CITATION: Knowles v Dosch, 2016 ONSC 7271
COURT FILE NO.: CV-15-525511
DATE: 20161209
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DEBRA KNOWLES
Plaintiff
– and –
HANS MICHAEL DOSCH and ANA DOSCH
Defendants
Peter R. Greene and Annie (Qurrat-ul-ain) Tayyab for the Plaintiff
Jeffrey C. Goldberg for the Defendants,
HEARD: November 21, 2016
G. DOW, J.
REASONS FOR DECISION
[1] The parties seek a determination as to whether a portion of the plaintiff’s claim for damages arising from the breach of an Agreement of Purchase and Sale regarding a residential Toronto home is recoverable.
[2] For my purposes, the relevant facts are:
a) the Agreement of Purchase and Sale was for $3,750,000.00 entered into on September 24, 2014 with a financing condition in favour of the defendants/ purchasers, which was waived in writing on October 1, 2014;
b) at a final inspection by the defendants, likely on December 10, 2014, they directly raised with the plaintiff for the first time that they may have difficulty closing;
c) unbeknownst to the plaintiff, the defendants had been unable to sell either the larger condominium they owned in the “South Tower” of the complex in which they lived or the smaller unit in the “North Tower”, both of which had not been listed for sale until late October, 2014 for $2,400,000.00 and $550,000.00 respectively;
d) also unbeknownst to the plaintiff, the defendants required the equity from the sale of at least one of the properties to supplement the $2,500,000.00 of financing they had secured to make the purchase of the plaintiff’s property;
e) the real estate lawyer for the plaintiff confirmed in writing to the real estate lawyer for the defendants on December 10, 2014 that the plaintiff had “financial commitments” requiring receipt of funds on December 19, 2014;
f) the transaction did not close and the property was immediately relisted for sale which resulted in it being sold in January, 2015 for $3,650,000.00 with the closing date moved up from May to February 19, 2015, which becomes the date the plaintiff’s claim for damages crystallized;
g) unbeknownst to the defendants, the plaintiff had previously purchased a property in Caledon which was being renovated and she had planned to move to a rental accommodation until that was completed (which took longer than expected);
h) also unbeknownst to the defendants, the plaintiff was financing this project through a series of Promissory Notes in U.S. Dollars from her brother-in-law (who resided in the United States) and totaled $635,000.00;
i) the parties agreed the defendants were liable to the plaintiff and the damages included the $100,000.00 shortfall in the subsequent sale price as well as the carrying costs incurred between December 19, 2014 and February 19, 2015 totaling $43,154.94 of which $20,345.65 was interest on loans including $5,995.08 attributable to the Promissory Notes;
j) unlike the mortgage registered on title for $1,645,000.00, none of the Promissory Notes were registered on title or secured by any term in them that permitted recovery of the funds by accessing the equity in the subject properties; and
k) the change in the exchange rate between American and Canadian funds between December 19, 2014 and February 19, 2015 resulted in the cost to the plaintiff of repaying the Promissory Notes being an additional $104,397.45.
[3] At issue is whether the $104,357.45 is recoverable as part of a plaintiff’s damages following the breach of contract to recover the amount necessary to put her in the same position as if the breach had not occurred or whether the amount is beyond what was reasonably foreseeable.
Analysis
[4] My characterization of the issue above is a summary of the respective positions of the parties. The plaintiff relies on the classic Hadley v. Baxendale approach that damages are based on what amount of money is required to place the party who did not breach the terms of the contract in the same position as if the contract had been observed. The plaintiff relied on the comment by the Court of Appeal in Kasekas v. Tessler, [1989] O.J. No. 644 that dismissed the appeal from a trial judge’s decision to award the plaintiff the expenses they incurred from being unable to complete a secondary real estate transaction that required the funds expected from the real estate transaction being litigated with the defendants. The test of what a reasonable person would have concluded to be appropriate or reasonably foreseeable in the circumstances was used.
[5] Both parties referred me to the analysis in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (Coulson) & Co. Ltd. (Third Party)), [1949] All ER 997 where the English Court of Appeal reviewed six propositions detailing the purpose and limits of damages resulting from a breach of contract. To paraphrase, the basic rule of damages for breach of contract and putting the aggrieved party in the position he or she would have been in had the contract been completed is limited to what was reasonably foreseeable at the time the contract was entered into. The knowledge of the parties is relevant, particularly that of the party who commits the breach, and knowledge includes not only what was known but what can be imputed on the basis of a “reasonable person” or “in the ordinary course”.
[6] The defendant relied on the limits of damages being what was reasonably foreseeable or reasonably contemplated and submitted (the relatively large and sudden) fluctuation in exchange rates was beyond what is recoverable. The defendants rely on the conclusion of the Court of Appeal in 1298417 Ontario Ltd. v. The Corporation of The Town of Lakeshore, 2014 ONCA 802 where all three Justices conclude the damages awarded by the trial judge to be too remote. In that case, the defendant, Town of Lakeshore allegedly breached its contract with the plaintiff numbered corporation to not allow others to build residential or commercial properties that would utilize part of a sewer line until the plaintiff completed its development which used the same sewer line. The trial judge quantified damages based on the profits purportedly made by the other developer (paragraph 24). My review suggests the problem was the trial judge offered “no analysis as to whether the loss of commercial leases to otherwise lawful competition was the type of loss that fell within the parties’ reasonable contemplation” (paragraph 137).
[7] In my view, the parties negotiated a variety of terms including, most importantly, a sale price and deposit. A reasonable person would contemplate that if they failed to complete the contract as set out, the party who did not breach the agreement would be entitled (here the vendor) to any shortfall in the subsequent sale and any reasonably direct and associated costs incurred over the additional period of time between when the balance of the purchase price was to be paid and when funds were actually received. The defendants have agreed and admitted the plaintiff was entitled to damages in the amount of $143,154.97 which represents the shortfall in subsequent sale price and itemized carrying costs (Exhibit 1, Tab 25). However, it is my conclusion the claim for the fluctuation in the exchange rate is not reasonably foreseeable or an appropriate claim for damages.
[8] The Promissory Notes make no reference to and are not in fact directly linked to the property the plaintiff was selling. They were not referred to in the Agreement of Purchase and Sale. They were not registered on title. They contained no clause that they were due and payable upon the sale of the property in question. It was open to the plaintiff to repay them “at any time”. I understand the funds advanced were being used to renovate the Caledon property and not the Toronto home the defendants agreed to buy.
[9] I am reinforced in this conclusion given the absence of any knowledge by the defendants of the existence of the Promissory Notes (let alone them being in US funds) nor the plaintiff’s intention to use the funds to be received upon closing to immediately repay these Promissory Notes at the time the contract was entered into. The plaintiff attempted to rely on the statement by the plaintiff’s real estate lawyer in a letter dated December 10, 2014 (Exhibit 1, Tab 4) that “my clients have financial commitments with which they are relying on the closing funds to satisfy” but that does not specifically raise the Promissory Notes and occurs well after the key moment of when the contract was entered into on September 24, 2014. Further, the plaintiff attempted to rely on the fact the defendants admitted their liability to pay the additional interest incurred on the outstanding loans which included $5,995.08 attributed to the Promissory Notes. In my view, what the plaintiff admitted liability to pay is not a compelling reason to alter my conclusion on what are reasonably foreseeable damages.
[10] In making these statements, I am mindful of the cases referred to above where the court has concluded it is reasonably foreseeable that in a real estate contract, the vendor will be using the funds for any number of purposes such as completing another real estate transaction (which is not the situation before me.)
Costs
[11] The parties failed to have available their Bill of Costs or Costs Outline contrary to Rule 57.01(5) and (6). However, they are to be commended for having not only prepared a Statement of Agreed Facts and a 26 tabbed Trial Brief marked as Exhibit 1 on consent but commencing, conducting and completing the trial in one day. I agreed to and received their respective claims for costs in writing two days later.
[12] The plaintiff claims, due to staffing changes, a reduced amount for partial indemnity costs of $65,000.00 and substantial indemnity costs of $92,000.00, both inclusive of fees, HST and disbursements. In stark contrast, the defendants seek ($16,725.00 for fees plus HST of $2,174.25 =) $18,899.25 on a partial indemnity basis based on actual fees of ($20,475.00 plus HST of $2,661.75 =) $23,136.75 without details of disbursements. Upon examination of each Bill of Costs, the basis for the difference is clear. Defence counsel claimed 37.05 hours was expended by him (alone) at $450.00 per hour. Plaintiff’s counsel docketed 44.03 hours at $750.00 per hour and two associates docketed 49.01 hours and 166.09 hours at $375.00 and $300.00 per hour respectively.
[13] In the circumstances, the defendants were successful at trial and, mindful of the factors set out by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 to “fix an amount that is fair and reasonable for the unsuccessful party to pay” (paragraph 26), as well as the discretion granted under Rule 57 in Section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43, I award the defendant $21,000.00 inclusive of fees, HST plus appropriate assessable disbursements. If the disbursements cannot be agreed to within the next 30 days, each counsel may provide me with their position, in writing, not longer than two pages using a 12 point font.
[14] Similarly, I was alerted to offers to settle having been made by the parties during the litigation and the parties may submit an additional two pages of written submissions should the parties be unable to agree that the above is the appropriate disposition of costs, again within the next 30 days.
Mr. Justice G. Dow
Released: December 9, 2016
CITATION: Knowles v Dosch, 2016 ONSC7271
COURT FILE NO.: CV-15-525511
DATE: 20161209
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DEBRA KNOWLES
Plaintiff
– and –
HANS MICHAEL DOSCH and ANA DOSCH
Defendants
REASONS FOR DECISION
Mr. Justice G. Dow
Released: December 9, 2016