Court File and Parties

COURT FILE NO.: CV-17-587951 DATE: 2019-02-11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PAUL ANTHONY BERNARD, Plaintiff AND: RE/MAX REALTRON REALTY INC., ELI BAKHTIARI, AND AMIR JAFARPISHEH, Defendants

BEFORE: Sossin J.

COUNSEL: Theodore (Ted) Rotenberg, Counsel, for the Plaintiff Roger A. Gosbee, Counsel, for the Defendant Amir Jafarpisheh, in person

HEARD: February 4, 2019

REASONS FOR DECISION

SOSSIN J.

Overview

[1] The plaintiff, Paul Anthony Bernard (“Bernard”), brings a motion for summary judgment against the defendants in this action, Re/Max Realtron Realty Inc. (“Realtron”), Eli Bakhtiari (“Bakhtiari”) and Amir Jafarpisheh (“Jafarpisheh”).

[2] The backdrop for this litigation is not disputed and involves a purchaser of Bernard’s Toronto property pulling out and thereby forfeiting a deposit in the amount of $170,000.00. There is no dispute that $100,000.00 of this amount was properly recovered by Bernard.

[3] The dispute relates to the additional $70,000.00 of the deposit, which was paid by the purchaser to Realtron pursuant to mutual releases signed by the purchaser and Bernard. Bernard claims that he was led to believe Realtron was entitled to this amount as part of its commission, and was misled to believe that he was obliged to sign the release giving that amount to Realtron as a commission. He now claims this amount. Realtron asserts that the $70,000.00 was properly provided to it pursuant to a subsequent agreement between Bernard and Realtron. Under this agreement, Bakhtiari, the listing agent, secured the deposit funds, and provided a future discount on her commissions if the property were relisted and sold.

[4] For the reasons set out below, the motion for summary judgment is dismissed as a trial is necessary.

Facts

[5] Bernard is the owner of a property on Tournament Drive in Toronto (the “Tournament Drive property”).

[6] On March 9, 2017, Bernard signed an agreement to retain Realtron as his listing realtor and Bakhtiari as the listing agent. This was one of several such agreements the parties had entered into relating to the sale of the Tournament Drive property. The listing agreement addressed the scenario of an agreement to purchase which was not completed, and provided that Bernard would be required to pay Re/Max the commission in this event, only where “such non-completion is owing or attributable to the Seller’s default or neglect.”

[7] On April 12, 2017, an offer to purchase the property was received. The Agreement of Purchase and Sale included a provision relating to a deposit of $100,000.00 on acceptance and an additional sum of $70,000.00 to Realtron as a further deposit by June 15, 2017, and further provided (at para. 2):

In the event the buyer fails to complete the transaction under the terms as provided for in this Agreement of Purchase and Sale, the buyer agrees to forfeit the entire deposit automatically to the seller without either party having to execute a mutual release. The Buyer further understand and agree [sic] that forfeiting of the said deposit will not relieve him from other liabilities due to his breach of contract and failure to complete the transaction.

[8] At some point in late May, the purchaser backed out of the transaction, though the purchaser agreed that $170,000.00 would be forfeited by way of the deposit as a result. There is no dispute that the purchaser’s decision was not as a result of any default or neglect on the part of Bernard.

[9] On May 31, 2017, Bernard attended the Realtron office to sign a mutual release. The release indicates that Bernard would receive from the purchaser $100,000.00, and that a further $70,000.00 (HST included) would be paid to Realtron as “commission.” The release provides, “Seller and Buyer hereby confirm and agree to Re/Max Realtron Realty Inc. receiving said commission.”

[10] On June 26, 2017, Bernard indicated to Bakhtiari that he was unhappy with the mutual releases and also advised the defendants that he no longer wished to have his house listed with them.

[11] On December 6, 2017, Bernard filed a statement of claim and commenced this action.

Position of the Parties

[12] Bernard relies on the listing agreement, which was signed on March 9, 2017 and in effect until July 24, 2017. This agreement governed the parties at the time of the mutual release and payment of the deposit amounts in question in May of 2017. The relevant clause of para. 2 of that agreement provides:

The Seller further agrees to pay such commission as calculated above even if the transaction contemplated by an agreement to purchase agreed to or accepted by the Seller or anyone on the Seller’s behalf is not completed, if such non-completion is owing or attributable to the Seller’s default or neglect, said commission to be payable on the date set for completion of the purchase of the property.

[13] As there is no dispute that Bernard as “Seller” was not responsible for the transaction not being completed, pursuant to the listing agreement, he asserts that was not legally required to pay any money to Realtron as a commission, and therefore there was no consideration for the $70,000.00 payment to Realtron.

[14] While there is no dispute that the plaintiff signed the mutual release which clearly indicated the $70,000.00 would be paid to Realtron, the plaintiff submits that he was led to believe by the defendant Bakhtiari that he owed the commission payment to Realtron and that while represented on the transaction, he did not receive specific, independent legal advice on the issue of the commission and deposit amounts.

[15] The defendant, Bakhtiari, disputes this account of the mutual release. Bakhtiari asserts that, prior to the meeting between the purchaser and Bernard at her office on May 31, 2017, for the purpose of signing the mutual release; she insisted both parties receive independent legal advice. To that end, her evidence is that she sent an email to Gary Shapiro, the solicitor representing Bernard, in the morning of May 31, 2017 prior to the meeting. That email indicated the language to be used for the mutual release, including that an additional $70,000.00 deposit would be paid by the purchase to Realtron. A further email she states she sent several minutes later attached the document.

[16] Following these emails, Bakhtiari submits that she also spoke with Mr. Shapiro by phone.

[17] Bernard denies ever receiving independent legal advice on his obligations with respect to the commission, or with respect to the mutual releases. Mr Shapiro’s affidavit indicates he did not receive the emails in question. He does not specifically address the subsequent phone conversation or what might have been discussed.

[18] Mr. Shapiro, in his affidavit, indicates that he received an email from Bakhtiari only after the meeting, attaching the executed mutual release. Mr. Shapiro concludes that he believes Bernard was misled into believing that he had a legal obligation to sign the release, including the provision that $70,000.00 go to Realtron, or he would not have received the $100,000.00 portion of the deposit. Mr. Shapiro was not cross-examined on his affidavit, in light of the limitations of the simplified rules under which this action has proceeded.

[19] The defendant Jafarpisheh is an assistant to Bakhtiari, who was present for some part of the meeting in the offices of Realtron on May 31, 2019. He states that he had no knowledge of any impropriety on the part of Bakhtiari or Realtron.

[20] The parties also disagree as to what a Realtron manager, Mr. Cheng, said during the meeting on May 31, 2019. Bernard’s evidence is that Mr. Cheng told him if he did not sign the mutual release, it may take 2 to 3 years to resolve the allocation of moneys through the courts and that he would not be able to access the deposit funds. Mr. Cheng’s response, when examined for discovery on this point, was that he understood the $70,000.00 payment to be part of an arrangement by which the defendants were assisting Bernard to access the deposit funds without the cost and delay of litigation, and this is the account upon which the defendants rely.

[21] Beyond these factual discrepancies between the parties as to whether the mutual release represents a valid agreement, the plaintiff asserts that the mutual release agreement is invalid as Realtron provided no consideration in exchange for receiving $70,000.00.

[22] In order to demonstrate consideration, the defendants rely on a subsequent verbal agreement between Bernard and Bakhtiari. Pursuant to that agreement, which they allege was initiated by Bernard, Bakhtiari undertook to persuade the purchaser to provide the deposit funds without litigation, and agreed to relist the house and not to charge a listing commission to Bernard, if the house was resold. The defendants allege that Bernard sought this agreement because of anxiety that he would be unable to obtain the deposit from the purchaser, without pursuing litigation and be subject to further cost and delay.

[23] Bernard denies he agreed to this arrangement. He also relies on the ethical duties of realtors, by which realtors are obliged to provide written agreements for any arrangements made with clients. Consequently, he submits that any verbal agreement entered into by a realtor with a client in these circumstances would be void as contrary to the law in any event.

[24] The plaintiff further argues that the theory of consideration raised by the defendants in their factum and in oral argument on this motion was not pleaded by the defendants, and was not the subject of cross-examination on the affidavits filed. Consequently, the defendants should not be permitted to raise this theory of consideration for purposes of this motion.

Analysis

Defect in the Pleadings

[25] The plaintiff, in oral argument, submitted that the defendants ought not to be permitted to rely on an alleged verbal contract providing for consideration for the $70,000.00 deposit agreed to on May 31, 2019, because it is not contained in their statements of defence, and the defendants did not seek leave to have their pleadings amended.

[26] The statement of claim alleges a range of facts, including the lack of consideration involved in the mutual release provision of $70,000.00 for Realtron, and allege a breach of fiduciary obligation by the defendants.

[27] The statement of defence provides a bald denial of a range of facts, including the provisions of the claim addressing a lack of consideration.

[28] While the statement of defence does not provide a theory of consideration to bolster its denial that the transaction involving the $70,000.00 had no consideration, these matters were clearly raised in the affidavit evidence filed by the parties, and in particular, the affidavit of Bakhtiari.

[29] In Healthy Lifestyle Medical Group Inc. v. Chand Morningside Plaza Inc., 2019 ONCA 6 at para. 7, the Court of Appeal has reinforced that defects in pleadings should not interfere with the resolution of litigation by summary judgment if the underlying issues in question are in the record.

[30] I find that the defendants can properly raise the alleged verbal agreement between Bernard and Bakhtiari as an explanation for why the defendants deny the assertion that no consideration was given for the $70,000.00.

Genuine Issue for Trial

[31] For the purposes of these reasons, I can address the court’s jurisdiction on summary judgment concisely. With the amendments to the summary judgment rule under the Rules of Civil Procedure, R.R.O. Reg. 194, and with the Supreme Court of Canada’s decisions in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, and Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, the court has enhanced the adjudicative tools to decide actions by summary judgment. Further, the Supreme Court has encouraged the use of those tools if by doing so justice can be done.

[32] Under this approach, when considering whether there is a genuine issue requiring a trial, I am to consider if the summary judgment process (1) allows me to make the necessary findings of fact, including any necessary findings of credibility; (2) allows me to apply the law to the facts; and, (3) if summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak, para. 49. If I find that there are genuine issues requiring a trial, and the motion record is not sufficient for those issues to be decided, I must consider if I can decide the issues using the enhance tools under the summary judgment rule.

[33] These enhanced tools include the ability to hold a “mini-trial” on discrete issues within the action, including where oral evidence is required to make findings of credibility. The plaintiff submits that a mini-trial would be appropriate in this case should specific issues of credibility need to be resolved.

[34] The key issues of credibility arising from the facts above relate to whether Bernard did in fact received legal advice in advance of signing the mutual release, or whether he was in fact misled by the defendants as to his legal obligations and pressured to sign the release under duress. A related issue of credibility will turn on whether the subsequent verbal agreement between Bernard and Bakhtiari was in fact concluded after the purchaser backed out of the transaction, and before the mutual release was signed.

[35] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 44, the Court of Appeal cautioned that it can be difficult for a judge hearing a summary judgment motion to make findings of fact where credibility is a central issue:

Evidence by affidavit, prepared by a party's legal counsel, which may include voluminous exhibits, can obscure the affiant's authentic voice. This makes the motion judge's task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

[36] Credibility has emerged as the central issue in the case. Much of the affidavit evidence at issue in this case has not been subject to cross-examination, and there are a number of individuals whose testimony will be critical to understanding whose version of the circumstances under which the mutual releases were signed is more persuasive. In other words, I am left with key determinations which cannot be resolved by the documentary evidence, or inferences therefrom, or by the limited scope for oral evidence within a mini-trial under Rule 20.04.

[37] I find these key credibility issues amount to genuine issues for trial, and that this is not a case in which it is in the interests of justice for me to exercise the powers under Rule 20.04 to conduct a mini-trial within the context of summary judgment. The assessment of evidence in this context requires live witnesses in a trial context (see Zurba v. Lakeridge Health Corp. et al. 2010 ONSC 318, 99 O.R. (3d) 596, at para. 53).

[38] In Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, the Court of Appeal emphasized that, generally speaking, in simplified procedure cases, courts should favour a summary trial under s. 76.12 over a “mini-trial” under r. 20.04(2.1):

[255] When a judge is faced with a contested motion for summary judgment in a simplified procedure action that requires exercising the powers in rule 20.04(2.1), the judge will not only have to apply the full appreciation test, but will also need to assess whether entertaining the motion is consistent with the efficiency rationale reflected in the simplified procedures under Rule 76. We make two general observations that will inform this assessment.

[256] First, summary judgment motions in simplified procedure actions should be discouraged where there is competing evidence from multiple witnesses, the evaluation of which would benefit from cross-examination, or where oral evidence is clearly needed to decide certain issues. Given that Rule 76 limits discoveries and prohibits cross-examination on affidavits and examinations of witnesses on motions, the test for granting summary judgment will generally not be met where there is significant conflicting evidence on issues confronting the motion judge. While the motion judge could order the hearing of limited oral evidence on the summary judgment motion under rule 20.04(2.2), in most cases where oral evidence is needed, the efficiency rationale reflected in the rule will indicate that the better course is to simply proceed to a speedy trial, whether an ordinary trial or a summary one: see rules 76.10(6) and 76.12.

[257] Second, we are not saying that a motion for summary judgment should never be brought in a simplified procedure action. There will be cases where such a motion is appropriate and where the claim can be resolved by using the powers set out in rule 20.04 in a way that also serves the efficiency rationale in Rule 76. For example, in a document- driven case, or in a case where there is limited contested evidence, both the full appreciation test and the efficiency rationale may be served by granting summary judgment in a simplified procedure action.

[39] In my view, this case fits squarely in the scenario discussed by the Court of Appeal in Combined Air Mechanical Services Inc., where there is competing evidence from multiple witnesses.

[40] Both the plaintiff and defendants raised the concern of proportionality in light of the time and expense of a trial. For this reason, the summary trial provisions of Rule 76.12 appear well-suited to this context, and would advance the goals of a proportionate and expeditious means to decide the key issues in this action.

Costs

[41] If the parties are unable to agree on the costs of this motion, I may be contacted in order to set a timetable for the delivery of cost submissions.

Sossin J. Released: February 11, 2019