COURT FILE NO.: CV15-136
DATE: 20180525
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jesse Fulton and Nicole White
Erroll G. Treslan, for the Plaintiffs
Plaintiffs
- and -
KOA Aloha Inc.
Christopher J. Staples, for the Defendant
Defendant
HEARD: April 12, 17, 18, 23, 24, 25, 26 and May 22, 2018
REASONS FOR JUDGMENT
Conlan J.
I. Introduction
The End of a Friendship
[1] Jesse Fulton (“Jesse”) and Nicole White (“Nicole”), the Plaintiffs, are common law spouses. Shane and Shelly Anderson (“Shane” and “Shelly”) are husband and wife. Their real estate holdings company, KOA Aloha Inc. (“KOA”), is the Defendant.
[2] There is a considerable age difference between the parties, with the Andersons being at least ten years older than Nicole, who is 39. Jesse is 40 years old.
[3] In any event, age is no barrier to friendship. Jesse, Nicole, Shane and Shelly were all good friends. Unfortunately, that came to an end over a dispute about a property located near Blue Mountain, a ski and snowboard facility in Grey County.
The Background
[4] Jesse and Nicole used to run a skateboard and snowboard shop in Orangeville, Ontario. They had a house there, too. Eventually, they had two children, now five and seven years old. They met Shane and Shelly, who have three children of their own.
[5] Jesse and Nicole ran another business called Shreducation. A creative name, no doubt, mixing the concept of “shredding snow” and education/coaching. It was a high performance snowboarding coaching program. Jesse, an accomplished athlete having prior experience with Canada’s Olympic snowboarding team, was the original coach. Nicole handled the administration.
[6] Two of Shane and Shelly’s children were involved with Shreducation. High performance snowboarders from various places would come to Blue Mountain each season, stay at housing provided to them, have fun and hone their skills. For years, Shreducation rented housing for the athletes.
[7] Then, an opportunity arose. Shane and Shelly bought two units at Wintergreen Place, a condominium complex near the Mountain. Jesse and Nicole could use one of the units, 116, as Shreducation’s team house. In time, Jesse and Nicole could purchase 116 and have it as their own. The bargain included some reduction in Shreducation fees for Shane and Shelly’s two children.
[8] The “deal” went ahead. Unfortunately, nothing was reduced to writing. There is a fundamental dispute between the parties as to what the terms of the bargain were.
[9] 116 was bought by Shane and Shelly in September 2012, and the transaction closed in October of that year (along with the deal on their other unit, 125). The down-payment and closing costs for 116 were $55,332.43. The Andersons borrowed some money from Shane’s friend. A mortgage was secured for the balance of the purchase price. Shreducation moved in as of December 2012, after extensive renovations were undertaken, paid for in the main by the Andersons.
[10] The athletes paid rent for staying at 116. During the off-season, the unit was available to be and was at times rented by the public at large.
[11] In 2013, in an effort to fast-track their purchase of 116, Jesse and Nicole sold their shop and their home in Orangeville and bought a place to live in Thornbury.
[12] By December 2014, the balance on the mortgage against 116 was $157,977.37. By then, however, things had soured between the parties. They had lost faith in one another. In a two-page letter addressed to Nicole and Jesse dated November 6, 2014, the Andersons effectively stated that, for various reasons, their former friends would not be acquiring 116.
[13] Notwithstanding that correspondence, Jesse and Nicole continued to pursue the matter. And, for a few weeks, the Andersons engaged in some back and forth. In an email to Nicole on December 3, 2014, Shane reiterated that the matter had been put to bed.
[14] The wrangling continued as to which side owed what amount of money to the other. Litigation was the end result.
[15] It should be noted that Jesse and Nicole no longer operate Shreducation. They sold (Jesse said “gifted”) the business in September 2015.
[16] Shane and Shelly still own 116. A Certificate of Pending Litigation (“CPL”) against the property was applied for previously by Jesse and Nicole and was granted to them.
The Issues
[17] In my view, looking at the pleadings, assessing the evidence, and considering the submissions of counsel, there are three factual issues, or issues of mixed fact and law: (i) whether there was an agreement between the parties with regard to 116, (ii) if so, what its terms were, and (iii) whether KOA (really, Shane and Shelly) breached the agreement?
[18] Those determinations will drive the resolution of the main legal issue: if the Plaintiffs are entitled to a remedy for breach of contract, should that remedy be specific performance of the sale of 116 from KOA to them, or should it be monetary damages, and if so how much?
[19] Of course, Jesse and Nicole will receive no remedy at all if there is no liability found on the part of KOA (Shane and Shelly). It is up to the Plaintiffs to prove, on a balance of probabilities, their case. That means proving an agreement, its terms, and a breach of the agreement by the other side.
The Trial and the Positions of the Parties
[20] This trial took place in Owen Sound in April and May 2018. For the Plaintiffs, I heard testimony from (i) Nicole, (ii) Matthew Cox (“Cox”), and (iii) Jesse. For the Defendant, I heard testimony from (i) Shelly and (ii) Shane.
[21] On consent, Cox offered expert opinion evidence in the field of residential appraisals. He has been designated as a Canadian Residential Appraiser since 2015. He authored two reports and presented some recent sales data for properties similar to 116. As of January 1, 2015, in his opinion, 116 had a market value of $310,000.00, excluding chattels. As of October 7, 2016, that value, in his opinion, was $360,000.00, excluding chattels.
[22] In cross-examination, Cox stated that he is unsure whether tax (HST) implications might be relevant to a potential purchaser of 116. Further, he did not disagree with the suggestion made by Mr. Staples that there is nothing particularly unique about 116.
[23] Mr. Treslan, for the Plaintiffs, submitted in his closing address that this Court ought not to accept the argument by the Defendant regarding section 4 of the Statute of Frauds, R.S.O. 1990, C. S.19, as amended (“SOF”), for two reasons. First, there is some evidence in writing of the agreement between the parties. Second, the doctrine of part performance applies, saving the action even in the absence of anything in writing.
[24] Mr. Treslan argues that the evidence is sufficient for this Court to find the existence of an oral contract between the parties, at least with regard to its essential terms. Further, the Andersons terminated the agreement, for no good reason. Finally, the appropriate remedy is specific performance – an Order that, within 60 days, KOA transfer 116 to the Plaintiffs for $225,615.25 ($55,332.43, the down-payment and closing costs paid by the Andersons, plus $12,691.56, the outstanding renovation costs paid by the Andersons, plus $157,977.37, the amount owing on the mortgage as of December 31, 2014).
[25] It is submitted by Mr. Treslan that specific performance should be granted because, otherwise, the Andersons will benefit from their alleged wrongdoing by virtue of the significant increase in the market value of 116 since the end of 2014.
[26] Alternatively, if monetary damages are awarded instead of specific performance, Mr. Treslan submits that the value of 116 ought to be taken as something between $310,000.00 and $360,000.00. The Court would then deduct from that figure the amounts paid for/owing by the Andersons (the down-payment and closing costs, the renovations expenses, and the balance due on the mortgage).
[27] Mr. Staples, for the Defendant, submitted in his closing address that the SOF is a complete defence to the action; there is nothing in writing signed by the Andersons or KOA, and the doctrine of part performance does not apply.
[28] In the event that this Court disagrees with that submission, Mr. Staples argues that this Court ought to either prefer the evidence of the Andersons in terms of what was agreed to between the parties or, alternatively, find that no clear agreement has been proven. In the result, there was no breach committed by the Defendant.
[29] In the further alternative, if this Court accepts the Plaintiffs’ version of the agreement between the parties, Mr. Staples submits that the Andersons were entitled to terminate the agreement because the Plaintiffs had not complied with its terms.
[30] Finally, if some remedy is granted to the Plaintiffs, Mr. Staples argues that it should be monetary damages and not specific performance. $250,000.00 ought to be taken as the value of 116, and after the amounts paid for/owing by the Andersons are deducted from that figure, the resulting number is very small.
II. Analysis
The Factual Issues
An Agreement?
[31] I will first address the question of whether the Plaintiffs’ action is defeated by the SOF.
[32] Section 4 of the SOF provides as follows:
No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor’s or administrator’s own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party. R.S.O. 1990, c. S.19, s. 4; 1994, c. 27, s. 55.
[33] Both sides agree that the said provision is subject to the equitable doctrine of part performance.
[34] More than 60 years ago, the Supreme Court of Canada decided the case of Deglman v. Guaranty Trust Co. of Canada, 1954 CarswellOnt 140. Paragraph 21 of its decision, reproduced below, explains what the party relying upon the doctrine of part performance (in our case, Jesse and Nicole) must prove on a balance of probabilities:
In Wilson v. Cameron, Meredith C.J.O. did not treat what was said in the judgments in Maddison v. Alderson in regard to the point with which we are here concerned as obiter, but interpreted those judgments as supporting the statements from Halsbury and Fry on Specific Performance which he adopted in the passage which is quoted from his judgment above. I am unable to agree with this interpretation. After an anxious consideration of the judgments in Maddison v. Alderson, of all the cases cited by counsel and of the decisions referred to by the Court of Appeal for Ontario in Fox v. White and in Wilson v. Cameron, I have reached the conclusion that the correct interpretation of the decision in Maddison v. Alderson is that adopted by this Court in McNeil v. Corbett[. In that case the unanimous judgment of the Court was delivered by Duff J., as he then was. The judgment turns on the question whether the acts relied upon as part performance were sufficient to take the contract sued on, which was for the purchase of an interest in lands and of which there was no sufficient written memorandum, out of the operation of the Statute of Frauds. At pages 611 and 612 Duff J. says:—
With great respect, moreover, I must disagree with the view of the court below that the plaintiff has made out a case enabling him to take advantage of the doctrine known as the doctrine of part performance. A condition of the application of that doctrine is thus stated by Lord Selborne, in Maddison v. Alderson. at page 479:—
“All the authorities shew that the acts relied upon must be unequivocally, and in their own nature, referable to some such agreement as that alleged;”
i.e. to an agreement respecting the lands themselves; and, as further explained in that case, a plaintiff who relies upon acts of part performance to excuse the non-production of a note or memorandum under the Statute of Frauds, should first prove the acts relied upon; it is only after such acts unequivocally referable in their own nature to some dealing with the land which is alleged to have been the subject of the agreement sued upon have been proved that evidence of the oral agreement becomes admissible for the purpose of explaining those acts. It is for this reason that a payment of purchase money alone can never be a sufficient act of performance within the rule.
Here there is nothing in the nature of the acts proved which bears any necessary relation to the interest in land said to have been the subject of the agreement in question.
[35] Moving ahead many years, I agree with and adopt the following, at paragraphs 37 through 40 of the decision of Justice Lofchik in Clark Machine Inc. v. R. Difruscia Holdings Ltd., 2010 ONSC 5449, as being an accurate statement of the law as it pertains to the doctrine of part performance:
[37] In order for an agreement for the sale of land to be enforceable, section 4 of the Statute of Frauds requires that such an agreement be in writing and signed by the party to be charged.
Statute of Frauds R.S.O. (1990), ch. S19.
[38] Equity has sought to prevent the Statute of Frauds from being used to inflict fraud by creating the doctrine of part performance. In determining whether or not to cause the Statute of Frauds to yield to the equitable doctrine, the Court ascertains if there are sufficient acts of part performance.
Erie Sand and Gravel Limited v. Tri-B Acres Inc. (2009), 2009 ONCA 709, 254 O.A.C. 377 (C.A.);
Ontario (Minister of National Revenue) v. Sunset Recreational Vehicles Ltd., et al (2003) 30337
[39] The doctrine of part performance requires that the Acts “must unequivocally interpretation”.
Erie Sand and Gravel Limited v. Tri-B Acres Inc. supra; and
Deglman v. Guarantee Trust Co. of Canada 1954 2 (SCC), [1954] S.C.R. 725
[40] The mere payment of money does not qualify as part performance unless it can be said to be unequivocally related to the alleged contract.
Starlight Variety Stores Ltd. v. Cloverlawn Investments Ltd. et al 1979 1879 (ON CA), 22 O.R. (2d) 104 affirmed (1979), 27 O.R. (2d) 256 (C.A.).
Ontario (M.N.R.) v. Sunset Recreation Vehicles Ltd. et al supra.
[36] Finally, no discussion of the law concerning the doctrine of part performance would be complete without mention of the decision of the Court of Appeal for Ontario in Erie Sand & Gravel Ltd. v. Seres’ Farms Ltd., 2009 ONCA 709. These points are important, taken from that decision:
(i) “if one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations, the first party will be precluded from relying on the requirements in the Statute of Frauds to excuse its own performance” (paragraph 64);
(ii) “the acts of both parties to an alleged oral agreement may be considered when a court is called on to determine if sufficient acts of part performance take an alleged agreement outside the operation of the Statute of Frauds” (paragraph 75);
(iii) in determining whether the acts of part performance are unequivocally referable in their own nature to some dealing with the property in question, a two-step approach should be taken: first analyze whether the acts of part performance are connected to that particular piece of property, and then determine whether there had been some dealing with the property (paragraphs 89-90); and
(iv) at the second step mentioned immediately above, the judge should consider the context or the relevant circumstances and then consider the acts of part performance having regard to the way in which reasonable people carry on their affairs (paragraph 94).
[37] Using the approach recommended by the Court of Appeal for Ontario in Erie Sand & Gravel Ltd., supra, which approach is not at all inconsistent with the other authorities cited above, I find that, although the SOF would normally apply to this situation in that there is clearly nothing in writing signed by KOA or the Andersons, the Plaintiffs have established, on a balance of probabilities, that the doctrine of part performance applies in this case.
[38] First, the Andersons are not entitled to rely upon section 4 of the SOF because they stood by while Jesse and Nicole acted to their detriment by performing at least some of their contractual obligations (beyond the mere payment of money to KOA). For example, during both the 2012/2013 and 2013/2014 seasons, the Plaintiffs used 116 as the team house for the Shreducation program. As another example, the Plaintiffs did not charge to the Andersons what would have been the normal Shreducation registration fees for the Andersons’ two children who were involved in the program.
[39] Second, looking at the acts of both sides after the Andersons acquired 116, one is left with the reality that, although there were some disputes between the parties along the way, nobody did anything to signal a termination of the deal until November 6, 2014, when Shane emailed to Nicole the termination letter, Exhibit 35. Surely, two whole years of both sides operating as if there was an agreement in place with regard to 116 takes this matter outside the ambit of the SOF.
[40] Third, in determining whether the acts of part performance are unequivocally referable in their own nature to some dealing with the property in question, the first step of the analysis results in the inescapable conclusion that the acts of part performance on behalf of Jesse and Nicole were indeed connected to the particular piece of property in question, 116. It was that specific real property where the Shreducation team house was located. And it was the Plaintiffs’ future interest in that specific real property that led to the waiver of the Shreducation registration fees for two of the Andersons’ children. There is no suggestion by anyone that the said waiver would have been extended but for some deal being in place whereby the Plaintiffs were anticipated to acquire from KOA ownership of 116. At the second step of the analysis, the question is whether there had been some dealing with 116? In my opinion, the answer is yes. Reasonable people do not make a new home for their business in a piece of real estate, help renovate that property (if even to a limited extent, as testified to by the Andersons), and sell everything they own in Orangeville to move closer to that property (all things done by Jesse and Nicole) if they do not have some agreement in place concerning that property.
[41] Finally, on a more global view of the issue, it would be a real injustice to throw this action out on the sole basis that there was no written agreement signed by KOA or the Andersons. Clearly, on everyone’s evidence, the Andersons were more sophisticated than the Plaintiffs when it came to business dealings and contracts in particular. And it was the Andersons who approached Jesse and Nicole about doing something together on a condominium unit in the Blue Mountain area; when reminded about his evidence at examination for discovery, Shane acknowledged that in cross-examination at trial. Thus, if anything in writing was going to be prepared and signed, especially given that the Andersons’ family home was on the line in order to secure the funding necessary to acquire the two condominiums, one would reasonably think that the Andersons would have done that.
[42] I will next address the question of whether there was any agreement at all between the parties with regard to 116.
[43] At its essence, any agreement that was made between these parties would form the basis of an oral contract.
[44] In dealing with alleged contracts that are wholly oral, (i) it is necessary to examine the words and actions of the parties in order to determine what they intended; (ii) evidence of the parties’ subjective intentions has no independent place in deciding what the terms of the agreement were; (iii) rather, the test of what the parties agreed to is an objective one; and (iv) the contract must include the necessary ingredients of offer, acceptance and consideration. S & J Gareri Trucking Ltd. v. Onyx Corporation, 2016 ONCA 505, at paragraph 7.
[45] I agree with and adopt the following, at paragraphs 43 through 49 of the decision of Justice Corbett in Brownlee v. Kashin, 2015 ONSC 1035, as being a helpful summary of the legal principles applicable to oral contracts:
[43] Formation of a contract occurs when one party makes an offer that the other accepts, the parties intend to create legal relations, and there is consideration.
[44] In this case there was intent to create legal relations and consideration. But was there “offer and acceptance”? Underlying “offer and acceptance” is the notion that the parties have reached a “meeting of the minds”. Thus a contract is created only where the parties “have formed a mutual intention to enter into a bargain with each other and, further, are in agreement as to the terms of that bargain”.
[45] It is settled law that “[t]he question of whether the parties entered into a binding contract must be determined objectively. What would a reasonable bystander observing the parties conclude with respect to whether a contract was concluded and on what terms?”
[46] Where possible the courts will find an enforceable contract.[4] However if the parties fail to agree on the essential terms of their contract, the contract will fail for lack of “sufficient [meeting of the minds] to enable the courts to enforce their agreement.”
Considering All of the Circumstances
[47] The court should look at all of the circumstances surrounding the alleged agreement to decide whether the parties came to an agreement, and if they did, in deciding the terms to which they agreed. These circumstances include words and conduct, future actions and representations by both parties, and reliance.
[48] This analysis applies, not just to the question of whether the parties formed a contract, but also in respect to the terms to which they agreed:
The law is clear that the test in this area must be what would an objective observer take the parties to have agreed to based on what they said or did. I suppose it could fairly be said that the corollary of that is that the objective observer should be able to, with some degree of confidence, stipulate what it is that the parties have agreed to do in order to determine if the alleged contract is enforceable. In other words, what could one order the parties specifically to perform in order to effectuate the alleged bargain.
What Contract Terms Are “Essential”?
[49] Not every minor detail must be agreed for there to be a contract. But the “essential” terms must be agreed. The “determination of whether the parties have agreed to all the essential terms of a particular agreement rests on an assessment of whether, in a case where there are missing terms, the omitted terms are so important that they warrant a conclusion that the parties have not yet reached an agreement.”
[46] In my view, looked at objectively, even accepting the evidence of the Andersons, there was clearly an agreement reached between the parties, a meeting of the minds, with regard to 116. There was an initial approach (an offer) made by the Andersons, specifically Shelly. There was some back and forth. There was acceptance by both sides of the essential ingredients of the bargain. And there was consideration extended from the Plaintiffs to the Andersons in the form of waived Shreducation fees.
[47] In direct examination, Shelly testified that, by the end of November 2012, after a meeting that she had with Jesse and Nicole at their home in Orangeville, she felt that the parties had reached an agreement.
[48] For his part, Shane, in cross-examination, testified that “I agree that there was an agreement, yes”.
[49] Thus, I conclude that the parties had an agreement concerning 116.
Terms of the Agreement?
[50] This is the more debatable issue. In direct examination, Nicole testified that the deal between the parties included these terms:
(i) 116 would be used as Shreducation’s team house;
(ii) within three years, by September 2015 or so, Jesse and Nicole had the option to buy 116;
(iii) certain Shreducation fees would be waived for the Andersons’ two children;
(iv) athlete rental income and public rental income generated by 116 would go towards the operating costs of the unit;
(v) if there was a shortfall (if the total rental income was less than the operating costs), then Jesse and Nicole were personally responsible to pay the difference; and
(vi) if there was a surplus (if the total rental income exceeded the operating costs), then the difference would be applied towards the down-payment, closing and renovations costs borne by the Andersons.
[51] In cross-examination, other alleged terms of the agreement were suggested to Nicole by Mr. Staples, such as her and Jesse being required to pay $2500.00 per month on top of all rental income, but Nicole adamantly disagreed with those suggestions.
[52] In direct examination, Jesse testified to those same terms of the agreement outlined above. He added some other details: the Andersons were not to be out any money; and Shane was to be responsible for the accounting; and, at the time of purchase, Jesse and Nicole were to simply assume the mortgage on the property, provided that the Andersons were fully compensated for the loan that they had taken out to acquire the unit (for the down-payment and closing costs), plus interest, plus the renovations costs.
[53] Again, in cross-examination, other alleged terms of the agreement were suggested to Jesse by counsel for the Defendant, such as a requirement that $1600.00 per month be paid to KOA on top of all rental income, but Jesse unequivocally disagreed with those suggestions.
[54] In direct examination, Shelly testified that the deal between the parties included the following terms:
(i) all team house athlete rent money would go towards the down-payment, closing and renovations costs;
(ii) Jesse and Nicole would personally pay the operating costs of the unit, year-round, estimated at $1600.00 per month;
(iii) all public rental income would belong to KOA until such time as the down-payment, closing and renovations costs had been paid-off;
(iv) for a minimum of three years, 116 would be used as Shreducation’s team house, and if Jesse and Nicole could not obtain a mortgage to acquire 116 by the end of the three years, then the Andersons would continue their involvement, as mortgagees;
(v) Shreducation’s $1000.00 registration fee per child would be waived (not charged to the Andersons), while coaching and trip fees that were not local would be paid for by the Andersons, and local daily coaching fees would be credited towards the down-payment, closing and renovations costs; and
(vi) when Jesse and Nicole came into any money, they would “chunk-down” towards the down-payment, closing and renovations costs in order to pay those off as soon as possible (the incentive to do so for the Plaintiffs was to gain access to the public rentals revenue stream).
[55] In cross-examination, Shelly expressed some uncertainty as to whether Jesse and Nicole had the right to buy 116 whenever they wanted to within three years. Ultimately, she said that they did not have that right because they had to run Shreducation out of 116 for at least three years and show some financial responsibility before acquiring the unit.
[56] I pause here to observe that I do not understand that evidence. What does financial responsibility have to do with the terms of the agreement as described by Shelly? I have no idea.
[57] In cross-examination, Shelly clarified that the $1600.00 per month, mentioned in clause (ii) above, was understood by all parties to be an estimate only and would increase because there were some unknowns, such as the cost of utilities, when the deal was made in November 2012.
[58] In direct examination, Shane’s evidence about the terms of the deal did not differ materially from anything that Shelly had testified to. On whether Jesse and Nicole had the right to acquire 116, for example, the day after the agreement was reached, Shane answered that in the negative; it was not contemplated that the Plaintiffs would quickly pay the Andersons what they were owed and then “leave 116 out of the team house”.
[59] Frankly, I am not sure what Shane meant by that. Presumably, he meant that Jesse and Nicole could acquire 116 immediately after the deal was made but on condition that the unit continued to be used as Shreducation’s team house for a minimum of three years after the agreement had been made.
[60] In cross-examination, Shane was not shaken on what the essential terms of the agreement were.
[61] I prefer the evidence of Nicole and Jesse over that of Shelly and Shane, and thus, I find on balance that the essential terms of the agreement between the parties were as stated by the Plaintiffs:
(i) 116 would be used as Shreducation’s team house;
(ii) within three years, by September 2015 or so, Jesse and Nicole had the option to buy 116;
(iii) certain Shreducation fees would be waived for the Andersons’ two children;
(iv) athlete rental income and public rental income generated by 116 would go towards the operating costs of the unit;
(v) if there was a shortfall (if the total rental income was less than the operating costs), then Jesse and Nicole were personally responsible to pay the difference; and
(vi) if there was a surplus (if the total rental income exceeded the operating costs), then the difference would be applied towards the down-payment, closing and renovations costs borne by the Andersons.
[62] I have come to that conclusion for three reasons.
[63] First, consider who the Andersons are. Shelly is the granddaughter of a well-known entrepreneur and philanthropist, the daughter of a biologist (her father) and a real estate agent (her mother), a high school graduate, and herself a former real estate agent. She is very conversant with the buying and selling of properties, including contracts therefor. Shane is a university graduate with a degree in physics and a self-employed consultant with considerable familiarity with contracts and business dealings. Together, they run a company, KOA, that holds real estate. Besides their family home in Caledon and their condominiums in the Blue Mountain area, they have a townhome and a building lot in British Columbia, and they own a timeshare in Florida.
[64] According to the Andersons, they had placed themselves at considerable financial jeopardy in order to make this deal with the Plaintiffs. They were forced to borrow money from Shane’s friend. They were forced to leverage all of their assets, including their beloved family home in Caledon, to make it happen.
[65] Well more than 100 Exhibits were filed at trial. Many of those are written communications between the parties after the agreement was reached concerning 116.
[66] Yet, in that context outlined above, there is not a single written communication, not one, not ever, from the Andersons, or either of them, to the Plaintiffs, or either of them, saying something to the effect of “where is our money – the $1600.00 or so, per month, or any amount per month, on top of the rental revenues?” Nothing to that effect.
[67] With respect, that makes absolutely no common sense, especially in the face of the uncontroverted evidence that Jesse and Nicole, from the onset, never made such a regular monthly payment to KOA in addition to the rental revenues generated by 116. Never. In two years.
[68] The only explanation for the deafening silence on the part of the Andersons is that there was no agreement that the Plaintiffs pay to KOA $1600.00 per month, or $2500.00 per month, or anything per month, in addition to the rentals. I so find.
[69] Second, a look at the totality of the writings from the Andersons to the Plaintiffs after the deal was made suggests that the agreement was exactly as described by Nicole and Jesse and did not include any requirement that the Plaintiffs pay any amount of money per month to KOA on top of rental revenues.
[70] One very clear example will suffice, Exhibit 15, Shane’s email to Jesse dated September 4, 2013, approximately one year after the agreement was made. Yes, as Shane testified to, context is important. I accept that Shane prepared the said communication rather quickly and while feeling some anger towards Jesse. I also accept that Shane was not intending to recite in complete detail every nuance of the bargain.
[71] But, at the same time, Shane is a prudent and careful person. The said email is well-written. It is thorough. It is lengthy. And it expressly corroborates the Plaintiffs’ version of the agreement and destroys any notion that the deal was as testified to by the Andersons. In the said communication, Shane reminds Jesse that rental income is to be used to cover operational costs, not that rental income plus some other monthly amount is to be used to cover those costs. Further, Shane tells Jesse that the Andersons want to ensure that Jesse and Nicole cover the operational costs so that the Andersons are not out-of-pocket any money, not that they are already considerably out-of-pocket due to the Plaintiffs having habitually failed to pay the top-up amount per month.
[72] It is simply beyond credulity to accept that Shane, with his background, wrote such a lengthy email which included a bullet-point summary of the deal but which omitted the crucial term about the top-up monthly payment because Shane was rushed and angry and focussed on something else. I reject that explanation. I find that Exhibit 15 is silent about any top-up monthly amount because that was never part of the agreement between the parties.
[73] Third and finally, I disagree with Mr. Staples that this Court ought to find the evidence of the Andersons to be generally more credible and reliable than that of the Plaintiffs. I come to the opposite conclusion.
[74] It is submitted by Mr. Staples that the Plaintiffs’ version of the deal is overly simplistic and unrealistic. Further, it is argued that the Plaintiffs were too vague and uncertain in their evidence about how the agreement came to be, in terms of dates and places of meetings, for example.
[75] I disagree with both submissions. On the first, there is nothing incredible about the notion of a simple agreement. In fact, between good friends, one might very well anticipate a slim deal. As for whether the agreement described by the Plaintiffs is unrealistic, I find that argument surprising given that what the Plaintiffs allege as being the essential terms of the agreement mirrors what Shane himself outlined in, for instance, his September 4, 2013 correspondence. And what more is required besides something that meets the objectives of both sides? The Andersons themselves testified that what they really wanted to do was to help Jesse and Nicole, and to help the Shreducation program by giving it a home for the athletes and the coaches. I think that Shelly’s tears while testifying, when she spoke about her love for the program and her commitment to the athletes, were genuine. The agreement as described by the Plaintiffs meets the objectives of the parties every bit as much, probably more, than that alleged by the Andersons. On the Plaintiffs’ version of the agreement, there was more room for error, something that the Andersons would have wanted. This was never intended to be an even-handed business venture. It was always intended to be a form of altruism, almost philanthropy, on the part of the Andersons.
[76] Shelly and Shane ought to be commended for their generosity and community-mindedness. Why their stance has changed, I do not know.
[77] On the second submission, I take a contrarian view. The fact that Jesse and Nicole were not as certain in their trial testimony about places and dates, and the fact that they did not send emails between themselves to prove the content of certain discussions, like the Andersons did, only serve to bolster (not detract from) the veracity of the Plaintiffs’ evidence.
[78] This was a deal between good friends. There was no reason for Nicole and Jesse to take protective notes or to create confirmatory “memorandums” as to what was discussed, when and where and with whom present. That there are in the record internal emails between the Andersons, like Exhibits 16 and 24 as examples, which were for some reason never sent to the Plaintiffs, makes me suspicious as to whether the Andersons, not the Plaintiffs, have engaged in the type of historical revisionism that they accuse Jesse and Nicole of.
Breach of the Agreement?
[79] I accept Shane’s admission in his testimony that his November 6, 2014 correspondence to Jesse and Nicole (Exhibit 35) finally terminated the agreement between the parties. I also accept his evidence that the Andersons elected to terminate the deal for two alleged reasons: (i) Jesse and Nicole had failed to cover all operating costs for 116, and (ii) the Plaintiffs failed to use 116 as the team house for Shreducation in the 2014/2015 season.
[80] I find that there was no legitimate basis for the termination of the agreement.
[81] On the first point, given my finding that there was no monthly top-up amount that was a part of the agreement between the parties, it is clear that the Plaintiffs had complied with the requirements that:
(i) athlete rental income and public rental income generated by 116 would go towards the operating costs of the unit;
(ii) if there was a shortfall (if the total rental income was less than the operating costs), then Jesse and Nicole were personally responsible to pay the difference; and
(iii) if there was a surplus (if the total rental income exceeded the operating costs), then the difference would be applied towards the down-payment, closing and renovations costs borne by the Andersons.
[82] Item (ii) never materialized. Item (iii) was within the purview of the Andersons.
[83] As for item (i), it is submitted by Mr. Staples that the Plaintiffs failed to remit to KOA all of the rental income, and therefore they breached the agreement, even on their own version of it.
[84] I disagree. I accept the evidence of Jesse during his cross-examination at trial that the Andersons were fully aware of and did not object to KOA receiving less than 100 cents on the dollar when it came to rental revenues so that Shreducation could meet its overhead expenses (for instance, pay the coaches).
[85] That makes sense to me. It is undisputed that Shreducation had overhead expenses, including but not limited to coaching costs. It is also undisputed that Shreducation’s only source of income besides what was generated by 116 in terms of rentals was fees paid by or on behalf of the athletes. Finally, it is undisputed that Shreducation had a new home in 116, and the program was not exactly dripping with excess cash (if it was, there would have been no need for the Andersons’ involvement to begin with). In those circumstances, and given that the Plaintiffs were ultimately responsible for any deficit that arose, I think that it is likely that Jesse is correct.
[86] As for whether 116 would be used as Shreducation’s team house in the upcoming season, the record reveals that the Andersons could not possibly have known that as of November 6, 2014. Why not? Because Shane’s own email to Nicole one month later, on December 3, 2014, includes a reference to “news that Shreducation will not be offering a team house this year”. That must have been a development since the date of Exhibit 35, and thus, putting aside the Plaintiffs’ disagreement that the allegation was true even in early December 2014, it certainly could not have formed a ground to terminate the deal a month earlier.
[87] In summary, neither reason advanced by the Andersons for terminating the agreement on November 6, 2014 can withstand scrutiny. It is trite law that a wrongful, or unjustified, termination of an agreement amounts to a material breach of contract. That is what occurred here. The Plaintiffs are therefore entitled to a remedy.
The Legal Issue
Specific Performance/Damages
[88] First, a brief refresher on the meaning of these two remedies.
[89] The term “damages” has been around for a very long time. In 1936, for example, at page 1 of his textbook, The Law of Damages, Frank Gahan, an English barrister, defined the term as “the sum of money which a person wronged is entitled to receive from the wrongdoer as compensation for the wrong”.
[90] Specific performance is an equitable remedy. It is the rendering of a promised performance. Put another way, it requires fulfillment of a legal or contractual obligation. It can arise from a written contract, an oral contract, or a combination of the two. While damages flow from the non-execution of a contract, specific performance enforces the execution of the contract as per its terms. Black’s Law Dictionary, Ninth Edition, Bryan A. Garner, Editor-in-Chief, at page 1529.
[91] Generally, specific performance should not be granted absent evidence that the property in question is unique, or has peculiar or special value, such that its substitute would not be readily available. Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 S.C.R. 415, at paragraph 22.
[92] I agree with Mr. Staples that specific performance is not appropriate here. There is nothing unique, peculiar or special about 116, as admitted to by the Plaintiffs’ own expert witness, Cox.
[93] Further, even assuming without deciding that Mr. Treslan is correct in submitting that there is a residual category of cases where specific performance may be granted to compensate for an especially egregious, perhaps even calculated, breach of contract regarding real property, I make no such finding here.
[94] The Plaintiffs do not even run Shreducation currently. They have no particular need for 116. Monetary damages are entirely adequate.
[95] Mr. Staples is also correct that the damages ought to be measured as of the date of the breach of contract – November 6, 2014.
[96] To calculate the damages, this Court must resolve the dispute between the parties as to the market value of 116 around the time of the breach – something between $310,000.00 and $360,000.00 (per the Plaintiffs) or $250,000.00 (the position of the Andersons).
[97] In my view, it has to be $310,000.00. That is the uncontradicted expert evidence of Cox, which I accept. I dismiss any complaints made by the Andersons about Cox’s methodology and/or his professionalism as being rather spurious.
[98] Mr. Treslan is correct that Cox’s $310,000.00 valuation of 116 as of January 2015 (Exhibit 73) excludes chattels, however, this is not a guessing-game. I have no evidence as to the value of the chattels, and thus, I cannot inflate Cox’s figure on a whim.
[99] On the quantum of the Plaintiffs’ damages, the parties agree that the following two amounts must be deducted from the $310,000.00: (i) $55,332.43 (the down-payment and closing costs) and (ii) $157,977.37 (the mortgage balance owing as of December 31, 2014).
[100] The parties agree further that a third amount for renovations costs must be deducted from the $310,000.00, but in closing submissions counsel disagreed on what that amount should be. Mr. Treslan suggested $12,691.56, pointing to Shane’s spreadsheet (page 279 of Exhibit 53). Mr. Staples suggested $25,543.51, as per paragraph 7(c) of the Statement of Defence.
[101] I agree with Mr. Staples. I have reviewed carefully the evidence of the Plaintiffs. Neither one, knowing of the existence of page 279 of Exhibit 53 while testifying, relied upon the $12,691.56 figure. In fact, during Nicole’s direct examination at trial, she was asked about and expressly agreed with paragraph 7(c) of the Statement of Defence.
[102] Thus, the damages are $310,000.00 minus $238,853.31 ($55,332.43 + $157,977.37 + $25,543.51) = $71,146.69.
III. Conclusion
[103] For all of the above reasons, judgment is granted in favour of the Plaintiffs in the amount of $71,146.69, plus prejudgment interest commencing on November 6, 2014 as per the Courts of Justice Act, plus post-judgment interest as per the Courts of Justice Act.
[104] The CPL against 116 shall be discharged.
[105] On its face, the Plaintiffs are entitled to some costs. If costs cannot be settled between the parties, I will accept written submissions.
[106] Each submission shall be limited to three (3) pages in length, excluding attachments. The Plaintiffs shall file within thirty (30) calendar days of the release of these Reasons, and the Defendant shall file within fifteen (15) calendar days thereafter. There shall be no reply without leave of the Court.
[107] I thank Mr. Treslan and Mr. Staples for their assistance with this case.
Conlan J.
Released: May 25, 2018
COURT FILE NO.: CV15-136
DATE: 20180525
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jesse Fulton and Nicole White
Plaintiffs
- and -
KOA Aloha Inc.
Defendant
REASONS FOR JUDGMENT
Conlan J.
Released: May 25, 2018