COURT OF APPEAL FOR ONTARIO

CITATION: Aylward v. Rebuild Response Group Inc., 2020 ONCA 62

DATE: 20200131

DOCKET: C65844

Lauwers, Miller and Fairburn JJ.A.

BETWEEN

Mary Magdalene Aylward

Plaintiff (Appellant)

and

Rebuild Response Group Inc., Harmony Homes Quinte Ltd.

and Tom Streek

Defendants (Respondents)

Jonathan Mesiano-Crookston, for the appellant

John Mastorakos, for the respondents

Heard: January 28, 2020

On appeal from the judgment of Justice Wolfram Tausendfreund of the Superior Court of Justice, dated August 9, 2018, with reasons reported at 2018 ONSC 4800, 92 C.L.R. (4th) 291 and from the costs order, dated November 29, 2018, with reasons reported at 2018 ONSC 7174.

REASONS FOR DECISION

[1] The trial judge dismissed the appellant’s claim for the return of the deposit she paid to the respondents with respect to the building contract for a new home. The building contract provided for a “25% deposit due upon signing contract. - $175,432.50”.

[2] The appellant terminated the building contract because she was unable to agree with the respondents on modifications to the building contract that could be done to reduce the cost to an amount that would be covered by fire insurance proceeds.

[3] The appeal turns on the meaning of the term “deposit” in the building contract.

[4] The law relating to deposits was set out generally by this court in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374, which the trial judge cited at para. 70 of the decision. At para. 20 of Redstone, this court quoted with approval Tang v. Zhang, 2013 BCCA 52, 359 D.L.R. (4th) 104, where Newbury J.A. noted, at para. 30, that:

A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and this is not dependent on proof of damages by the other party. If the contract is performed, the deposit is applied to the purchase price [.]

[5] The language of the building contract expressly identified the first payment of 25 percent of the contract price as a deposit in the phrase: “25% deposit due upon signing contract. - $175,432.50”. As a real estate agent, the appellant would have been well aware of the ordinary role of a deposit.

[6] The appellant argues that the trial judge erred in not taking the Independent Contractor Agreement [“ICA”] into account in his interpretation of the deposit provision in the building contract. The appellant argues that the word “deposit” in the building contract must be interpreted differently, in this case, in light of the ICA, which was signed by the parties on or about the same day as the parties signed the building contract. particular, the appellant invokes cl. 8 of the ICA, which provides:

For the services rendered by the Contractor as required by this Agreement, the Customer will provide compensation (the “Compensation”) to the contractor as follows: 25% of contract amount upon completion of each phase of construction to the satisfaction of the Project Management Team as well as the TD Bank Adjuster.

The appellant argues that the effect of the ICA is that the contractor was not entitled to the deposit unless it had completed 25 percent of the work. In other words, the deposit was not really a true deposit. The appellant argues that very little work had been done, as building plans had not been agreed to, a building permit had not been obtained, and no ground on the rebuild had been broken.

[7] The trial judge analyzed the ICA at para. 34 of his reasons and pointed out a number of problems with it that prevented him from reading it together with the building contract; in essence, the ICA did not mesh with the building contract in material respects. He took the view, at para. 35, that the ICA was “a separate document and is not to be read as part of the building contract.” He added: “That is so, even if I were incorrect in my finding that the ICA is not enforceable in the absence of consideration.”

[8] The appellant pleaded that the ICA was not an enforceable contract. Nonetheless, counsel argued that it properly forms part of the factual matrix. Giving effect to this proposition would not assist the appellant. We do not accept the interpretation of the term “deposit” proposed by the appellant. The deposit was paid under the building contract, not the ICA, which does not use the term deposit at all. The terms of the documents regarding payment and the deposit do not conflict. The payment provision in the ICA means that the respondent could appropriate the deposit as revenue at the completion of the first phase, but that did not affect the fundamental character of the deposit as a deposit if the contract were not performed. The contract was not performed, as the trial judge found, because the appellant repudiated it.

[9] The appellant next argues that the trial judge erred in failing to grant relief from forfeiture under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[10] The trial judge found, at para. 85, that the pleading was “not sufficiently specific for me to find that the plaintiff has pleaded relief from forfeiture.” But he then went on to analyze the claim and reject it, at paras. 87-90, on the basis that the forfeited sum was not out of all proportion to the damages suffered and that it would not be unconscionable for the respondents to retain the deposit, in accordance with the principles set out in Redstone.

[11] Regarding proportionality and the damages, the trial judge’s assessment was largely factual in nature. He fixed the damages suffered by the respondents at $150,000: at para. 82. We are not persuaded that in doing so he made a palpable and overriding error. The size of the deposit is not so significant that it would give rise to a finding of unconscionability based on proportionality alone. The factors referred to at para. 30 of Redstone for assessing unconscionability, such as an inequality of bargaining power, or a substantially unfair bargain, simply do not exist in this case. In our view, the trial judge did not err in concluding that there was no basis for relief from forfeiture in this case.

[12] The appellant also seeks leave to appeal costs. The trial judge noted that the respondents’ substantial indemnity costs would have been $63,000, which compared favourably to the appellant’s claim for substantial indemnity trial costs of $75,000. He considered that an award of partial indemnity costs to the respondents in the amount of $38,000 all-in was reasonable and proportional. We do not see any error in the trial judge’s reasoning leading to the costs award.

[13] For these reasons we dismiss the appeal with costs to the respondents fixed in the amount of $ 9,000, all-inclusive.

“P. Lauwers J.A.”

“B.W. Miller J.A.”

“Fairburn J.A.”