Appeal court defers to judge's ruling that buyer's part performance was detrimental to it
The Ontario Court of Appeal dismissed an appeal of a Superior Court decision, which found that a company orally agreed in September 2019 to sell lands it owned to another company for a price of $4.1 million.
A trial judge of the Ontario Superior Court of Justice determined that the parties engaged in a process toward closing after the making of the agreement; that the respondent buyer tendered the required documents and funds on the closing date scheduled on or before Jan. 8, 2020; and that the appellant seller refused to close without legal justification.
The trial judge found the doctrine of part performance applicable and ordered the appellant to specifically perform the oral agreement.
The equitable doctrine of part performance, rooted in fairness, was an exception to the general rule that an oral agreement to sell land was unenforceable. In this case, the alleged part performance referred to the buyer’s conduct leading up to and at the aborted closing of the agreement.
On appeal, the appellant argued that this case did not meet the requirements of the detrimental reliance aspect of the part performance doctrine because none of the conduct upon which the trial judge relied involved the respondent acting to its detriment in performing its obligations under the sale agreement.
The appellant alleged that the respondent had a single obligation under the sale agreement, which was to pay the $4.1-million purchase price upon closing, and that tendering that amount was not detrimental to the respondent because the tender had been refused.
The appellant further claimed that other conduct – either taken in preparation of the aborted closing or in reliance on the sale agreement’s existence but not expressly contemplated by its terms – was insufficient to constitute the detrimental reliance aspect of the part performance doctrine.
In 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112, the Court of Appeal for Ontario dismissed the appeal and upheld the trial judge’s decision finding the equitable doctrine of part performance applicable.
The appeal court saw no basis to interfere and no reversible error on the part of the trial judge, who was not required to focus only on the last step of the closing process, namely the refused tender of the purchase price.
The appeal court deferred to the trial judge’s findings that the respondent’s conduct amounted to part performance, that this performance was detrimental to it, and that it would be inequitable to allow the appellant to rely on Ontario’s Statute of Frauds, 1990. These findings were legally available on the case record, the appeal court said.
The appeal court noted that the doctrine of part performance had both an evidentiary aspect and a detrimental reliance aspect.
Under the detrimental reliance aspect, the court should be satisfied that the party seeking to enforce the oral agreement acted to its detriment by irremediably carrying out its obligations or a significant portion of them under the oral agreement, while the other party stood by, which made it inequitable to allow the other party to rely on s. 4 of the Statute of Frauds.
The court, when determining the extent to which there was part performance and resulting detriment, could consider what the party seeking to enforce the agreement did to achieve the closing of the agreed transaction and the extent to which the party seeking to avoid enforcement acquiesced or encouraged that conduct.
In this case, the appeal court noted the trial judge was entitled to assess whether there was detriment from the respondent’s performance of its obligations.
Here, the trial judge found that the respondent’s conduct included acts that were required to complete the agreed real estate transaction and that were performed in dialogue with the appellant and in response to communications on the appellant’s behalf about what had to be done and which documents had to be prepared and signed to complete the purchase.
The appeal court noted that the trial judge determined that these communications showed that the appellant was intending to close an agreement already reached.
