Court of Appeal for Ontario

Date: November 26, 2019 Docket: C66785 Judges: van Rensburg, Paciocco and Thorburn JJ.A.

Parties

Between

Richard Kim Perkins and Sylvia Perkins Plaintiffs/Defendants by Counterclaim (Respondents)

and

Shahla Sheikhtavi Defendant/Plaintiff by Counterclaim (Appellant)

and

Karim Samadi and Homelife Victory Team Realty Inc. Third Parties

Counsel

• Brian Sherman, for the appellant
• Dylan O'Leary, for the respondents
• Allan D. Powell, for the third parties

Heard: November 18, 2019

On appeal from: The judgment of Justice Philip W. Sutherland, of the Superior Court of Justice, dated March 11, 2019, with reasons reported at 2019 ONSC 1595.

Reasons for Decision

Overview

[1] This is an appeal of a motion granting summary judgment and awarding damages resulting from the failure to close the purchase of a home.

[2] The appellant, Shahla Sheikhtavi, claims the agreement of purchase and sale was frustrated. In the alternative, she claims there was an implied condition in her offer that the agreement was conditional on her selling her own home and obtaining mortgage financing. Lastly, she claims that the motion judge rejected uncontested evidence.

Background Facts

[3] The respondents listed their home for sale in March 2017. The appellant made an offer to purchase the home on April 3, 2017. There were thirteen offers to purchase the home. The appellant's offer was the second highest.

[4] The appellant's offer was accepted by the vendor.

[5] The terms of the offer included a purchase price of $1,871,000 and a deposit of $80,000 to be held in trust by the realtor until the closing scheduled to take place on July 10, 2017. The offer was unconditional.

[6] After the unconditional offer was accepted but before closing, the government of Ontario made a policy announcement. The evidence of two real estate agents, who swore affidavits at the request of the appellant, was that within days of this announcement, real estate prices in the area dropped 20 to 30 per cent.

[7] On the day of closing, the appellant advised that she could not close, as she had been unable to sell her own home and could not obtain sufficient mortgage financing.

[8] As a result of the failure to close, the respondent put the property back on the market and it sold for $1,251,888. This was $619,112 less than the appellant had agreed to pay.

[9] The respondent commenced legal proceedings against the appellant seeking:

a) $619,112, being the difference between the amount the appellant had offered and the amount the property later sold for; and

b) carrying costs of the property between July 10, 2017 and the sale of the property.

[10] The appellant opposed the motion for summary judgment claiming that the government announcement frustrated the agreement. She also brought her own motion seeking return of the deposit.

The Decision of the Motion Judge

[11] The motion judge held that:

I am not convinced that the doctrine of frustration applies in these circumstances.

Though I can agree that there was a "supervening event", that is the announcement of the policy by the provincial government at the time, I do not find that this event was "a radical change in obligation" to force the defendant "to do something radically different from what the parties agreed."

Any term to relieve the defendant from her obligation concerning financing could have been resolved by including a term concerning financing.

[T]he defendant knowingly did not include a term for financing. The reason for not including such term is clear from the evidence on this motion: the defendant wanted to have her offer to purchase accepted by the plaintiffs. She anticipated that an offer to purchase with the price she offered with no conditions would more likely to be accepted.

The defendant got what she wanted, the property at the price she was offering to purchase. She did so knowing that she took a risk; that she may not be able to obtain financing by not being able to sell her existing home. This was a risk knowingly taken by the defendant.

[12] He therefore ordered the appellant to pay $619,112 and carrying costs in the amount of $4,621.05.

Analysis and Conclusion

[13] We find no error in the motion judge's disposition of the motions.

[14] Though there was a supervening event (the announcement of a new government policy), the supervening event did not constitute frustration of the agreement, as the announcement was not such that "performance of the contract becomes a 'thing radically different from that which was undertaken by the contract'": Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 53.

[15] Frustration applies to contracts including real estate transactions, when a supervening event alters the nature of the appellant's obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agree to under their contract: Naylor, at para. 55.

[16] A contract is not frustrated if the supervening event was contemplated by the parties at the time of contracting and was provided for or deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 9 O.R. (2d) 617 (C.A.), at p. 626.

[17] A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Bang v. Sebastian, 2018 ONSC 6226, at para. 30; Gerstel v. Kelman, 2015 ONSC 978, 40 B.L.R. (5th) 314.

[18] In this case, the appellant deliberately chose not to include a condition that she had to be able to sell her home and obtain mortgage financing before closing as a term of her offer to purchase.

[19] She would reasonably have known there was a risk her home would not sell at the price she sought but made an unconditional offer to purchase the respondents' home because she wanted her offer to be accepted (although she was not the highest bidder).

[20] The appellant was specifically told by her real estate agent that unless she put in an unconditional offer, her offer would not be accepted.

[21] It was reasonable for the motion judge to conclude that the test for frustration was not met, as the policy announcement relied on by the appellant did not "force her to do something radically different from what the parties agreed." The appellant's contract was not frustrated; it was breached by the appellant.

[22] Secondly, the agreement contains a clause that the written agreement is the entire agreement between the parties. We see no error in the motion judge's conclusion that this precluded any implied condition or term as asserted by the appellant.

[23] Lastly, the motion judge did not reject uncontested evidence. He accepted that there was an unforeseen event. While his reasons do not specifically mention the 20 to 30 per cent decrease in home prices cited by the real estate agents who filed affidavits in support of the appellant's position, he accepted that there was a supervening event but found it was not a "radical change" such that the appellant should be relieved of her obligations under the contract. There was no rejection of uncontested evidence.

[24] For these reasons, the appeal is dismissed. Partial indemnity costs to the respondents in the amount of $15,019.62 as per the Bill of Costs submitted.

K. van Rensburg J.A. David M. Paciocco J.A. J.A. Thorburn J.A.