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REMEDIES - Equitable remedies - Specific performance

Thursday, October 31, 2019 @ 8:25 AM  

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Appeal by Stilton Corp. from judgment granting the respondent’s application for specific performance of a 2013 settlement agreement. The respondent purchased the appellant’s veterinary practice. Pursuant to the agreement of purchase and sale, the appellant continued to own the property, but granted the respondent a lease of the property with an option to purchase. Because of a dispute that arose when the respondent wanted to exercise its option to purchase the property, it commenced an action for specific performance in 2013. The action settled. The settlement agreement provided that, following a five-year lease extension, the appellant would transfer its title and ownership of the property to the respondent for $1,250,000. In 2018, after the five-year lease term expired, the appellant refused to sell because the value of the property had increased significantly since the settlement agreement was concluded. The respondent applied for specific performance of the settlement agreement and a vesting order. The application was granted, and the appellant appealed.

HELD: Appeal dismissed. The application judge did not err by allowing this matter to proceed by way of application. There was no impediment to the court’s ability to interpret the legal meaning of the settlement agreement and to make a declaration concerning the interest in the property based on the settlement agreement. There were no material facts in dispute that would have rendered an application an inappropriate procedural route for determining whether to order the equitable remedy sought. The dramatic increase in the value of the property since the settlement agreement was negotiated was, in and of itself, not a frustrating event. The price increase was not a supervening event that made the performance of the contract radically different. Although the application judge erred in finding that the existence of a settlement agreement allowed her to order specific performance without undertaking an analysis as to whether this was the appropriate remedy, specific performance was the appropriate remedy. The clinic had operated out of the property since 1974. In that time, goodwill value had been accumulated which attached not only to the veterinary practice but also to the property on which it had operated during this period. The goodwill value attached to the property made it particularly suitable for continuing to operate the veterinary practice. The property logically has several features that made it uniquely suited to the purpose of carrying on a veterinary practice that had in fact operated there for decades. As the combination of the goodwill and physical features could not be replicated elsewhere and were uniquely suited to the continuation of the veterinary practice by the respondent, the property was unique. The respondent was clearly ready, willing and able to purchase the property as of the date agreed upon in the settlement agreement. The equities clearly favoured the respondent who sought to enforce a valid settlement agreement in face of the appellant’s clear breach. Damages were not a suitable alternative to specific performance on the facts of this case.

Paterson Veterinary Professional Corp. v. Stilton Corp., [2019] O.J. No. 4853, Ontario Court of Appeal, D. Paciocco, A.L. Harvison Young and M. Jamal JJ.A., September 24, 2019. Digest No. TLD-October282019012