4. Undertakings re: Tender, particularly in reference to discharges of mortgages.

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1 TENDER The topic of this particular paper is the Law of Tender and the purpose of this particular paper is to attempt to leave the reader a little less confused and more knowledgeable than the writer. When choosing the topic it appeared at first glance that the Law of Tender could be laid out in rather straight forward and in precise detail. The more I read however the less precise the law appeared to be but I will make some attempts to highlight the main features. I have broken the topic down into certain headings with this view in mind. The headings that I will outline are as follows: 1. what is Tender? 2. How do you Tender from a practitioner's point of view. 3. Are there times when a Tender is unnecessary or even unwise? 4. Undertakings re: Tender, particularly in reference to discharges of mortgages. An excellent article dealing with the Practitioner's Guide to the Law of Tender can be found in (1969), 12 Can Bar J. 2a2 which outlines in rather simple reading many of the pitfalls involved in tendering on a real estate transaction and I will attempt to summarize this article under the first two headings. This Practitioner's Guide however should be read in conjunction with a few of the later cases that will be cited throughout this paper. WHAT IS TENDER? As mentioned in the article above tender is basically a form of evidence as to the parties preparedness to fulfill his agreement. Generally speaking, tender is made in order that a party may indicate that he is ready and willing to perform a contract and he has in fact performed it as far as he was able but has been prevented from completely performing it by the refusal of the other party to accept performance (1). As pointed out in Watts v. Strezos, [1955 ]O.R. 615 at page 620: "I think it is abundantly established by the authorities that before a party to a contract, in which time is made of the essence, can secure specific performance, he must, as was said in McSweeney v. Kay (1868), 15 Gr. 432 at "shew a good and valid reason for its nonperformance at the time; as for instance that he did all that in him lay, in order to its performance, and especially will he be admitted to "shew that it was the fault of the other party that it was not performed within the time." A person, to insist upon specific performance, must show that he himself was ready, desirous, prompt and eager to carry out his agreement: see Mills v. Haywood (1877), 6 Ch. D And he must show that lie himself has not been the cause of the delay or default: see Brickles v. Snell, [1916] 2 A.C. 599, 30 D.L.R. 31, [1917] 1 W.W.R Also see the other cases cited in Shaw et al v. Holmes et al, [1952] O.W.N. 267 at 270, [1952] 2 D.L.R In this case, it will be noted, the trial judge found as a fact - which was not disturbed on appeal - that the purchasers had been "most diligent in attempting to get the transaction closed on the date set for closing". The earliest cases of tender one can find that would be applicable in Nova Scotia are the result of English Case Law. It was the English practice however.for the vendor through his solicitor to tender a draft deed before the purchaser was obliged to do anything. In fact, if the vendor failed to provide a draft deed despite the purchasers request and failed to advise the purchaser that the deed had been executed and available, the vendor was precluded from setting up the default of the purchaser in paying the purchase price. In these circumstances, the vendor's own default precluded him from relying on the purchaser's default. (2) The Thomson Groceries case which is cited above which was

2 followed for many years in English practice ruled that "even where time is of the essence, the duty to make tender did not arise until the vendor has done that which it was incumbent upon him to do in order to close a sale. It was the duty of the defendants (vendors) to prepare the conveyance and submit the same for approval. The obligation of the plaintiffs (purchasers) to make payment did not arise until after the completion of the unfulfilled duty of the vendor. In Nova Scotia however this has not been the practice and the purchaser would not be able to set up the failure to tender a draft deed as a reason for refusing to complete the closing of the transaction. It is the writer's impression that the practice of tendering a draft deed was done prior to closing as a matter of course to give the purchaser's solicitor the description etc. and should not be confused with the actual tendering of a duly executed deed on closing date. Thus in Nova Scotia this defence is not applicable and the person suing for specific performance must be willing to show that he was ready, willing and able to close on the closing date and tender is perhaps the best evidence of this willingness. (see Dacon Construction Limited v. Karkoulis et al, (1944) 44 D.L.R. (2D) 4(33 which stands for the proposition that a party's failure to submit a draft deed in no way prevents the other party from completing -tender if so desired and that the significance of tender is proof that the narty tendering is ready, willing and able to complete his part of the contract and that the argument that there was no obligation to tender the balance of the purchase money and mortgage when a draft deed has not been presented falls). TIME AND PLACE OF TENDER It is generally accepted that tender in the last hour of the last day for performance of a contract is acceptable (3). One encounters some difficulties in real estate transactions where the closing date falls on a Sunday with the relevant Lord's Day Act. It has been held at common law that tender on a Sunday was not illegal but tender was valid if made on the next juridical day since neither could be compelled to attend business on any day which would be "unlawful" by one's religious beliefs". (4)One must be cautious however of our agreements used in this province which state that the closing shall he "on or before" a stated day. Under such circumstances it may be prudent to tender on the day before, i.e. Saturday, if in fact. the closing date was scheduled for Sunday and again on Monday. One must be cautious to tender on the proper closing day so as not to set up a technical defence to the opposing party. However, with the words "on or before" in the contract and the purchaser sees the vendor and tenders him before the closing date, this has been considered appropriate although early tender of the purchase monies cannot force the vendor to convey prior to the date set by the contract. (5)The determination of the proper date is also important for another reason i.e. if the tender is made after the date fixed for closing such tender operates as an acknowledgment that the contract is still in force and the contract would then be broken only if the other party refuses to perform as agreed (6).It would appear in general that tender could be made on a person authorized by the relevant party and that the general principles of agency law should apply to a solicitor who is authorized or held out as being authorized to receive payment. There are some pitfalls in this however and a few cases have determined that in fact, tender on the solicitor was not sufficient and tender on the relevant party should be made instead of his solicitor (Zhilka v. Turney & Turney, [1955 ) O.R. 213; Ontario Woodsworth Foundation v. Grozbord et al, O.R. 435). The above cases however are decided on tender of cash rather than certified cheque and it is suggested that should the agreement call for a tender of cash which in Nova Scotia practice is very often the case with the usual clause being "Balance in cash on the date of closing", tender would be very likely be required to be made on the party.instead of

3 his solicitor. If, however, the contract provides for certified cheque it is felt that the tender can be effected upon the vendor's solicitor with the cheque payable to the vendor. This problem does not arise when tendering on a purchaser as the deed being tendered on the solicitor would be in the purchaser's name. The Supreme Court of Canada however, has ruled that "Cash" means not money when looking a+_ a clause "the lessor hereby gives to the lessee an option irrevocable within the time limited herein to purchase... the lands... the sum of $5, payable in cash on the acceptance of the option", but as distinguished from credit for payment over a period of time. (7) The court ruled that "cash" in this context meant not money, but is as distinguished from credit for payment over a period of time. "Cash" meant only payment in full rather than a form of financing. As will be pointed out later in this paper there was considerable evidence of the Vendor's reluctance to close and it is felt that the court was most anxious to assist the Purchaser. When considering the above cases however, the writer points out Clause 7 of our standard form of Agreement of Purchase and Sale as follows: "Any tender of documents to be delivered or money payable hereunder may be made upon the Vendor or the Purchaser or any party acting for him and money to be legal tender." It is suggested that this particular wording if applicable in any given situation would relieve the tendering party from the confusion as to who to tender upon, the opposing party or his solicitor. it would appear that either would be applicable under our Clause 7. As a Purchaser considering the amount to be tendered the law is clear that the full amount due must be tendered. In the United States there are many cases which state that deficiency of less than One Dollar ($1.00) was held to be fatal to a tender. As pointed out in Halsbury, 198 it is also undesirable to tender more than is due since if the tendering party requires change, it is not good tender. However, if no change is required tender of the excessive amount may still be good. One caution pointed out when tendering a deed however is that if the tender of conveyance is from a third party who is the actual owner rather than the vendor as per the contract stated, this may not be good tender if the deed is not in compliance with the contract even though it may be a good conveyance and pass as title. It has been ruled that apurchaser is entitled to have the vendor's covenants and this has been applied in the situation where the purchaser is simply acquiring an interest under a long form of Agreement of Purchase and Sale (8). The wording of tender follows no particular format but the tenderer must be very cautious not to impose any conditions which he is not entitled to require as this may invalidate the tender itself, i.e. the tendering party must I ordinarily not demand a release or receipt in full since the tender "must be unqualified by any circumstances whatsoever" (9). one must be careful not to demand a receipt from someone who is unable to give it and if one is conveying the balance of purchase price a conveyance may be asked for but it must not be made a condition of the tender. (1Q) As suggested by the article by M.A. Cross it would appear that the best rule I to be gleaned from the relevant cases is for the tendering solicitor to refrain from saying anything other than what is absolutely essential to indicate his client's willingness and ability to complete the transaction - since it is this willingness and ability to fulfill an obligation which is what the Law of Tender is all about. ARE THERE TIMES WHEN TENDER IS UNNECESSARY OR EVEN UNWISE? Although tender is the best form of evidence as to a party's willingness and readiness to close, one can see the pitfalls in actually going through the tendering process. As outlined above, for example, there is the danger of the closing date falling on a Sunday; who do you tender cash or certified cheque on - the vendor or his solicitor; the particular difficulties as to determining the actual amount of tender and the actual form of tender. It is suggested that. the majority of these difficulties may be overcome by examining the Agreement of Purchase and Sale in detail. It has been my experience that solicitors today tend to take the Agreement of Purchase and Sale for granted as we have an

4 established form and it has been used by the real estate profession and lawyers for some years without considering the difference in phraseology between "balance in cash on date of closing" and "balance by solicitor's trust cheque on (late of closing". If, after examining the Agreement there are still many questions left in the solicitor's mind, the absence of actual tender does not necessarily mean his action for specific performance will fail. As mentioned throughout it is the party's ability to show his readiness and willingness to close that is important in the judge's mind.. In fact, it would appear from reading of many cases on the subject as to the absence of tender and its consequences to the party who is insisting on specific performance, that the judge was more concerned with the equities of the particular case than the formalities of tender itself. In certain situations tender may be totally unnecessary. For example, one party to the contract may repudiate the contract prior to closing date and therefore tender would be unnecessary. It may well be that one party through his actions refuses or neglects to provide information which was soley under his power and control to provide and the other party has done all that he can albeit not everything was done as in the usual case for closing with all adjustments, etc. because of the failure of the other party to provide certain information. The party who has failed to provide the information or refused to provide the information critical to the closing may very well be held by his actions to have waived tender (11). The case of Thomson Groceries Limited v. Scott (1943 ) 3 D.L.R. 25 is another case where the court looked to the conduct of the parties and it basically states that where one party prevents the other from performing by deliberate evasion and shows an intention not to abide by the contract, tender by the other party will be excused particularly where it was obvious from the facts that the defaulting party had no intention whatsoever of going through with the transaction. The court found that it would be idle to go through the motions of tender. Other than in situations as outlined above where one party refuses to provide critical information or repudiates the contract prior to the closing date there is abundant case law to cover situations where tender was not made (abeit could have been made by the solicitor claiming specific performance)and where the court waived the necessity of tender. In Hobart Investments Corporation Ltd. v. Walker et al (1977] 4 W.W.R. 113 the court found as follows: "Ordinarily tender of payment must be shown in such cases before action for specific performance will lie. In this case, however, it is clear from the evidence that the Appellant was ready, willing and able to complete the transaction. It took all steps necessary short of actual tender, and it is a fair, even a compelling inference.from the evidence, that the Respondents were unable to and would have refused to perform the agreement. The absence of formal tender in such circumstances will not defeat an action for specific performance". The leading Nova Scotia case can be found in Syl-Nor Realties Ltd. v. Keramaris (1974) 9 N.S.R. (2d) 1 which stands for the proposition that tender is basically a form of evidence as to one party's preparedness to fill the agreement, in other words, tender shows that the party is ready, willing and able to close but it is not necessary if other facts can substantiate this position. The court found "the conduct of the Defendant was sufficient to indicate that he had dispensed with the contract he set forth the terms upon which...willing to finalize the sale the Defendant was in breach of his agreement and must be prepared to pay whatever damages flow financially from his default." It has been found that notification of the availability of funds indicated the Purchaser was "ready, willing and able to close" and was sufficient tender and that actual tendering of the funds was not required on the date of closing (12) and that notification that the funds were in an interest bearing account and available on closing was sufficient tender

5 of cash. (13) UNDERTAKINGS RE TENDER - DISCHARGE OF MORTGAGE One of the more difficult positions to get a hold of in Nova Scotia may be the practice of solicitors giving undertakings to obtain or record discharges of mortgages. As we all know, it is the practice in this province for one lawyer or the other to undertake to payout the mortgage currently existing on the subject property and to record a release of same as one of the conditions of closing as confirmed with the opposing solicitor. Charles W. MacIntosh in the Nova Scotia Law News, Volume 1, Number 3, January, 1984, pages 41 and 56 considered this difficulty and cited several cases for the proposition that a written undertaking discharging a registered mortgage is not sufficient on the tendering of documents and that said undertaking would disentitle the claimant. to specific performance. Mr. MacIntosh quotes several cases as follows: "Two decisions of this Court, Fong v. Wienper, [1973 ] 2 O.R. 760, 35 D.L.R. (3d) 244, and Garfreed Const. Co. v. Blue Orchid Holdings Ltd. (1967), 15 O.R. 2d 22, 1 R.P.R. 79, recognized that in the normal course many transactions of purchase and sale are closed on an undertaking to discharge a mortgage. Those decisions held, however, that where the parties are standing on the strict terms of their agreement, as they were here, then the purchaser is entitled to insist that the vendor comply with the agreement by producing and registering discharges of all mortgages on or before the date of closing. The failure to produce the required discharge disentitles the vendor to a decree of specific performance. In Fong v. Weinper case, supra, Pennell J. observed that the insistence on production of the actual discharge of mortgages as a condition to the right of the vendor to enforce the agreement of purchase and sale, may appear to create "a mechanical or even a harsh result". In this case the equities are all in favour of the purchasers; the result is not harsh and I have no hesitation in giving effect to their technical defence." Mr. Macintosh also quoted the case of McFaden v. Pye 6 R.P.R. 198 where the same result was found. The rather unnerving case for us all was the Ontario case of Cain v. Genereux as pointed out by Mr. Macintosh were the solicitor who gave the undertaking personally, upon his failure to do so although lie lead not converted any of the monies to his own use, was held in contempt and fined $1, or three months in jail in default. One shining light in view of the cases set out by Mr. Macintosh has been a 1979 case decided by the Ontario High Court, Okinczyc v. Tessier et al (1979) 8 R.P.R. 249 which has the following delightful quotation: "I find that no executed discharge of the outstanding mortgage on the house property was tendered. However, there was tendered a direction to have the monies due on closing payable to the solicitor for the vendor and an undertaking by such solicitor that he would discharge the outstanding mortgage. I find that the solicitor for the vendor had a statement from the mortgagee as to the amount required to obtain the discharge and that there would be no problem in obtaining such discharge. On the facts of this case, 1 find that the correspondence and discussions between the solicitors waived a requirement that a fully executed discharge of the mortgage be tendered on closing. In any event, at the time of the tender no objection was made to the tender. The solicitor for the purchaser merely stated they were not in funds and could not close." The judge did go on to determine that the purchaser's solicitor had repudiated the contract the day before and found that tender was not necessary but his obiter is refreshing to say the least. I have read the cases of Fong v. Weinper; Garfreed Construction Co. v. Blue Orchid Holdings Limited and McFadden v. Pye and without attempting to find needles in a hay stack would suggest that all of these cases revolved around the particular wording in the agreement that the mortgages would be paid out and the discharge recorded on or before closing date and it was apparent throughout the correspondence between solicitors that the purchasers solicitor was not going to waive this clause but in fact requisitioned the discharge prior to closing with his title objections.

6 With that in mind it would be suggested that if the normal practice is followed in this province and no particular objection made prior to the closing that a discharge was required and no particular clause can be found in the agreement of purchase and sale demanding it to be discharged on or before closing date that we would fall within the obiter of the Okinczyc case. It is pointed out, however, that most realtors are in the practice of putting a clause stating all mortgages are to be paid out and discharged onor before closing at the vendor s expense and one must then examine the particular correspondence and actions of the solicitors and their clients to determine whether this is being waives as a matter of conduct or not. It may be prudent for a vendor s solicitor to determine in his initial letter to the purchaser s solicitor as to whether he will accept the usual undertakings on closing and again the purchaser s solicitor may want to indicate the vendor s solicitor in his initial letter if he has any difficulty with the usual undertakings re: discharges. In conclusion, tender is preferred but not essential. It is merely a form of evidence to show that one party is ready, willing and able to close. There are a number of pitfalls in tender and the lack of tender will not necessarily defeat an action for specific performance. It is the writer s feeling that the court looks to the equity of each situation and will allow a harsh determination if the equities of the situation called for same. In the majority of decisions, and in particular the decisions since 1975, which the writer was able to find, the court appeared to stray further from the technical defences in order to find in favour of the party who was ready, willing and able to close. It is suggested by the writer that each solicitor in every instance must examine his client s position to determine if the equities lie in his favour and if he should attempt to set up a technical defence for his client s refusal to complete the transaction as per the Agreement of Purchase and Sale. It is suggested that each case will be determined on its facts and every solicitor must be very cautious to advise his client as to the uncertainty of a court s possible decision where the equities of the situation have a very great role to play in its final determination. 1.Halsbury's Laws of England, 3rd Edition, Volume 8, Page Thomson Groceries Limited v. Scott,[1943] 3 D.L.R Sullivan v. Ramsay (1862) 1 P.E.I Cundey v. Cives (1890) 20 O.R Burns v. Boyd (1859) 19 U.C.Q.B Miller v. Young (1918) 14 O.W.N Shockey v. MoInar (1949) 1 D.L.R. Supreme Court of Canada D.L.R Bonie Construction Ltd. v. Titan Investment Corp. Ltd. et al D.L.R Blanco v. Nugent (1949) 1 W.W.R Shockey v. Molnar (1949) 1 D.L.R. Supreme Court of Canada D.L.R Fidelity Realt Limited v. Rockinqham Realty Limited 13 N.S.R. 2d 54, Reversed on other grounds 17 N.S.R. (2d) Romaniuk v. Nelson (1983) 4 D.L.-. (4th) Thiel & Thiel v. Perepelitza & Perepelitza (1981) 33

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