DATE: 20060209
DOCKET: C42751

COURT OF APPEAL FOR ONTARIO

RE: MARGARET JEAN Malpass (Plaintiff/Respondent) –and- JAMES Morrison and EILA MORRISON (Defendants/Appellants) –and- DAVID NELSON (Third Party/Appellant)

BEFORE: Armstrong, Lang and MacFarland JJ.A.

COUNSEL:
Aaron Postelnik for the third party/appellant
Eli S. Lederman and Orlando M. Rosa for the respondents

HEARD: February 1, 2006

On appeal from the judgment of Justice Peter A. Grossi dated November 9, 2004 made at Sault Ste. Marie, Ontario.

ENDORSEMENT

[1] This is an appeal from a trial judgment that awarded the respondents $57,122.91 in damages and $63,126.28 in costs.

[2] The main action arose from an aborted real estate transaction. Shortly before trial, the vendor and purchaser settled that action for $57,122.91. The purchaser proceeded to trial against the real estate agent on the third party claim and was successful in obtaining an award in that amount.

[3] The appellant argues that the trial judge erred in the third party action in his findings of breach of duty, breach of fiduciary duty, as well as on the issues of causation and mitigation. The appellant also challenges the trial judge’s award of costs.

[4] In our view, the evidence at trial and the trial judge’s factual findings supported the trial judge’s conclusion of breach of duty, breach of fiduciary duty and causation. The appellant has not persuaded us of any reviewable error on the part of the trial judge on these issues.

[5] The appellant argues that the respondents were required to mitigate their damages by closing the transaction and accepting an offer made by the vendor on the day of closing. In that offer, the vendor proposed that she pay the “reasonable” costs of the necessary construction that were incurred within ninety days of closing. The vendor also offered an abatement. The offer did not propose a quantum for the abatement nor a means of arriving at an appropriate quantum. We do not accept this ground of appeal for the following reason.

[6] The evidence disclosed that, on the day of closing, the respondents and the vendor did not know either the cost or the extent of the construction, including potential structural changes, that may have been necessary to bring the house into by-law compliance. Indeed even at trial, no evidence was called on these issues. Moreover, the respondents had been very specific in their clear instructions to the agent that they required a fourth bedroom, which would have necessitated the construction. The respondents had also been very specific that, given their age and poor health, they required a home that was in move-in condition. In those circumstances, the trial judge was entitled to conclude that the respondents were not obliged to accept the offer and to close the transaction.

[7] We are of the view, however, that the trial judge erred in his award of costs. The trial judge awarded a total of $63,126.28 costs. That amount included both costs for the three-day trial of the third party action and costs for the main action incurred by the respondents in defending that claim.

[8] In our view, the respondents’ costs in defending the main action were more properly characterized as part of their damages. In settling the main action, the respondents paid the vendor damages that included a costs component of $13,333, which represented the vendor’s costs of pursuing the respondents. This was a reasonable measure of the respondents’ costs in defending that claim. Accordingly, we would vary the damages award to add the costs of $13,333 to the damages award. This brings the total damages to $70,455.91.

[9] Deducting the $13,333 from the costs award, costs for the three-day trial of the third party action were awarded at $49,793.28. We are of the view that the trial judge erred in principle in awarding these costs, which exceeded what could be considered fair and reasonable taking into account the reasonable expectations of the parties. After considering the bill of costs, we vary the third party trial costs to $20,000, inclusive of disbursements and GST.

[10] In the result, the judgment below is varied to award the respondents damages of $70,455.91 and total costs of $20,000.

[11] The respondents have been successful in upholding the negligence finding and damages award. They have not been successful on the costs issue. Balancing this mixed result with the bill of costs presented, we award costs of the appeal to the respondents fixed in the amount of $2,500, inclusive of disbursements and GST.