Nepean Carleton Developments v. Hope et al., [1978] 1 SCR 427

Supreme Court of Canada

Nepean Carleton Developments v. Hope et al., [1978] 1 S.C.R. 427

Date: 1976-12-20

Nepean Carleton Developments Limited (Plaintiff) Appellant;

and

Lloyd Alexander Hope (Defendant)

and

Dulmage Boyd Kirkland & Murphy (Third Party) Respondents;

and

Nepean Carleton Developments Limited (Plaintiff) Appellant;

and

Scott Munro Hope and Ruth Hope (Defendants)

and

Dulmage Boyd Kirkland & Murphy (Third Party) Respondents.

1976: November 22, 23; 1976: December 20.

Present: Laskin C.J. and Judson, Ritchie, Spence and Beetz JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Contracts—Sale of land—Specific performance—Planning legislation—Agreement in contravention of statutory provisions—Agreement unenforceable by operation of statute—Waiver of date for closing—Repudiation by vendor—Adequacy of tender—The Planning Act, R.S.O. 1970, c. 349, s. 29(7).

Actions for specific performance and in the alternative for damages were brought by the assignee of the purchaser under two agreements for the sale of land made on March 21, 1969 between Lloyd Hope and Scott Hope respectively as vendors and an investment and development company as purchaser. Each agreement was for the sale of 150 acres at a price of $240,000. $7,500 was payable as a deposit with $50,000 to be paid by cash or certified cheque on closing, the balance to be secured by a first mortgage. The closing date was October 1, 1969 and time was declared to be of the essence. The price in each case was based on the stated acreage and to be adjusted on a pro rata basis according to the actual survey. The Lloyd Hope agreement contained a paragraph excluding the vendor’s existing residence to-

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gether with 225´ x 255´ of land with rights of way for ingress and egress to the premises and further reserving to the vendor “side frontage 5 lots 100´ x 225´. In the case of both agreements the closing dates had passed, but the parties continued to negotiate. Both actions were heard together and dismissed by the trial judge whose judgment was affirmed in the Court of Appeal.

Held: The first appeal should be dismissed; the second appeal should be allowed.

Section 29 of the Planning Act deals with subdivision control and its provisions governed the Lloyd Hope agreement if Hope was to retain the fee in his residence and associated land. Section 29(7) therefore applied and as the agreement could not by virtue of s. 29(7) create or convey any interest in land it could give neither a right to specific performance nor a right to damages. The statutory exception in s. 29(7) which applies in the case of an agreement made subject to the express condition that such an agreement is to be effective only if s. 29 is complied with cannot extend to an implied condition to the same effect.

Glascar Ltd. et al. v. Polysar Ltd. (1975), 9 O.R. (2d) 705 distinguished.

As to the Scott Hope apppeal, no objection was taken to the tender at the time it was made, nor was there any suggestion before the action was brought that the insufficiency of the tender entitled the vendor to terminate the subsisting agreement of sale. While the statement of defence denied that there had been a proper tender, equally it denied that there was any contract of sale and then went on to contend that the contract had become null and void when there was no closing on October 1. This on the record was an unacceptable proposition. Further, the contention that the contract was properly terminated by notice of repudiation given on October 14 to the purchaser’s solicitor was not well taken in law. Both vendor and purchaser had continued the act on the basis that the contract was still in force and there was a waiver of essentiality of time when October 3 (to which the date of closing had been postponed) passed and when on October 8 the vendor’s solicitor stated that his clients were ready to close but fixed no date and when negotiation continued thereafter. The effect of the improper repudiation was to waive the need for tender.

King et al. v. Urban & Country Transport Ltd. (1973), 1 O.R. (2d) 449; Kloepfer Wholesale Hardware and Automative Co. Ltd. v. Roy, [1952] 2 S.C.R. 465; Bark-Fong et al. v. Cooper (1913), 49 S.C.R. 14 referred to.

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APPEALS from a judgment of the Court of Appeal for Ontario dismissing appeals from a judgment of O’Driscoll J. dismissing action on contract for the sale of land. First appeal dismissed; second appeal allowed.

Bernard Chernos, Q.C., and R.N. Poole, for the appellant.

W.D. Chilcott, Q.C., and W.J. Simpson, for the respondents.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—These two appeals arise out of two separate actions for specific performance and, in the alternative, for damages, which were heard together and were dismissed by O’Driscoll J. in reasons delivered on February 19, 1974. His judgment was affirmed on appeal in reasons given on behalf of the Court by Schroeder J.A. on November 12, 1974.

The actions were brought by the assignee of the purchaser under two agreements for the sale of land made on March 21, 1969, between Lloyd Hope and Scott Hope, respectively, as vendors, and Time Square Investment & Development Limited as purchaser. Each agreement was for the sale of 150 acres of land at a price of $240,000 of which $7,500 was payable as a deposit and $50,000 was to be paid by cash or certified cheque on closing, the date of closing being October 1, 1969 and time being declared to be of the essence. Each agreement provided that “price being based on the said acreage and to be adjusted on a pro rata basis according to actual survey”. In each case, the balance of the purchase price was to be secured by a first mortgage from the purchaser to the vendor on specified terms, which it is unnecessary to mention here.

There was one significant difference between the two agreements in that the Lloyd Hope agreement contained the following paragraph not found in the Scott Hope agreement:

It is agreed between the parties hereto that the said offer does not include an existing residence in which the

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Vendor now resides which shall be retained by the Vendor together with 225´ x 255´ of land to be used in connection therewith. The said parcel of land shall be such parcel of land as shall be designated by the Vendor. It is further agreed that the Purchaser shall give the Vendor a right of way for ingress and egress to the said premises permitting all kinds of vehicular traffic to the said house for the Vendor, his heirs, administrators, successors and assigns.

Vendor reserves side frontage 5 lots 100´ x 225´.

One of the issues in these appeals, pertaining only to the Lloyd Hope agreement, concerned the effect of what is now s. 29(7) of The Planning Act, R.S.O. 1970, c. 349, (first enacted by 1960-61 (Ont.), c. 76, s. 26(4)) on the right to specific performance and, indeed, on the right to enforce the agreement in any way. It was the submission of counsel for the appellant that The Planning Act had no application to the Lloyd Hope agreement because the clause therein for the retention by Lloyd Hope of his existing residence and land in connection therewith did not leave him the fee simple but only a licence to use. He pointed to another clause in Appendix B to the agreement to support his contention, a clause which reads as follows:

It is agreed that the Vendor shall have the right to occupy the house and other buildings and to work the lands not required for subdivision purposes and to keep all the produce raised upon said lands free of charge, subject to the Vendor paying the municipal taxes for such portion of land and buildings used by the Vendor during the term of such use and to keep such buildings used by him covered by adequate fire insurance at all times and to keep the buildings in good state of repair.

It is understood between the parties hereto that the Purchaser does not have the right hereunder to remove the top soil, save and excepting as may be required for the normal development thereof as a subdivision.

There is a somewhat similar clause in Appendix B to the Scott Hope agreement but it differs in that it has, of course, no reference to the occupation of a house or buildings and there is, further, a provision in the Scott Hope agreement that “it is agreed that the purchaser shall give twelve months notice to the vendor if he requires the vendor to

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vacate the lands”. There is no corresponding provision in the Lloyd Hope Agreement.

There is one further clause in the Lloyd Hope agreement upon which counsel for the appellant relies with respect to the point under discussion, and it reads as follows:

It is further understood and agreed that this Agreement shall not be subject to severance in so far as the real property is concerned and accordingly the Purchaser shall not be bound to accept anything less than the whole of the real property.

Section 29 of The Planning Act aforesaid deals with subdivision control, and it is common ground that the provisions of s. 29 govern the present transaction if Lloyd Hope retains the fee in his residence and associated land and that, if so, s. 29(7) is applicable. This last-mentioned clause is as follows:

(7) An agreement, conveyance, mortgage or charge made, or a power of appointment granted, assigned or exercised in contravention of this section or a predecessor thereof does not create or convey any interest in land, but this section does not affect an agreement entered into subject to the express condition contained therein that such agreement is to be effective only if the provisions of this section are complied with.

The Lloyd Hope agreement of sale does not contain an express condition in the terms of s. 29(7), but counsel for the appellants contends that the history of the provision is such as not to preclude a Court from finding that the parties had impliedly agreed to make their contract of sale effective only on compliance with s. 29 of The Planning Act, and that s. 29(7) would be satisfied accordingly. I am unable to appreciate how the course of decision preceding the enactment of what is now s. 29(7)—and it is the course of previous decision which counsel for the appellant relies on—can modify the force of what is stated to be necessary, that is that there be an express condition.

Counsel thereupon fell back on his submission that Lloyd Hope did not retain a fee, and in further support of this contention he referred to a statutory declaration made by Lloyd Hope on July 23, 1969, in which the following paragraph appears:

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(14) I do not retain the fee or the equity of redemption in any lands abutting the lands that are the subject matter of this my statutory declaration and therefore the conveyance contemplated between Time Square Investment & Development Limited and myself is not in contravention of Section 26 of The Planning Act, R.S.O. 1960, Chapter 296, or the amendments thereto.

This statutory declaration is the usual declaration as to possession, and I note that it was made in relation to the entire 150 acres of land which was the subject matter of the agreement for sale. Nonetheless, the context indicates that the vendor must have had in mind the residence and associated land which by the very terms of the accepted offer to purchase were not included in the offer. What significance then is to be attached to the statutory declaration?

Apart from the clause in that declaration quoted above, I am in no doubt that the Lloyd Hope agreement for sale reserved to the vendor the fee simple in the residence and associated land. The exclusion of this property from the ambit of the offer is followed by a provision for a right of way to it to provide ingress and egress “for the vendor, his heirs, administrators, successors and assigns”. Indeed, as the appellant’s factum indicated, the appellant attempted to close the transaction on the basis of acceptance of a fee to less than the whole of the vendor’s land. It is clear from the record that the solicitors for the appellant felt the need to obtain the consent of the Committee of Adjustment of Nepean in respect of the transaction because of the reservation of a fee to the vendor. A contrary indication in support of a contention that there was no reserved fee in any of the land is provided by the “no severance” clause which went on to say that “the purchaser shall not be bound to accept anything less than the whole of the real property”. Counsel for the respondents contended, of course, that this could only refer to what was covered by the offer.

Neither the trial judge nor the Court of Appeal made any reference to the statutory declaration in coming to a conclusion adverse to the appellant on the application of s. 29(7) of The Planning Act to the Lloyd Hope agreement. I would not assume that they overlooked it, but they must have con-

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sidered that it did not alter the effect of that contract of sale, that it was a routine declaration. This is supported by the fact that the same clause 14, quoted above, that was in the statutory declaration sworn by Lloyd Hope appears in the declaration by Scott Hope.

The contract in this case is not an entirely coherent document, but I am not prepared to give the statutory declaration the effect of a release of an interest in fee which, in my opinion, was reserved by the contract. It follows that whatever other considerations there may be in support of the appeals, that in respect of the Lloyd Hope agreement must fail in respect of the claim of specific performance because of non-compliance with s. 29(7) of The Planning Act.

The appellant urges, however, that the Lloyd Hope agreement is still effective to permit it to claim damages for its breach, notwithstanding non-compliance with The Planning Act. I am unable to appreciate this submission. In view of the conclusion to which I have come as to the effect of The Planning Act on the Lloyd Hope agreement, the appellant is faced with a statutory prescription that states that the agreement does not create or convey any interest in land. No fault can be ascribed to the vendor in this aspect of the matter, and there can be no relief to the appellant, either by way of specific performance or by way of damages, when the relief in either case is founded on an assertion of a contractual claim to an interest in land which by statute cannot pass to the purchaser. Glasgar Ltd. v. Polysar Ltd.[1] is of no assistance to the appellant. There the right to damages arose only as a consequence of rectification of the contract of sale to include the condition prescribed by s. 29(7) of The Planning Act.

It follows that the appeal in respect of the Lloyd Hope agreement fails and must be dismissed. The other issues in these appeals, common to both agreements, need be considered therefore only in relation to the Scott Hope agreement.

Prior to the date of closing, which was October 1, 1969, the purchaser sought an extension of time

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and agreement was reached to move the closing forward to October 3, 1969. Nothing was said as to time being of the essence. October 3 came and went, with no move being made either by the purchaser to close or by the vendor to give notice of intended termination. The solicitors for the respective parties continued to act on the footing that the agreement was still alive. The vendor’s solicitor stated in a letter of October 8, 1969 to the purchaser’s solicitor that he was ready for closing but no date was fixed. Copies of the statutory declarations of possession were enclosed with this letter.

There had been talk between the solicitors about an increase in the purchase price as an inducement to extend the time but no firm agreement to that effect was made. By letter dated October 14, 1969, the purchaser’s solicitor wrote to Scott Hope’s solicitor that he was ready for closing and that he had ordered the certificate of acreage and the description from a surveyor. The letter stated that the certificate would be forwarded when it was received and asked the vendor for a draft deed after the description was sent on to his solicitor. The letter concluded by asking that the deed be made to the appellant. It is common ground that it was only on October 15, 1969, when this letter was received, that the vendor became aware of the assignment of the contract to the appellant. After the letter aforementioned was mailed, Scott Hope’s solicitor, on his client’s instructions, sent a letter dated October 13 but written on October 14, to the purchaser’s solicitor repudiating the contract, and adding in it that “in connection with Lloyd Hope, no survey for the accepted parcel has ever been produced”. No similar objection was mentioned in respect of Scott Hope. This letter was delivered by hand by Lloyd Hope to the purchaser’s solicitor in the afternoon of October 14, 1969.

On receipt of this letter, the solicitor for the purchaser wrote to the vendors’ solicitor on October 15, objecting to the unilateral repudiation and reviewing the course of dealing to October 14. He wrote again on October 17, enclosing the descriptions and plan of survey and asking for draft deeds. On October 23, he wrote separate letters to

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each vendor, enclosing a deed in duplicate from each vendor to the appellant and copy of a mortgage executed by the appellant. He asked for a statement of adjustments and proposed a closing on October 28, 1969 at the Registry Office. The vendors’ solicitor replied on behalf of both vendors under date of October 27, 1969 saying only that “due to commitments of my clients and my prearranged absence from the office for the balance of the week October 27 to October 31, it will not be possible for me to give this matter any consideration until the first week of November”. There was a telephone conversation next day between the solicitors, and a letter from the appellant’s solicitor under that day’s date, October 28, was sent to the vendors’ solicitor, purporting “to confirm our agreement by telephone this day that the date for completion of the purchase…from Scott Hope has been fixed for the 7th day of November, 1969, at your office in Smiths Falls at the hour of 2:00 in the afternoon. I shall be there prepared to complete the transaction. Time is to be of the essence in every respect hereof. Enclosed was a direction under the seal of the original purchaser for the deed to be made out to the appellant assignee.

On the record, Kirkland, the vendors’ solicitor, continued to act for them throughout the period of dealing and to the date of a tender made to him at his office on November 7. Under date of October 31, 1969, Kirkland wrote to Scott Hope that the appellant was insisting on proceeding with the transaction and had fixed November 7 as the date for tender. He added that “as stated in our earlier telephone conversations and my meeting with you on the 24th day of October, I have had an expert opinion that there is a binding agreement between yourself and (the purchaser)…” A tender was made on November 7, which included the balance due on closing and an executed mortgage back to Scott Hope. The vendor was not there to close nor did Kirkland close for him or have ready a statement of adjustments in respect of the transaction.

The trial judge made a finding, in answer apparently to the contention that the deals were off as of October 1, 1969, that Kirkland had authority to continue to attempt to close until October 14 when

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the letter of repudiation was written and delivered to the purchaser’s solicitor. He said nothing of any continuing authority beyond that date but he proceeded to dismiss the actions on the ground that the mortgage tendered to each vendor by the appellant as mortgagor did not contain a covenant by the original purchaser to pay the amount of the mortgage, and a vendor was not compelled to accept a mortgage back from the assignee of a contract without a covenant from the original purchaser. This must be, of course, in the absence of agreement by the vendor to accept the assignee as sole obligor.

In the Court of Appeal, Schroeder J.A. affirmed that conclusion, adding that he was prepared to assume, as did the trial judge, that the contract was still subsisting as of November 7 and on that view (and without deciding that question) the issue was whether the appellant assignee had made a valid tender.

I do not doubt the integrity of the principle applied by the Courts below as stated by Arnup J.A. in King v. Urban & Country Transport Ltd.[2] The question is whether this was an appropriate case for its application in the circumstances, these being that the vendor had repudiated the contract on October 14, 1969 and the purchaser was determined to enforce it. Whether the vendor was rightly entitled to object to a mortgage back from an assignee of the contract that did not contain a covenant for payment by the purchaser must depend on whether the vendor could say at the time that a proper tender was a prerequisite to his duty to close. Certainly, the vendors’ solicitor did not object to the form of mortgage (which was the form in which it was included in the tender) that was enclosed in the purchaser’s solicitor’s letter of October 23, 1969, already mentioned. The evidence of the vendors’ solicitor, moreover, was that his clients were concerned about getting the balance of the cash payment, whoever the purchaser might be.

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Neither the vendor Scott Hope nor his solicitor took any objection to the tender as being insufficient at the time it was made; nor was there any suggestion by them before action brought that the insufficiency of the tender entitled them to terminate a subsisting agreement of sale. True, the statement of defence denied that there was a proper tender but equally it denied that there was any contract of sale and then went on to contend that the contract had become null and void when there was no closing on October 1. This, on the record, was an unacceptable proposition.

On the argument in this Court, the main contention of the vendors, apart from The Planning Act point raised in relation to the Lloyd Hope agreement, was that the contract was properly terminated by the vendors by the notice of repudiation in their solicitor’s letter of October 14. The contention was founded on the fact that the purchaser had to that date done nothing to go forward with the contract. In my opinion, the point is not well taken in law. There were no requirements that the purchaser had to meet in relation to the Scott Hope agreement as a prerequisite that would be fatal if not met before the date of closing. Assuming that time continued to be of the essence in equity (although not so stated) when the date of closing was postponed to October 3, 1969, there was clearly a waiver of the essentiality of time when October 3 passed without any steps towards completion being taken by either the purchaser or the vendors and when, in his letter of October 8, 1969, the vendors’ solicitor stated that his clients were ready to close but fixed no date, and when negotiations continued thereafter directed to completion.

In the result, if there was to be another fixed date for completion, it was incumbent on either the vendors or the purchaser to give notice fixing a reasonable time. A notice, as in the vendors’ letter of October 14, calling off the contract without giving the purchaser any time to perform, could not put the purchaser in default. As a consequence of that letter, the vendors became the defaulting parties, and it was open to the purchaser to elect to

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insist on performance by the vendors, and that is what they did.

It is the fact that the vendors’ solicitor refused the appellant’s tender. I have already noted that no objection was taken to the form of tender in any of its parts when it was made, and the refusal, on the instructions of the vendor, was grounded on the renunciation of the contract by the vendor through the letter of October 14, 1969. This Court held in Kloepfer Wholesale Hardware and Automotive Company Limited v. Roy[3], that upon repudiation of a contract of sale by a vendor before the date of performance, the purchaser can at once bring a declaratory action as to the enforceability of the contract and seek specific performance in that action. This was the form of action instituted by the appellant in the present case.

The fact that the appellant assignee tendered a mortgage with only its own covenant for payment was remediable, and its counsel before this Court offered cash in payment of the full purchase price. Since the mortgage which the vendor Scott Hope agreed to take was an open mortgage, there can be no objection to the substitution of a cash payment. In Bark-Fong et al. v. Cooper[4], at pp. 31-32, Anglin J. said:

As to the failure to tender a conveyance for execution, the attitude taken by the defendant in his defence makes it quite clear that such a tender if made would have been useless. Tender of the purchase money—the really material thing to evidence the plaintiffs’ readiness and willingness to complete the contract—was sufficiently made. It was rejected not on the ground that it was unaccompanied by a tender of a conveyance for execution, but on the ground that the contract had been rescinded. That would amount to a waiver of the tender of a conveyance.

I would adapt this to the present case.

In my opinion, the appellant is entitled to succeed in its claim for specific performance against Scott Hope, and I would, accordingly, allow that appeal and direct a decree on the footing of payment in cash after the necessary adjustments are

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made. There should be a reference for that purpose unless the parties can agree thereon.

The Courts below did not deal with the disposition of the deposits made in respect of each agreement, and it was agreed by counsel that this Court would deal with that matter. It becomes unnecessary to do so in respect of the Scott Hope agreement since the purchase is to be completed under the direction in these reasons. So far as the Lloyd Hope agreement is concerned, the deposit thereunder must be returned to the appellant assignee. The agreement went off without the fault of either party and there is no ground upon which Lloyd Hope can retain it. There will, accordingly, be an order for its return.

Since success in respect of the two appeals was divided, I would make no order as to costs either in this Court or in the Courts below.

Judgment accordingly.

Solicitors for the appellant: Feigman & Chernos, Toronto.

Solicitors for the defendants, respondents: Binks, Chilcott & Simpson, Toronto.

Solicitors for the third party, respondent: Thomson, Rogers, Toronto.