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| Balvinder Kumar |
The case, Shcolyar v. Bensher Holdings Ltd., 2025 ONSC 2205, was heard before the Ontario Superior Court of Justice, where the plaintiff, Gil Shcolyar, took action against the defendant, Bensher Holdings Ltd., for specific performance compelling the defendant to complete the real estate transaction.
According to the facts of this case, the parties entered into an Agreement of Purchase and Sale on Dec. 5, 2019, for a commercial property with a purchase price of $2.95 million. All conditions were waived by the plaintiff. The closing date was set for Jan. 29, 2020. The closing date was amended to Feb. 28, 2020. In mid-January, the plaintiff’s lender, DUCA Financial Service Credit Union Ltd., provided a letter of intent to the plaintiff. In February, DUCA advised the plaintiff that there would be a delay in advancing the mortgage, requesting that the closing date be extended until late March to finalize the loan. To be on the safer side, the plaintiff requested that the defendant extend the closing to April 27. The defendant agreed to extend the closing, provided that the plaintiff released the given deposit of $100,000 and to give an additional non-refundable deposit of $100,000, with the total deposit paid by the plaintiff being $200,000.
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Since time is of the essence, the defendant on April 27 tendered the necessary documents to close the deal. The plaintiff did not tender the closing funds or documents. The plaintiff accepted that he was unable to tender. He was “ready and willing but not able” to tender due to the inability on the part of DUCA to advance funds on closing. On April 28 (the day after closing), DUCA sent a commitment letter for $2,000,000 to the plaintiff’s lawyer. The commitment letter was not unconditional, including conditions like an appraisal of no less than $3,880,000, environmental assessment, inspections and so on. The plaintiff had to come up with $750,000 to close the transaction over and above the deposit of $200,000 and loan amount from DUCA. There was no evidence from the plaintiff as to how and from what source the plaintiff was obtaining the remaining balance of the purchase price. The plaintiff’s lawyer requested to set a new closing date for May 11, which was rejected by the defendant.
The defendant’s lawyer confirmed that while the defendant was “ready, willing and able to complete the transaction,” the plaintiff defaulted leading the deposits to be forfeited and holding the plaintiff responsible for any damages. The defendant concedes that the property was unique and that the damages would not be an adequate remedy for the plaintiff should it be found that specific performance is otherwise an appropriate remedy. The defendant never sold the property and still owns it.
Issues before the court were (1) was the defendant ready willing and able to close, such that both parties were unable to close and a new closing date should be set, and (2) in the face of COVID-19, was the defendant unreasonable in not agreeing to extend and if so, should the court award specific performance.
On the first issue, the defendant relied on the clause of “time is of the essence” to assert that he was ready, willing and able to close the transaction. The plaintiff relied on a 1973 Court of Appeal decision in King et al. v. Urban & Country Transport Ltd. et al., [1973] O.J. No. 2181 that held that a party cannot rely on a “time of the essence” clause to defeat a transaction when that party was itself not ready, willing and able to close. The plaintiff submitted that although the defendant tendered all the necessary documents on closing, he intended to retain the building, did not want to sell (certain email communications between the defendant and his counsel had inferred this) and only tendered knowing that the plaintiff could not close. The court did not accept this, as the defendant’s counsel had received clear instructions on April 17 to close and further that if the plaintiff tendered the funds and the closing documents, the defendant would close. The defendant tendered with the intention to conclude the transaction in accordance with the Agreement of Purchase and Sale and was ready, willing and able to close on April 27.
On the second issue, the plaintiff asserted that DUCA was unable to complete the loan because of COVID-19 and relied on two cases where the courts excused contractual non-performance because of the exigent circumstances arising from COVID-19. These cases did not assist the plaintiff. The plaintiff and DUCA had months to work on the financing. The Agreement of Purchase and Sale was signed in December 2019, and the provincial emergency order was not invoked until March 20, 2020. DUCA was silent until the April 22 commitment letter that was done after the closing date and came with conditions that were hard to complete. There was no evidence that the plaintiff had the additional $750,000 needed to close the deal. Not only this, COVID-19 does not create a blanket excuse for non-performance. Although an exceptional circumstance, COVID-19 does not excuse contractual non-performance. The court rejected the plaintiff’s argument that COVID-19 created an independent legal justification to excuse the failure to close on April 27. The claim for specific performance was dismissed, and the defendant granted a declaration that the deposits had been forfeited.
Moral of the story: There is no contractual, legal or equitable basis to excuse non-performance of the contract, and the contract terminates when one party fails to fulfil its contractual obligation and does not tender.
Balvinder Kumar practises real estate law (residential and commercial) and is a freelance writer and author with LexisNexis.
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