An Ontario Superior Court judge has granted a court-appointed receiver the authority to cancel a sales agreement for an unfinished luxury condominium unit in Toronto’s Yorkville neighbourhood, ruling against a purchaser who claimed he was entitled to take ownership of the unit without any further payment due to a series of secret side agreements1. The decision, released by Justice Osborne, permits KSV Restructuring Inc., in its capacity as Receiver for Mizrahi (128 Hazelton) Inc., to disclaim the Agreement of Purchase and Sale for Unit 901 at the 126-128 Hazelton Avenue project. This move allows the Receiver to sell the unit on the open market in an effort to maximize recovery for the developer’s numerous creditors.
The core of the dispute was a conflict between the Receiver’s duty to all creditors and the unique claims of the purchaser, Mr. David Berry. The Receiver, KSV, argued that Unit 901 was incomplete, requiring an estimated $3.215 million to finish, and that the receivership estate lacked the funds for this work. Selling the unit in its current “as is” condition was projected to generate between $7.7 million and $9 million. The developer, Mizrahi (128 Hazelton) Inc., has over $50 million in secured debt, primarily owed to Constantine Enterprises Inc. (CEI), in addition to millions more in unsecured debt. The Receiver argued that simply transferring title to Mr. Berry, an unsecured creditor, would improperly rewrite the purchase agreement to give his claim priority over all other secured and unsecured creditors. Mr. Berry opposed the cancellation, insisting that equity entitled him to “specific performance,” meaning the court should force the completion of the sale. He claimed he was entitled to receive the title without further payment, becoming an unsecured creditor for any deficiencies in the unit.
The Hazelton project, a nine-storey, 20-unit luxury building, was placed into receivership on June 4, 2024, before construction was finished. Three residential units, including Unit 901, were incomplete. The developer company, Hazelton, was co-owned equally by Mizrahi Developments Inc., controlled by Mr. Sam Mizrahi, and the applicant, CEI. Mr. Mizrahi managed the project and served as Hazelton’s president until he resigned on May 13, 2024, just weeks before the receivership. CEI was also the major secured creditor, having loaned $21 million in 2015. In 2017, CEI allowed DUCA Financial Services Credit Union to take a senior position for a $33.5 million loan. When DUCA later initiated a receivership application, CEI took assignment of DUCA’s debt in February 2024, consolidating its position as the senior creditor. At that time, Hazelton owed CEI approximately $31 million from the original loan plus another $13 million from the acquired DUCA debt.
Mr. Berry’s contractual relationship with the project was complex and evolved over eight years. He originally agreed to purchase both Units 901 and 802 in April 2016 for a combined $13.25 million, paying a deposit of $2.65 million. A year later, in May 2017, the agreement was amended to allow Mr. Berry to transfer shares in Yappn Corp., valued at $2 million, to Hazelton as an advance against the purchase price. In August 2019, this original combined agreement was terminated and replaced with two separate agreements, one for each unit. Mr. Berry assigned the agreement for Unit 802 to another purchaser but remained the buyer for Unit 901.
The new Agreement of Purchase and Sale (APS) for Unit 901 set the price at $6.25 million. It credited $1.25 million of his original deposit and maintained the $2 million credit for the Yappn shares. This 2019 agreement also contained a standard “entire agreement” clause, stating that no other representations, warranties, or collateral agreements existed beyond what was written in the document. In April 2020, the purchase price for Unit 901 was amended and increased to $7,142,244. Later, in October 2022, Hazelton issued an invoice to Mr. Berry for $800,000 for “extras and finishes,” which Mr. Berry paid in full. Based on these agreements, the Receiver calculated that Mr. Berry had been credited with $1.25 million (deposit) and $2 million (Yappn shares), leaving a balance of $3,892,244 still owing on the $7.142 million purchase price. The Receiver noted it was prepared to honor the $2 million share credit, even though the shares currently have nominal value.
Mr. Berry’s claim that he owed nothing further rested on a set of undisclosed side agreements he revealed to the Receiver only in September 2024, months after the receivership began. These agreements were unknown to CEI, the 50 percent co-owner and main creditor. The court heard that just weeks after the original 2016 purchase, Mr. Berry had agreed to loan $10 million to Mizrahi Developments, a separate company from the developer, for an unrelated condominium project in Ottawa. That Ottawa project is now in CCAA proceedings. Three weeks after that loan, on June 28, 2016, Mr. Berry, Mr. Mizrahi, and the developer (Hazelton) signed a “Supplementary Agreement.” In this secret deal, Mr. Mizrahi agreed, as an officer of Hazelton, that if the Ottawa loan remained unpaid, Hazelton would look to Mr. Mizrahi personally for any balance Mr. Berry owed on the condo. The agreement stipulated that Hazelton must complete the sale to Mr. Berry even if Mr. Mizrahi failed to pay.
This side deal was accompanied by a Confidentiality Agreement, also signed on June 28, 2016, by Mr. Berry and Mr. Mizrahi. It stated that if Mr. Berry disclosed the Supplementary Agreement, he would forfeit his right to be repaid the $10 million Ottawa loans. A handwritten note on the Supplementary Agreement itself read: “As representative of Mizrahi Developments I acknowledge this is the only copy of supplementary agreement.” Mr. Berry argued that because the Ottawa loans were not repaid, this secret agreement meant he was owed the outstanding balance on Unit 901 and was therefore entitled to the condo without further payment.
Justice Osborne rejected this argument entirely, finding the Supplementary Agreement was not enforceable. The judge ruled that when the parties mutually agreed to terminate the original 2016 two-unit APS and replace it with the new, separate Unit 901 APS in 2019, the “entire agreement” clause in that new contract extinguished all prior side agreements. The court dismissed Mr. Berry’s counter-argument that a clause within the secret deal was meant to survive such “entire agreement” clauses, finding that provision applied only to documents related to the Ottawa loan, not the Hazelton condo purchase. With the secret Supplementary Agreement deemed unenforceable, Mr. Berry’s primary argument collapsed.
The court also dismissed Mr. Berry’s other claims. He had argued that the $800,000 he paid in 2022 was an advance on the purchase price and should be credited against the balance. The court sided with the Receiver, finding the invoice was clearly for “Upgrades and Extras” as it stated. The document’s plain language described new plans and materials, and it contained a clause stating that other work, on the rooftop, would be “at no additional cost,” implying the items on the invoice were, in fact, an additional cost. Therefore, the $800,000 payment did not reduce the $3,892,244 balance owing.
Mr. Berry also argued that he held a “constructive trust” over the unit, making him the beneficial owner. The court rejected this, noting that such a trust only arises when a purchaser has fully paid the purchase price and performed all obligations. Since the court found Mr. Berry still owed nearly $3.9 million, he had not fully performed the contract, and no such equitable interest existed. Finally, the court dismissed a claim that an “as is, where is” offer had been accepted in January 2024. The court found no binding contract was formed, as Mr. Berry’s acceptance was conditional on an “accurate estimation” of completion costs, a crucial term that was never agreed upon. His attempt to accept the offer months later, just days before the Receiver was appointed, was too late.
In applying the legal test for disclaiming a contract, Justice Osborne found all three factors favored the Receiver. First, the legal priorities were clear: CEI is a secured creditor, while Mr. Berry is an unsecured creditor, and his interest ranks lower. Second, disclaiming the contract would enhance the value of the assets for all creditors. Selling the unit for $7.685 million would provide a significant recovery, whereas transferring it to Mr. Berry would result in a $7.685 million loss to the estate. Forcing the sale, even for the $3.89 million balance, would still be less than the market value and would amount to a preference for Mr. Berry.
Third, the court found the equities did not support giving Mr. Berry a preference. His position was based on a “secret and intentionally undisclosed” agreement hidden from the company’s 50 percent partner and the Receiver. While acknowledging the unfortunate effect on Mr. Berry, who paid substantial sums, the judge concluded that his position was no different from other unsecured creditors who advance money to a debtor that becomes insolvent. The court found no basis in law or equity to depart from the ordinary hierarchy of creditors. The Receiver’s motion was granted, authorizing it to cancel all sale agreements with Mr. Berry for Unit 901.
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