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SALE OF LAND - Conditions and warranties - Terms - Duties and obligations

Wednesday, June 13, 2018 @ 8:19 AM  

Lexis Advance® Quicklaw®
Appeal by the vendor from an order requiring it return $407,582 paid by the purchaser pursuant to a cost sharing agreement. The appellant agreed to sell an undeveloped parcel of land to the respondent for $3.96 million. The land was part of a larger parcel of land that was zoned agricultural. The sale was conditional upon the City consenting to a severance. The Agreement of Purchase and Sale required the appellant to apply to the Committee of Adjustment for the severance and to satisfy any conditions imposed, at its sole expense. The Agreement also provided that if the conditions of the consent to sever were onerous or unreasonable such that the appellant was not prepared to satisfy them, the appellant could offer to the respondent the opportunity to satisfy the conditions at the respondent's cost. If the respondent chose not to do so, the agreement would be null and void. The appellant obtained the severance, but it was subject to conditions, including that the appellant enter into a cost sharing agreement. One condition of the agreement was that the appellant would have to fund development related costs in the amount of $407,582. The appellant took the position that the severance condition was onerous or unreasonable and it gave the respondent the option to satisfy the severance condition. The respondent disagreed that the condition was onerous or unreasonable, but it satisfied the condition by paying the $407,582 in order to prevent the agreement from terminating and reserved its rights to seek the amount back from the appellant. The respondent then applied to the court for a determination that the appellant was required to pay it the $407,582 it had paid to satisfy the severance condition. The application judge allowed the application, finding that the requirement to pay the cost sharing obligation did not render the severance condition onerous and unreasonable. The judge found that the intention of the parties as expressed in the agreement was that the land would be rezoned and that zoning would be operational at the time of the sale. He also found that it was the intention of the parties that the appellant pay the costs associated with rezoning. He further found that while the rezoning had been completed, it was not in full force and effect until the Cost Sharing Agreement was entered into and accompanying obligations were paid.

HELD: Appeal allowed. The judgment below was set aside and the application was dismissed. The judge's decision to dispose of the application on a basis that was not advanced by the parties amounted to a denial of procedural fairness. The requirement to pay $407,582 was unreasonable as the appellant never had any intention to develop the property.

Union Building Corp. of Canada v. Markham Woodmills Development Inc., [2018] O.J. No. 2265, Ontario Court of Appeal, C.W. Hourigan, G. Huscroft and I.V.B. Nordheimer JJ.A., April 27, 2018. Digest No. TLD-June112018006