COURT FILE NO.: CV-17-132714-00

DATE: 20190311

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Richard Kim Perkins and Sylvia Perkins Plaintiffs

– and –

Shala Sheikhtavi Defendant

Karim Samadi and Homelife Victory Team Realty Inc. Third Parties

Jason K. Allan, for the Plaintiff

Brian Sherman, for the Defendant Allan D. Powell, for the Third Parties

HEARD: February 8, 2019

DECISION FROM MOTIONS FOR SUMMARY JUDGMENT

SUTHERLAND J.:

Overview

[1] The plaintiffs and the defendant each have brought a motion for summary judgment.

[2] The proceeding flows from a real estate transaction on the purchase of a family residence owned by the plaintiffs that did not close.

[3] For the reasons to follow, I grant summary judgment in favour of the plaintiffs.

Factual Background

[4] The plaintiffs and the defendant entered into an agreement of purchase and sale for the defendant to purchase the home of the plaintiffs municipally located at 20012 2nd Concession Road, East Gwillimbury, Ontario (the property).

[5] The property was listed for sale in March 2017.

[6] The defendant presented an offer to purchase to the plaintiffs. The defendant’s offer was one of thirteen that the plaintiffs received. The defendant’s offer was for the second highest purchase price with no conditions.

[7] The plaintiffs accepted the defendant’s offer and the parties entered in an unconditional Agreement of Purchase and Sale on April 3, 2017 (the APS).

[8] The terms of the APS included:

(a) The purchase price was $1,871,000, with a deposit of $80,000 to be held in trust by Re/Max Realtron Lander Realty Inc. in a non-interest bearing account.

(b) The closing date was scheduled for July 10, 2017.

[9] On or about July 10, 2017, the defendant advised, through her real estate lawyer, that she would not be closing on the purchase.

[10] The defendant was unable to sell her existing home and could not obtain financing based on their income without selling their existing home.

[11] The real estate transaction pursuant to the APS did not close.

[12] The plaintiffs put the property back up for sale. The plaintiffs sold the property for $1,251,888. The plaintiffs are seeking damages being the difference in the sale price and carrying costs and expenses incurred from the date the APS was scheduled to close on July 10, 2017 to the closing of the property with the other buyer in October 2017.

[13] The defendant commenced a third party claim against her real estate agent and broker. The defendant claims in the third party action full indemnity for her “possible losses and damages” along with damages in the sum of $500,000 for negligence.

[14] The defendant opposes the claim of the plaintiffs claiming frustration and that an implied term of the APS existed as a condition to the completion of the APS. The defendant requested the return of the deposit.

Legal Principles of Summary Judgment

[15] Pursuant to rule 20.01 of the Rules of Civil Procedure,[^1] the court must grant summary judgment if it is satisfied there is no genuine issue requiring a trial. In response to a summary judgment motion, one is not permitted to solely rely on allegations or denials in their statement of defence but must provide affidavit material with the specific facts showing that there is a genuine issue requiring a trial.

[16] There will be no genuine issue requiring a trial when a court is able to reach a fair and just determination on the merits. A fair and just determination on the merits is achieved when:

(a) The process allows the judge to make necessary findings of facts;

(b) The process allows the judge to apply the law to the facts; and,

(c) It is a proportionate and more expeditious and less expensive means to achieve a just result.[^2]

[17] On a motion for summary judgment, the court must first determine if there is a genuine issue requiring a trial based on the evidence given on the motion. If there appears to be a genuine issue requiring a trial, the court would then determine if the need for a trial can be avoided using the powers under rule 20.04(2.1) of the Rules of Civil Procedure by weighing the evidence, evaluating the credibility of the deponents, and drawing any reasonable inference from the evidence unless it is in the interest of justice for these powers to be exercised only at a trial. These powers are presumptively available to the judge to give effect to the goals of timeliness, affordability and proportionality in review of the litigation as a whole.[^3]

[18] In contrast, the responding party to the motion must put their “best foot forward” or risk summary judgment being awarded against it. The responding party bears the evidentiary burden to present affidavit material or other evidence to support the allegations or denials in their pleading. Absent this evidence, an adverse inference can be drawn.[^4]

Analysis

[19] The factual circumstances that gave rise to this proceeding are not in dispute. The issue is that of mixed fact and law. The issues are:

(a) Was frustration the reason the APS was not completed?

(b) Did an implied term exist?

(c) If an implied term did not exist, what are the damages?

(d) Does the Third Party claim continue?

[20] There is no dispute that the real estate transaction did not close. The defendant failed to complete the transaction.

[21] The defendant contends that due to the change in government policy concerning the real estate market, the defendant was unable to obtain the necessary financing to purchase the property and in addition, could not sell their home which sale proceeds were required to purchase the property. The change in government policy frustrated the completion of the APS.

[22] The defendant contends that due to the change of government policy announced by the then Premier of Ontario, Kathleen Wynn, the market went “dead.” The factum of the defendant, at paragraph 32, summarized the defendant’s factual contention:

32. Since Premier Wynne’s announcement there was a lot of uncertainty in the market and both buyers and lenders chose to proceed with great conservatism and caution. As a result, mortgage funds for resale residential buyers also substantially reduced almost right away. In fact, banks who had given mortgage approvals for purchasers buying resale homes prior to April 20th but perhaps closing in the summer soon determined that there was a substantial reduction in value and they typically ordered a new appraisal after April 20th,”pulled” the original approval and offered much less mortgage financing quite often resulting in the purchaser being unable to close the purchase.

[23] I will begin my analysis with basic concepts of contracts. The negotiation of terms of a contract between parties is where each party is attempting to obtain terms that benefit them including the allocation of risk. Each party to a contract wishes to minimize their risk and have the most beneficial terms for them. The negotiation of an agreement of purchase and sale is no different. Each party to an agreement of purchase and sale wishes to minimize their risk by incorporating or not incorporating terms into the purchase and sale agreement. Purchasers generally wish to include as many conditions as then can to provide them with an “out” of an agreement of purchase and sale, if the events dictate. Sellers wish to minimize conditions in an agreement of purchase and sale to enhance the likelihood that the purchase and sale agreement is firm and the purchaser has little opportunity not be bound by the terms of the purchase and sale agreement.

[24] In this situation, the seller obtained no conditions in the APS and the purchaser agreed to execute the APS with no conditions. Both parties had a consensus ad idem to the terms of the APS. Having said this, there are principles in contract law, which include equitable principles, which may relieve a party to comply or complete the terms of a contract. One of those principles is frustration.

Was frustration the reason the APS was not completed?

[25] 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 which was undertaken by the contract””.[^5]

[26] The Supreme Court of Canada in Naylor Group Inc. v. Ellis-Don Construction Ltd.[^6] considered a situation where Ellis-Don Construction Ltd. (Ellis-Don) sought to be relieved from its obligation, if any, to a prospective contractor, Naylor Group Inc., whose bid, through the Toronto Bid Depository, was incorporated in Ellis-Don’s own successful tender for a construction project. One of the issues in the proceeding was whether Ellis-Don could be relieved from its obligation due to Naylor Group being deemed unacceptable because its employees belonged to the wrong trade union; they belonged to an in-house union. Naylor Group replied that Ellis-Don had full knowledge of the in-house union and with full knowledge accepted Naylor Group’s bid. During this time, Ellis-Don had a continuing dispute with the International Brotherhood of Electrical Workers (IBEW) on whether the IBEW was the exclusive bargaining agent for electrical workers on Ellis-Don’s jobs since 1962. At the time of the bid, the decision of the Ontario Labour Relations Board (OLRB) was under reserve, having finished an 18 day hearing. After Ellis-Don carried the low bid of Naylor Group and was awarded the contract for the construction, the OLRB decision was released which found in favour of the IBEW. Notwithstanding the ruling, Ellis-Don sought from all subcontractors of the construction project to submit prices for contract changes incorporated by the owner. Naylor Group responded with increase in price to its bid amount, which was carried by Ellis Don. Given the ruling of the OLRB, Ellis Don claimed that its contract with Naylor Group, if any, was frustrated.

[27] In reviewing the law of frustration, the Supreme Court of Canada in Ellis-Don stated:

54. Earlier cases of “frustration” proceeded as an “implied term” theory. The court was to ask itself a hypothetical question: if the contracting parties, as reasonable people, had contemplated the supervising event at the time of contracting, would they have agreed that it would put the contract to an end? The implied term theory is now largely rejected because of its reliance on fiction and imputation.

55. More recent case law, including Peter Kiewit, adopts a more candid approach. The court is asked to intervene, not to enforce some fictional intention imputed to the parties, but to relieve the parties of their bargain because a supervening event (the OLRB decision) has occurred without the fault of either party. For instance, in the present case, the supervening event would have had to alter the nature of the appellant’s obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to so something radically different from what the parties agreed to under the tendering contract. (citations omitted)

56. While the second approach (“a radical change in the obligation”) is to be preferred and is now the established test, the appellant’s argument would fail under either view. There has been no “supervening event” in the sense required by either approach to the doctrine of frustration and in fact the OLRB ruling against the appellant was a foreseeable outcome.[^7]

[28] There is no dispute between the parties that the doctrine of frustration applies to agreements on the sale of land.[^8]

[29] Notwithstanding the able argument of defendant counsel, I am not convinced that the doctrine of frustration applies in these circumstances.

[30] Though, I can agree that there was a “supervening event”, that is the announcement of the policy by the provincial government at the time, I do not find that this event was “a radical change in obligation” to force the defendant “to do something radically different from what the parties agreed”.

[31] The terms of the contract were not radically different: the purchase of the property at a price of $1,871,000. The difference was that of financing. Any term to relieve the defendant from her obligation concerning financing could have been resolved by including a term concerning financing. Such a term is not unforeseen in real estate transactions. The reason for such a term is well known, that is, to insulate the prospective purchaser from an obligation to purchase the home if the person does not have a firm commitment for financing.

[32] In the circumstances of this matter, the defendant knowingly did not include a term for financing. The reason for not including such term is clear from the evidence[^9] on this motion: the defendant wanted to have her offer to purchase accepted by the plaintiffs. She anticipated that an offer to purchase with the price she offered with no conditions would more likely to be accepted. Not surprisingly, her offer to purchase was accepted by the plaintiffs resulting in the APS.

[33] The defendant believed that the housing prices would “continue to go up” and that she could sell her existing home at a high price which would translate into her transferring her existing mortgage to another house and not be subject to have a “high end mortgage”.[^10]

[34] The defendant got what she wanted, the property at the price she was offering to purchase. She did so knowing that she took a risk; that she may not be able to obtain financing by not being able to sell her existing home. This was a risk knowingly taken by the defendant.

[35] I do not find that the change in policy of the provincial government or a decline in the real estate market due to market forces is any different. It is not unforeseeable that real market prices may increase or decrease, with or without warning, for a multiple of reasons. Accordingly, due to changes in the market conditions such as that with financing are included as terms of an agreement of purchase and sale.

[36] I thus do not find that the change in the provincial government’s policy regarding the real estate market is such a supervening event that radically changed the nature of the obligation of the parties. The nature of the obligation did not change. The ability to complete the obligation may have changed but that, in my opinion, did not force the defendant to do something radically different from what the parties agreed.

[37] Consequently, I come to the conclusion that the doctrine of frustration does not apply.

Implied Term

[38] The defendant contends that an implied term of the APS was that if the defendant was unable to sell their existing home, she would not be able to obtain financing and the APS would not be completed.

[39] The defendant argues that there is no dispute in that facts that the plaintiffs were aware that the defendant needed to sell their existing home to complete the terms of the APS.

[40] I do not accept this submission. I do not accept it for two reasons.

(a) First, paragraph 26 of the APS states:

26. AGREEMENT IN WRITING; If there is conflict or discrepancy any provisions added to the Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.

(b) Second, as stated, the defendant had knowledge of the fact that real estate market increases and decreases in value and the necessity of selling their existing home complete the APS. With this knowledge, the defendant did not include a condition in the APS that the completion of the APS depends on the defendant selling her home.

[41] The terms of the APS are clear. There are representations, collateral agreement, warranty or conditions which affect the APS other than what is contained in the APS. The defendant has not provided any basis, in law, why paragraph 26 should not be enforced.

[42] Thus, I do not accept that there existed an implied term in the APS as submitted by the defendant.

Damages

[43] The plaintiffs are claiming damages for the difference in price between what the defendant agreed to purchase the property and the price when it was ultimately sold to another buyer. The defendant does not dispute the quantum of damages in the difference in sale price between the defendant and the ultimate purchasers of the property. This is in the amount of $619,112 ($1,871,000 - $1,251,888).

[44] The issue arsis between the amounts claimed in carrying costs after the defendant failed to close the transaction, in the amount of $10,129. The defendant concedes the amount of $3,809.05. This amount includes the costs for Enbridge, hydro, grass cutting (not for August or September), property taxes and legal fees.

[45] The plaintiffs request the additional amounts which include costs for line of credit, boat financing, deck refinishing and grass cutting for August and September.[^11]

[46] I agree with the submissions of the defendant. I do not see how the cost for the line of credit, boat financing or deck refinishing are reasonably foreseeable as damages for the failure of the defendant to close the APS. I am not satisfied on the evidence presented that these damages are reasonably foreseeable. During submissions, the plaintiffs did not have an objection to the court’s reluctance to award damages for the line of credit, boat financing or deck refinishing.

[47] Hence, I allow the amounts claimed by the plaintiffs except for the line of credit, boat financing, and deck refinishing for a total amount of $4,621.05.

Third Party Claim

[48] The third parties did not file any responding material or notice of motion.

[49] The third party claim is a separate proceeding than that of the main action commenced by the plaintiffs[^12]. The third party claim asserts indemnity for all losses incurred by the defendant and damages for negligence against the third parties.

[50] The defendant asserts that the Ontario Court of Appeal has made it clear that a court should, only in rare circumstances, grant partial summary judgment.[^13]

[51] The defendant contends that the third party claim is so intertwined with the main action that if the court was to grant summary judgment in favour of the plaintiffs, the court would be, in effect, giving partial summary judgment.

[52] I do not accept the submission of the defendant, and do not find that the reasoning set out in the present by the defendant apply. First, given the separate proceedings of the main action and the third party action, I do not find that the concept of partial judgment applies. The claims are two separate proceedings.

[53] If I am wrong and the Ontario Court of Appeal cases on partial judgment apply, in reviewing the cases provided by the defendant, I find the statement of Pepall J.A. in Butera[^14], which was quoted by Nordheimer J.A. in Mason[^15] instructive:

A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner.

[54] I am of the view that the circumstances in the case before me falls within the meaning of the statement of Pepall J.A. The issues of liability of the third parties to the defendant for negligence are separate and distinct from the issues in the main action, being breach of contract of the APS. The issues are not intertwined to the extent that it would be inefficient and not cost effective to have the third party action adjudicated separate from the determination of responsibility in the summary judgment motion brought by the plaintiffs.

[55] I do not accept the submission of the defendant that the court should dismiss the summary judgment motion and permit the main action to continue to trial.

Conclusion

[56] For the reasons given, I conclude that I am able to determine if there is a genuine issue requiring a trial and I have determined there is not. I grant the relief requested by the plaintiffs and in so doing, grant summary judgment in their favour.

Disposition

[57] I order the following:

(a) The plaintiffs are granted summary judgment in the amounts of $619,112 and $4,621.05 for a total of $623,733.05.

(b) The plaintiffs are entitled to the deposit held in the trust by Re/Max Realtron Lander Realty Inc. and all monies received for the deposit shall be deducted from the total amount in paragraph (a) above.

(c) The plaintiffs are granted prejudgment interest pursuant to the provisions of the Courts of Justice Act[^16], commencing September 21, 2017.

(d) Post-judgment interest pursuant to the provisions of the Courts of Justice Act.

(e) The third party proceeding may continue.

Costs

[58] If the parties cannot agree on costs, then the plaintiffs to serve and file their submissions for costs within 21 days from the date of this decision, and the defendants and third party, if applicable, will have 21 days thereafter to serve and file their respective submissions. There is no right for any reply submissions. The submissions to be no more than three pages, double-spaced, exclusive of any cost outline, case law and offers to settle. Submissions are to be filed with the court. If no submissions are received within the time period set out herein, an order will be made that there will be no order as to costs.

Justice P.W. Sutherland

Released: March 11, 2019

[^1]: R.R.O. 1990, Reg. 194. [^2]: Hryniak v. Mauldin, 2014 SCC 7, at para. 49. [^3]: Ibid at para. 65; and Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716, at para. 31. [^4]: Vincorp Financial Ltd., et al. v. Hope’s Holdings Inc. et al, 2010 ONSC 6819, at para. 17. [^5]: Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2SCR 943, 2001 SCC 58, para 53. [^6]: Ibid, paras. 55 and 56. [^7]: Ibid, paras. 54, 55 and 56. [^8]: Capital Quality Homes Ltd. v. Colwyn Construction Ltd., 1975 CanLII 726 (ON CA), [1975] O.J. No. 2435 (CA). [^9]: The affidavit of the defendant dated May 18, 2018 and the transcripts from the cross examination of the defendant dated September 26, 2018, questions 61, 87, 105, 116, 145. [^10]: Ibid, transcript of cross examination of the defendant, question 95. [^11]: See paragraph 35 of the Affidavit of Richard Kim Perkins sworn April 12, 2018. [^12]: Rule 29 of the Rules of Civil Procedure, RRO 1990, Reg. 194. [^13]: Butera v. Chown, 2017 ONCA 783 and Mason v. Perras Mongeniais, 2018 ONCA 978. [^14]: Supra, footnote 11, para 34. [^15]: Supra, footnote 11, para. 22. [^16]: RSO 1990, C.43