Court File and Parties
COURT FILE NO.: 17-62666 DATE: 2018-07-05
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Herbert Holst and Sandra Lee Holst, Plaintiffs A N D: Harjit Singh and Puja Grewal, Defendants
BEFORE: The Honourable Mr. Justice P. R. Sweeny
COUNSEL: Michael B. Stanton, for the Plaintiffs Ajay Duggal and Pankus Sharma, for the Defendants
HEARD: June 21, 2018
E N D O R S E M E N T
[1] This is a motion for summary judgment brought by the plaintiffs in an action arising out of the defendants’ failure to complete an unconditional agreement of purchase and sale for a residential property. The defendants argue that they did not breach the contract and they should be relieved of their obligation as a result of an alleged dramatic drop in the real estate market. In addition, the defendants assert this is not an appropriate case for summary judgment because there is an issue as to whether or not the plaintiffs appropriately mitigated their damages.
[2] On April 10, 2017, the plaintiffs listed their property at 31 Wingfield Place, Hamilton, for $469,900. On April 11, 2017 the defendants entered into a binding agreement of purchase and sale to purchase the property for $565,000 (almost $100,000 over the list price) and paid a $10,000 deposit. The transaction was to close on July 14, 2017. Unfortunately, the defendants were unable to sell their property in Brampton. The defendants requested an extension of the closing which was not granted by the plaintiffs. On July 14, 2017, defendants failed to complete the agreement of purchase and sale.
[3] On August 30, 2017, the plaintiffs commenced this action for damages for breach of contract. The defendants delivered their statement of defence of the territory, 2017. The plaintiffs brought this motion for summary judgment. In their notice of motion, the plaintiffs sought, inter alia, a declaration of the defendants breached the agreement of purchase and sale; an order granting summary judgment to the plaintiff; in the alternative, an order directing a trial of an issue regarding the damages arising from the breach of the agreement of purchase and sale.
[4] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial, with respect to a claim or defence. As the Supreme Court of Canada noted in Hyrniak v. Mauldin, 2014 SCC 7, a trial is not required and the summary judgment motion can achieve a fair and just adjudication if it provides a process that:
(a) allows the judge to make necessary findings of fact; (b) allows the judge to apply law to the facts; and (c) is a more expeditious and less expensive means to achieve a just result than in going to trial.
[5] I am satisfied that there is no genuine issue requiring a trial with regard to whether or not the defendants breached the agreement of purchase and sale.
[6] The defendants have sought to invoke the doctrine of frustration, impossibility, and force majeure. Those doctrines have no application to this case. The defendants entered into an unconditional agreement of purchase and sale to purchase property at a certain price. The offer was not conditional on the sale of their home. They did not complete the transaction. This is a straightforward breach of contract case. A drop in real estate values, even a dramatic drop, would not meet the test of frustration, impossibility or be a force majeure. In any event, the defendants led no expert evidence to address the market conditions. I find that the defendants are liable for damages which the plaintiffs have suffered as a result of the breach of contract.
[7] On the issue of damages, the law is that in the case of a breach of an agreement of purchase and sale, the innocent party is entitled to be placed in the same economic position in which he or she would have been had the contract been performed. The plaintiffs have an obligation to mitigate their damages; that is, the plaintiffs are required to take all reasonable steps to mitigate their losses. It is important to appreciate the interaction between the plaintiffs’ requirement to prove damages and the issue of mitigation.
[8] In 100 Main Street Ltd. v. W.B. Sullivan Construction (1978), 20 O.R. (2d) 401 at para. 73, the Court of Appeal noted the following in dealing with the assessment of damages in the case of breach of an agreement to purchase land:
The damages should have been calculated on the basis of a finding of the highest price obtainable within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commencing on that date. What is reasonable, in each instance, of course, is a question of fact to be decided on the basis of all relevant market circumstances.
[9] The court went on at para. 81 to address the issue of mitigation as follows:
As I have said, with respect to the issue of mitigation, the onus is on the defendant. However, the onus on the defendant to prove failure to mitigate does not relieve the plaintiff from proving an obvious element in the calculation of his damages. McGregor on Damages, supra, at para. 212, page 149, puts the matter this way:
The onus of proof on the issue of mitigation is on the defendant. If he fails to show that the plaintiff ought reasonably to have taken certain mitigating steps, then the normal measure will apply.
Included in the “normal measure” is the difference between the contract price and the market price. Thus, I think that the proper courses for the plaintiff, in presenting its case, is to adduce evidence of the contract price and of the market price or resale price upon which he relies in establishing the loss of bargain. The onus is then on the defendant to show, if he can, that if the plaintiff had taken certain reasonable mitigating steps the damages would be lower.
[10] It is well established that the parties are required to put their best foot forward and lead the evidence which they have to address the issues raised. On the issue of damages, the evidence led by the plaintiffs is that the property was relisted within a few days of the breach. It was relisted for the same price at which it had been previously listed less $900. There were no offers received on the property and after 10 days the price was reduced to $459,000. Within one day, two offers were received on the property: one for $450,000 with a closing date of September 29, 2017 and another with a closing date of August 8, 2017. The plaintiffs accepted the offer for $435,000 with an earlier closing date. This is a significantly lower offer and one of the reasons given supporting the offer was that the purchaser was a colleague at her office and was a newlywed.
[11] On the issue of the value of the property, there was no expert evidence led by the plaintiffs. The plaintiffs’ real estate agent was examined as a witness on this motion under rule 39.03 of the Rules of Civil Procedure. In her examination, she testified that in April 2017 it was her assessment that the property should be listed at $469,900. She testified that it was at the lower end of the market value. She also testified that there was a possibility that this could create a bidding war between potential purchasers. She testified that there were two offers received on the property prior to the plaintiffs’ offer: one for $510,000 and another for $493,560. The evidence was that $469,900 was at the lower end of the price range. Her evidence was that her price range was between about $10-$15,000. It was her evidence that the market value of the property was the same in July 2017 as it was in April 2017.
[12] The real estate agent’s evidence focused on this particular transaction and the advice she gave to the plaintiffs. She was not tendered as an an expert. The plaintiffs have not provided any expert evidence as to the value of the property at the time of the breach; that is, on July 14, 2017. The plaintiffs rely on the sale price of $435,000 as the market value. However, on the evidence of the plaintiffs’ own real estate agent, that was less than the lower range of the market value at that time.
[13] This obligation of the plaintiff to establish the damages applies before any issue of mitigation arises. On the evidence adduced on this motion, the plaintiffs have failed to establish the market value of the property. Based on the evidence of the Plaintiffs’ real estate agent, it appears that the plaintiffs accepted an offer significantly less than the market value of the property; that offer was from a person who worked in the office of the plaintiff Sandra Lee Holst.
[14] The plaintiffs have also claimed certain other damages. These include carrying costs until the transaction closed; extraordinary sums paid to obtain financing to complete the purchase of the property in Tobermory. On this issue, the plaintiffs borrowed $300,000 which was more than they would have received had the transaction been completed. In addition, there is no evidence of what efforts the plaintiffs made to seek more conventional financing and no evidence as to the reasonableness of the financing which was arranged.
[15] On the issue of damages, I find there is a genuine issue requiring a trial. I am unable to reach a fair and just determination of the damages on this motion.
[16] In the result, the plaintiffs will have partial summary judgment in the nature of a declaration that the defendants breached the agreement of purchase and sale with the plaintiffs dated April 11, 2017 relating to 31 Wingfield Place, Hamilton Ontario. I direct that there will be a trial of the issue of damages.
[17] If the parties are unable to agree on costs, I will accept written submissions from the plaintiffs with the bill of costs, any offers to settle and submissions limited to five pages by July 13, 2018. The defendants shall deliver their bill of costs, any offers to settle and submissions limited to five pages by July 27, 2018. If no cost submissions are received by July 27, 2018, the costs will be deemed settled. In addressing the issue of costs, the parties should bear in mind that the plaintiffs are only partially successful.