Court of Appeal for Ontario

Date: March 8, 2017 Docket: C61531

Judges: Sharpe, Lauwers and Hourigan, JJ.A.

Between

Chang Pu Yan and Qiu Lin Yan Plaintiffs (Respondents/Appellants by way of Cross-Appeal)

and

Ravichandran Nadarajah, Kalaiyarasi Nanthakumar, and Red Carpet Realty Ltd. also known as Red Carpet Royal Realty Ltd., Brokerage Defendants (Appellants/Respondents by Cross-Appeal)

Counsel

Ronald Lachmansingh and Ioulia Vinogradova, for the appellants/respondents by way of cross-appeal

James H. Chow, for the respondents/appellants by way of cross-appeal

Heard: March 1, 2017

On appeal from: The judgment of The Honourable Justice Mary E. Vallee of the Ontario Superior Court of Justice, dated December 4, 2015.

Endorsement

[1] The appellants were the vendors and the respondents were the purchasers in a residential real estate transaction that the appellants refused to close. The respondents sued for specific performance and eventually brought a successful motion for summary judgment.

[2] The appellants submit that the motion judge erred in granting summary judgment and that the case should have proceeded to trial. In the alternative, they argue that the appropriate remedy is damages and not specific performance.

[3] The respondents cross-appeal, submitting that the motion judge erred in not awarding them damages for various expenses flowing from the aborted transaction.

[4] For the reasons that follow, we dismiss the appeal and cross-appeal.

A. Background

[5] The appellants are the registered owners of 39 Dairis Crescent in Markham, Ontario (the "residence"). They live at the residence with their spouses, who are not registered on title.

[6] The respondents allege that they entered into an agreement of purchase and sale for the residence dated December 3, 2010, with a purchase price of $470,000 and a closing date of December 27, 2011. According to the respondents, following a home inspection, the parties renegotiated the purchase price, reducing it to $468,000 and extended the closing date to January 5, 2011.

[7] It is common ground that the appellants refused to close the transaction on the specified closing date or at any time thereafter. The respondents sued for specific performance and obtained a Certificate of Pending Litigation ("CPL").

[8] The appellants did not file a statement of defence within the requisite time and were noted in default. On a motion before Edwards J. seeking leave to file a statement of defence and discharge the CPL, the appellants filed nearly identical affidavits, dated July 24, 2011. In those affidavits, they both denied that they ever intended to sell the residence. They swore that they never met with a real estate agent or signed any agreement with a real estate agent. Further, they testified that no one came to see the residence with the intention of purchasing it and that there was never a for sale sign on the property. According to the appellants, someone attempted to sell their house without their knowledge.

[9] The evidence of the appellants' real estate agent contradicted their testimony in the July 24, 2011 affidavits. He swore an affidavit stating that he met with the respondents, obtained their identification and witnessed their execution of a listing agreement for the residence. He further testified that he witnessed the respondents sign and initial the agreement of purchase and sale and the revised agreement of purchase and sale.

[10] Prior to the motion for summary judgment, the appellants were cross-examined on various affidavits they filed in the action. During his cross-examination, Mr. Nadarajah initially maintained his position from his July 24, 2011 affidavit, but he eventually conceded that: he had signed the listing agreement; a for-sale sign was on the property for a week in December 2010; and he knew that the residence was on the market in December 2010. In her cross-examination, Ms. Nanthakumar denied that there was ever a for-sale sign on the property but admitted that she signed the listing agreement. Both appellants maintained that they never signed the agreement of purchase and sale.

[11] The motion judge found that the appellants were not credible and concluded that they executed the agreement of purchase and sale, which they subsequently breached. Further, she held that the respondents were entitled to specific performance as a remedy for the appellants' breach.

B. Analysis

(1) Summary Judgment Analysis

[12] The appellants submit that the motion judge erred in her summary judgment analysis by using the new fact-finding powers under r. 20 of the Rules of Civil Procedure, R.R.O. Reg. 194, to conclude that they were not credible. They argue that this finding coloured all of her subsequent findings and resulted in her wrongly concluding that summary judgment was appropriate.

[13] We would not give effect to this submission. The trial judge found that she was able to determine the issues in this action on the material before her without resort to the fact-finding powers under r. 20. This case turned on credibility issues, and the motion judge found that the appellants were not credible. There was ample evidence to support this finding. Indeed, such a finding was virtually inescapable, given that the appellants had offered inconsistent accounts regarding their participation in the transaction and their evidence was inconsistent with that of their own real estate agent. We see no error in the motion judge's summary judgment analysis.

(2) July 24, 2011 Affidavits

[14] The appellants argued on the motion and the appeal that the respondents' counsel violated the rule in Browne v. Dunn (1893), 6 R. 67 (H.L.). They submit that the breach of the rule occurred during their cross-examination when the respondents' counsel failed to tender their evidence in their July 24, 2011 affidavits, ask them whether they made the statements and give them an opportunity to explain them. The appellants submit that as a consequence of this breach the respondents cannot rely on the evidence in the affidavits.

[15] We agree with the motion judge that the appellants seem to have misunderstood the rule in Browne v. Dunn. The application of that rule is generally restricted to situations where a party cross-examining a witness called by the opposite side is planning on adducing contradictory evidence to impeach the witness's credibility. The cross-examiner must "put" the contradictory evidence to the witness to allow the witness to provide an explanation for it: R. v. Quansah, 2015 ONCA 237, 125 O.R. (3d) 81, at paras. 75-76, leave to appeal to S.C.C. refused, [2016] S.C.C.A. No. 203. The rule reflects fairness to the witness whose credibility is attacked and to the party whose witness is impeached. It "prevents the 'ambush' of a witness by not giving him an opportunity to state his position with respect to later evidence which contradicts him on an essential matter": R. v. Verney (1993), 87 C.C.C. (3d) 363 (Ont. C.A.), at p. 376, cited in R. v. M.B., 2009 ONCA 524, 68 C.R. (6th) 55, at para. 73.

[16] In the present case, there was no element of the kind of unfairness or surprise that the rule in Browne v. Dunn protects against. The contradictory evidence used to impeach the appellants came in the form of the appellants' own affidavits. Moreover, at the beginning of the cross-examination the appellants were asked whether there was anything in their affidavits that was incorrect or needed to be changed. They declined to make any changes or corrections. In the circumstances, there was no violation of the rule in Browne v. Dunn.

(3) Service of Spouses

[17] The appellants submit that the motion judge should not have proceeded with the motion for summary judgment because the appellants' spouses had not been served. The appellants were unable to provide any authority in support of their position that service of the spouses was required.

[18] The motion judge found that the spouses agreed to the sale of the residence and that it was highly likely that they were aware of this proceeding and that the respondents were seeking a transfer of the residence. Accordingly, she found that service of the motion record was unnecessary.

[19] We see no error in this analysis. There was ample evidence to suggest that both spouses agreed to the sale of the residence. There was no evidence that they took any steps to assert any rights under the Family Law Act, R.S.O. 1990, c. F3, to set aside the sale of the residence.

(4) Specific Performance

[20] The appellants submit that specific performance should not have been ordered because the respondents delayed in the prosecution of their action. They argue that ordering specific performance in such circumstances permits a purchaser to sit back and strategically take advantage of an increase in the market value of a property.

[21] We agree that litigants should not be permitted to unduly delay seeking specific performance so that they can obtain an economic advantage. However, the motion judge carefully considered the issue of delay. She reviewed the progress of this action from the issuance of the statement of claim in February 2011 to the hearing of the motion in March 2015. She found that during a one year period the respondents took no steps to advance the action and during two other periods, totalling approximately one year, they took some steps to advance their claim but could have moved the matter forward more efficiently. The motion judge also found that the appellants delayed in serving a proper affidavit of documents until December 31, 2014. She concluded that the pace of the respondents' prosecution of the claim did not disentitle them from obtaining an order for specific performance.

[22] The granting of an order for specific performance is discretionary: Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858, 125 O.R. (3d) 121, at paras. 29, 32, leave to appeal to S.C.C. refused, [2015] S.C.C.A. No. 50. We are not satisfied that the motion judge made any error in principle in the exercise of her discretion regarding the issue of delay. Therefore, there is no basis for appellate interference.

[23] The appellants also submit that the motion judge erred in awarding specific performance because the residence was insufficiently unique. We disagree. The motion judge found that the residence was unique because the size of the lot, as well as its proximity to Ms. Yan's sister and public transit. There is no basis to interfere with that finding.

(5) Damages

[24] The respondents submit that the motion judge erred in not awarding damages in addition to specific performance. They also note that the motion judge provided no reasons for rejecting this claim.

[25] We would not give effect to this submission. The respondents tendered evidence on the motion regarding costs they incurred as a result of the aborted transaction, including evidence of the cost of rent for alternative accommodation and insurance costs. They did not, however, provide details regarding the carrying costs they would have incurred had the transaction closed. Consequently, it is not possible for this court to quantify any damages that might have resulted from the appellants' breach.

(6) Costs

[26] The appellants submit that the motion judge erred in awarding costs of $90,415 on a substantial indemnity basis. The motion judge found that costs on a higher scale were justified because the appellants tendered misleading evidence. There is no basis to interfere with that finding.

[27] We are also satisfied that the quantum of costs is reasonable given that the appellants' costs on a substantial indemnity basis were approximately $124,000.

C. Disposition

[28] For these reasons, we dismiss the appeal and cross-appeal. The respondents are entitled to their costs of the appeal, which we fix at $18,000, inclusive of fees, disbursements, and taxes.

Released: March 8, 2017

"RJS" Robert J. Sharpe J.A. P. Lauwers J.A. C.W. Hourigan J.A.