BLANEY’S APPEALS: ONTARIO COURT OF APPEAL SUMMARIES (JULY 8 – 12, 2019)Himidan v. Farquharson, 2019 ONCA 575 (CanLII)
[Huscroft, Trotter and Zarnett JJ.A.]
T. Pagliaroli and B. McKoy, for the appellant
C. Raphael and B. Chung, for the respondents
The parties entered into an agreement for the respondents to purchase the appellant’s house. Prior to the closing, neighbours of the property asserted ownership over a two foot strip of the nine foot wide driveway. The appellant and the neighbours were unable to resolve the dispute and litigation was commenced between the appellant and the neighbours. In light of the litigation, the respondents refused to close the sale on the basis that the appellant could not convey clear title to the entire driveway and walked away. The appellant commenced an action for damages arising from the failure to close. The respondents counterclaimed for a return of their deposit. Both parties moved for summary judgment to dismiss the claims against them and for judgment on their own claims.
The motion judge found for the respondents because in her view, the purchase agreement was a representation that the appellant owned all of “what was visually apparent as the functioning private driveway.” She found that there was a defect in the appellant’s title to the driveway, and this defect was significant enough to entitle the respondents to refuse to close.
(1) Did the motion judge err in her interpretation of the purchase agreement?
(2) If there was no error, did the motion judge err in finding the defect to be significant enough to permit the respondents to refuse to close?
(1) No, the motion judge did not err in her interpretation of the purchase agreement.
The purchase agreement represented that the driveway was only 7 feet wide, but that the driveway belonged to property, subject to a right of way. However, the driveway, as it visually appeared, was nine feet wide. The appellant submitted that the motion judge erred by relying on the respondent’s subjective “understanding of what they were getting”, and not the text of the Schedule to the agreement.
The Court found that the motion judge used the factual matrix to “deepen” her understanding of the intentions of the parties at the time of executing the contract. Further, in LeMesurier, the Court of Appeal had previously held that purchasers were entitle to assume that “everything which to the eye appeared part of the driveway” was in fact part of the driveway. The motion judge was entitled to find as she did that any reasonable person, upon viewing the property, would assume the driveway was in fact 9 feet wide, notwithstanding the provision in the APS that indicated the driveway was only 7 feet wide.
The fact that the purchase agreement made reference to right of way was of no relief to the appellant as the neighbours’ claim was for ownership, not right of way.
The Court also referenced the need to interpret contracts in accordance with sound commercial principals and good business sense, as was discussed in Ventas. If, as the appellants submitted, they were only selling seven of the nine feet of the driveway, as well as the house, it would mean they would, if successful against the neighbours, retain a two foot strip of driveway and nothing else. The Court found this did not make commercial sense and so rejected this argument.
(2) No, the motion judge did not err in finding the defect to be significant enough to permit the respondents to refuse to close.
The neighbours were seeking $200,000 to settle their claim to ownership. The appellant later sold the property for $145,000 less than the respondents had agreed to purchase it for. The two foot strip that was subject to dispute, in the appellant’s own words, interfered with opening car doors and use of the garage. In light of these facts, the Court found no error in the motion judge’s reasons. “The respondents’ reliance on it in refusing to close was neither arbitrary nor capricious” and so was not a wrongful refusal to close.