauley v. McVey et al., [1980] 1 S.C.R. 165

Date: 1979-06-28

Charles W. McCauley (Plaintiff) Appellant;

and

James G. McVey, G.L. Hudson and Ronald Martin MacFarlane (Defendants) Respondents.

1979: February 21; 1979: June 28.

Present: Laskin C.J. and Pigeon, Dickson, Estey and Mclntyre JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Real property—Contracts of sale and purchase of land—Closing dates—Time of the essence—Failure of purchaser in first agreement to secure survey and therefore title by closing date—Right of purchaser in second agreement to require specific performance—Effect of stipulation that time shall be of the essence.

Solicitor—Acting for both parties to a transaction—To be avoided if difficulties possible.

Hudson, a real estate agent, sought to interest the appellant in purchasing two lots of land which their owner, Hawkins, was anxious to sell. The appellant indicated interest in buying one of the lots. Hudson interested McVey in both of them and a contract of sale was entered between Hawkins and McVey on December 28, 1972. The contract, under which time was stated to be of the essence, called for completion on or before March 30, 1973, and included a purchaser’s obligation to arrange and pay for the survey. On January 3, 1973, the appellant contracted to buy one of the lots from McVey. The agreement was contingent upon the vendor having title by the date set for closing of this sale. The closing date was March 30, 1973, and again time was of the essence.

The purchaser (McVey) here failed to have the surveys completed in time in that although he alerted his surveyor in mid January, 1973 it was not until March 26 that he told him of the closing date and by then it was impossible for the surveyor to meet the date. The trial judge dismissed McCauley’s action for specific performance and this was affirmed by the Court of Appeal. A claim for damages against MacFarlane, a solicitor who had acted for both parties, was also dismissed.

Held (Mclntyre J. dissenting): The appeal should be allowed, as against the respondent McVey.

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Per Laskin C.J. and Pigeon, Dickson and Estey JJ.: It is trite law that a vendor is under an implied obligation to give title even if the contract is silent, and a purchaser cannot be forced to take less than a full title unless the bargain has been for a lesser one. McVey’s failure to give the surveyor adequate time was not because of any deliberate intention of avoiding the transaction and was not significant. The obligation as to the survey lay on McVey. That obligation was more a matter of conveyancing than of title and it is clear that a vendor cannot justify a refusal to complete by relying on a matter of conveyancing that is within his power to correct. Moreover, even if a matter of title is involved, a vendor cannot use his own default to avoid a transaction but must use such reasonable efforts as are open to him to carry the transaction through to completion. There was here no true condition precedent i.e., “a future uncertain event the happening of which depends entirely on the will of a third party.” The principle expressed in Danforth Heights Ltd. v. McDermid Bros. (1922), 52 O.L.R. 412, can be applied i.e. that the stipulation that time shall be of the essence does not mean that, if either party fails to complete within the time specified, the agreement shall be at an end, but rather that if either party fails to do his part within the time specified the other party may, if he so desires, keep the contract in force rather than elect to terminate it. That is what happened here.

On agreeing to act for both parties to a transaction which might possibly raise difficulties, MacFarlane put himself in a position from which he necessarily had to withdraw when an issue arose between his clients. It is the prudent course, if other solicitors are available in the area, to act in one interest only.

Per Mclntyre J. dissenting: There were here two contracts, the one between Hawkins and McVey and the other between McVey and McCauley, related only in the sense that they dealt in part with the same land. The appellant McCauley to succeed had to find his cause of action in his own contract. McVey’s covenant was to sell the land in question subject to his having title by March 30, 1973. No obligation to acquire title was expressed or implied. The covenant regarding the survey was in the first agreement to which McCauley was a stranger. The Court of Appeal correctly concluded that title in McVey by the specified date was a condition precedent and because it was not complied with the transaction came to an end.

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[Danforth Heights Ltd. v. McDermid Bros. (1922), 52 O.L.R. 412, applied; Turney v. Zhilka, [1959] S.C.R. 578; George Wimpey Canada Ltd. v. Focal Properties Ltd., [1978] 1 S.C.R. 2, distinguished; Mason v. Freedman, [1958] S.C.R. 483 referred to.]

APPEAL from a judgment of the Court of Appeal for Ontario affirming a judgment of Osler J. who dismissed an action by the appellant McCauley against the respondent McVey for specific performance of a contract of sale of land; a claim for damages against the respondent MacFarlane, a solicitor acting for both parties was also dismissed. Appeal as against McVey allowed and specific performance ordered; appeal as against MacFarlane dismissed; Mclntyre J. dissenting.

Peter C.P. Thompson, for the appellant.

G.J. Smith, Q.C., for the respondent McVey.

S.G. Fisher, Q.C., for the respondent MacFarlane.

The judgment of Laskin C.J. and Pigeon, Dickson and Estey JJ. was delivered by

THE CHIEF JUSTICE—This is an appeal, by leave of this Court, from a judgment of the Ontario Court of Appeal, affirming a judgment of Osler J. who dismissed an action brought by the appellant McCauley against the respondent McVey for specific performance of a contract of sale of land. A claim for damages against the respondent MacFarlane, a solicitor who had acted for both parties to the transaction, was also dismissed.

In the view that I take of this case, namely, that the claim for specific performance should succeed, I need not be concerned with the alternative claim against MacFarlane. I say only this. In agreeing to act for both parties to a transaction which might possibly raise difficulties, and which in fact did, MacFarlane put himself in a position from which he necessarily had to withdraw when an issue arose between his clients. Each was then left to consult other solicitors, with consequential delays in dealing with an urgent situation and added

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expense. However simple and uncomplicated a real estate transaction may appear, it is the prudent course, if other solicitors are available in the area, for a solicitor to act in one interest only and thus avoid the embarrassment of possible later withdrawal, to the detriment of both parties for whom he had agreed to act.

I come then to the facts of the present case. A real estate agent, one Hudson, sought to interest the appellant in purchasing two lots of land which their owner, one Hawkins, was anxious to sell. The appellant indicated interest in buying one of the lots. Hudson interested the respondent McVey in both of them and a contract of sale between Hawkins and McVey was entered into on December 28, 1972. The contract, under which time was stated to be of the essence, called for completion on or before March 30, 1973. It included the following obligation assumed by the purchaser McVey:

Purchaser to arrange for and bear cost of any necessary survey or surveys to allow transfer of title. Purchaser, and his agents, to be allowed to enter upon the herein mentioned lands at any time for purpose of surveys and measuring.

Shortly afterward, on January 3, 1973, the appellant contracted to buy one of the lots from the respondent, the transaction to close on the same day as that between Hawkins and McVey, namely, March 30, 1973. Time was also of the essence of this agreement which contained the following stipulation:

This agreement to be contingent upon the herein named vendor having title to the herein mentioned real property by date set for closing of this sale.

It is, of course, trite law that a vendor is under an implied obligation to give title even if the contract is silent, and a purchaser cannot be forced to take less than a full title unless the bargain has been for a lesser one. The importance of the provision for title above-mentioned arises simply from the interrelation of the two contracts of sale, an interrelation noted by the Ontario Court of Appeal. What happened here was a failure by the

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respondent to have the surveys completed by March 30, 1973. Although his chosen surveyor was alerted in mid January, 1973 to the need of surveys it was not until March 26, 1973 that the surveyor became aware of the closing date of the two transactions and it was impossible for him to finish his work to meet that date.

Despite the point made of it by the Ontario Court of Appeal, I do not think that it matters in the least that McVey’s failure to give the surveyor enough time to produce a survey by the closing date was not because of any deliberate intention of avoiding the transaction. The Hawkins-McVey agreement laid the obligation as to surveys on McVey, and not upon any mutually chosen third party for whose default neither vendor nor purchaser could be held responsible. It appears that only the completion of the surveys held up conclusion of the deal between the appellant and the respondent, and this was a matter in the hands of the respondent. Indeed, the survey obligation assumed by McVey was more a matter of conveyancing than of title, and it is clear that a vendor cannot justify a refusal to complete by relying on a matter of conveyancing that is within his power to correct. Moreover, even if a matter of title is involved, a vendor cannot use his own default to avoid a transaction of sale and purchase but must use such reasonable efforts as are open to him to carry the transaction through to completion: cf. Mason v. Freedman.[1]

The principal ground upon which counsel for the respondent sought to maintain the judgments below in his favour was that the condition as to title was what he called a “true” condition precedent and hence, if there was no title to pass March 30, 1973, the contract was off by its own terms. This was the view of the Ontario Court of Appeal but, with respect, I find it untenable. There is no ground for the implication (because that is what is involved in the Court of Appeal’s conclusion) that the purchaser McCauley had agreed to run the risk of completion of the surveys by March 30, 1973. The obligation as to title was upon McVey. That obligation, as matters stood at the time of the

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contract between McVey and McCauley, depended for its fulfilment only on the completion of the surveys, as undertaken by McVey in his contract with Hawkins. This is emphasized by the fixing of the same date for the performance of both contracts. There was here no true condition precedent in the sense expressed by Judson J. speaking for the Court in Turney v. Zhilka[2], at pp. 583-4, where he said this:

…The obligations under the contract, on both sides, depend upon a future uncertain event, the happening of which depends entirely on the will of a third party… This is a true condition precedent—an external condition upon which the existence of the obligation depends…

There is in the present case no future uncertain event the happening of which depends on the will of a third party under the contract.

I am also of the opinion that the Court of Appeal’s reliance on this Court’s judgment in George Wimpey Canada Ltd. v. Focal Properties Ltd.[3] is misplaced. Although there was an obligation laid upon the vendor in that case to obtain registration of certain plans of subdivision within a five year period, approval of the plans involved action by third persons, municipal authorities, and there was a finding that despite continued and earnest efforts the vendor was unable to obtain registration. The present case is clearly of a different order since it does not involve action by third persons beyond the vendor’s control.

March 30, 1973 came and went without either party then doing anything. The evidence shows that McCauley was anxious to close and he spoke to MacFarlane, the common solicitor for the parties, on April 2 or 3, 1973, who told him that he was still waiting for a survey. About a week later, McVey decided to take advantage of the clause as to title to free himself of the contract with McCauley although up to that time, according to the evidence, he appeared prepared to carry it

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through. By letter dated and delivered April 17, 1973, McCauley’s new solicitor indicated that he took the vendor’s conduct up to April 10, 1973, as involving an implied extension of time to the closing of his transaction with Hawkins. At the same time McCauley delivered a certified cheque for $500 to McVey in fulfilment of the terms of their contract. The cheque was returned by the new solicitors for McVey who rejected the assertion of an extension of time. McCauley was clearly prepared to wait for the survey and, treating the letter of April 17, 1973 as having this effect, the trial judge concluded that this was a fixing of a new date for completion, but that in the circumstances it was unreasonable. He did not say why.

Of course, if there was a true condition precedent that was not met, there was no need to consider the reasonableness of an extension of time if the other party took the position that the deal was off when the date for completion, time being of the essence, passed. That, however, is, as I have already said, not this case. I think the proper principle to be applied here is that expressed by Rose J. in Danforth Heights Ltd. v. McDermid Bros.[4] at p. 426, as follows:

…The stipulation that time shall be of the essence of the agreement does not mean that, if either party fails to complete within the time specified, the agreement shall be at an end; if it had that meaning, either party could escape his obligations by making default. What it does mean is that, if either party fails to do his part within the time specified, the other party may declare the agreement to be at an end, if he so desires. The party not in default has an option: he may elect to keep the agreement in force or he may elect to terminate it. If he elects to keep it in force he cannot afterwards say that it terminated on the expiration of the specified time; but that is not because he has effected any variation of it, or because he has “waived” any right to terminate it; it is because he has exercised the right which he had under it. If this is so, the Statute of Frauds has no possible application; the question is not a question of enforcing a written contract with a variation; it is merely a question of finding upon the evidence whether there has or has not been an election…

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There is no doubt that the appellant, as the innocent party, elected to keep the contract in force, and it was not unreasonable for him to require performance when the surveys were completed and McVey was in a position to obtain title from Hawkins. The surveys were completed on April 20, 1973 but the plan was not registered until May 22, 1973. McCauley issued a writ for specific performance on May 29, 1973. McVey, after paying an additional deposit to Hawkins, completed his purchase of the two lots on July 6, 1973 and was then in a position to give title to the one lot he contracted to sell to McCauley. I am of the opinion that the latter was entitled to enforce his contract against McVey. The question of continued readiness and willingness on McCauley’s part is not in issue and, certainly, McVey’s attempted cancellation of the contract on or about April 11, 1973 on another unrelated ground disentitles him from any reliance on that matter.

I would, accordingly, allow the appeal as against the respondent McVey, set aside the judgments below and order specific performance in favour of the appellant, with costs against the respondent McVey throughout. I would dismiss the appeal as against MacFarlane but without costs in this Court.

The following are the reasons delivered by

MCINTYRE J. (dissenting)—I have read the reasons for judgment of the Chief Justice in which he has set out the relevant facts. I regret that I am unable to reach the same conclusion. In my opinion, it is necessary to keep in mind that there are two separate contracts involved in this case, the first between Hawkins and McVey and the second between McVey and McCauley. They were related in the sense that they dealt in part with the same land but McCauley, to succeed in an action for a decree of specific performance, must find his cause of action, that is, his right to compel performance by McVey, in his own contract. There was no other relationship between them which could confer such a right. McVey’s covenant to McCauley was to sell the land in question. It was, however, subject to his having title by March 30th, 1973. He did not promise title. No obligation to acquire title was expressed in the agreement and,

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on my reading of the evidence, none could be implied. The covenant regarding survey was given to Hawkins in the first agreement to which McCauley was a stranger. Hawkins was the sole beneficiary of that undertaking and the sole person entitled to sue upon it.

The key words in the McVey-McCauley contract are in the proviso which said:

This agreement to be contingent upon the herein named vendor having title to the herein mentioned real property by the date set for the closing of this sale.

The date for closing was March 30th of 1973. Arnup J.A., for a unanimous Court of Appeal, was of the opinion that title in McVey by the specified date was a condition precedent the nonfulfilment of which would terminate the relationship between McVey and McCauley. He said:

We are all of the opinion that the clause in the agreement of purchase and sale was a condition precedent. It was not complied with by the closing date, and in our view, without any notice whatever, the transaction between the plaintiff and McVey came to an end, by reason of nonfulfilment of the condition precedent.

I am of the opinion that he reached the right conclusion.

It is clear to me that the Ontario Court of Appeal was, in reaching its conclusion, following and applying the principles enunciated in the case of Turney v. Zhilka[5]. In that case, Judson J. for this Court construed a provision in a contract for the sale of land which was in these terms:

provided the property can be annexed to the Village of Streetsville and a plan is approved by the Village Council for subdivision.

He pointed out that neither party to the contract undertook to fulfil the condition. The purchaser, upon the nonfulfilment of the condition, purported to waive its performance upon the ground that it was solely for his benefit and severable. He sued for specific performance and succeeded at trial. An appeal to the Court of Appeal was dismissed. In allowing the appeal in this Court, Judson J. said:

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This is a true condition precedent—an external condition upon which the obligation depends. Until the event occurs, there is no right to performance on either side. The parties have not promised that it will occur. In the absence of such promise, there can be no breach of contract until the event does occur.

In other cases such as F.T. Developments Ltd. v. Sherman[6], and O’Reilly v. Marketers Diversified Ltd.[7], the same principles were approved and applied. In my opinion, this is such a case. It will be observed that the condition upon which this agreement was expressed did not provide that the vendor was to acquire title. It referred merely to the vendor having title and there was no promise to acquire it.

It was argued that the fulfilment of the condition as to title was not an external circumstance beyond the power of McVey to fulfil. In my view, this argument cannot assist the appellant. The ability of McVey to acquire title by the 30th day of March 1973 depended upon the performance by Hawkins of his covenant to convey and the completion and registration if required of the survey plan. The trial judge found that in connection with the survey plan McVey was guilty of no wilful or intentional default, a finding which I do not think this Court should disturb, and it therefore appears to me that the transfer of title to McVey by the 30th of March 1973 depending as it did upon these circumstances was not entirely within the control of McVey himself.

There are other cases where actions for specific performance have succeeded under contracts involving the fulfilment of a condition precedent where the defendant was held to have expressly or impliedly promised to take steps to fulfil a condition. Dynamic Transport Limited v. O.K. Detailing Limited[8], affords an example. Such cases are distinguishable from this and the Turney v. Zhilka, supra, line of cases in that no such promise exists in the case at bar nor, as I have said,

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should one be implied. McVey promised no performance to McCauley unless he had title to the land by March 30th of 1973. He did not have it and, in my opinion, no action for specific performance can succeed. I would dismiss the appeal.

Appeal allowed as against the respondent McVey, with costs, MCINTYRE J. dissenting.

Solicitors for the appellant: Scott & Aylen, Ottawa.

Solicitors for the respondent McVey: Weir & Foulds, Toronto.

Solicitors for the respondent MacFarlane: McMillan, Binch, Toronto.