COURT OF APPEAL FOR ONTARIO DATE: 20240611 DOCKET: COA-23-CV-1162
Miller, Zarnett and Thorburn JJ.A.
BETWEEN
Michael Fulvio John De Rita Applicant (Respondent)
and
1266078 Ontario Inc. Respondent (Appellant)
Counsel: Nour Jomaa, for the appellant Cynthia L. Mackenzie, for the respondent
Heard: June 3, 2024
On appeal from the judgment of Justice Martha A. Cook of the Superior Court of Justice, dated October 3, 2023.
REASONS FOR DECISION
[1] The appellant challenges the application judge’s determination that it is liable to the respondent for damages in the amount of $150,375 for its failure to honour its contractual obligation to timely discharge a mortgage it held on the respondent’s property on Ouellette Avenue in Windsor, Ontario.
[2] The application judge found that the delay in discharging the mortgage deprived the respondent of the opportunity to use the Ouellette property to obtain financing to fund the purchase of a property on Bruce Avenue in Windsor, which he had contracted to do at an extremely favourable price. By the time the respondent obtained a discharge by court order, the Bruce Avenue purchase agreement had lapsed. The application judge awarded damages based on the difference between the purchase price of the Bruce Avenue property and her estimate of what the property was worth when the respondent was able to re-enter the market, less certain deductions and adjusted for certain contingencies.
[3] The appellant contends that the application judge made four errors in reaching her conclusion.
(1) Causation
[4] First, the appellant argues that the application judge made a palpable and overriding error of fact when she concluded that the respondent lacked other resources to purchase the Bruce Avenue property and was completely reliant on the equity in the Ouellette property as the source of financing. The appellant points, for example, to the amount the respondent borrowed to be ready to pay off the appellant’s mortgage and says there was a surplus amount that could have been used for the Bruce Avenue purchase.
[5] We disagree. The record included evidence of the actual amounts the respondent had borrowed. The assessment and interpretation of that evidence was a matter for the application judge. It was open to her to conclude that without the ability to access the equity in the Ouellette property, which could only be done after the appellant’s mortgage was discharged, the respondent was without funds to complete the Bruce Avenue purchase.
(2) Remoteness
[6] Second, the appellant argues that the application judge should have considered the loss arising from the inability to complete the Bruce Avenue purchase to be non-recoverable because it was too remote. It submits that a loss on a secondary transaction that a timely discharge of the mortgage would have enabled is not the type of loss that falls within either branch of the Hadley v. Baxendale (1854), 156 E.R. 145 (Exch. Ct.) test for remoteness. This court described those two branches, in Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, at para. 36 as: (i) a loss that arises “fairly, reasonably, and naturally as a result of the breach of contract”; and (ii) a loss that was “within the reasonable contemplation of the parties at the time of contract.”
[7] The application judge found that the loss of the Bruce Avenue purchase was not too remote, stating:
A party registering a charge against title to property of another must foresee the consequences of continuing to encumber title once the charge is spent. Slander of title is a tort premised upon the foreseeability of such harm. As discussed above, a cloud on title may impact an owner’s interest in lands in any number of ways, but each is a foreseeable consequence of impairing title after the amounts secured by a mortgage have been repaid.
The [appellant], and its directing mind, Mr. Trojansek, are experienced real estate investors and mortgage lenders. Mr. Trojansek knew that [the respondent] was earning a living buying, selling, and managing a portfolio of commercial real estate in Windsor, and that he was acquiring the subject property with a view to earning a profit. I find that it was reasonably foreseeable to the [appellant] that unlawfully impairing title to the subject property would threaten [the respondent’s] access to the equity in his real estate and result in lost business opportunities.
[8] The appellant argues that, in these passages, the application judge conflated the two branches of the remoteness test. We disagree. Read fairly, she found that the type of loss was recoverable under either branch.
[9] The appellant also submits that the trial judge erred in referring to slander of title, as this was a contract claim. In our view that reference was by way of analogy and was not inappropriate, since foreseeability of harm is a concept in both tort and contract law.
[10] More fundamentally, the appellant maintains that this court’s decision in Kienzle v. Stringer (1981), 35 O.R. (2d) 85 (C.A.) essentially deems losses on a “secondary transaction” – a transaction involving another property (the Bruce Avenue property) rather than the land that was the subject of the mortgage (the Ouellette Avenue property) – to be unrecoverable.
[11] Kienzle was a lawyer’s negligence case, not a claim against a mortgagee or about a mortgage discharge. A majority of this court held that a claim that a lawyer who had negligently certified title to a farm property extended to damages “immediately concerned with the failure of marketability” of the farm property but did “not extend to the loss of profits from secondary transactions which may [have] be[en] fuelled by funds expected from the marketing of the subject real property”: at paras. 22-23. Wilson J.A., in dissent, would have allowed recovery of the loss on the secondary transaction in issue in that case.
[12] In our view it is unnecessary to decide whether the broad proposition advanced by the appellant is a necessary extrapolation from the decision in Kienzle, because there is a material factual distinction between that case and this one. In Kienzle, the majority pointed out that there had been no disclosure that the farm property – the one whose title the lawyer had certified – would serve as the basis for a future purchase. The majority noted that the situation would be different if that kind of disclosure had been made: “particular disclosure may lead to the assumption of additional risks”: at para. 23. In contrast, in the case at bar the application judge found there had been significant information disclosed to the appellant. The respondent had purchased the Ouellette property, a commercial investment, from the appellant, and the mortgage was a result of that transaction. Based on their dealings, the application judge found the appellant knew “that [the respondent] was earning a living buying, selling, and managing a portfolio of commercial real estate in Windsor, and that he was acquiring the [Ouellette] property with a view to earning a profit.” Her finding that “it was reasonably foreseeable to the [appellant] that unlawfully impairing title to the subject property would threaten [the respondent’s] access to the equity in his real estate and result in lost business opportunities” was a fact specific conclusion derived from evidentiary findings that were available to the application judge on the record.
[13] The remoteness test addresses the type of loss that is recoverable, not its quantum: Saramia, at para. 36. Here the loss of a business opportunity to the respondent, who was in the real estate investment business, was a foreseeable type of loss at the time of contracting for the mortgage. The fact that the Bruce Avenue property represented a particularly advantageous opportunity relates to the quantum, which did not have to be foreseeable.
[14] Although it is sufficient that the type of loss was foreseeable at the time of contracting, it is worth noting that after the appellant delayed in providing the discharge the appellant was specifically advised that further delay was threatening the respondent’s business opportunities. The appellant could, even then, have delivered the discharge and avoided the consequence about which it now complains. It chose not to do so.
[15] As the majority stated in Kienzle, at para. 21, remoteness is about assuring the compensation awarded is fair. In the circumstances of this case, there is no unfairness in the finding that the damages were not too remote.
(3) Mitigation
[16] The appellant also submits that the application judge should have found that the respondent failed to mitigate his damages by not applying to the court to compel the discharge more quickly. We see no merit in this submission. The respondent, advised by legal counsel, applied promptly after giving the appellant several opportunities to comply with its discharge obligations and warning the appellant that there were financial consequences to its course of action.
[17] The onus was on the appellant to show a failure to mitigate. It led no evidence that a reasonable person in the position of the respondent would have proceeded any differently.
(4) Date of Assessment
[18] Finally, the appellant submits that the application judge erred by departing from the date of breach as the date to assess damages.
[19] Although the date of breach is the presumptive date for assessment of damages, the court may choose a different date depending on the context. One example of when a later date may be chosen is where the innocent party establishes that it was not in a position to re-enter the market to mitigate at the date of breach: Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, 161 O.R. (3d) 469, at paras. 22-25; The Rosseau Group Inc. v. 2528061 Ontario Inc., 2023 ONCA 814, 169 O.R. (3d) 192, at para. 62.
[20] The application judge adverted to the correct principles concerning the date of assessment and when the presumptive date can be varied. She exercised her discretion to fix the date based on principle – her determination of when the respondent was able to re-enter the market. We see no error in her determination that would warrant appellate interference.
Conclusion
[21] The appeal is dismissed. The respondent is entitled to its costs of the appeal fixed in the amount of $12,315 inclusive of disbursements and applicable taxes.
“B.W. Miller J.A.”
“B. Zarnett J.A.”