CITATION: Nguyen v. Hu, 2023 ONSC 299
DIVISIONAL COURT FILE NO.: 332/22
DATE: 2023/01/13
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Sachs, O’Brien and Schabas JJ.
BETWEEN:
HAI NGUYEN
Appellant
– and –
SHAOJUN HU
Respondent
Romesh Hettiarachchi, for the Appellant
Ran Tao, for the Respondent
HEARD at Toronto by videoconference: January 3, 2023
The Court
NATURE OF PROCEEDING
[1] This is an appeal and cross appeal of the May 2, 2022 decision of Myers J. The decision arose out of a summary judgment motion relating to an aborted real estate transaction. In the decision the motion judge found that the Respondent, Mr. Hu, had breached the transaction and awarded the Appellant, Mr. Nguyen, nominal damages in the amount of $5,000 as well as $1,130 in special damages.
[2] Mr. Nguyen appeals the award of damages, arguing that the motion judge breached procedural fairness and committed errors of principle when he assessed damages as of the date of the breach. Mr. Hu cross-appeals, claiming that the amount of nominal damages should have been fixed at $1 instead of $5000.00.
[3] For the reasons that follow, the appeal and cross-appeal are dismissed.
BACKGROUND
The Agreement of Purchase and Sale
[4] Mr. Hu purchased a pre-construction condominium unit on November 24, 2014. The purchase price was $606,00.00. The first tentative occupancy date listed in the agreement of purchase and sale (APS) was April 2018, with the final deadline for occupancy listed as April 2021. Article 2.01 of the APS prohibited the purchaser from assigning the agreement without the consent of the builder.
The Assignment Agreement
[5] On April 14, 2018, Mr. Hu assigned the APS to Mr. Nguyen for $715,000.00 with a deposit of $160,000.00. The assignment agreement required Mr. Hu to obtain the consent of the builder, with the agreement becoming null and void and the deposit returned if the builder refused to consent. Mr. Hu and Mr. Nguyen, as the assignor and assignee, were required to co-operate and take reasonable actions to carry out the purpose and the intent of the assignment.
[6] The assignment agreement required Mr. Hu to obtain the consent of the builder by May 24, 2018. Mr. Hu left for China to care for sick family members. While there he made unsuccessful efforts to obtain the builder’s consent to the assignment. The date to obtain consent was extended to June 25, 2018. On June 28, 2018, Mr. Hu’s lawyer sent an email to Mr. Nguyen’s lawyer confirming that the condition regarding consent could not be fulfilled and the deal was at an end.
The Breach
[7] The motion judge found that Mr. Hu’s efforts to obtain consent from the builder were not sufficient and that he failed to take reasonable steps to ensure that the consent condition was fulfilled. Thus, Mr. Hu was responsible for breaching the assignment agreement. That finding is not being appealed. As noted earlier, this appeal only concerns the issue of damages.
The Deposit
[8] Despite the provision in the assignment agreement requiring the return of the deposit if the consent condition was not fulfilled, Mr. Hu did not return the deposit, which amounted to $160,000.00.
[9] On December 4, 2018 Justice O’Marra ordered the release and return of the deposit, with costs to Mr. Nguyen. He found that there was an “aura of bad faith” on the part of Mr. Hu.
The Motion for Summary Judgement
[10] Mr. Nguyen chose to pursue a claim for further damages, resulting in the motion for summary judgement heard on April 22, 2022.
[11] On the motion Mr. Nguyen argued that damages should be assessed as of the date that the purchase of the condominium closed. According to Mr. Nguyen, since there had been a rise in the value of the condominium from the date of the Assignment Agreement, this entitled him to damages in the amount of $195,000.00.
[12] Mr. Hu submitted that the appropriate date for the assessment of damages was the date of the breach or June 25, 2018, when the condition regarding the builder’s consent was supposed to be fulfilled.
[13] Ultimately, the motion judge found that the date for the assessment of damages should be the date of the breach, which he fixed as June 28, 2018, the date of the email from Mr. Hu’s lawyer terminating the transaction. As a result, Mr. Nguyen was awarded only nominal damages ($5,000) and $1,130 in special damages.
The Motion Judge’s Reasons
[14] The motion judge began his assessment of damages by stating that “[d]amages for breach of contract are designed to put the innocent party in the position in which he or she would have stood had the contract been performed as agreed.”
[15] Citing the Court of Appeal’s decision in 306793 Ontario Ltd. v. Rimes (1979), 1979 1845 (ON CA), 100 DLR (3d) 350 (Ont. C.A.) , the motion judge found that where the contract is one of sale (such as the one at issue in this case), the principle requiring putting the innocent party in the position he or she would have been in if the contract had been performed as agreed leads to assessing the damages as of the date of the breach. However, this is not an absolute rule. If doing so would result in an injustice, the court may choose another date.
[16] After canvassing other case law on the subject, the motion judge discussed Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, a recent decision of the Court of Appeal, reiterating the applicable principles.
[17] As put by the motion judge:
[90] In Akelius, the Court of Appeal reiterated that the date for the assessment of damages is a search for what is fair in the circumstances. It relied on the words of Laskin J.A. from 6472047 Ontario Ltd. v. Fleischer, 2021 8623 (ONCA) that “underlying these propositions is the simple notion of fairness.”
[91] Then, after considering various precedent cases, the Court of Appeal summarized the state of the law as follows:
[27] In all these cases, the date of the breach remains the
starting point for the assessment of loss, modified only to the extent that innocent party satisfies the court that a later date is appropriate on the grounds that it is the first date upon which the party could reasonably have expected to re-enter the market and mitigate its damage. [Emphasis added by the motion judge].
[92] In paragraph 29 of the decision, the Court of Appeal affirmed that the same principles apply to an innocent purchaser in a rising market- as is the case here. It held:
…the fact that a party is innocent does not displace the date of breach as the presumptive date for the measure of damages in a real estate case.
[18] In dealing with the question of whose burden it is to establish that a date other than the date of breach is the correct date, the motion judge found that the burden rests with the party trying to displace the presumptive date.
[94] Here it is Mr. Nguyen who is trying to defer the presumptive date of the assessment of his damages to almost two years after the date of the breach and some 18 months after he elected to terminate the assignment agreement. At para. 31 of Akelius, the Court of Appeal discussed the burden on the innocent party applicant to defer the presumptive date of assessment of damages.
[31] Even if the applicant could have shown that it could not have bought other buildings that would have appreciated as much over the next two and a half years, the appellant has not established why, for the purpose of mere capital speculation, it was necessary to purchase six buildings close to one another in Parkdale.
[19] Therefore, according to the motion judge, it was incumbent on Mr. Nguyen to establish why he could not re-enter the market as of the date of the breach if he sought to establish that fairness requires that a date for assessing his loss should be deferred. According to the motion judge, Mr. Nguyen adduced no evidence as to why, when Mr. Ha definitively repudiated the assignment agreement on June 28, 2018, Mr. Nguyen could not have re-entered the market and bought another condominium.
THE ISSUES:
[20] This appeal raises the following issues:
(1) Did the motion judge violate procedural fairness when he assessed damages as of the date of the breach?
(2) Did the motion judge commit an error in principle by failing to consider the law concerning repudiation when he assessed damages as of the date of the breach?
(3) Did the motion judge commit an error in his consideration of the principle of fairness when he assessed damages as of the date of the breach?
(4) Did the motion judge err in principle when he assessed nominal damages at $5000.00?
COURT’S JURISDICTION
[21] The Divisional Court has jurisdiction to hear the appeal pursuant to s. 19(1.2)(a) of the Courts of Justice Act , which gives the Divisional Court jurisdiction over an appeal from a final order of the Superior Court of Justice for a payment of not more than $50,000, exclusive of costs.
STANDARD OF REVIEW:
[22] The assessment of damages is a discretionary exercise. As the Court of Appeal stated in Michel v. Spirit Financial Inc., 2020 ONCA 398, 151 OR (3d) 583, at para. 30:
An appellate court should only intervene in the award of damages where "the trial judge made an error of principle or law, or misapprehended the evidence, or it could be shown there was no evidence on which the trial judge could have reached his or her conclusion, or the trial judge failed to consider relevant factors in the assessment of damages, or considered irrelevant factors, or otherwise, in the result, made 'a palpably incorrect' or 'wholly erroneous' assessment of the damages."[citations omitted]
ANALYSIS
Did the motion judge violate procedural fairness when he assessed damages as of the date of the breach?
[23] On the motion, Mr. Nguyen sought damages based on the increase in the value of the property on the date when the sale by the builder to Mr. Hu closed in 2020. Mr. Hu, however, submitted that damages should be assessed “as of the date of the breach or as of June 25, 2018”, the date by which the condition requiring the builder to consent to the assignment of the agreement of purchase and sale had expired.
[24] Mr. Hu’s position regarding the date when the damages should be assessed was only put forward in material served one day before the motion was to be heard. However, the motion judge provided Mr. Nguyen with an opportunity to adjourn the motion and Mr. Nguyen chose to proceed.
[25] The motion judge did not act unfairly in finding the date of the breach to be on a date not argued by either party. The motion judge assessed damages as of June 28, 2018, the date on which Mr. Hu’s lawyer confirmed to Mr. Nguyen that “the transaction is at an end”, and the date on which the motion judge found that Mr. Hu “definitively repudiated the assignment agreement”. This was three days after the date argued by Mr. Hu.
[26] Indeed, accepting Mr. Nguyen’s position on this appeal would create the very unfairness he complains of. Mr. Nguyen is asking this court to find that the date on which the damages should be assessed is the date when the deposit was returned, which was not his position before the motion judge.
Did the motion judge err in principle by failing to properly apply the law concerning repudiation?
[27] According to Mr. Nguyen, the law concerning repudiation makes it clear that an agreement is not terminated until the repudiation has been accepted by the non-repudiating party. “If the non-repudiating or innocent party does not accept the repudiation, then the repudiation has no legal effect”: Ching v. Pier 27 Toronto Inc., 2021 ONCA 551. Mr. Nguyen argues that this means that when it comes to assessing damages, the date of repudiation cannot be used as the date when damages are assessed. Therefore, the motion judge erred in principle when he used that date.
[28] While we agree that a non-repudiating party is entitled to make an election as to whether to accept repudiation or affirm the contract and sue for specific performance, we do not agree that the decision in Ching means that damages can only be assessed when the non-repudiating party makes that election. To find otherwise would be to give non-repudiating parties an incentive to delay making their election as long as possible in order to maximize their return in a rising market. This would be unfair, especially in a case such as this one, where Mr. Nguyen admitted that he bought the property as a speculative investment and the motion judge found that there was nothing unique about the property from Mr. Nguyen’s perspective. He also found that there were other properties available for purchase in the same condominium building as of the date of the repudiation.
[29] This is not to preclude the possibility that in some cases, it may be fair to assess damages as of the date of acceptance of the repudiation, provided the non-repudiating party submits evidence as to why this is a fair date to choose.
Did the motion judge err in his consideration of the principle of fairness when he assessed damages as of the date of the breach?
[30] Mr. Nguyen makes an overriding argument that it was unfair for the motion judge to assess damages as of a date that resulted in him receiving only nominal damages. After all, he was the innocent party in the transaction. This submission is fully answered by the Court of Appeal’s decision in Akelius. As the motion judge noted, para. 29 of Akelius makes it clear that the principles governing the date to choose for the assessment of damages apply equally to an innocent purchaser in a rising market.
[31] Mr. Nguyen also submits that it was unfair for the motion judge to assess damages as of the date of the breach because he was not able to re-enter the market until his deposit was returned to him.
[32] We do not see any basis to interfere in the conclusion that assessing damages on the date of the breach was fair in all the circumstances. As set out above, the motion judge relied on Akelius to correctly conclude Mr. Nguyen had the onus of establishing he could not re-enter the market on the date of breach. The motion judge expressly found Mr. Nguyen failed to meet this onus. He noted at para. 84 of his reasons that Mr. Nguyen had admitted to purchasing the property as a speculative investment and had given “no evidence of his resources.” Meanwhile, Mr. Hu pointed to the mortgage approval obtained by Mr. Nguyen to suggest he had the financial ability to buy elsewhere. The motion judge concluded that, on learning the transaction would not close, Mr. Nguyen was not out of any money other than the deposit that remained with the real estate agents. He had not “adduced any evidence suggesting that he was disabled at all from investing in another condominium.”
[33] Although Mr. Nguyen now claims he needed the return of his deposit to re-enter the market, this argument was not raised on the motion. The motion judge stated at para. 12:
Mr. Nguyen does not claim that he could not re-invest until he received his deposit back and provided no evidence justifying a delay of the assessment of damages from the date of the breach of contract committed by Mr. Hu.[Emphasis added]
[34] Given that Mr. Nguyen did not raise this argument before the motion judge and in the face of his failure to lead evidence of his financial resources, the motion judge was entitled to assess damages as of the date of the breach.
Did the motion judge err in his assessment of the quantum of nominal damages?
[35] As already noted, the motion judge’s decision to fix nominal damages at $5,000 is entitled to deference. The motion judge made no errors of the kind identified by the Court of Appeal in Michel. Although it was open to the motion judge to have fixed a lower amount, a nominal damage award of $5,000 in the context of a failed transaction worth over $700,000 cannot be said to be “palpably incorrect” or “wholly erroneous.” Rather, it fulfills the purpose of nominal damages in affirming that Mr. Hu infringed Mr. Nguyen’s legal rights in circumstances where, as the motion judge found, the damages suffered by the appellant were minimal.
CONCLUSION
[36] For these reasons the appeal and the cross-appeal are dismissed. In accordance with the agreement of the parties, Mr. Hu is entitled to his costs fixed in the amount of $9000.00.
Sachs J.
O’Brien J.
Schabas J.
Released: January 13, 2023
CITATION: Nguyen v. Hu, 2023 ONSC 299
DIVISIONAL COURT FILE NO.: 332/22
DATE: 2023/01/13
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Sachs, O’Brien and Schabas JJ.
BETWEEN:
HAI NGUYEN
Appellant
– and –
SHAOJUN HU
Respondent
REASONS FOR JUDGMENT
THE COURT
Released: January 13, 2023