CITATION: Sirisena v. Oakdale Village Homes Inc., 2013 ONSC 1051
COURT FILE NO: DC – 10 - 184
DATE: 20130220
SUPERIOR COURT OF JUSTICE - ONTARIO
(DIVISIONAL COURT)
RE: sirisena v. oakdale village homes Inc.
WIJESUNDERA (THIRD PARTY)
BEFORE: Justices Matlow, Kiteley, and Lederer
COUNSEL: Theodore B. Rotenberg, for the Appellant
Alfred Schorr, for the Respondents Sirisena
Daniel Bernstein, for the Third Party
HEARD AT OSHAWA: September 20, 2012
E N D O R S E M E N T
By the Court
[1] This is an appeal by the Defendant from the decision of Lauwers J. released July 12, 2010[^1] in which he ordered the Defendant to pay to the Plaintiffs the sum of $32,823.73 together with interest at 3.75% and costs in the amount of $13,000. He dismissed the Third Party Claim and ordered the Defendant to pay costs of the Third Party. Counsel subsequently agreed to fix those costs in the amount of $18,000. For the reasons that follow, we dismiss the appeal.
Background
[2] On January 29, 2005, the Plaintiffs entered into an Agreement of Purchase and Sale to buy a home from the builder. They made deposit payments in installments that totaled $25000. The original closing date was October 26, 2006. The Defendant sent a letter dated May 31, 2006 advising that the closing date was to be extended to February 23, 2007. That was 120 days, the maximum first extension that the Defendant could impose. The plaintiffs did not want to move in the winter and requested a summer date. The parties entered into an Amending Agreement dated September 9, 2006 that replaced the original closing date of October 26, 2006 with July 27, 2007.
[3] According to the Agreement of Purchase and Sale, the purchasers were obliged to complete a Pre-construction Chart showing their selections of kitchen fixtures, staircases, electrical fixtures, fireplace, heating, air conditioning and gas line, telephone and cable, central vacuuming and security system. The Pre-Construction Chart contained a term that all selections were final. In addition, beside each amount in the Chart appear the words: “No refund, no exchanges, all sales final”. On November 21, 2006, the Plaintiffs made their selections and paid by credit card in the amount of $7823.72.
[4] In a letter dated January 22, 2007, the Defendant advised the Plaintiffs that the closing date was extended to October 30, 2007 and offered to terminate the Agreement. According to the letter, the Plaintiffs were required to submit the “Record of Decision” by February 5, 2007 to indicate whether they intended to be released from the Agreement of Purchase and Sale and obtain a refund of their deposit or enter into a new Agreement at the same price. This “extension letter” was quoted in the reasons for decision.
[5] As the reasons for decision indicate, Mr. Sirisena consulted Mr. Wijesundera about the letter. In a letter dated January 30, 2007, Mr. Wijesundera indicated on behalf of his clients that they wanted to terminate and recover their initial deposit of $25000 plus $7823.73 which was the cost of their upgrades. There were attempts to obtain an answer to that letter over the next few days. On February 5, 2007 (the deadline in the January 22nd letter), Mr. Wijesundera sent by fax the Record of Decision form signed by the Plaintiffs in which Mr. Wijesundera had made a hand written annotation, bolded in the text below. The Plaintiffs chose the second option:
I/We wish to terminate the Agreement with the Vendor. I/We understand that my/our deposit, and all monies given for upgrades, will be refunded in full, without deduction or interest, after signing and returning to the Vendor three (3) copies of the Vendor’s standard release.
[6] On March 25, 2007, the Plaintiffs sold their existing home and on April 14, 2007, they purchased another home which closed in June 2007.
[7] As indicated by the Trial Judge at paragraph 33, the first substantive response from the Defendant to Mr. Wijesundera was a letter dated April 16, 2007 in which it’s counsel took the position that the extension letter had been sent in error and that, accordingly, the original Agreement of Purchase and Sale as amended by the Amending Agreement with the extended closing date of July 27, 2007 was valid and continued to bind the Plaintiffs.
[8] By letter dated June 12, 2007, the Defendant asked the Plaintiffs to attend and complete the colour selections. The Plaintiffs responded that the contract had been terminated in February. The uncontradicted evidence at trial was that the house could have been completed by July 26, 2007 if the Colour Selection Form had been completed and returned.
[9] There was no closing on July 27, 2007. The Defendant refused to return the deposit on the purchase and the payments for the upgrades. In January 2008, the Plaintiffs issued a statement of claim against the Defendant seeking judgment for the deposits and the prepayment for the upgrades.
[10] In February, 2008, the Defendant served and filed a statement of defence and counterclaim in which it pleaded mutual mistake, that the Defendant’s offer to terminate the Agreement of Purchase and Sale was not accepted as made, and that the Plaintiffs made a counter-offer by altering the Record of Decision form. The Defendant also pleaded that the Agreement of Purchase and Sale excluded the return of upgrades if the Agreement of Purchase and Sale ended without liability. In the Counterclaim, the Defendant added a damages claim if the loss on a resale exceeded the deposit and upgrade payments.
[11] In their reply, the Plaintiffs alleged that the Defendant had not been in a position to close on July 27, 2007.
[12] In June 2008, the Third Party Claim was issued in which the Plaintiffs alleged that, if the court decided that the Record of Decision as altered was a counter-offer, then Mr. Wijesundera was negligent because the alteration was made without their consent. In his statement of defence to the main action, Mr. Wijesundera denied that a counter-offer had been made and alleged that the return of the upgrade money “was an implicit term of the offer” which the Plaintiffs had accepted. Mr. Wijesundera defended the Third Party Claim on the basis that he had made the alteration on their instructions.
[13] The witnesses at trial were Mr. Sirisena, Corey Libfeld (a principal of the Defendant), Mr. Wijesundera, and David Jayaweera, a legal assistant to Mr. Wijesundera.
Judgment Under Appeal
[14] The Trial Judge granted judgment for the deposits and the upgrades and dismissed the Third Party Claim on the basis that the Defendant had abandoned the counterclaim. He ordered the Defendant to pay costs of the Third Party which were subsequently agreed at $18000.
[15] The pleaded issues before the trial judge were as follows:
(a) Did the Plaintiffs terminate the Agreement of Purchase and Sale by accepting the Defendant’s offer; did they fail to accept the offer; had they rejected the offer by making a counter-offer as reflected in the additional words inserted in the Record of Decision?
(b) Was there a common or mutual mistake caused by the Defendant and if so were the Plaintiffs precluded from taking advantage of the mistake?[^2]
(c) Had the Defendant given an oral assurance that the money would be repaid?
[16] The Trial Judge found that the Agreement of Purchase and Sale with its six schedules and Ontario New Home Warranty Program (ONHWP) Addendum was difficult for a lawyer to read, let alone the plaintiffs whose first language is not English. He described it as a standard form contract. He observed that the extent to which the Agreement of Purchase and Sale is enforceable in its strict terms was an issue. He noted s. 6.03 of Schedule B of the Agreement that afforded the vendor the option of altering the closing date one or more times on giving at least 60 days notice with this proviso:
Any subsequent extensions of this new Closing Date under the Addendum up to either 120 days or 240 days shall be calculated by reference to the original Closing Date on the Frontpage.
[17] The ONHWP Addendum was prescribed under the Ontario New Home Warranties Plan Act[^3]. At paragraph 11, the Trial Judge quoted s. 5 and described it as containing “consumer-unfriendly language” about the extension of the closing date and the termination of the Agreement. At paragraph 12, he quoted as well from s. 6.04 of Schedule B of the Agreement which he said purported to reset the Vendor’s unilateral closing date extension rights if an amending agreement was concluded and he observed that the propriety of s. 6.04 and its legal effectiveness was in issue.
[18] In his review of the evidence and the documents, the Trial Judge observed at paragraph 23 that the extension letter “bristled with ambiguity”.
[19] At paragraphs 43 and 44 appear the following:
The basic position of the defendant is simple. The original closing date in the Agreement of Purchase and Sale of October 26, 2006 was extended unilaterally by the defendant for 120 days to February 27, 2007, as was permitted by the Addendum. It was then extended again by Amending Agreement to July 27, 2007. The home would have been complete and ready for conveyance by that date if the plaintiffs had come into the Home Décor Office and made their final colour selections when asked to do so in accordance with section 3.01 of Schedule “B”. By failing to so attend, the plaintiffs were in breach of the Agreement of Purchase and Sale, and under section 9.08 of Schedule “B” their deposit was forfeit. The position attempts to sidestep the legislative context and the facts, especially the legal effect of defendant’s extension letter of January 22, 2007.
I hold that the defendant’s extension letter amounted to an anticipatory breach of the Agreement of Purchase and Sale, and particularly the agreed upon closing date of July 27, 2007. Given the legislative context and the facts, this amounted to what Professor Waddams calls a “substantial failure of performance”. [citation omitted] The plaintiffs were entitled to accept the breach and terminate the Agreement, which they did through Mr. Wijesundera’s letter of January 30, 3007. Although the defendant could have repaired the breach with a timely correction reinstating the July 27, 2007 closing date, that opportunity was lost when the plaintiffs accepted the breach, terminated the Agreement, and then acted on that by selling their existing home and buying another, all before the defendant’s responding letter of April 22, 2007[^4] from its counsel. As Professor Waddams notes: “If the promisor says that she will not perform and the promisee acts on that statement, it will usually be unfair to allow the promisor after all to tender a performance that may no longer be wanted.” [citation omitted] It would be unfair in the circumstances of this case, where the plaintiffs have sold their old home and purchased another, to allow the defendant to retain the plaintiffs’ funds. (emphasis added)
[20] The Trial Judge went on to consider the legislative context. At paragraph 55, he held that s.6.04(d) of Schedule B of the Agreement of Purchase and Sale did not permit the vendor, through an Addendum, to revive the permitted maximum extension periods in section 5 of the Addendum through an amending agreement. At paragraph 56 he held as follows:
I hold that nothing in the Addendum permits the revival of the vendor’s unilateral right to extend the Agreement by 120 to 240 days; such a revival would be inconsistent with the letter and purpose of the Addendum and the Ontario New Homes Warranties Plan Act. The parties may agree to extend the closing date to a date beyond 120 days in the first stage under section 5(iii) of the Addendum or beyond 240 days in the second stage. I hold that if the new closing date chosen by the parties is more than 240 days from the closing date in the original Agreement of Purchase and Sale, then the purchaser and the vendor must negotiate the terms of any additional extension beyond the new closing date if one becomes necessary; in other words, the vendor loses the right to unilaterally extend the closing date and the unilateral right cannot be revived. If the parties do not agree on an additional extension beyond the new closing date, then the Agreement terminates automatically and the consequences in section 5 of the Addendum come into play, that is: “the Agreement shall be at an end and all sums paid by the Purchaser shall be returned without deduction”; interest may be payable depending on the circumstances.
[21] Section 9.10 of the Agreement provided that on termination where the purchaser was not in default, the purchaser was entitled to “the return of all money paid as deposits, and to the refund of all money paid for extras or upgrades without deduction or interest” and accordingly, he granted judgment in the full amount sought.
[22] The Trial Judge did not ask for submissions as to costs. At paragraph 67 he held that the plaintiffs were entitled to costs and at paragraph 68, he held as follows:
- As noted above, the counterclaim was abandoned by the defendant at the opening of trial. As a result the third party action brought by the plaintiff/defendant by counterclaim against Mr. Wijesundera must also fall and is therefore dismissed with costs against the defendant/plaintiff by counterclaim, since the defendant abandoned the counterclaim at the opening of trial and it was not unreasonable for the plaintiff/defendant by counterclaim to commence the third party action.
Issues in the Appeal
[23] In the factum, counsel for the Appellant raised the following issues:
(a) Did the Trial Judge decide the case on the basis of the pleaded issues and the evidence?
(b) Does the trial evidence support the Plaintiffs’ claim for the return of the money they had paid?
(c) Did the Plaintiffs default on the Agreement of Purchase and Sale in June of 2007?
(d) Can the Plaintiffs obtain the return of money they paid if they did not lawfully terminate the Agreement of Purchase and Sale?
(e) Should leave to appeal the order as to costs be granted? If so, did the Trial Judge err by awarding the Third Party his costs against the Appellant?
Standard of Review
[24] In Housen v. Nikolaisen[^5], the Supreme Court held that the standard of review on a question of law is correctness. The standard of review for findings of fact is that the findings ought not to be reversed unless it is established that the trial judge made a palpable and overriding error. The standard of review for findings of mixed fact and law is on a spectrum between correctness and palpable and overriding error. The key issue in this appeal is the first one which is a question of law and hence the standard of review is correctness.
Analysis:
A. Did the Trial Judge decide the case on the basis of pleaded issues and the evidence?
[25] The first issue was the most significant. Counsel for the Appellant took the position that, while the Trial Judge did consider the issue of mistake as pleaded, in paragraph 44 of the reasons quoted above, he decided the case on legal grounds that had not been pleaded, namely that the extension letter constituted an anticipatory breach of the Agreement of Purchase and Sale (and particularly the agreed upon closing date of July 27, 2007) and that the Plaintiffs accepted that repudiation as manifested in the letter from Mr. Wijesundera on February 5th and in the sale of their home and purchase of a new home.
[26] Counsel for the Sirisena Respondents conceded that anticipatory breach of contract was not pleaded nor was it the subject of submissions. He agreed with the legal principle that a new trial or a substituted judgment may be obtained where the judgment under appeal was based on issues not pleaded or addressed at trial. However, he argued that the essence of this case was in the documentary evidence and in interpreting those documents and accordingly, the Trial Judge was entitled to apply the law to the facts so long as the proceeding did not result in unfairness to the Appellant. Counsel argued that there was no unfairness.
[27] In the appeal before us the Trial Judge asked if there were any facts in dispute and he queried whether the trial that was about to commence should really be dealt with as a long motion on an agreed statement of fact. Mr. Rotenberg replied that, in his view, the case was “90% legal and documentary” and then there were a couple of small areas of factual difference that might or might not impact on the outcome.
[28] The transcript of the submissions on May 25, 2010 demonstrates that there was a lively exchange on various issues including the interpretation of the Agreement of Purchase and Sale and the Addendum and whether by entering into the amending agreement, the vendor could “reset the clock” and have a new closing date. At page 91 of the transcript of the submissions, the Trial Judge made the following comment in the context of the extension letter:
You know, you come – you know, you might well succeed in this case but it’s going to be over my trembling dead body, because this [is] an outrage, frankly. The whole thing is a dog’s breakfast, it was designed to be a dog’s breakfast, your letter was a dog’s breakfast, and if you win, it’s going to be in spite of that. (emphasis added)
[29] There is no reference in the transcript either by counsel or by the Trial Judge to the legal principle of anticipatory breach of contract. However, it was clear that the Trial Judge was very preoccupied with the legal significance of the extension letter and he was unlikely to find the vendor could rely on it to “reset the clock”.
[30] Although there is no reference to anticipatory breach of contract, counsel for the Appellant did not challenge the applicability of that principle to the facts in this case. The options in the extension letter contemplated termination as the likely outcome. Counsel for the Appellant argued that the letter dated January 30th was a qualified acceptance. It might be considered to be a qualified acceptance of the consequences of the breach but it was an unqualified acceptance of the breach by the vendor. The letter sent February 5th was an unqualified acceptance of the termination of the Agreement. The Trial Judge could not ignore the evidence of the extension letter and the law that necessarily applied.
[31] We agree with counsel for the Sirisena Respondents that the finding of repudiation was a natural consequence of the finding that the Amending Agreement did not have the effect of “restarting the clock” insofar as the provision of the ONHWA Addendum is concerned. In that context, the Appellant had a full opportunity to argue the point at trial.
[32] Based on the legal principles of offer and acceptance, the Sirisena Respondents were consistent in their pleading and their evidence and in their submissions that there was no agreement to extend the time and that there was no legal basis upon which the Appellant could extend the time. We are satisfied that there was evidence on which the Trial Judge could make that finding.
[33] Counsel collectively referred to six decisions in support of their respective positions.[^6] Without reviewing each of them in detail, we conclude that this case is distinguishable from Rodaro where a novel theory was relied on by the trial judge; and from Grass where the theory of negligence was neither advanced nor supported by the evidence; and from A-C-H where no defence was called based on the pleadings; and from Labatt’s where the defence to the application would have been conducted in a very different fashion.
[34] We conclude that this case is analogous to Oshawa Group and Barker in that the Trial Judge did not rely on a novel theory of liability. The issues were the enforceability of a contract, whether the Appellant could extend the closing date, and whether the ostensible extension invalidated the contract. The issues of the impact of the “extension letter” and the impact of the lawyer’s letter in response were squarely before the Trial Judge. In the words of Doherty J.A. in Rodaro “battle had been joined” on the issue of the enforceability of the contract.
[35] In submissions, Mr. Rotenberg was unable to identify any area on which he would have cross-examined had the issue of anticipatory breach of contract been contemplated. The decision turned on the interpretation of a limited number of documents. It did not turn on evidence of any of the witnesses. There were a limited number of communications and they were primarily in writing. We are satisfied that further cross-examination specifically on the issue of anticipatory breach of contract would not have assisted the Appellant at trial.
[36] To respond to the question posed by the Appellant: the Trial Judge did decide the case on the basis of anticipatory breach of contract which cause of action was not pleaded nor argued. However, he did so on the basis of his interpretation of the documents and specifically the extension letter, and on the evidence he heard and on the basis of the correct application of appropriate legal principles. In so doing, no unfairness or prejudice was visited on the Appellant.
[37] We are not persuaded that the Trial Judge erred in finding liability on the basis of anticipatory breach of contract.
B. Does the Trial Evidence support the Plaintiffs’ Claim for the return of the money they had paid?
C. Did the Plaintiffs default on the Agreement of Purchase and Sale in June 2007?
D. Can the Plaintiffs obtain the return of money they paid if they did not lawfully terminate the Agreement of Purchase and Sale?
[38] Counsel for the Appellant conceded that if the appeal was not successful on the issue of repudiation and if we accepted that findings of the Trial Judge, then the appeal could not succeed on any of these three grounds.
[39] We agree with the findings of the Trial Judge. None of these grounds of appeal have merit.
E. Did the Trial Judge err by awarding the Third Party costs against the Appellant?
[40] As the Trial Judge indicated in paragraph 2 of the reasons for decision, the Defendant counterclaimed to recover lost profits but abandoned that claim at trial. Mr. Wijesundera was the lawyer for the plaintiffs. He was not sued by them in the main action but was added as Third Party by the Plaintiffs for contribution and indemnity in respect of the Defendant’s Counterclaim. Mr. Wijesundera defended both the Third Party Claim and the Counterclaim in a way that amounted to support of the Plaintiffs in the main action. As indicated above, without asking for submissions, the Trial Judge ordered the Defendant to pay costs of the Third Party.
[41] In the Notice of Appeal, counsel sought leave to appeal that finding of costs. In submissions, counsel took the position that the Appellant was entitled as of right to appeal the finding because there had been no submissions and no fair hearing on the merits as to who should pay the costs of the Third Party, and, based on the results at trial, there was no legal basis for the award. He argued that it was an error in principle for an unsuccessful defendant to be responsible to the Third Party when no negligence was found and when the Third Party knew at an early point that he had no real exposure.
[42] As for the standard of review, counsel agree that a Trial Judge has broad discretion in making an award of costs which, of course, must be exercised judicially.[^7] It would have been prudent for the Trial Judge to have given counsel an opportunity to make written submissions and for that reason we grant leave to appeal.
[43] Pursuant to s. 134(1) of the Courts of Justice Act,[^8] this court has the jurisdiction to make any order or decision that ought to have been made that this court considers just. The successful party is entitled to costs. The Third Party was successful. As between the successful plaintiffs and the unsuccessful Defendants, it is reasonable to impose the obligation on the unsuccessful Defendants to pay the costs of the Third Party who was brought into the proceeding as a result of the counterclaim. We are satisfied that the order made by the Trial Judge was just.
ORDER TO GO AS FOLLOWS:
[44] The appeal is dismissed.
[45] On consent, the Appellant shall pay costs of the Sirisena Respondents fixed in the amount of $7500 and shall pay costs of the Third Party Respondent fixed in the amount of $5000.
Matlow J.
Kiteley J.
Lederer J.
DATE: February 20, 2013
[^1]: 2010 ONSC 2996
[^2]: In para 7(b) of the factum filed in this appeal, the Appellant conceded that this issue was decided against it for reasons that are not appealable.
[^3]: R.S.O. 1990, c. O.31
[^4]: As indicated in paragraph 7 above, this letter was dated April 16, 2007 found at tab 34 of the Appeal Book and Compendium.
[^5]: 2002 SCC 33
[^6]: Rodaro et al. v. Royal Bank of Canada 2002 41834 (ON CA), 59 O.R. (3d) 74
Grass v. Women’s College Hospital 2005 11387 (ON CA), 75 OR (3d) 85
A-C-H International Inc. v. Royal Bank of Canada 2005 17769 (ON CA), 254 DLR (4th) 327 (OCA)
Oshawa Group Limited v. Mason Homes Limited 2005 36443 (ON CA) )OCA)
Barker v. Montfort Hospital 2007 ONCA 282, 278 DLR (4th) 215
Labatt Brewing Co. v. NHL Enterprises Canada [2011] ONCA 511
[^7]: Credit Foncier Franco-Can. v. Bennett (1964) 1964 449 (BC CA), 47 W.W.R. 369 B.C.C.A.
[^8]: R.S.O. 1990, c. 43, s. 134(5)