COURT FILE NO.: CV-14-516357 DATE: 20160526 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

James Michael Harris and Leandra Kathleen Lackie Plaintiffs – and – Thomas Vaughan Garcia and Laverne Adele Garcia Defendants

Counsel: David M. Goodman, for the Plaintiffs Evan L. Tingley, for the Defendant Laverne Adele Garcia Osborne G. Barnwell, for the Defendant, Thomas Vaughan Garcia

HEARD: March 7, 2016

M.A. Sanderson J.

REASONS FOR DECISION

INTRODUCTION

[1] The Plaintiffs/Vendors James Harris and Leandra Lackie (hereinafter the “Harrises”) have moved for summary judgment against the Defendants/Purchasers in the amount of $318,308.23.

The Test for Summary Judgment

[2] On a motion for summary judgment under Rule 20, the responding party is required to "put his best foot forward."

[3] The Court must decide, on the basis of the evidence before it, whether, without a trial, it can fairly make the necessary findings of fact, apply the law to the facts as found, and justly adjudicate the case on the merits.

BACKGROUND

[4] On December 29, 2013, the Harrises, as vendors, entered into an Agreement of Purchase and Sale with the Defendants, the Garcias, as purchasers, for the sale of 80 North Street, Brooklin, Ontario (“80 North") for $1,385,000.00.

[5] It is common ground that on April 22, 2012, nearly two years before December 29, 2013, the Plaintiffs had signed a contract with a builder for the construction of a custom-built house (the “Woodington Agreement.”)

[6] April 30, 2014 was the scheduled closing date on 80 North and on the Woodington house.

[7] On April 29, 2014, the day before the scheduled closings, the Garcias requested an extension of the 80 North closing to May 7, 2014 “to secure financing.” Later on that same day they requested a further extension to June 30, 2014.

[8] The Harrises did not grant either request.

[9] On the closing date of April 30, 2014, the Harris' solicitor tendered on the Garcias' solicitor and on the Garcias personally.

[10] When the sale of 80 North did not close, the Harrises had insufficient funds to close the Woodington purchase. They relisted 80 North for sale. Their realtor showed it more than 20 times. The one offer they received was not high enough to allow them to complete the Woodington purchase.

[11] Although the Harrises secured extensions of the Woodington purchase from time to time, on June 9, 2014, the Woodington vendor terminated the Woodington Agreement, retaining the deposits of $310,000.00 that the Harrises had paid.

[12] As a result, the Harrises claim $310,000.00 from the Garcias along with other costs of $8,308.23.

Defences of the Vendors

[13] The Garcias were each separately represented. When I refer to submissions of counsel for the Garcias, I have referred to submissions by either or both of their counsel.

[14] Counsel for the Garcias submitted that the Harrises’ motion for summary judgment should be dismissed on five bases:

Defence #1: The Agreement of Purchase and Sale is Unenforceable

[15] Counsel for the Garcias submitted that the Harrises did not comply with the terms of the Agreement of Purchase and Sale dated December 29, 2013. They never gave notice in writing of the fulfillment of the [home inspection] condition as required by that Agreement. The Harrises never properly waived the [home inspection] condition.

[16] The Agreement of Purchase and Sale contained the following:

This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer's own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer's sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto, not later than 6:00p.m. on January 13, 2014 that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

[17] Counsel for the Garcias relied upon two other provisions:

(a) Section 14 of the Agreement provided as follows:

TIME LIMITS: Time shall be of the essence hereof provided that the time for doing or completion of any matter provided for herein may be extended or abridged by an agreement in writing signed by Vendor and purchaser or their respective lawyers who may be specifically authorized in that regard.

(b) Section 17 of the Agreement provided as follows:

AGREEMENT IN WRITING: If there is conflict between any provision written or typed in this Agreement (including any Schedule attached hereto) and any provision in the printed portion hereof, the written or typed provision shall supersede the printed provision to the extent of such conflict. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Purchaser and Vendor. There is no representation, warranty, collateral agreement or condition which affects this Agreement other than as expressed herein. This Agreement shall be read with all changes of gender or number required by the context.

[18] Counsel for the Harrises submitted that the Garcias waived the home inspection condition. He relied upon the following provision in the Agreement of Purchase and Sale: "Purchaser agrees to submit $25,000 in cash or negotiable cheque payable to the Sellers lawyer upon waiving all conditions..."

[19] He referred to an email dated January 3, 2014 that Mrs. Garcia sent to the Harrises after they had agreed to a home inspection: “We have accepted all your terms other than the inspection (that would take place tomorrow afternoon) and the deposit amount will likely be paid on Monday.”

[20] It is uncontested that the home inspection did occur on January 4, 2014.

[21] On January 7, 2014, Mrs. Garcia emailed the Vendor/Plaintiff James Harris: “Mark [Woitzik, solicitor for the Purchasers] has told me to go ahead and send the deposit to Peter [Zoldhelyi, solicitors for the Vendors]…I think after that, its’ [sic] closing”. The $25,000 deposit was delivered.

[22] Counsel for the Plaintiffs/Harrises submitted that the Garcias waived the inspection condition after the home inspection was conducted, by delivering the deposit of $25,000.

[23] After the $25,000 deposit was forwarded to the Plaintiffs, the Harrises and the Garcias moved forward to the closing. Letters of requisition were sent and answered.

Law Re: Enforceability of Agreement of Purchase and Sale

[24] In Technicore Underground Inc. v. Toronto, 2012 ONCA 597, Gillese JA writing for the Ontario Court of Appeal, summarized the elements of waiver as set out by the Supreme Court of Canada in Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 SCR 490:

Waiver occurs when one party to a contract…takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party. It will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to rely on it. The intention to relinquish the right must be communicated…

[25] Counsel for the Plaintiffs submitted that the Garcias’ waiver of the condition re home inspection was clear, unequivocal and in writing and that they are estopped from denying otherwise.

Defence #2: The Loss of the Plaintiffs Was Unforeseeable

[26] Counsel for Mrs. Garcia submitted that the loss now being asserted by the Harrises was unforeseeable. She deposed that at the time she entered into the Agreement of Purchase and Sale, she did not know that the Harrises would need the proceeds from the sale of 80 North in order to close the Woodington purchase.

[27] Counsel for the Garcias submitted that there is no evidence before this Court upon which it could properly conclude that the Garcias knew that the Harrises needed the sale proceeds from 80 North to close their Woodington purchase.

[28] Counsel for the Garcias further submitted that when the Garcias entered into the contract to purchase 80 North, they were unaware of the amounts of the deposits that the Harrises had paid in respect of the Woodington house. They did not know the Harrises would be required to forfeit deposits or their amount if the Garcias were unable to close on 80 North.

[29] Counsel for the Garcias submitted that the Defendants could not be reasonably expected to have anticipated the magnitude of the losses now being claimed if they failed to complete the purchase of 80 North, or that damages of $318,000.00 would be claimed against them.

[30] Counsel for the Plaintiffs submitted that there was ample evidence that on December 29, 2013 when the Agreement of Purchase and Sale was entered into, the Garcias knew that the Vendors had already purchased the Woodington home to be built.

[31] Indeed, on November 9, 2013, the Garcias had toured the partially constructed Woodington home. They were therefore aware that many upgrades were being included. Mrs. Garcia wrote to the Harrises on January 7, 2014 mentioning those extras.

[32] Mr. Harris deposed that the purchasers knew that the Harrises had paid a large amount of money to the builder by way of deposits toward the purchase of Woodington, a custom-built home.

The Law on Foreseeability of the Loss

[33] In Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 SCR 3, 2006 SCC 30, the Supreme Court of Canada wrote at paragraph 29:

29. In Hadley v. Baxendale, the court explained the principle of reasonable expectation as follows:

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. [Emphasis added by SCC.]

[34] Counsel for the Garcias relied on the decision of the Ontario Court, General Division in Godin v Jenovac [1993] O.J. No. 2548. In that case, vendors had signed an Agreement of Purchase and Sale of another property prior to agreeing to sell their home to the defaulting buyers. The Court wrote:

[I]n the case before me, the original vendors, the Jenovacs, had entered into their Agreement of Purchase and Sale before agreeing to sell the Property to the Godins. Logically, it is reasonable to presume that the Town-Wood purchase was not in the reasonable contemplation of the parties. The question is whether the evidence taken as a whole displaces that presumption of logic.

Clearly, the Jenovacs did not contract to purchase another property on the strength of the sale to the Godins, because the deal was already made before the Godins came on the scene. Further, although the Godins were made aware that the Jenovacs had agreed to purchase a new home, the evidence does not suggest that they knew or ought to have known that the Jenovacs needed the money from the sale of the Property in order to close the Town-Wood deal...Accordingly, I conclude that it was not within the reasonable contemplation of the parties that the Jenovacs would need the funds from the sale of the Property in order to close the Town- Wood deal.

[35] Counsel for the Harrises relied on the reasoning of the Ontario Court of Appeal in Kasekas v. Tessler, 1989 CarswellOnt 572. In that case, when the purchasers failed to close, the vendors' purchase of another house could not be completed. The plaintiffs/vendors were successful in an action for breach of contract against the defendants/purchasers.

[36] In dismissing the appeal, the Court wrote that the trial judge had properly determined that damages from the aborted second purchase should fall upon the purchasers as they knew "or certainly reasonably ought to have known" that the vendors intended to buy a new home with the purchase funds derived from the sale.

[37] The Court quoted Cuttell v. Bentz (1986), 70 B.C.L.R. 85 (at paragraph 56) as follows:

This claim is relatively straightforward and the issue is essentially one of causation. It turns on the answers to three questions. First, could it reasonably have been anticipated that vendors in the position of the Cuttells would, on the strength of an unconditional contract to purchase their property for cash, commit themselves to purchase of another property? I have no difficulty answering that question in the affirmative. Secondly, was it reasonably foreseeable that vendors in their position might rely on the proceeds of sale to meet their contractual obligations on another house and, if deprived of those moneys, be driven to default on their contract of purchase? That question too requires an affirmative answer. The cost of carrying two homes is beyond the means of many, if not most, people. Thirdly, could it reasonably have been foreseen that vendors in the Cuttells' position might not be able to find another purchaser for their home in time to permit them to complete their purchase of the other property, with consequent financial loss. That question ought also to be answered affirmatively. Liability results for losses incurred on the Richmond transaction and, as previously noted, the figures in Ex. 56 appear not to be in dispute.”

[38] Counsel for the Harrises also cited Froude v. Nash, Tolmie & Johnston, 1994 Carswell Ont 2836 at paragraph 21, as follows:

After considering the case authority, I am of the view that a trial judge in the resolution of the issue of foreseeability of damages is to apply appropriate public policy based on the facts of the case, ordinary human expectations, as generally agreed by reasonable persons and (saying the same thing), on common sense. I do not find a fixed policy or rule that states all secondary transactions must be excluded from compensation. In my view, each case must be decided on its own facts, consistent with the control discipline of stare decisis.

Defence #3: The Plaintiffs Acted in Bad Faith

[39] Counsel for Mr. Garcia submitted that this Court should reject the claim of the Harrises because they acted in bad faith in their dealings with the Garcias. They kept them “in the dark” as to their true intentions.

[40] In Bhasin v. Hrynew, 2014 SCC 71, Cromwell J., writing for a unanimous Supreme Court of Canada, recognized as a general doctrine of contract law, a duty of good faith in the performance of contracts that cannot be excluded by an entire agreement clause.

[41] Counsel for the Garcias cited the Harrises' alleged refusal to agree to an extension of the closing date on the Woodington property unless the Garcias paid $106,000.

Defence #4: The Plaintiffs Failed to Adequately Mitigate Their Damages

[42] Counsel for the Garcias submitted that the Harrises have failed to adequately mitigate their damages.

[43] They submitted that the Harrises unreasonably abandoned their efforts to sell 80 North and in turn to complete the Woodington purchase.

[44] They unreasonably rejected an offer they received for 80 North. They should have accepted that offer.

[45] They should have mitigated by seeking bridge financing so that they could close the purchase of the Woodington property even before they received funds from the closing of 80 North.

[46] They should have sought the consent of the Woodington builder to an assignment of the Agreement of Purchase and Sale with the Harrises.

[47] The Harrises should have commenced legal proceedings against the Woodington builder, seeking, among other things, relief from forfeiture.

[48] Counsel for the Harrises submitted that in all the circumstances, they made reasonable attempts to mitigate.

Defence #5: Even if the Transaction on 80 North had Closed on April 30, 2014, the Harrises would still have had Insufficient Funds to Purchase the Woodington Property

[49] Counsel for the Garcias submitted that any breach of the Agreement of Purchase and Sale did not cause the Harrises' inability to close the Woodington purchase. Even if the Garcias had closed the purchase and sale of 80 North as contracted, the Harrises would still not have had sufficient funds to complete the Woodington purchase.

[50] Counsel for Mrs. Garcia submitted that the Harrises' mortgage financing on the purchase of the Woodington property had been made conditional upon the payment of three mortgages, unpaid realty taxes and other debts from the net sale proceeds. Had the Garcias completed the purchase of 80 North, the Harrises would have netted $133,992.92, calculated as follows: sale price of $1,385,000.00, less first mortgage to FirstLine of $912,085.72, less second mortgage to TD Canada Trust of $109,124.77, less third mortgage to Prime Rates of $51,861.27, less property tax arrears of $24,979.98, less first CIBC line of credit of $55,000.00, less second CIBC line of credit of $50,000.00, less first MBNA line of credit of $36,000.00, less second MBNA line of credit of $3,147.00, less legal costs of sale of $2,283.14, less legal costs of purchase of $4,525.20, less moving costs of $2,000.00.

[51] The balance due on closing Woodington was $1,356,055.36. The land transfer tax on the purchase was $26,182.75. The expected mortgage advance was $1,240,865.00. Therefore, $133,992.92 would have been insufficient to close the purchase of the Woodington property. There would have been a shortfall of $7,380.19.

[52] Counsel for the Harrises submitted that if 80 North had closed, the Harrises could have closed the Woodington purchase. They could have deferred payment of the legal costs of the sale of $2,283.14, the legal costs of the purchase of $4,525.20 and the moving costs of $2,000.00. The Harrises would not have been required to pay those costs until after the closing.

CONCLUSIONS

Defence #1: The Garcias’ Alleged Failure to Waive the Conditions in the Agreement of Purchase and Sale

[53] I reject the submissions of counsel for the Garcias that the Garcias failed to waive the condition re home inspection in compliance with the Agreement of Purchase and Sale. I find the Garcias waived the inspection condition. I find that the Garcias communicated in writing an "unequivocal and conscious decision to abandon" any rights in connection with home inspection.

[54] The Agreement clearly provided that upon waiving all conditions, the Garcias would pay the $25,000. I find the Garcias confirmed their waiver in writing [by email]. They paid the $25,000 after they waived the inspection condition.

[55] Defence #1 must fail.

Defence #2: Foreseeability of the Damages

[56] In my view, the Garcias knew or ought to have known on the information available to them at the time they signed the Agreement of Purchase and Sale on 80 North, that if they did not close their purchase of 80 North, the Harrises would not be able to close the Woodington property purchase.

[57] What is less clear is whether they appreciated at the time of the Agreement of Purchase and Sale that deposits totaling $310,000 or deposits of that nature had been paid that would be forfeited in the event the Harrises were unable to close the Woodington purchase.

[58] Mr. Harris deposed that the purchasers knew that the Harrises had paid a large amount of money to the builder by way of deposits toward the purchase of Woodington, a custom-built home.

[59] Mr. Garcia’s uncontradicted evidence was that he only found out about the size of the deposits after he signed the Agreement of Purchase and Sale. He swore "it was after the Purchase Agreement that I discovered that the deposit on the new house was significant."

[60] Counsel for Mrs. Garcia submitted that there was no evidence that at the time she signed the Agreement of Purchase and Sale, she knew about the quantum of the deposits the Harrises had paid in respect of the Woodington property.

[61] On the evidence on this motion, this Court cannot resolve the conflict whether forfeiture of deposits of $310,000 was reasonably foreseeable if the purchase of 80 North did not close.

[62] The resolution of this issue requires a trial.

Defence #3: The Harrises Acted in Bad Faith

[63] There is insufficient evidence to support a finding that the Harrises acted in bad faith.

[64] In my view, no trial is necessary on that issue.

Defence #4: The Harrises Failed to Mitigate Their Damages

[65] The Harrises were required only to make reasonable efforts to mitigate. What is reasonable in the circumstances of each individual case is a question of fact, not of law. See: Hobbs v. Johnson (1994), 116 Sask. R. 209; Pfob v. Bakalik (2004), 2004 Carswell Alta 1194 (Alta. C.A.) at [17].

[66] On the evidence here, I am of the view that no trial is necessary on the issue of mitigation.

[67] I do not agree that the Harrises failed to adequately mitigate their damages.

[68] With respect to the Garcias' submissions that the Harrises failed to mitigate by accepting the one offer received, no trial is necessary for me to determine that the Harrises had three mortgages on 80 North or to accept their evidence that to close, they needed the net proceeds of sale of 80 North plus the new mortgage funds that they had negotiated for the purchase of the Woodington property.

[69] I find it was reasonable for the Harrises to relist 80 North and attempt to resell it, but to refuse to accept the one offer they received because it would have been insufficient to allow them to complete the purchase of the Woodington property.

[70] To require them to have accepted an offer that would have necessitated that they move from 80 North Street at a time when they would not have had sufficient funds to close Woodington and when they would not have been able to move into the Woodington property, would be unreasonable.

[71] Similarly, it would not be reasonable to require them to obtain bridge financing to close the Woodington purchase. I have accepted the uncontradicted evidence of the Harrises that they did make inquiries of a mortgage broker, but that they were already at the upper limit of what they could borrow.

[72] Where a defendant's actions have caused the plaintiff's impecuniosity, a plaintiff should not be penalized for her inability to mitigate: Marriott v. Carson's Construction Ltd. (1983), 146 D.L.R. (3d) 126, at [44].

[73] In my view no trial is necessary on this issue.

Defence #5: The Harrises Would Not Have Had Sufficient Funds to Close Woodington even if 80 North had Closed on April 30, 2014

[74] On the evidence, I have concluded that if the Garcias had closed the purchase of 80 North as they contracted to do, the Harrises would have been able to close the Woodington purchase.

[75] In my view, no trial is necessary on this issue.

Has The Test For Summary Judgment Been Met?

[76] The test for summary judgment has been met in respect of all of the Garcias' defences except Defence #2.

[77] A trial is not required with respect to Defences 1, 3, 4 and 5.

[78] With respect to Defence #2, a trial is necessary to determine what, as of December 29, 2013, the Garcias knew about the deposits that the Harrises had made on the Woodington home and if they knew that those deposits would be forfeited if the sale of 80 North did not close.

[79] There is no dispute that the Harrises forfeited deposits of $310,000.00.

[80] However, a trial is necessary to resolve the factual issues and to apply the applicable law.

DISPOSITION

[81] With respect to Defence #2, a trial of an issue is required, limited to (1) determining what, at the time they signed the Agreement of Purchase and Sale, the Garcias knew about deposits the Harrises had made or would be required to make before closing of the Woodington purchase and what forfeiture of those deposits if the sale of 80 North did not close; and (2) applying the law to those facts.

[82] A short trial of this issue may be scheduled before me as soon as the parties have had discovery on it. Before the trial of the issue, a short pre-trial should be held.

[83] The matter of costs of the summary judgment motion will be determined after the trial of the issue.

M.A. Sanderson J.

Released: May 26, 2016