ONTARIO
SUPERIOR COURT OF JUSTICE
KINGSTON COURT FILE NO.: CV-13-163-SR
DATE: 2014/07/16
BETWEEN:
Allison Briscoe-Montgomery and Thomas Montgomery
Plaintiffs/Moving Parties
– and –
Anna Kelly
Defendant/Responding Party
Kurt R. Pearson, for the Plaintiffs/Moving Parties
David M. Adams, for the Defendant/ Responding Party
– and –
Ray Raymond and the Mortgage Alliance Company of Canada
Third Parties
The Third Parties did not participate in this motion
HEARD in KINGSTON: July 10, 2014
REASONS FOR DECISION ON SUMMARY JUDGMENT
PHILLIPS J.
[1] This dispute arises out of a failed real estate deal. It was agreed that the defendant would buy the plaintiffs’ farm. When it came time to close the transaction, the defendant revealed that she did not have the funds. The plaintiffs now move for summary judgment.
Background facts:
[2] The property in question is what one might call a “hobby farm”. It is set up primarily for equestrian pursuits with trails and outbuildings designed for that purpose. The plaintiffs put it up for sale in March 2012 asking $449,900. As things unfolded, there became two potential purchasers interested. Ultimately, on July 19, 2012 an unconditional Agreement of Purchase and Sale was entered into between the plaintiffs and the defendant with an agreed-upon price of $458,000. Closing was to occur on September 14, 2012.
[3] With a firm agreement in hand, the plaintiffs took steps to line up their next place to live. They bought a vacant plot of land as well as a modular home to install upon it. They leased a nearby cottage to live in while that installation was to take place and they put most of their furniture into storage.
[4] The defendant agrees that when September 14, 2012 came she did not have the financing to close the agreement. While it does not bear directly on any of the issues before the Court at this time, there is a third party claim between the defendant and a mortgage broker, alleging some sort of negligent misrepresentation.
[5] In any event, after the deal fell through the plaintiffs had two properties on their hands. Because they had let the defendant move in prior to the closing date, by September of 2012, the plaintiffs had already moved to the temporary cottage accommodations with their two young children. The plaintiffs had significant carrying costs with respect to both the mortgage on the subject property and on their new lot and modular home. Moreover, they were living a considerable distance away.
[6] The plaintiffs decided to immediately put the property back onto the market, listing it at $449,900. Despite not living there, they drove back several times per week to maintain it at the level required to keep it attractive for sale. The property failed to attract any offers during September, October or November. Consequently, on the advice of their real estate agent they reduced the asking price to $429,900. Finally, an offer came in January 5, 2013 for $415,000 which they accepted, agreeing to close on March 1, 2013.
The positions of the parties:
[7] The plaintiffs seek summary judgment for recovery of two amounts:
The sum of $43,000, which is the difference between the agreed upon amount of $458,000 and the eventual selling price of $415,000.
The sum of $39,073.31, which is an aggregate of various expenses the plaintiffs incurred in having to carry and maintain two properties as a result of the defendant’s breach of contract.
[8] The defendant does not deny that she breached the contract and is liable for damages. However, she takes the position that the plaintiffs failed to adequately mitigate their damages in two ways. First, she complains that the plaintiffs returned the property to the market at a time of year when selling conditions are not optimal and thus the eventual selling price of $415,000 was not as high as it could have been had they waited until the spring. Secondly, the defendant asserts that after the deal fell through the plaintiffs should have moved back to the farm thereby avoiding many of the costs incurred as a result of living elsewhere.
The law with respect to Summary Judgment:
[9] Rule 20.01(3) of the Rules of Civil Procedure provides:
(3) A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all or part of the claim in the statement of claim. R.R.O. 1990, Reg. 194, r. 20.01 (3).
[10] Rule 20.04(2) of the Rules of Civil Procedure reads:
(2) The court shall grant summary judgment if,
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).
(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence. O. Reg. 438/08, s. 13 (3).
[11] The leading case is the Supreme Court of Canada decision in Hryniak v. Mauldin, 2014 SCC 7, 366 D.L.R. (4th) 641, in which the Court considered the Court of Appeal's decision in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431. The Supreme Court of Canada stated at para. 4: “the Ontario Court of Appeal placed too high a premium on the "full appreciation" of evidence that can be gained at a conventional trial”.
[12] The Supreme Court of Canada emphasized the importance of "proportionality" in Hryniak. Karakatsanis J., writing for the Court, states at para. 4:
... a trial is not required if a summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.
[13] Karakatsanis J. went on to state, at para. 5, that “[s]ummary judgment rules must be interpreted broadly, favouring proportionality and fair access to affordable, timely and just adjudication of claims.”
[14] At para. 49 of Hryniak the Court held that there will be no genuine issue requiring a trial when:
[T]the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process 1) allows the judge to make the necessary findings of fact; 2) allows the judge to apply the laws and to the facts; and 3) is a proportionate more expeditious and less expensive means to achieve a just result.
The law with respect to the Duty to Mitigate:
[15] Justice Allen has concisely summarized the law with respect to the duty to mitigate in Canadian Faces Inc. v. Cosmetic Manufacturing Inc. (2011) ONSC 6171 and I paraphrase his words below.
[16] It is the defendant who carries the burden to prove the plaintiffs have failed in their duty to mitigate (see: Red Deer College v. Michaels (1974) 1975 15 (SCC), 57 D.L.R. (3d) 386 (S.C.C.)). The plaintiffs are not expected to take every possible avenue to reduce the loss caused by the defendant’s breach. They are simply required to take all reasonable steps to mitigate their loss and may recover what they incurred in taking those reasonable steps even though they did not succeed in fully mitigating the loss (see: Pilkington v. Wood [1953] Ch 770). It has been held that the reasonableness of the plaintiffs decisions are not to be scrutinized too harshly by the defendant since it was the defendant’s breach that brought about the necessity to make the decisions and it does not therefore lie with the breaker of the contract to be overly critical (see: Banco de Portugal v. Waterloo & Sons Ltd. [1932] A.C. 452 (H.L.) and Kamlee Construction v. Town of Oakville (1906) 26 D.L.R (2d) (S.C.C.).
Analysis:
Is this an appropriate case for summary judgment?
[17] I find that I am in a position from which I can reach a fair and just determination on the merits of this motion for summary judgment. The evidentiary landscape here is largely uncontested. There is no dispute that the plaintiffs were ready, able and willing to close the transaction on September 14, 2012, and that the defendant failed to close. Accordingly, there is no dispute that the contract was breached by the defendant. Moreover, I am able to both ascertain the full scope of the expenses incurred by the plaintiffs and assess their reasonableness both on their own and as against the duty to mitigate. There is no issue advanced by the plaintiffs requiring a trial.
[18] I assume that the defendant has put her best foot forward on this motion. It seems to me that assessing her defenses does not require any findings of fact not already available on the record, nor any findings of credibility. The defendant’s position is readily appreciated and can be inferred from the evidence just like that of the plaintiff. From the defendant’s perspective, there is no issue requiring a trial.
[19] I find this to be an appropriate case for summary judgment.
Are the Plaintiffs entitled to damages? If so, what is the quantum?
[20] It is fair to say that many Canadians in recent years have been living through a remarkable period of real estate appreciation. Most homeowners have experience with essentially two conversations. First, we talk in awe about the constantly escalating prices in the real estate market. Second, we talk with apprehension about how perhaps the time has finally come where this “bubble” will burst. No one can tell the future. While hindsight tells us that the real estate market has been good, every prospective seller fears that the end of those good times is just around the corner. In my view, it is understandable that any seller would want to get their property onto the market sooner than later.
[21] While I accept as a general proposition that it is best to sell a home during the springtime, I cannot agree that the plaintiffs’ decision to return their property to the market in late September and not wait until the next spring represents a failure to adequately mitigate their loss. I find that the defendant bears some responsibility for the timing of things given that she reneged upon her agreement in late September. In any event, in my view, while it is true that the market fluctuates through the seasons, that fluctuation is not so significant as to amount to a reason to prevent the plaintiffs from trying to sell their farm as soon as possible in the circumstances. Keeping in mind the considerable pressures they were under with respect to carrying two properties, I find that it was reasonable of the plaintiffs to promptly return the property to the market and to accept the first reasonable offer they received. The fact that the eventual price was lower than the original one demonstrates only that the housing market can be fickle and inconsistent. That reality is simply one of the consequences of breach of contract in this context.
[22] I am in a position to fairly assess the quantum of the damages arising from the breach of contract. I find instructive the words of Rosenberg J. (as he then was) in Victorian Homes (Ontario) Inc. v. DeFreitas et al. [1991] 16 R.P.R. (2nd) 55 at paragraph 20:
The respondent argues that it is inappropriate that damages are calculated based on the selling price at a later date, rather than the value at the time of the breach. While hypothetical appraisals at the time of the breach might disclose different figures, in my view, there is no better evidence to calculate the real damage suffered then the price that the plaintiff was able to obtain in the market for the resale of the home. This determines the actual out-of-pocket damage suffered by the plaintiff as a result of the purchaser’s default.
[23] Moreover, in addition to the discrepancy between the ultimate sale price and the one contracted to by the parties, I have decided to award the plaintiffs damages in an amount that puts them as close as reasonable into the position they would be in had the contract closed as agreed on September 14, 2012. Those damages can be particularized as follows:
• $43,000 which is the difference between the ultimate selling price and the selling price agreed-upon between the parties;
• $7,798.16 which is the amount of interest the plaintiffs paid on the farm’s mortgage from September 14, 2012 to March 1, 2013 which interest would not have been paid had the deal closed given that the mortgage would have been immediately discharged;
• $472.52 which is the amount of taxes paid on the farm from September 14, 2012 to March 1, 2013;
• $4,873.25 which is the amount the plaintiffs paid in legal fees dealing with the flurry of communications and other steps occasioned by the failure to close the transaction on September 14, 2012;
• $3,231.80 which is the difference in the real estate commissions applicable with respect to the two transactions.
• $1,892.47 which is one half of the utility bills (hydro and gas) applicable to the farm property from September 14, 2012 to March 1, 2013.
[24] Any deposit(s) paid is/are forfeited and shall be deducted from the damages outlined above (which total $61,268.20). Prejudgment interest shall apply on the $43,000 component from September 14, 2012, while prejudgment interest shall apply on the remainder from March 1, 2013.
[25] As should be clear given the amounts outlined above, I have agreed somewhat with defendant’s counsel that the ancillary damages should be reduced in consideration of the fact that the plaintiffs decided not to move back to the farm once it was clear that the agreement was not going to close. While I can understand why they did not do so, given that they could not have foreseen how long the farm would take to sell, the fact is they were stuck in September 2012 with two places to live – one, the rented cottage that if kept empty would result in a loss of $6,000 and another, the farm, which would result in a loss of far more. I find that their decision to stay at the rented cottage is somewhat of a failure to mitigate their losses in terms of managing the ancillary fallout of the failed sale of the farm. Accordingly, I have elected to award only half of the utility bills and none of the other costs associated with maintenance of that property from September 14, 2012 to March 1, 2013.
[26] To conclude, I grant summary judgment in favour of the plaintiffs in the amount of $61,268.20 less any deposit(s) and in addition to prejudgment interest.
[27] Brief written submissions with respect to costs of this summary judgment motion may be made within 30 days.
Justice Kevin B. Phillips
Released: July 16, 2014
KINGSTON COURT FILE NO.: CV-13-163-SR
DATE: 2014/07/16
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Allison Briscoe-Montgomery and Thomas Montgomery
Plaintiffs/Moving Parties
– and –
Anna Kelly
Defendant/Responding Party
– and –
Ray Raymond and the Mortgage Alliance Company of Canada
Third Parties
REASONS FOR JUDGMENT
PHILLIPS J.
Released: July 16, 2014