Surprising Decision on Specific Performance

Mark Twain once made a comment about how reports of his death were highly exaggerated.

Perhaps the same can be said about the chances of a corporate plaintiff obtaining specific performance of an agreement of purchase and sale for commercial property, given the recent decision of the Superior Court of Ontario in 2329131 Ontario Inc. v. Carlyle Development Corporation.

This case involved an agreement of purchase and sale for 3 adjacent buildings in Espanola, Ontario which contained a gas bar, a convenience store, several quick service restaurants, and some smaller tenants.

There was no question that the plaintiff purchaser was trying to buy this property to own and maintain for the profit to be derived from the leases to the various tenants.

The agreement of purchase and sale was amended by the parties on a number of occasions. The last written amending agreement provided for a specific closing date, which passed without either side attempting to close. Both sides continued to behave as if the transaction was still valid but neither party identified a new closing date.

Ultimately, and after the parties encountered difficulty obtaining estoppel certificates from the tenants and confirmation from the plaintiff’s bank that the bank would finance the purchase, the plaintiff purchaser announced that it was ready to close. The defendant vendor took the position that the transaction was no longer alive and refused to complete the transaction.

The purchaser sued and moved for summary judgment, alleging that the vendor had breached the agreement of purchase and sale for a number of reasons and asking the Court to order specific performance by requiring the defendant to hand over a deed to the property.

After reviewing the facts, the Court was satisfied that it was in a position to render a summary judgment simply because the documents were sufficiently clear as to illustrate what had actually happened.

The interesting aspect of the case has to do with the issue of remedy.

The Court observed that the plaintiff had explained why the property was special to the principals of the plaintiff company, using the language “it provides a good opportunity for them to carry on a business and to have good tenants in the other buildings”. The Court also observed that the plaintiff’s principals had “put much effort into obtaining the property”.
Of some significance was the fact that strangely, the defendant did not take issue with the appropriateness of an order for specific performance.

There is an abundance of authority for the proposition that specific performance will not be granted with respect to a commercial property, at least where the only thing special or unique about the property is its ability to generate revenue. This is because it is assumed that a commercial buyer will be able to find another revenue–generating property elsewhere. These types of properties, in this context, are considered commodity items.

Nevertheless, and presumably assisted by the defendant’s failure to challenge the plaintiff’s right to an order for specific performance, the Court determined that “it would not be unjust” to grant specific performance in these circumstances. The Court ruled that a substitute property “is not readily available”.

In my view, this decision is completely inconsistent with both the trend in the jurisprudence over the last number of years and specific comments made in earlier decisions.

Nevertheless, it does provide some support for the idea that specific performance may be available with respect to commercial properties. Reports of the death of that remedy, apparently, are greatly exaggerated.

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