COURT FILE NO.: CV-18-591832-0000 DATE: 2018/12/07 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Linda louise novotny Applicant – and – RABI AHMADDI a.k.a. ROB AHMADDI, EVIJA GAILE and ROYAL LEPAGE J & D DIVISION Respondents
Michael Katzman for the Applicant
HEARD : December 5, 2018
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] The applicant Linda Louise Novotny sues Rabi Ahmaddi and Evija Gaile for breach of an agreement of purchase and sale of Mrs. Novotny’s property. She claims damages of $313,914.01.
[2] The respondents did not attend at the hearing of the application, and I made the following endorsement:
This is an abortive real estate proceeding brought by application. The applicant has withdrawn her motion to strike the respondents’ responding affidavit for failure to attend a cross-examination although served with two consecutive appointment notices. The application proceeded as unopposed because the respondents did not attend although duly served and aware of the scheduled hearing. Having read the motion record and having heard the applicant’s counsel’s submissions and for written reasons to follow, I grant the applicant judgment of $313,914.01 for damages. The damages gives credit for the deposit of $125,000, which I declare forfeit to the applicant. I direct the respondent Royal Lepage J & D Division to release the deposit to the applicant. (The respondent real estate agent did not appear and does not oppose the application.) The applicant is entitled to pre and post judgment interest at 3 % per annum. The plaintiff [sic, applicant] may take out a judgment or order in accordance with this endorsement without the respondents’ consent as to form and content. I award the applicant costs on a partial indemnity basis of $10,000, all inclusive.
[3] What follows are my Reasons for Decision.
B. Facts
[4] On April 17, 2017, Ms. Novotny as vendor and Mr. Ahmaddi and Ms. Gaile as purchasers entered into a standard form agreement of purchase and sale for the sale of Ms. Novotny’s residential property at 1355 Mount Pleasant Rd. in Toronto, Ontario. The purchase price was $2,325,000 and the closing date was set for October 13, 2017. The transaction was a cash transaction and there were no conditions.
[5] Mr. Ahmaddi and Ms. Gaile paid deposits totalling $125,000, which were held by Ms. Novotny’s real estate agent, the respondent, Royal LePage J & D. Division.
[6] On April 24, 2017, Ms. Novotny purchased 276 Fairlawn Avenue. Her plan was to use the purchase monies from the sale of 1355 Mount Pleasant Rd. eventually to pay for the Fairlawn Avenue property.
[7] On October 13, 2017, Mrs. Novotny was ready to close her sale, but a few days before closing; i.e., on October 6, 2017, she was advised by her conveyancing lawyer, that Mr. Ahmaddi and Ms. Gailes were not in funds to close the transaction.
[8] To demonstrate that Ms. Novotny had been ready to close on October 13, 2018, her lawyer sent Mr. Ahmaddi and Ms. Gailes’ lawyer the closing documents. The parties, however, agreed to extend the closing date to October 27, 2018 and Ms. Novotny agreed to take back a mortgage in order to facilitate the closing of the transaction.
[9] On October 25, 2017, Ms. Novotny’s lawyer sent Mr. Ahmaddi and Ms Gailes’ lawyer the closing document with respect to the take-back mortgage.
[10] On October 27, 2017, Mr. Ahmaddi and Ms. Gailes’ lawyer advised that they were still not in a position to close the transaction. The transaction did not close. Ms. Novotny declared the deposit forfeit, and her lawyer advised that she would be claiming damages for the purchasers’ failure to close the transaction.
[11] On November 2, 2017 she relisted her property for sale on Toronto’s Multiple Listing Service.
[12] On November 12, 2017, Mr. Ahmaddi and Ms. Gailes’ lawyer wrote to Ms. Novotny’s lawyer attempting to revive the failed transaction. The letter stated:
Further to your letters dated October 27th, 2017, the purchasers have continued their efforts to obtain mortgage financing and find a way to complete this transaction.
My clients have arranged mortgage financing that, based on the lower property appraisal, would require a vendor take-back mortgage of $564,760.00. The purchasers are willing to pay 7% interest for a term of one year, with an option to renew the term of the mortgage for an additional six months. The mortgage should permit the purchasers to pay all or part of the principal at any time or times, without notice or penalty. My clients intend to make prepayments when other properties are eventually sold.
In the alternative, if your client will consider reducing the sale price to the appraised value, namely $2,100,000.00, the purchasers can arrange to close the transaction, without a vendor take-back mortgage.
Please consult with your client and advise whether the vendor will consider either of the aforementioned proposals.
[13] On November 14, 2017, Ms. Novotny’s lawyer responded by letter. The letter stated:
Our client has now reviewed your letter dated November 12th, 2017 and received by our office on November 13th, 2017, which said letter contained further terms and conditions by which your clients are proposing to proceed in order to close the transaction.
Our client has indicated that she is prepared to proceed with the closing of the said sale upon the following terms and conditions:
- Your clients agree to a purchase price of $2,150,000 by 5:00 pm Wednesday Nov 15, 2017.This amount is over and above the deposit amount of $125,000 which your clients shall agree to release to our client.
- Your clients are to pay all expenses incurred to date since your clients were in breach of the Agreement on Oct.13, 2017. Said amounts to be provided by our client in due course.
- Your clients are to sign an Irrevocable Direction to immediately release the deposit in full to the seller upon failure of the buyers to complete this transaction on Nov. 15, 2017.
[14] There was no response to Ms. Novotny’s lawyer’s letter of November 14, 2017, and on November 23, 2017, she entered into a new agreement, and she sold the property for $1,925,000 with a closing on January 18, 2018. The transaction closed on that date with a $7,500 abatement of the purchase price.
[15] The abatement was necessary because some time after October 27, 2017, a neighbouring land owner had unilaterally and improperly removed trees on Ms. Novotny’s property. The removal of the trees occurred after Ms. Novotny had signed the agreement to re-sell her property.
[16] On this application, Ms. Novotny seeks damages of $313,914.01, being the difference between the price and the resale price of the Mount Pleasant property plus the costs of continuing to own that property between October 13, 2017 to January 18, 2018 including the cost of bridge financing, property tax, property insurance, and utilities. The calculation for the loss of the benefit of the bargain gives credit for the forfeiture of the deposit.
[17] The breakdown of the damages is as follows:
a. Difference in purchase prices less deposit $282,500.00 b. Property tax $2,648.74 c. Hydro $183.12 d. Water and Solid Waste Management $39.43 e. Enbridge Gas $741.99 f. Insurance $680.04 g. Legal fees $3,945.42 h. Interest on bridge loan $13,709.12 i. Mortgage Interest $303.36 j. Line of credit interest $9,186.82 TOTAL $313,914.01
C. Discussion
[18] In an abortive real estate action, a successful plaintiff must prove the quantum of his or her damages from the failure of the transaction to close, but the onus is on the defendant to prove any failure to mitigate. The proper course is for plaintiff to adduce evidence of the contract price and of the market price or resale price upon which he or she relies in establishing the loss of bargain and then the onus is on the defendant to show, if he or she can, that if the plaintiff had taken certain reasonable mitigating steps, then the innocent party’s losses would be lower. [1]
[19] Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove both that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible. [2]
[20] In assessing the innocent party's efforts at mitigation, the courts are tolerant, and the innocent party need only be reasonable, not perfect; in deciding what is a reasonable way to mitigate the effects of a breach of contract, the innocent party is not to be held to too nice a standard; it need only act reasonably, using what it knows then, without hindsight, and it need not do anything risky. [3]
[21] In the immediate case, Mr. Ahmaddi and Ms. Gaile have no defence to Ms. Novotny’s breach of contract claim, and she has proven the quantum of her damages for the loss of the benefit of the bargain and the consequential damages associated with having to carry two properties until she could close her re-sale transaction.
[22] The onus was on Mr. Ahmaddi and Ms. Gaile to show that Ms. Novotny failed to take reasonable steps to mitigate her loss. They have failed to show any failure to mitigate. Ms. Novotny prudently and promptly listed the property for resale on the multiple listing service.
[23] Her lawyer’s response to Mr. Ahmaddi and Ms. Gaile’s lawyer’s letter of November 12, 2017 was reasonable, and it was Mr. Ahmaddi and Ms. Gaile who did not follow up, and they never have demonstrated the ability to close the transaction. Ms. Novotny was never offered a firm offer from them, and it was reasonable for her to accept the firm offer from a new purchaser.
[24] The principle of mitigation entails that the vendor will not recover for avoidable loss and so a vendor should find a new purchaser as soon as reasonable possible and mitigate the loss, which in the immediate case involved Ms. Novotny having to maintain and among other things pay realty taxes on a property that she no longer lived in.
[25] To repeat, Mr. Ahmaddi and Ms. Gaile have not proven a failure to mitigate, and, therefore, Ms. Novotny is entitled to judgment for $313,914.01 plus pre and post-judgment interest and costs of $10,000.
D. Conclusion
[26] Judgment accordingly.
Perell, J.
Released: December 07, 2018
COURT FILE NO.: CV-18-591832-0000 DATE: 2018/12/07 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Linda louise novotny Applicant – and – RABI AHMADDI a.k.a. ROB AHMADDI, EVIJA GAILE and ROYAL LEPAGE J & D DIVISION Respondents
REASONS FOR DECISION PERELL J. Released: December 7, 2018
[1] Main Street Ltd. v. W.B. Sullivan Construction (1978) , 20 O.R. (2d) 401 at para. 78 (C.A.); Dobson v. Winton & Robbins Ltd ., [1959] S.C.R. 755 .
[2] Southcott Estates Inc. v. Toronto Catholic District School Board , 2012 SCC 51 at paras. 23-25 ; Asamera; Evans v. Teamsters Local Union No. 31 , 2008 SCC 20 at para. 30 ; Red Deer College v. Michaels , [1976] 2 S.C.R. 324.