Benzie v. Kunin et al., 2012 ONCA 766

• Jurisdiction: Ontario
• Court: Court of Appeal (Ontario)
• Judge: Goudge, Gillese and Armstrong, JJ.A.
• Citation: 2012 ONCA 766,(2012), 299 O.A.C. 1 (CA)
• Date: 21 August 2012

Benzie v. Kunin (2012), 299 O.A.C. 1 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. DE.001

Michael Benzie and Norman Benzie (applicants/appellants) v. Barbara Hania and Mitchell Kunin (respondents/respondents)

(C55155; 2012 ONCA 766)

Indexed As: Benzie v. Kunin et al.

Ontario Court of Appeal

Goudge, Gillese and Armstrong, JJ.A.

November 13, 2012.

Summary:

In 1987, three siblings (Michael, Barbara and Mitchell) executed an Agreement that contained a right of first refusal should Michael decide to sell a property (the Property) that she had purchased from their parents for $425,000. The Agreement also provided for equal distribution among the three children of the net proceeds of any future sale (sale proceeds less sale expenses and less a repayment to Michael of $425,000, plus the amounts that she spent on renovations and improvements to the Property). The Agreement provided that it would enure to the benefit of and be binding on their respective heirs, administrators, and successors. Michael married Norman Benzie in November 1987. On November 30, 1987, Norman signed a document in which he promised Mitchell and Barbara that he would be bound by the terms and conditions of the Agreement (the Norman Undertaking). Also on that date, in consideration of "natural love and affection", Michael conveyed title to the Property to herself and Norman as joint tenants. The Agreement, with the Norman Undertaking appended, was registered on title. It remained registered on title when the Property was converted to the Land Titles system of registration. In 2012, Michael and Norman applied to have the Agreement deleted from the Land Titles registry. They also sought a declaration that the Agreement was not binding on non-parties, specifically, Norman, Michael's two sons, or any other of Michael's heirs.

The Ontario Superior Court, in a decision reported at [2012] O.T.C. Uned. 976, dismissed the application. Michael and Norman appealed. They submitted that the application judge erred in concluding that: 1. the Agreement was binding on Michael's heirs; 2. the Norman Undertaking was a binding contract; and 3. the Agreement was registrable under the Land Titles Act.

The Ontario Court of Appeal dismissed the appeal.

Contracts - Topic 2875

Consideration - What constitutes consideration - Forbearance - General - Three siblings (Michael, Barbara and Mitchell) executed an Agreement that contained a right of first refusal should Michael decide to sell a property (the Property) that she had purchased from their parents - The Agreement also provided for equal distribution among the three children of the net proceeds of any future sale - Michael married Norman Benzie - Norman signed a document in which he promised Mitchell and Barbara that he would be bound by the terms and conditions of the Agreement (the Norman Undertaking) - On the same date, in consideration of "natural love and affection", Michael conveyed title to the Property to herself and Norman as joint tenants - Michael and Norman were subsequently unsuccessful in an application to have the Agreement deleted from the Land Titles registry - They appealed, submitting, inter alia, that the application judge erred in concluding that Barbara and Mitchell gave consideration for the Norman Undertaking by way of forbearance - The Ontario Court of Appeal dismissed the appeal - Michael's transfer of title into joint names with Norman amounted to a disposition - While a court might find that such a disposition fell outside the scope of the right of first refusal, that did not mean that Barbara and Mitchell did not have the right to take legal steps to attempt to enforce the Agreement - Forbearance from bringing even a doubtful claim would constitute good consideration provided that the party with the claim believed the claim to be a valid one or that it had a fair chance of success - It was open to the application judge to find that because of the Norman Undertaking, Barbara and Mitchell forbore from taking action to enforce the right of first refusal - In so doing, they gave consideration for the Norman Undertaking - See paragraphs 54 to 63.

Contracts - Topic 9000

Rights and liability of strangers to contract - General - Privity of contract - Three siblings (Michael, Barbara and Mitchell) executed an Agreement that contained a right of first refusal should Michael decide to sell a property (the Property) that she had purchased from their parents - The Agreement also provided for equal distribution among the three children of the net proceeds of any future sale - The Agreement provided that it would enure to the benefit of and be binding on their respective heirs, administrators, and successors - Michael and her husband (the appellants) subsequently sought a declaration that the Agreement was not binding on non-parties, specifically, Michael's husband or sons, or any other of Michael's heirs - The application was dismissed - The appellants appealed - They submitted that the Agreement neither fell within an exception to the doctrine of privity of contract nor ran with the land and, therefore, it was not binding on non-parties - The Ontario Court of Appeal held that such an application of the privity doctrine would be incorrect because it ignored the effect of death on contractual rights and obligations - Death did not terminate a contract unless the contract was based on personal considerations, skill or confidence (a personal contract) - As the Agreement was not a personal contract it survived Michael's death and Michael's estate would be bound by the Agreement - The estate would pass title to the Property to the heirs subject to the Agreement - Heirs did not fall into the category of a bona fide purchaser for value without notice - Not only did they have actual notice of the Agreement in this case, they were volunteers in the sense that they gave no consideration for title to the Property - As such, the heirs could not stand in a better position than the estate and they would take title to the Property subject to the Agreement - See paragraphs 27 to 53.

Real Property - Topic 1747.1

Equitable estates and interests - Equitable interests - Right of first refusal - [See Real Property - Topic 8001 ].

Real Property - Topic 8001

Title - Registration of instruments, etc. - Land titles system - General - The appellants submitted that an agreement containing a right of first refusal to purchase property was not properly registered on title to the property because a right of first refusal did not create an interest that was capable of running with the land - They relied on s. 119(3) of the Land Titles Act, which stipulated that in order to be registered, a covenant had to be one that was "running with or capable of being legally annexed to the land" - The Ontario Court of Appeal rejected the argument - Section 119 dealt with covenants and interests in property that were capable of running with the land - What was in issue in this case was not a covenant but, rather, a right of first refusal - Section 71(1) of the Land Titles Act provided that any person "entitled to" or "interested in", among other things, any unregistered equity in registered land could be protected by registration under s. 71(1) - In the language of s. 71(1), the holder was a person "... interested in [an] unregistered ... [equity] in registered land ..." - Accordingly, rights of first refusal over land could be protected by registration under s. 71(1) - See paragraphs 64 to 84.

Cases Noticed:

London Drugs Ltd. v. Kuehne & Nagel International Ltd. - see London Drugs Ltd. v. Brassart and Vanwinkel.

London Drugs Ltd. v. Brassart and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, addendum 147 N.R. 336; 21 B.C.A.C. 159; 37 W.A.C. 159, refd to. [para. 28].

Greenwood Shopping Plaza Ltd. v. Beattie and Pettipas, [1980] 2 S.C.R. 228; 32 N.R. 163; 39 N.S.R.(2d) 119; 71 A.P.R. 119, refd to. [para. 29].

Lawson v. Poirier Estate (1997), 187 N.B.R.(2d) 161; 478 A.P.R. 161; 143 D.L.R.(4th) 660 (C.A.), consd. [para. 38].

Heintzman v. Poole et al., [2008] O.T.C. Uned. F18; 2008 CarswellOnt 4484; 70 R.P.R.(4th) 107 (Sup. Ct.), consd. [para. 38].

Lister (Ronald Elwyn) Ltd. et al. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726; 42 N.R. 181, refd to. [para. 57].

Irving Industries (Irving Wire Products Division) Ltd. et al. v. Canadian Long Island Petroleums Ltd. and Sadim Oil & Gas Co., [1975] 2 S.C.R. 715; 3 N.R. 430, refd to. [para. 66].

McFarland v. Hauser et al., [1979] 1 S.C.R. 337; 23 N.R. 362; 12 A.R. 332, refd to. [para. 66].

McLeod v. Castlepoint Development Corp. et al. (1997), 97 O.A.C. 123; 31 O.R.(3d) 737 (C.A.), leave to appeal denied (1997), 223 N.R. 394; 105 O.A.C. 160; 34 O.R.(3d) xv (S.C.C.), refd to. [para. 66].

Harris v. McNeely et al. (2000), 130 O.A.C. 282; 47 O.R.(3d) 161 (C.A.), refd to. [para. 66].

SBS Sealants Inc. v. Robroy Industries Ltd. et al. (2002), 158 O.A.C. 365; 59 O.R.(3d) 257 (C.A.), refd to. [para. 66].

Canadian Pacific Railway Co. v. Turta, [1954] S.C.R. 427, refd to. [para. 82].

Statutes Noticed:

Land Titles Act, R.S.O. 1990, c. L-5, sect. 71(1) [para. 74]; sect. 71(2) [para. 80].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Contract in Canada (6th Ed. 2011), p. 661 [para. 34].

Counsel:

Michael Meredith and Clarke Tedesco, for the appellants;

Allan S. Halpert, for the respondents.

This appeal was heard on August 21, 2012, before Goudge, Gillese and Armstrong, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Gillese, J.A., and was released on November 13, 2012.