COURT FILE NO.: CV-18-593451 DATE: 20181018
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
WONKYUN BANG and EUNKYUNG MOON Plaintiffs
– and –
JULIA BENCY SEBASTIAN and SIGNATURE REALTY INC. carrying on business as ROYAL LEPAGE SIGNATURE REALTY Defendants
COUNSEL: Robert S. Choi, for the Plaintiffs Harpeet Singh Makkar, for the Defendant Julia Bency Sebastian
HEARD: August 15, 2018
REASONS FOR DECISION
SANFILIPPO J.
Overview
1On May 7, 2017, Julia Bency Sebastian entered into an Agreement of Purchase and Sale to purchase from Wonkyun Bang and Eunkyung Moon a house known municipally as 4796 Glasshill Grove, Mississauga. Ms. Sebastian paid a $25,000 deposit at the time the agreement to purchase was executed, and agreed to pay a further deposit of $10,000 by May 14, 2017. She did so.
2Ms. Sebastian was to complete the purchase of this property on August 7, 2017. She was at that time required to pay the balance due of the $995,000 purchase price. Instead, Ms. Sebastian and her husband bought a nearby house at a lower price, closing that property acquisition on July 28, 2017. On August 3, 2017, she told Mr. Bang and Ms. Moon, through her lawyers, that she was not able to complete the purchase of their house because she could not obtain financing.
3This left Mr. Bang and Ms. Moon in a challenging position, as they had contracted to purchase a home in Oakville, Ontario, and were relying on the funds that they expected to receive from Ms. Sebastian to pay for their new home. They re-listed the Glasshill Grove property for sale, but it did not re-sell for seven months and, even then, they did not get the price that Ms. Sebastian had agreed to pay. They incurred carrying costs and other expenses in the time that their property was on the market before a new purchaser came forward.
4Ms. Sebastian submits that she ought to be relieved of any obligation under her agreement to purchase the Glasshill Grove property because the contract was frustrated by a supervening unforeseen event: a fall in real estate prices in Mississauga which made her unable to obtain adequate financing. Ms. Sebastian makes this submission even though she agreed to delete the financing condition contained in her offer to purchase the Glasshill Grove property and, indeed, offered to pay above the listing price in furtherance of her objective to purchase this property.
5The vendor plaintiffs bring this motion for summary judgment. Ms. Sebastian argued that this is not an appropriate case for summary judgment. I disagree. I have determined that there is no genuine issue raised by this action that requires a trial for determination.
6For the reasons that follow, I find that the plaintiffs have established that they are entitled to damages against Ms. Sebastian, in the amount of $122,221.33. I order that the deposits paid by Ms. Sebastian, totaling $35,000, shall be transferred to the plaintiffs and applied as a credit toward these damages with the result that Ms. Sebastian is liable to pay the plaintiffs the amount of $87,221.33 plus pre-judgment interest from August 16, 2018 to the date of judgment and post-judgment interest, in accordance with the Courts of Justice Act.
I. IS THE PURCHASER DEFENDANT LIABLE TO THE PLAINTIFFS?
A. The Agreement of Purchase and Sale
7On April 26, 2017, the plaintiffs listed the Glasshill Grove property for sale for the asking price of $949,900. By Agreement of Purchase and Sale dated May 7, 2017, Ms. Sebastian offered to purchase the Glasshill Grove property for $995,000: $45,100 above the list price (the “Agreement of Purchase and Sale”). Additionally, she deleted two conditions from her Agreement of Purchase and Sale prior to its presentation to the vendors, being a home inspection condition and a financing condition that stated as follows:
This offer is conditional upon the Buyer arranging satisfactory financing within five (5) banking days from acceptance of this offer, otherwise the Offer shall become null and void and the deposit returned to the Buyer in full without interest or deduction. This condition is included for the benefit of the Buyer and may be waived at his sole option by notice delivered in writing to the Seller or the Listing Broker within the time period herein.
8Ms. Sebastian deposed that she agreed to the removal of the financing condition “upon the Plaintiff’s insistence”. The evidence does not support this. The Agreement of Purchase and Sale shows, by its terms, that when it was presented to the plaintiffs the financing condition had already been deleted by Ms. Sebastian.
9Counsel for this defendant argued that she was under pressure from the vendors to remove the financing condition in order to make her first offer as attractive as possible, and did so only under duress. Even if there were evidence to support this submission, duress cannot be established solely by stating that the vendor plaintiffs took advantage of a superior bargaining position. I agree with the statement by Perell J. in Lei v. Crawford, 2011 ONSC 349, at para. 7, citing Brooks v. Alker (1975), 9 O.R. (2d) 409 (H.C.J.); Underwood v. Cox (1912), 26 O.L.R. 303 (C.A.); Burris v. Rhind (1899), 29 S.C.R. 498; Piper v. Harris Mfg. Co. (1888), 15 O.A.R. 642: “for duress, there must be coercion of the will of the contracting party and the pressure must be exercised in an unfair, excessive or coercive manner.” None of these elements are established in the current record.
10The Agreement of Purchase and Sale was accepted by the plaintiffs on May 7, 2017, and contractually obligated Ms. Sebastian to complete the purchase of the Glasshill Grove property on August 7, 2017 through payment of the net adjusted amount of the purchase price, $995,000, with credit for deposits she had already paid in the amount of $35,000.
B. The Purchaser’s Failure to Close
11Ms. Sebastian deposed that immediately after May 7, 2017, real estate values in Mississauga took a significant downturn so that the Glasshill Grove property was no longer worth $995,000. The appraisal commissioned by her lender is said to have concluded that the property’s value was $920,000.
12Ms. Sebastian states that, in or about June 2017, she instructed her real estate agent to advise the vendors that she was not able to obtain financing due to the lower than anticipated appraised value of the Glasshill Grove property. Ms. Sebastian proposed to purchase the property at a revised price of $920,000. The vendor plaintiffs deny that they received any such proposal from Ms. Sebastian in June or July 2017 but, in any event, Ms. Sebastian did not receive a response.
13On June 20, 2017, Ms. Sebastian and her husband executed an agreement to sell their existing home at 3348 Angel Pass Drive, Mississauga for the sale price of $715,000, with a closing date of July 27, 2017.
14Instead of using the proceeds from her home sale to complete the purchase of the Glasshill Grove property, Ms. Sebastian entered into an Agreement of Purchase and Sale on June 30, 2017 to purchase another residential property: 3857 Tacc Drive, Mississauga, Ontario. The agreement to purchase the Tacc Drive property obligated Ms. Sebastian to pay $919,000 on the closing of this property on July 28, 2017, mere days before she was already contractually committed to complete her purchase of the plaintiffs’ property. Ms. Sebastian’s offer to purchase the Tacc Drive property contains the identical financing condition that was in her Agreement of Purchase and Sale to purchase the Glasshill Grove Property. Ms. Sebastian chose to delete this condition in her offer to purchase the Tacc Drive property, as she had done in her offer on the Glasshill Grove property.
15On July 28, 2017, Ms. Sebastian completed the acquisition of the Tacc Drive property. She paid the balance owing on the purchase price of $919,000, assisted by mortgage financing in the amount of $597,350. On August 3, 2017, her real estate lawyer delivered an email to the plaintiffs’ real estate lawyer stating simply as follows:
In respect of the above transaction, we have been advised by the purchasers that they are unable to close this transaction. They have informed us that the appraisal for the subject property has come up really low and has made it impossible for our clients to go ahead with the purchase. Kindly advise your client accordingly.
16The plaintiffs treated this communication as an anticipatory breach of contract. The plaintiffs agreed to forgo tender on closing and to proceed with relisting the property for sale, reserving to seek from Ms. Sebastian any resultant damages. The plaintiffs seek such damages through this action and submit that they are entitled to summary judgment because the claims that they advance raise no genuine issue requiring a trial.
C. Principles Applicable to Summary Judgment
17The plaintiffs’ motion for summary judgment is based on Rule 20.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides as follows:
A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim.
18Rule 20.04(2) directs as follows:
20.04(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
20.04(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.
20.04(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.
19In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court emphasized that the important objective of ensuring access to justice requires an effective and accessible process for the enforcement of rights. The procedural tool refined in Hryniak, the summary judgment motion, was emphasized as a means to achieve timely and efficient adjudication in certain, but not all, cases. In Hryniak, the Supreme Court provided the template by which Rule 20 is to be applied.
20In Hryniak, at para. 66, the court sets out a two-part test for considering summary judgment under Rule 20.04(2)(a), termed the “Roadmap”. The first step is that the motion judge must determine whether there is a genuine issue requiring trial based only on the evidence contained in the motion record, specifically without using any of the powers set out in Rule 20.04(2.1). There will be no genuine issue requiring trial where the evidentiary record on the motion provides the judge with the evidence necessary to reach a fair and just determination in a process that is timely, proportionate and affordable, as is stated in Hryniak at paras. 4, 28, 66 and specifically at 49. Paragraph 49 states:
There will be no genuine issue requiring a trial when 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 law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
21The second step in the “Roadmap” is activated when a judge finds that there is a genuine issue requiring a trial. The court should then determine whether the issue can be decided using the powers set out in Rules 20.04(2.1) and (2.2). These powers are to be employed where they will lead to a fair and just result but not where they do not serve the goals of affordability and proportionality, as stated in Hryniak at para. 66:
She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
22The foundational themes in Hryniak focus on the goals of proportionate, cost-effective and timely adjudication on an evidentiary record and in a process that allows for a fair and just determination. The Supreme Court emphasized that when a judge can fairly and justly adjudicate a case using the new powers under Rules 20.04(2.1) and (2.2), it will be in the interest of justice to do so. The decision to use these powers is within the discretion of the judge: Hryniak at para. 68.
23The initial task on this motion is to analyze the record to determine whether there is an evidentiary basis on which the plaintiffs can establish an entitlement to judgment without requiring a trial. If there are genuine issues for trial, the next step would be to determine whether they are capable of adjudication using the tools set out in Rules 20.04(2.1) and (2.2).
D. Analysis – Liability
24Mr. Bang and Ms. Moon seek summary judgment against Ms. Sebastian for damages arising from her failure to close the purchase of the Glasshill Grove property on August 7, 2017. Ms. Sebastian relies on the common law doctrine of frustration. She submits that she did not breach the Agreement of Purchase and Sale of the Glasshill Grove property, but rather it was frustrated by a drop in real estate values that prevented her from obtaining the required mortgage financing. Ms. Sebastian submits that the plaintiffs’ damage claim is excessive, remote and not foreseeable.
25The facts necessary to determine the issue of liability are largely not in dispute. The parties agree that they entered into the Agreement of Purchase and Sale; the financing condition was deleted and therefore did not form part of that agreement; the defendant did not obtain financing for the purchase of the Glasshill Grove property, and; the defendant did not complete the acquisition of this property on the date agreed upon for closing.
26Ms. Sebastian submits that there is a genuine issue requiring trial concerning whether she is discharged from performing her obligations under the Agreement of Purchase and Sale on the basis of the doctrine of frustration. I disagree. This issue does not require a trial for determination.
The Doctrine of Frustration
27The doctrine of frustration operates to relieve parties of their bargain because a supervening event has occurred, without the fault of either party, which renders the performance of the contract substantively different than the parties had bargained for. This is seen in Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 53:
Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”: Peter Kiewit Sons Co. of Canada v. Eakins Construction Ltd., [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Farehan Urban District Council, [1956] A.C. 696 (U.K. H.L.), at p. 729.
28The Supreme Court canvassed earlier cases of frustration that assessed the contractual obligations on an “implied term” theory, namely: “if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end”: Naylor Group at para. 54. This approach was discarded in favour of a preferred analysis, referred to by the Court as the “radical change in the obligation” approach, namely: has a supervening event occurred that has altered the contract to such an extent that to compel performance would cause one of the contracting parties to do something that is “radically different” than what the parties had agreed to under the contract: Naylor Group at para. 55.
29Both approaches, however, share a common element: there can be no frustration if the supervening event was contemplated by the parties at the time of contracting and was provided for or, as in the present case, deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 9 O.R. (2d) 617, at p. 626 (C.A.).
30A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Gerstel v. Kelman, 2015 ONSC 978, 40 B.L.R. (5th) 314. I have determined that the purchaser defendant has failed to do so.
Application of Principles
31The doctrine of frustration applies to contracts affecting land: Capital Quality Homes, at p. 629; Dinicola v. Huang & Danczkay Properties (1996), 29 O.R. (3d) 161 (Gen. Div.), aff’d (1998), 40 O.R. (3d) 252 (C.A.).
32The purchaser defendant must establish that the Agreement of Purchase and Sale is frustrated because an unforeseen supervening event took place without the fault of either party that radically altered the contractual obligations and thereby made it impossible for her to carry out the purchase of the Glasshill Grove property.
33Ms. Sebastian relies on two events that she claims constitute unforeseen supervening events: her inability to qualify for financing at the level required for her to complete the purchase transaction and, as a sub-element of this event, a fall in the value of real estate in the area of the Glasshill Grove property. Neither of these events were established as an unforeseen supervening event in the circumstances of this case.
34Ms. Sebastian knew at the time she was making her offer to purchase that she would need to obtain mortgage financing to complete the purchase of the Glasshill Grove property. She also knew what a failure to obtain the required financing would mean for her ability to complete the purchase transaction, as is evidenced by her inclusion of a financing condition in the first draft of her offer to purchase. Deleting the financing condition shows that Ms. Sebastian accepted the risk that she could obtain mortgage financing as part of her offer to purchase the Glasshill Grove Property. In her words, she submitted the offer to purchase with the financing condition deleted because the property market was “hot”, and she wanted to make her offer more attractive. There is nothing unforeseen about the complication that occurred when she failed to qualify for the level of financing required to purchase the plaintiffs’ property.
35Further, Ms. Sebastian has not established that there was any decline in real estate values in the time period between her execution of the Agreement of Purchase and Sale (May 7, 2017) and the closing date (August 7, 2017). No expert evidence was presented on this issue. Rather, the purchaser defendant relies on an appraisal received by her institutional mortgage lender that, she says, assessed the value of the Glasshill Grove property in May 2017 as $920,000. Aside from the reliability of this evidence as hearsay, this evidence does not, on its own, establish that the value of this property fell in the weeks after Ms. Sebastian’s offer to purchase the property for the amount of $995,000. If anything, this evidence shows only that Ms. Sebastian overpaid when offering to pay $45,100 above the property’s listing price of $949,900.
36However, even if the purchaser defendant had established a fall in real estate values in Mississauga in the period from May to August 2017, this would still not have constituted an “unforeseen supervening event” of the nature required to invoke the doctrine of frustration in this case. Ms. Sebastian was the owner of real estate at the time that she offered to purchase the Glasshill Grove property. She had listed her property for sale in order to have sufficient capital on hand to purchase the Glasshill Grove property. She timed the sale of her property with the acquisition of a new property. She knew that property values could go up, and from this she knew that property values could go down. Ms. Sebastian deposed that the decrease in values was beyond her control and not what she expected would occur, but this does not make it “unforeseen”.
37In any event, any fall in real estate values did not “radically alter” the obligations that Ms. Sebastian had agreed to in the Agreement of Purchase and Sale. Ms. Sebastian contracted to pay $995,000 on August 7, 2017 regardless of whether she could obtain financing.
Summary - Liability
38I have concluded that there is no genuine issue requiring a trial concerning the plaintiffs’ claim that Ms. Sebastian is liable to them for breach of the Agreement of Purchase and Sale. Ms. Sebastian’s failure to complete her contractual agreement to purchase the Glasshill Grove property constitutes a breach of contract that is not excused by the doctrine of frustration. She has not established that real estate values fell in the short time under analysis or, if so, that a fall in real estate values in residential home ownership or acquisition was an unforeseen supervening event of the nature required to give effect to the doctrine of frustration. She has not established that any such decline in value would radically alter the contract that she entered into. The plaintiffs have established a basis for summary judgment.
II. WHAT DAMAGES WERE CAUSED BY THE PURCHASER’S BREACH?
Applicable Principles to the Determination of Damages
39Having found that the purchaser defendant is liable to the plaintiffs in breach of contract, the task then is to determine the damages to which the plaintiffs are entitled. Damages for breach of contract should place the plaintiffs in the monetary position that the plaintiffs would have been in had the purchaser defendant not breached the Agreement of Purchase and Sale.
40The principles applicable to the determination of damages arising out of a failed real estate transaction were stated by the Ontario Court of Appeal in 100 Main Street East Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401 (C.A.), at pp. 414-415: “The most general principle relating to the assessment of the damages is that the plaintiff is entitled to be put in the position it would have been in if the contract had been performed, so far as money can do it.” Also, Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3 at para. 29, applying Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145, at p. 151: “[the plaintiffs are entitled to receive damages] such as may fairly and reasonably be considered either arising naturally … from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”
41In the circumstances of this case, the appropriate date for assessment of damages is the date of judgment: Semelhago v. Paramadevan, [1996] 2 S.C.R. 415.
42The plaintiffs have a duty to mitigate their damages: Michaels v. Red Deer College, [1976] 2 S.C.R. 324 at p. 331. This duty requires that the plaintiffs act reasonably in containing or limiting the losses resulting from the purchaser defendant’s conduct, as is explained in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675 at paras. 23-25: “The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps… Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant….” See also: 100 Main Street, at p. 423; Dobson v. Winton & Robbins Ltd., [1959] S.C.R. 775.
43The purchaser defendant contends that the plaintiffs failed to mitigate their loss by refusing to a reduction in the contract purchase price from $995,000 to $920,000 when this proposal is said to have been made to them by the purchaser’s agent in June or July 2017. The plaintiffs deny receipt of any such proposal and submit that there is no evidence that such an offer was made to them through the agents. I agree. In any event, the duty to mitigate does not require that the plaintiffs abandon their damage claim for loss of value.
A. Loss of Value of the Glasshill Grove Property
44The plaintiffs re-listed the Glasshill Grove property for sale on August 8, 2017, the day after the failed closing of the sale to Ms. Sebastian. The plaintiffs maintained the property in the multiple listing system from this date to February 15, 2018, starting at a listing price of $998,900 and gradually reducing to $939,000 in their attempts to attract a purchaser. The plaintiffs conducted several open houses, and maintained the property in an attractive condition by retaining home stagers to accentuate the interior design of the house and by tending to the grounds.
45The only offer that the plaintiffs received to purchase the Glasshill Grove property was dated February 12, 2018, by which Yun Peng Zhao and Yuxin Tang (the “Subsequent Purchasers”) offered to purchase the property for $910,000. The plaintiffs’ counter-offer at the sum of $920,000 was accepted by the Subsequent Purchasers. The closing took place on March 8, 2018.
46The purchaser defendant contends that the plaintiffs did not present expert evidence of the market value of the Glasshill Grove property at the time of its sale. The plaintiffs had no obligation to do so. In 100 Main Street, at p.423, Morden J.A. held that, in these circumstances, the resale price of the property is evidence of the market value. As such, I will fix the fair market value of the Glasshill Grove property, realized by the plaintiffs through reasonable mitigation, as $920,000.
47I find that the plaintiffs’ loss of value resulting from Ms. Sebastian’s failure to complete the purchase of the Glasshill Grove property is $75,000, being the difference between the amount that Ms. Sebastian contractually agreed to pay ($995,000) and the amount that the plaintiffs were able to obtain on resale ($920,000).
B. Financing and Carrying Costs
48In addition to the loss in value of the sale of the Glasshill Grove property, the plaintiffs are also entitled to damages that reasonably flowed from the purchaser defendant’s failure to provide them with the closing funds on the scheduled closing date.
Financing Costs
49The plaintiffs’ sale of the Glasshill Grove property was part of their plan to move from Mississauga to Oakville, where they had entered into an agreement of purchase and sale to purchase a property known municipally as 2136 Grosvenor Street. The purchase price of the Grosvenor Street property was $1,200,000. It was scheduled to close on July 7, 2017.
50The plaintiffs intended to apply the proceeds from the sale of the Glasshill Grove property to the purchase of the Grosvenor Street property. They were delayed in doing so from August 7, 2017, the date of the failed purchase by Ms. Sebastian, until March 8, 2018, when they received the proceeds from the resale of the Glasshill Grove property. This meant that the plaintiffs had to borrow money to complete their purchase of the Grosvenor Street property. They incurred financing costs for a period of seven months that would not have been incurred had Ms. Sebastian completed her purchase of the Glasshill Grove property on August 7, 2017.
51The costs of financing that the plaintiffs had to pay because they did not receive the net closing proceeds from Ms. Sebastian on August 7, 2017 include interest on borrowed funds, renewal fees on renewal of loan facilities, the cost of security registrations and home valuation costs. The plaintiffs led evidence on these various cost items in the summary judgment motion and, to allow for the evidence to be presented in a more organized manner for purposes of its computation, I granted leave for the plaintiffs to deliver a further affidavit on the quantification of the financing costs, and leave for the purchaser defendant to cross-examine on any such further affidavit. This did not prove necessary as I was notified by the parties that they reached an agreement that the property financing expenses were $34,325.95 as of June 6, 2018 and $35,800.48 as of August 15, 2018. As the damages sustained by the plaintiffs are being carried through the borrowed money, I will use the August 15, 2018 value ($35,800.48) and award pre-judgment interest on any damages awarded from August 16, 2018 to the date of judgment in accordance with the Courts of Justice Act.
52Ms. Sebastian submits that she is not liable for the financing costs associated with the plaintiffs’ continued ownership of the Glasshill Grove property because these costs are overly remote and not reasonably foreseeable by the purchaser defendant. I cannot accept this submission. I find that Ms. Sebastian knew that the plaintiffs were selling the Glasshill Grove property to purchase another property, just as she and her husband were doing. Ms. Sebastian admitted, in cross-examination, that she knew that the plaintiffs would have to borrow money to cover the $995,000 that the plaintiffs expected to receive from her on August 7, 2017.
53The plaintiffs are entitled to recover any reasonable damages that foreseeably flow from the breach of contract by the defendant: Hadley v. Baxendale, at p. 151. In Kasekas v. Tessler (1989) 4 R.P.R. (2d) 110 (Ont. C.A.), the Court of Appeal upheld a trial judge’s finding that the vendor plaintiff’s damages included the carrying costs, including financing costs, arising from the purchase of a second property. I agree with the statement by Morgan J. in Goldstein v. Goldar, 2018 ONSC 608, at para. 25, that the “damages amount will be the difference between the price under the Agreement and the price of the new sale of the property once it closes, plus any additional carrying costs incurred by the Vendor in mitigating her loss and dealing with the Purchaser’s breach.”
54I have concluded that it was reasonably foreseeable to the purchaser defendant that the plaintiffs would sustain financing costs, or loss of use of funds, in not receiving the contracted net closing amount on August 7, 2017. I also conclude that it was reasonably foreseeable to the purchaser defendant, particularly on her submissions of decreasing real estate values, that it would take a matter of months for the plaintiffs to re-sell their property.
55I do not accept, however, that Ms. Sebastian could reasonably have foreseen that the plaintiffs’ financing would involve four loan facilities (Scotia Bank Bridge Loan; Scotia Bank Line of Credit; National Bank Mortgage; National Bank Line of Credit). The plaintiffs incurred financing broker fees of $1,690, home appraisal fees of $548.05 and lawyer’s fees of $621.50 in managing these four loan facilities, which I find to be remote and unforeseeable by the purchaser defendant.
56As such, I quantify the financing costs reasonably arising from the purchaser defendant’s breach of contract as $35,800.48, being the amount agreed upon as of August 15, 2018, less the amount of $2,859.55 disallowed for broker fees, appraisal fees and lawyer’s costs, for a total of $32,940.93. This amount is awarded to the plaintiffs as against the purchaser defendant.
Carrying Costs
57In addition to the financing costs, the plaintiffs contended that they incurred carrying costs in maintaining the Glasshill Grove property in the time between the failed closing to Ms. Sebastian (August 7, 2017) and the closing of the resale on March 7, 2018. The following carrying costs all result directly from the need to preserve, maintain and market the Glasshill Grove property:
a) Utility expenses for water, electricity and gas heating. The parties agreed during argument that the quantification of utility charges is $1,200; b) Property taxes. The annual property tax for 2017 was $5,187.54, or $342.30 per month. The property taxes for the period from August 7, 2017 to March 8, 2018 are thereby quantified as $3,026.07; c) Insurance. The insurance cost for the house in the affected time period was established was $206.98 each month. The plaintiffs agreed to fix the total amount of insurance as $827.88, waiving the insurance cost for 2018; d) Home Maintenance. The plaintiffs incurred $271.20 each summer and fall month in grass cutting and landscape maintenance, and $293.80 each winter month in snow removal and grounds maintenance. The total amount so incurred is $2,282.60; e) Home Staging. The plaintiffs paid $4,294 to stage the home for sale, and a further amount of $1,695 to continue the staging in the period from December 21, 2017 to February 18, 2018. The total amount so incurred is $5,989.
58These expenses were all reasonably foreseeable to Ms. Sebastian. Indeed, she admitted in cross-examination that she knew that the plaintiffs would have to pay the property taxes, stage and market the property for sale, maintain the grounds and incur additional legal fees as a result of her failure to close the acquisition of the property. These carrying costs result directly from the fact that the plaintiffs needed to maintain the Glasshill Grove property and to market it for sale. These carrying costs, totaling $13,325.55 are awarded to the plaintiffs, payable by the purchaser defendant.
59I also award to the plaintiffs the legal fees thrown away in the aborted sale transaction of $954.85. I find that it was reasonably foreseeable to Ms. Sebastian that her failure to close the transaction would cause the plaintiffs to lose the value of the legal services that they had incurred to complete the Agreement of Purchase and Sale.
60There are two categories of carrying costs that the plaintiffs have failed to establish. The plaintiffs tendered a bundle of invoices totaling $754.41 that were termed “Miscellaneous Costs” and were said to represent costs incurred in maintaining the property. There was no evidence concerning the use of the products purchased, which consisted principally of home cleaning and lawn care products. Additionally, the plaintiffs sought a driving allowance for trips to manage the Glasshill Grove property, submitted in the amount of $1,417.50, said to consist of 15 trips of 25 kilometres per month at an allowance rate of $0.54 per kilometer. There was no evidence concerning the frequency of the trips, their purpose, the need for attendance at the property, the specific distance travelled in each trip, or by whom they were taken.
Summary – Financing Costs and Carrying Costs
61I have determined that the plaintiffs have established that they incurred the sum of $32,940.93 in financing costs, $13,325.55 in carrying costs and $954.85 in legal fees thrown away by reason of the breach of contract of Ms. Sebastian in failing to complete the acquisition of the Glasshill Grove property. These constitute reasonably foreseeable damages that result from the default on the part of the purchaser defendant. I award the plaintiffs $47,221.33, payable by the purchaser defendant, in relation to these damages.
C. Treatment of the Deposit
62Ms. Sebastian paid a deposit of $25,000 when she presented the plaintiffs with the Agreement of Purchase and Sale. She paid a further deposit of $10,000 on or about May 14, 2017 as a supplementary deposit.
63The payment of the initial deposit was contractually stated to be treated as follows:
Buyer submits herewith Twenty-Five Thousand dollars ($25,000) by negotiable cheque payable to [Royal LePage] “Deposit Holder” to be held in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion.
64The payment of the further deposit was contractually stated to be on substantively identical terms:
The Buyer agrees to pay a further sum of ten thousand dollars ($10,000) to [Royal LePage], by negotiable cheque, not later than 6:00 pm on May 14, 2017, as a supplementary deposit to be held in trust in the same manner as the initial deposit pending completion or other termination of this Agreement. This amount is to be credited towards the purchase price on completion of this transaction.
65Counsel for plaintiffs contends that these deposits, totaling $35,000, should be forfeited to the plaintiffs without credit against the damage claim advanced by the plaintiffs. In making this submission, the plaintiffs rely on cases where a purchaser’s default results in the deposit being forfeited to the vendor in circumstances where the vendor has not otherwise sustained damages: Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374; Tang v. Zhang, 2013 BCCA 52, 359 D.L.R. (4th) 104; Baker v. Wynter (2006), 49 R.P.R (4th) 134 (Ont. S.C.J.); De Palma v. Runnymede Iron & Steel Co., [1950] O.R. 1 (C.A.). I do not find applicable the case authorities submitted by the plaintiffs that address a circumstance where the purchaser’s breach of contract does not result in any damages to the vendor.
66I am not required, in this case, to determine whether a deposit is forfeited by a purchaser where no damages were otherwise caused to the vendor as I have determined that Ms. Sebastian’s breach has caused damages to the plaintiffs. This is not a case where I have to determine whether the deposit is required to be treated as a “penalty” or as a pre-estimate of liquidated damages, such as in Waugh v. Pioneer Logging Co., [1949] S.C.R. 299, or whether the deposit ought to be forfeited to the vendor in the absence of damages: Iyer v. Pleasant Developments Inc. (2006), 45 R.P.R. (4th) 147 (Ont. Div. Ct.), Sinha v. Shabestari, 2018 ONSC 298.
67The issue that I have to determine is whether the deposits made by Ms. Sebastian are payable to the plaintiffs additional to the damages that they have established or whether the deposits are to be applied as a credit against the plaintiffs’ damages.
68The plaintiffs were not able to cite a single case authority for the proposition that they are entitled to forfeiture of the purchaser’s deposits in addition to damages established by the vendor. Rather, in the circumstances of this case, I follow those courts that have found that the purchaser’s deposit is to be credited against the damages proven by the vendor: Goldstein v. Goldar, at para. 25; Blonski v. Jarmakowicz (1957), 9 D.L.R. (2d) 66 (Ont. H.C.) at p. 70; Dobson v. Winton and Robins Ltd.; Lozcal Holdings Ltd. v. Brassos Developments Ltd. (1980), 22 A.R. 131 (C.A.).
69Real estate transactions routinely involve the payment of deposits. The proper application of the deposit in circumstances where the purchaser fails to complete the transaction is governed by the parties’ agreement. Here, the wording of the Agreement of Purchase and Sale states expressly that the deposit is to be “credited towards the purchase price” on completion of the transaction.
70In Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47, the Supreme Court set out the modern principles of contractual interpretation. The over-riding objective is to determine the intention of the parties by reading the contract as a whole, “giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.” The purpose of this contractual interpretation is to achieve “a fair and sensible commercial result”: Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129.
71I find that the wording of the deposit term in the Agreement of Purchase and Sale clearly and unambiguously reflects the parties’ intention that the deposit would be applied as a credit to the payment obligation owed by the purchaser defendant to the vendor plaintiffs on completion of the transaction. There is no difference to the use of the deposit in the event of termination of the agreement as opposed to its successful completion. Rather, it was intended to be applied as a credit to the obligation owed by the purchaser to the vendors: whatever form that obligation might take. I conclude that the $35,000 paid by the purchaser defendant is to be paid to the vendor plaintiffs and credited against the damages that they have proven.
III. DISPOSITION
72There is no genuine issue requiring a trial concerning the plaintiffs’ claim that Ms. Sebastian is liable to them for breach of the Agreement of Purchase and Sale. The plaintiffs have established a basis for summary judgment against this defendant.
73I have determined that the plaintiffs have established damages payable by Ms. Sebastian in the amount of $75,000 for loss of value in the sale of the Glasshill Grove property, $32,940.93 in financing costs, $13,325.55 in carrying costs and $954.85 in legal fees thrown away for a total of $122,221.33.
74I order that the deposits paid by Ms. Sebastian in the amount of $35,000, and held in trust without interest by the defendant Signature Realty Inc. carrying on business as Royal LePage Signature Realty (“Royal LePage”), shall be applied as a credit against these damages. I thereby order that the defendant Royal LePage transfer to the counsel for the plaintiffs the full amount of the deposits totaling $35,000 for payment to the plaintiffs as a credit against the damages established by the plaintiffs against Ms. Sebastian.
75I order that Ms. Sebastian shall pay damages to the plaintiffs in the sum of $87,221.33, plus pre-judgment interest from August 16, 2018 to the date of judgment and post-judgment interest, in accordance with the Courts of Justice Act.
IV. COSTS
76I encourage the parties to discuss and agree on the issue of costs.
77If the parties are not able to agree on the issue of costs, the plaintiffs may deliver to me written submissions on costs, of no more than three pages in length (plus their cost outline and any offer to settle) within 15 days of the date of these Reasons for Decision. The purchaser defendant may then deliver to me her written submissions on costs, of a similar length, within 30 days of the date of these Reasons for Decision. The real estate agent defendant, Royal LePage, did not contest the relief sought in this motion and is thereby not involved in the issue of costs. I will consider the parties’ written submissions and release my decision on the issue of costs.
Sanfilippo J.
Released: October 18, 2018