Ontario – consent order prompts agreement to arbitrate to complete it and fresh litigation over vague term – #326

In Lokhandwala v. Khan et. al., 2020 ONSC 3209, Mr. Justice William M. LeMay determined that an offer received for a property qualified as “reasonable” according to a consent order agreed to by the parties in an earlier hearing.  That consent order also included an agreement to arbitrate, if need be, the choice of real estate agent to list the property.  LeMay J.’s reasons illustrate the care needed by parties to disputes when drafting terms to resolve their disputes so that today’s resolution does not inadvertently sow seeds for future, new disputes.  The reasons also include helpful references to case law on judicial notice and the pandemic.

Applicant and Respondent disputed the terms of their separation, one of which focused on the listing and sale of a residential property (“Property”).  Though title to the Property was held in the names of other parties listed as respondents, all agreed that Applicant and Respondent were beneficial owners.

The Property remained empty since August 2018.  Respondent had responsibility for payment of the carrying costs of the Property (including taxes, utilities and maintenance) estimated in the range of $10,000.00 per month.

The application before LeMay J. stemmed from an earlier attendance at court during which Applicant and Respondent had litigated the sale of the Property.  Respondent had sought, but failed, to obtain Applicant’s agreement between May and October 2019 to list the Property for sale, prompting Respondent to bring a motion in November 2019 for an order requiring that the Property be listed and sold.

Instead of having the court determine the application, Applicant and Respondent agreed to a consent order (“Consent Order”), issued by Mr. Justice James Stribopoulos, which included the following:

1 (c) the parties will accept the first reasonable offer to purchase [Property].  If they cannot agree on the sale price, or any other aspect of the sale, they may return a motion to court on short notice”[.]

After the Consent Order, Applicant and Respondent added an agreement to arbitrate the choice of the agent who would list the Property.

[23] After the order of Stribopoulos J. was made, there were problems in choosing a real estate agent.  As a result, under the terms of Stribopoulos J.’s Order, the parties were to arbitrate the question of which real estate agent should list and sell the property if they could not agree on a real estate agent.  That arbitration was to proceed before Kelly Jordan”.

Prior to the Consent Order and Respondent’s application in November 2019, the Property had been initially listed in September 2018 for $2,888,000.00 and then reduced to $2,675,000.00 in January 2019 before being delisted. Paras 22-40 of LeMay J.’s reasons then set out the details of subsequent valuations set for by Applicant and Respondent for sale of the Property as well as the give-and-take of offer and counteroffer with different third parties.

After the Consent Order, on May 3, 2020 a third party made an offer for $2,042,000.00. It was the last offer in the series listed by LeMay J.  Respondent accepted the offer and Applicant accepted but subject to conditions regarding payment of her share of the proceeds.  Respondent accepted Applicant’s offer subject to a number of conditions, all of which were accepted, save for one which required that the vendors of the Property “obtain a satisfactory order relating to the sale of the property withing seven (7) business days following acceptance of the agreement”.  The latter condition lead to a conference call hearing before LeMay J. during which he ordered that the offer be accepted and to his May 25, 2020 reasons.

LeMay J. considered several arguments raised by Applicant against accepting that May 3, 2020 offer. For example, he dismissed Applicant’s argument that it was best to wait for the end of the pandemic as doing so would “fetch a better price”. LeMay J. considered that the argument was speculative, that no one knows how long the pandemic would last and that the Property remained unsold well before the impact of the pandemic.  He remarked that he “must be cautious of taking judicial notice of facts around the pandemic” and referred to the recent decision in R. v. Baidwan, 2020 ONSC 2349.

Focusing on the term “reasonable” consented to by Applicant and Respondent for the Consent Order, LeMay J. at para. 62(b) explained that “reasonable” did not grant a veto to a party. LeMay J. was equally alert to the time constraints created by the give-and-take of offer and counteroffer.  The complexity and expense of the Applicant’s and Respondent’s litigation combined with those constraints to inform LeMay J.’s determination of what would be a “reasonable” offer.

The parties are obliged to accept the first reasonable offer.  Adopting the position that counter-offers (including counter-offers with provisions that would allow the Court to be the final arbiter of whether the counter-offer was reasonable) could not even be made without the Applicant’s approval has the effect of nullifying the Order of Stribopoulos J.  Instead, unless an urgent motion is brought and adjudicated before the tendered offer expires, the Applicant would be able to exercise a veto over any counteroffers if the position outlined by her former counsel was adopted”.

LeMay J. considered that, on the facts presented to him, the offer should be accepted.  He resisted Applicant’s argument that Respondent had not complied with an earlier order against him, invoking the consequences of non-compliance set out by Rule 1(8) of Ontario’s Family Law Rules, O Reg 114/99.

[63] Based on all of those comments, I am of the view that the Applicant has been seeking to avoid selling the property, and has been putting barriers up to prevent the sale of the property.  This conduct is a factor that favours hearing the motion.  If the offer to purchase the property is reasonable, then the Applicant is bound to accept it by the terms of Stribopoulos J.’s order.  The Applicant should not be permitted to use the provisions of Rule 1(8) to avoid the application of a Court order which would otherwise bind her”.

LeMay J.’s involvement in resolving whether the offer was “reasonable” stemmed from Applicant and Respondent adopting “reasonable” as a key term for the basis of their agreement for the Consent Order.  Applicant and Respondent had given themselves uncertain guidance to determine by/for themselves whether an offer qualified as “reasonable”.  LeMay J. openly asked the question at para. 73 (“Is this a reasonable offer?”) and at paras 85-87 answered it.

[85] The property must be sold.  The parties have not lived in it for almost two years, and it has been vacant for almost two years.  At this stage, the offer that has been tabled appears to be reasonable.

[86] However, as one of the terms of selling the property, I am not prepared to foreclose litigation over the question of whether the selling price is actually reasonable.  One of the conditions of accepting this offer is that the Applicant may, at trial, litigate the question of whether the sale was actually reasonable.

[87] I would only remind the parties that the question of what is a “reasonable” offer is likely different from what is “the best offer we could get”.  However, that issue is to be left to the trial judge”.

LeMay J. did reserve Applicant’s right to re-litigate at trial whether the offer was reasonable.  At para. 89, noting that Applicant and Respondent were engaged in “very contentious litigation”, he remained seized of any details regarding the sale if any arose relating to the sale.

urbitral note – First, in November 2019 Applicant and Respondent had sought to resolve their dispute themselves and, in doing so, entered into the terms of the Consent Order issued by Stribopoulos J. That willingness and initiative was not enough to resolve their dispute.  Rather, LeMay J.’s reasons demonstrate the need for parties to determine the precise content of such agreements, including what is meant by terms such as “reasonable”.  Their willingness to collaborate on a Consent Order lead to further skirmishes stemming from disagreement as to what exactly had been agreed in the Consent Order.

Second, the Consent Order promptly lead to an agreement to arbitrate the real estate broker.  The broker would then list the Property and then deliver, if all went well, an offer which would qualify as “reasonable”.  The agreement to arbitrate proved unnecessary.

Third, in his recent decision in R. v. Baidwan, 2020 ONSC 2349 at paras 27-38, Mr. Justice Antonio Skarica surveyed recent statements in Ontario on judicial notice of the pandemic and Skarica J.’s concluded at para. 39 that the “gist of all the decisions reviewed above is that justices are making liberal use of the doctrine of judicial notice”.

Fourth, Skarica J. identified examples of “trustworthy hearsay” related to the pandemic:

[53] The discussion above leads to the question: What does constitute evidence capable of being considered to be trustworthy hearsay?

[54] Generally, as outlined above, internet and media articles are not trustworthy hearsay and should be admitted, if it all, with great caution.

[55] In [R. v. Phuntsok 2020 ONSC 2158], Justice Barnes at para. 26 considered health models published by the government of Ontario by way of judicial notice. Health models are predictions in the future of projected rates of infection. They are just opinions formulated by health/medical experts as to possible future impacts of COVID-19. Pursuant to Find, the admission, of the opinions of properly qualified experts, needs to provide for the opportunity for cross-examination and cannot be judicially noticed.

[56] Further, there is no evidence in Phuntsok as to just how accurate these models are turning out to be. There is considerable debate in the media regarding their accuracy but if I am to be consistent, I should not rely on this media debate. However, I suggest that before the court relies on models of projected impacts, there should be some evidence introduced as to how accurate the models are turning out to be. The accuracy of models can only be determined in hindsight after the gathering of data of the ongoing impacts of the COVID-19 pandemic. This data will become increasingly available over time. I suggest that at the present time, without any evidence of empirical accuracy, health models should be given little weight as they do not meet the test at present of trustworthy hearsay.

[57] So, what is available to a reviewing court as trustworthy hearsay evidence regarding COVID-19?

[58] It is obvious that as COVID-19 is a new disease, the best and most reliable evidence of its impact is the actual rates of infection and death rates in the Ontario and Canadian population. Hospitals and official agencies in Ontario keep careful records regarding treatment and deaths in various institutions. That is why institutional business records are generally admissible at trial with sufficient notice and disclosure”.