Specific Performance: Reports of Its Death Have Been Greatly Exaggerated

With apologies to Mark Twain for the mangling of his famous quote, fans of specific performance may be cheered by the very recent decision of the Court of Appeal in Maraschiello v. Shellrock Developments Ltd.

For the uninitiated, specific performance is an Order granted by a Court requiring the party in breach of obligations under a contract to perform those obligations.

In this case, the plaintiffs sold their farm, where they had lived and worked since 1978, to Shellrock.  The terms of the agreement included an obligation on Shellrock to use best efforts within 12 months after the May 2004 closing date to obtain a severance of a 1 acre parcel of the property on which the plaintiffs’ house was located.  The intention was that the plaintiffs would continue to own and live in their house.

Shellrock failed to obtain the severance and the plaintiffs sued for specific performance, alleging that Shellrock had failed to use best efforts to obtain the severance.  The plaintiffs maintained that had Shellrock made best efforts, or in fact any reasonable effort, it is very likely that severance would have been obtained. 

Shellrock defended by saying that it had made reasonable efforts and that in any event, specific performance should not have been awarded.

After an 8 day trial, the judge found in favour of the plaintiffs and ordered specific performance.

On appeal, the Court of Appeal observed that according to the minutes kept by the Committee of Adjustments, the consultant who had prepared the severance application and represented Shellrock at the Committee of Adjustment hearing had informed the Committee that:

(a)  the only reason Shellrock was applying for severance was to meet its legal obligations to the plaintiff;

(b)  he agreed with the municipal staff’s recommended refusal of the application because the proposal did not meet the Town’s official plan or zoning by-law; and

(c)   he agreed that the consent application was not an example of good planning.

The consultant testified at trial and denied having said these things but the trial judge did not believe the consultant and neither did the Court of Appeal.  The Court of Appeal’s summary comment was simply that Shellrock’s conduct “was far removed from a ‘best efforts’ attempt to obtain a severance; indeed these minutes appear to document a ‘worst efforts’ attempt”.

On the question of specific performance, the Court of Appeal agreed with the trial judge that the 1 acre block had been created, from the plaintiffs’ perspective, to preserve their rights including the right to specific performance.  The Court of Appeal also agreed that in this particular case, damages would not be an adequate remedy.  In fact, it was hard for the Court to imagine a more unique property.  The property had been the plaintiffs’ home since 1978.  They had worked the property as a farm for decades and in 1989 built a golf course on part of it.  They wanted to stay on the property and be part of whatever subdivision was built.  They did not want to stand in Shellrock’s way and simply wanted their home to remain among the new development.

As a result, the Court of Appeal accepted that specific performance was an entirely reasonable remedy.

The trend in the case law for many years has been to diminish the availability of specific performance as a remedy.  It appears to be extremely difficult for developers to obtain this type of remedy at this point and only slightly less difficult for homeowners or home purchasers.  This was a very unusual case but it did give the Court an opportunity to confirm that specific performance remains available in at least some circumstances.

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