Court File and Parties

COURT FILE NO.: 17-63574 DATE: 24 May 2019

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Jennifer Lee Degner, in her capacity as Estate Trustee for the Estate of Pamela Joan Leishman Plaintiff – and – Emanuel Cabral and Sherif Behiry Defendants

Counsel: Jennifer M.C. Stebbing, Counsel for the Plaintiff Graydon Sheppard, Counsel for the Defendant Emanuel Cabral

Emanuel Cabral Plaintiff by Counterclaim – and – Jennifer Lee Degner, in her capacity as Estate Trustee for the Estate of Pamela Joan Leishman Defendant to the Counterclaim

Counsel: Graydon Sheppard, Counsel for the Plaintiff by Counterclaim Jennifer M.C. Stebbing, Counsel for the Defendant to the Counterclaim

HEARD: February 25, 2019

the honourable mr. justice r. j. nightingale

Reasons for Judgment

[1] The plaintiff brings this motion for summary judgment against the defendant Emanuel Cabral for the Estate’s damages sustained of $100,842.07 arising because of the defendant’s failure as a purchaser to close an agreement of purchase and sale on the Estate’s house at 35 Cline Avenue North, Hamilton.

[2] This case is one of a number of cases that have come before this Court recently as a result of the overheated real estate market in the spring of 2017 that then fell off significantly and quickly during that summer.

[3] The defendant Sherif Behiry has been noted in default as no defence had been delivered and the plaintiff moves for default judgment against him.

[4] The plaintiff filed her own affidavit evidence and the affidavit of an expert real estate appraiser Ryan Slade. I did not permit her to rely on her evidence from her examination for discovery except to the extent that the defendant filed excerpts from that examination. Lana International Ltd. v. Menasco Aerospace Ltd. (2000), 50 O.R. (3d) 97 (C.A.).

[5] The defendant Cabral did not file any affidavit evidence except that of his lawyer’s law clerk referring to excerpts of the plaintiff’s examination for discovery and the affidavit evidence of his real estate appraiser.

Factual Background

[6] The facts are not significantly in dispute on this motion.

[7] The plaintiff as estate trustee of her late aunt’s estate listed her house for sale in April 2017 on the recommendation of her real estate agent at a price of $399,900. No appraisal was obtained as she relied on her real estate agent’s advice that the market value for the property would be determined by the market.

[8] She received 16 offers to purchase the property within six days of having it listed which offers exceeded the listing price.

[9] The defendants submitted an unconditional offer to purchase the property for $551,000 with the original closing date on June 9, 2017 paying a $10,000 deposit. The plaintiff executed that agreement for sale on April 13, 2017.

[10] On or about May 18, 2017 the defendants requested an extension of the closing date to June 12, 2017 which plaintiff estate agreed to. The plaintiff also subsequently agreed to the request by the defendants for an extension of closing to July 12, 2017.

[11] On the July 12, 2017 closing date, the defendants failed to close the transaction as the defendant Behiry was unable to obtain financing breaching the agreement.

[12] The plaintiff on her real estate agent’s advice relisted the property on or about July 18, 2017, six days later, for the same listing price of $399,900 and terms as the original listing.

[13] The plaintiff’s real estate agent Brian Slade then contacted the previous parties who had put offers in initially to purchase the property to see if there was interest in their purchasing the property.

[14] The plaintiff then received three offers to purchase the property in six days. The first offer was for $400,000 without conditions and the second offer was $426,000 with a financing condition. The third offer was originally in the middle of the two other offers. The plaintiff’s real estate agent spoke to that purchaser who then submitted an increased offer to purchase the property for $450,000, the highest offer, with a closing date of August 10, 2017. That offer was accepted on July 24, 2017 by the plaintiff.

[15] The plaintiff’s evidence was that between July 12, 2017 and August 10, 2017, there was a drop in the real estate market as a result of which she was unable to resell the property for the original purchase price of $551,000 received from the defendants.

[16] Her evidence was also that although the property was only relisted on the market for approximately six days before she accepted this offer, she was advised by her real estate agent that it would not be best to keep it on the market bearing in mind the difference between this last offer received of $450,000 and the defendant’s original purchase price of $551,000. She was advised by the agent that she should not do so because the market had changed so drastically in that time. The Fair Housing Act had been passed and the market was shifting and going down quickly. She did not get an appraisal to verify that information she received from her real estate agent as she was told by him that the value of the property was dependent on market value and that would be determined by the market i.e. the value of what people are willing to pay for a house.

[17] She confirmed that she relied on the advice of her real estate agent as she had no idea about real estate herself.

[18] The agent advised her to accept the $450,000 offer she received and not keep it on the market because they couldn’t predict the future and the way the market had been heading at the time was down so that was the best advice that he could give her.

[19] She confirmed the variation in the amounts of the offers that she received the second time were about the same as they were the first time the property was listed for sale.

[20] She stated that there were offers of $441,000, $415,000, $450,000 and $451,000 and so on the first time around and that some of these were less than what she eventually sold the property for the second time.

[21] The defendant Cabral made a significant admission is his statement of defence in paragraph 6 that the price for which the property was resold (i.e., $450,000) exceeded the market value of the property at the time of sale on August 10, 2017.

[22] Furthermore, on his examination for discovery in July 2018 the defendant Cabral confirmed his position that the plaintiff on the resale of the property received more than the fair market value for the property in August 2017 although he had no supporting evidence at that point stating that he would provide an expert’s report on that issue if he decided to obtain one. He did not do so.

[23] Defendant’s counsel during the hearing of the motion submitted that he wanted to withdraw that admission. I declined to do so given the objection of plaintiff’s counsel without a formal motion being served to that effect. No such motion was brought including after I had granted the parties time to file further written submissions at the end of the oral hearing on relevant case law that the parties had not included in their motion materials for the Court’s consideration.

[24] The defendant Cabral also admitted on his examination for discovery that he did not have any evidence that there was a purchaser willing to pay the price of $551,000 that he had originally agreed to pay for the property when the property was sold the second time on July 24, 2017 with the August 10, 2017 closing date.

[25] After the plaintiff served her motion for summary judgment, the defendant obtained a report from an independent real estate appraiser Mr. Del Sorda.

[26] His affidavit evidence including his report confirmed that the average residential price levels within the City of Hamilton reached a peak in the months of April and May 2017 before the market contracted with price levels then decreasing in June to a more stabilized level in July and August 2017 with no significant increases or decreases then noted in price levels for the remainder of the year.

[27] Mr. Del Sorda also stated that the average exposure listings for residences in the spring of 2017 were for 18 days reflective of an overheated marketplace. The average exposure listing times between July 1 of August 31, 2017 was the minimum of 30 days recommended for the subject property. His opinion was that since the property was listed on July 18, 2017, the property should have been retained on the market for at least until August 16, 2017 for a minimum marketing period of 30 days in order to achieve a fair value.

[28] What is significant in Mr. Del Sorda’s evidence is what he did not say.

[29] He did not provide any opinion with respect to the fair market value of the property on July 12, 2017, the date the defendant failed to close the transaction or of its fair value when the plaintiff after relisting the property accepted the offer of $450,000 on July 24, 2017, 12 days later. He also did not dispute or deny the defendant’s admissions made that the plaintiff resold the property in July 2017 for more than its fair market value. It appears from his report that he was instructed not to provide an appraisal of the property’s market value.

[30] Significantly, he also did not provide any expert opinion evidence that had the plaintiff relisted the property for 30 days until August 16, 2017, the plaintiff would likely have received an offer or offers greater than the $450,000 offer she did receive let alone up to the $551,000 offer originally submitted by the defendant and accepted by her in April 2017. In fact, the reasonable inference from his evidence in paragraph 25 herein and from his charts in his report is that the real estate market significantly dropped off in June and then stabilized but did not return to the original overheated market state that existed when the defendant submitted his offer.

[31] Moreover, the defendant’s expert gave no opinion that the defendant’s original offer of $551,000 actually represented the fair market value of the property in April 2017 as compared to it being an amount that greatly exceeded it because of the overheated real estate market at the time.

[32] The opinion evidence of the plaintiff’s real estate appraiser expert Brian Slade was that the summer of 2017 marked a change in the real estate market conditions in the Hamilton/ Burlington area after an extended period of rapidly increasing price trends. This was because of the low inventory of houses on the market prior to January 2017. The median price of residential properties in Hamilton hiked between March and May 2017 but waned between the 2017 summer to early 2018 due to resurgent inventory, increased interest rates and changes in tax financing policies. The total residential sales volume houses in the subject neighborhood decreased drastically in July 2017 signaling unusual fluctuations in market demand given the increase in real estate inventory. The number of sales showed a similar trend which underlined the hesitation and reduced market demand that existed in the market around that period of time.

[33] Mr. Slade also confirmed his opinion that the market analysis of the subject neighborhood revealed that marketing times were typically within the range of 10 to 30 days. He stated that although the plaintiff’s seven days of marketing her property was outside the typical range in marketing times, it was not unreasonable given the desirability of the subject neighborhood and prior marketing.

[34] He stated that the subject property’s marketing time and effort was considered to be reasonable and reflected market norms.

Summary Judgment Principles

[35] In her motion for summary judgment under Rule 20, the onus is on the plaintiff to establish on a balance of probabilities that there is no genuine issue requiring a trial with respect to the plaintiff’s claims.

[36] On a motion for summary judgment, the Court is entitled to assume that the parties have provided all of the relevant evidence that will be presented at the trial and that there will be no further evidence. Each party must put his/her best foot forward and lead trump or risk losing.

[37] The Court should first determine if there is a genuine issue requiring a trial based only on the evidence before the court without using the fact-finding powers under Rule 20.04(2)(1). Under that Rule, the motion judge may weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence unless it is in the interests of justice for such powers to be exercised only at trial. Hryniak v. Mauldin, [2014] 1 S.C.R. 87.

[38] There will be no genuine issue requiring a trial if the summary judgment process provides the motion judge the evidence required to fairly and justly adjudicate the dispute in a timely, affordable and proportionate procedure.

[39] If the moving party plaintiff has discharged the evidentiary burden of proving there is no genuine issue requiring a trial, the burden shifts to the responding party (here the defendant) to prove that his claim has a real chance of success i.e., there is a genuine issue for trial.

[40] Given that this summary judgment motion is in a simplified procedure action, during the hearing I raised with counsel the issue of whether there was any unfairness to either party as a result of the unavailability of cross-examinations of the witnesses. Singh v. Concept Plastics Limited, 2016 ONCA 815. Counsel advised that the parties had consented to a court order in November 2018 permitting cross-examinations of the experts prior to the hearing but both declined to do so. Accordingly, there is no potential of unfairness to either party because of the unavailability of cross-examinations on the experts.

Analysis

[41] The defendant Cabral on this motion does not dispute that he breached the agreement by not closing the purchase transaction on July 12, 2017.

[42] His position is that the plaintiff did not mitigate her damages by listing the property for at least 30 days as suggested by his expert after he refused to close the transaction especially given the variance of the three offers subsequently received by her. The plaintiff should also have obtained an appraisal and listed the property at a much higher price than the $399,900 price originally used in April 2017. His position is that had she done so, as a matter of common sense she would have received offers higher than the $450,000 offer received that she accepted on July 18, 2017 within only six days after relisting it.

[43] The evidence of the plaintiff, the hearsay evidence from her real estate agent Mr. Bush and the expert evidence of the plaintiff’s appraiser Mr. Slade and the defendant’s appraiser Mr. Del Sorda all confirmed that the real estate market in Hamilton experienced a significant downturn from the seller’s market that prevailed in the spring of 2017. That decrease took place in June or July 2017 and then became more stable.

[44] However, none of the evidence suggested or confirmed that in August 2017 and thereafter the market reverted to the original high demand seller’s market that prevailed in the spring 2017 when the defendants submitted their offer to purchase the property for $551,000 which the plaintiff accepted.

[45] Although there is some conflict in the experts’ opinions of whether the plaintiff ought to have relisted the property for 30 days before considering all offers received during that time period rather than the seven days she did before accepting the $450,000 offer, there is no evidence provided by the defendant that even if she had done so, she would likely have received an offer higher than the $450,000 highest offer she did receive.

[46] The only evidence before me on this motion is that the previous 16 offers were in the range of approximately $450,000 when the defendants offered to purchase the property without even inspecting it for $551,000. I declined to consider the statements of Cabral’s counsel of other offers that were allegedly received originally by the plaintiff and contained in defendant counsel’s written submissions I had asked for of both counsel on case law that I considered relevant that counsel had not provided to the Court originally. There was no evidence of that from any of the parties before the Court, the defendant filed no such affidavit material and plaintiff’s counsel objected to that attempt to file evidence during submissions.

[47] There were only three offers received when it was relisted ranging from $400,000, $426,000 to the high of $450,000. The defendant admitted that the $450,000 offer that was accepted was higher than the market value of the property at the time of sale on August 10, 2017.

[48] Although the plaintiff provided no expert appraisal evidence of the fair market value at the time of sale, she did not need to do so given this evidence, the admissions of the defendant, the clear evidence of the significantly declining real estate market, and the resale price affording good evidence of the market price. 100 Main Street Limited v. WB Sullivan Construction Limited (1978), 88 D.L.R. (3d) 1 (Ont. C.A.)

[49] Moreover, the defendant’s appraiser could very well have provided his own appraisal of the property at the relevant times but did not do so. Instead, there is nothing in his evidence that qualifies or disputes the defendant’s admissions that the property was sold for more than its fair market value in August 2017.

[50] The Ontario Court of Appeal in 100 Main Street Limited v. WB Sullivan Construction Limited, above, confirmed that the most general principle relating to the assessment of the damages in the case of a vendor against the defaulting purchaser 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.

[51] The Court followed the principles of Dobson v. Winton & Robbins Ltd., [1959] S.C.R. 775 and Hickey v. Paletta (1973), 14 N.R. 3 (Ont. C.A.), affd [1974] 1 S.C.R.vi. in confirming that the plaintiff’s loss where the market value of the property declined between the date of the breach and the resale the property is the difference between the resale price and the contract price.

“Damages should have been calculated on the basis of a finding of the highest price obtained within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commence on that date. What is reasonable, in each instance, of course, is a question of fact to be decided on the basis of all relevant market circumstances.”

[52] That principle was confirmed in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51 which held that the plaintiff’s duty to mitigate her damages requires that she take all reasonable steps to mitigate the loss consequent on the breach and debars her from claiming any part of the damage which is due to her neglect to take such steps.

[53] These decisions furthermore held that when the defendant alleges that the plaintiff failed to mitigate her damages, the onus of proof is on the defendant. The proper course is for the plaintiff presenting its case to adduce evidence of the contract price and of the market price or resale price on which she relies in establishing the loss of bargain. The onus is then on the defendant to show, if he can, that if the plaintiff had taken certain reasonable mitigating steps, the damages would be lower.

[54] In the decision of 642947 Ontario Ltd. v. Fleischer (2001), 209 D.L.R. (4th) 182 (Ont. C.A.), the court found that as a general rule in a falling market the court should award the vendor damages equal to the difference between the contract price and the highest price obtainable within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commencing on that date.

[55] The resale price of the property obtained by the vendor can in most cases afford good evidence of the market price although it is not strictly to be taken in preference to the market price. 100 Main Street, above.

[56] The innocent party need only act reasonably and not perfectly or flawlessly in his efforts to mitigate; he need not take all possible steps to reduce his loss. O’Hare v. Wyton, 2018 ONSC 3946; Janiak v. Ippolito, [1985] 1 S.C.R. 146. That principle was recently followed in the Ontario Court of Appeal decision of Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519 where the Court @ para 80 confirmed that the duty to mitigate only requires the plaintiff to take reasonable steps, not any and all steps.

[57] The defendant states that summary judgment should not be granted in favour of the plaintiff because of the expert opinion of Mr. Del Sorda that the plaintiff failed to act reasonably in mitigating her damages which issue can only be resolved after a trial.

[58] I disagree.

[59] The facts are not materially in dispute in this case as indicated above. There are no issues of credibility between the parties. In my view, I can make a just determination of the issues in dispute in this case and applying the law to the facts even accepting the defendant’s expert evidence without the necessity of a full trial.

[60] The difference in the parties’ expert opinions at its highest is whether the plaintiff ought to have relisted the property for 30 days before considering and accepting any offers as suggested by the defendant’s expert or whether selling it after only six days of listing was reasonable according to the plaintiff’s expert. Either way, there is no evidence that the plaintiff resold the property for less than its market value and all of the evidence including the defendant’s admissions is that it resold for more than its market value in August 2017.

[61] Although the defendant’s expert Mr. Del Sorda suggested that the plaintiff ought to have relisted the property for a total of 30 days, he at no time suggested that her failure to do so resulted in her accepting the $450,000 offer that was less than the property’s market value price and less than any likely offer she would have expected to receive up to the amount of the purchase price the defendant had initially agreed to pay of $551,000 in April 2017.

[62] His evidence was that the real estate market had leveled off in July and August 2017 after having dropped significantly from the sellers’ market in the spring of 2017; he did not state that it had increased by August or September and reverted by then to its original state it was in the spring 2017.

[63] As indicated above, the plaintiff is required to take reasonable steps to mitigate her damages by reselling the property after the defendant’s breach. She was acting as the estate trustee in a fiduciary capacity to the estate. The plaintiff had no knowledge of real estate matters and relied on the advice of her real estate agent that she should accept the $450,000 offer she received because of the declining market and that she should not keep it on the market because they couldn’t predict the future and that was the best advice he could give her.

[64] It would not be appropriate to require the plaintiff in these circumstances to speculate in a declining market after the initial closing date on the market rebounding and her assuming the burden or the benefit of those changes in the market after the closing date. 642947 Ontario Ltd. v. Fleischer, above. In my view, the law regarding mitigation of damages does not require her to do so in in this case.

[65] In summary, the defendant’s expert evidence, at its highest, does not establish that the plaintiff’s efforts on reselling the property by not listing it for approximately 30 days was unreasonable in the circumstances.

[66] Moreover, the only evidence in this case is that the property was resold in August 2017 for more than its market value as admitted by the defendant. There is no evidence including from the defendant’s expert evidence that the plaintiff would likely have received more than what she received had she relisted the property for an additional approximate 24 days.

[67] The real estate market had plateaued in July and August 2017 but the evidence does not establish that it had increased and reverted to a sellers’ market at that time which would have resulted in the plaintiff obtaining an offer close to or equal what the defendant had initially agreed to pay. The defendant is simply asking the court to speculate that if certain steps were taken differently by the plaintiff, “as a matter of common sense” a higher price could have been obtained which is not appropriate. Gamoff v. Hu, 2018 ONSC 2172; O’Hare v. Wyton, 2018 ONSC 3946; McKnight v. Morrison, 2019 ONSC 552.

[68] The defendant Cabral by his evidence presented including that of his real estate expert has not met the onus required of him and he has failed to establish that the plaintiff did not mitigate her damages as required. The plaintiff has established that there is no genuine issue requiring a trial on the issue of mitigation of its damages and is entitled to summary judgment for the damages sustained because of the defendants’ breach of the contract.

Damages

[69] In addition to the difference of the sale price of $98,000, the plaintiff claims for her additional expenses incurred because of the defendant’s breach of the contract including her legal fees incurred on the aborted purchase, hydro, gas, hot water tank rental costs, house insurance premiums and property taxes incurred by her for the house from the initial date of closing of June 12 to August 10, 2017. These are all reasonable expenses and claimable damages as indicated below:

a. Purchase Price $98,000 b. Legal fees for aborted purchase $615.85 c. Hydro $149.84 d. Union Gas $234.33 e. Hot water tank rental $24.91 f. House insurance premiums $102.60 g. Property Taxes $964.54 h. Total $100,092.07

The plaintiff claimed an additional sum of $750 for legal fees incurred but provided no reasons or evidence for that claim and I do not allow anything for them.

Conclusion

[70] The plaintiff is entitled to the following order:

a) Summary judgment against the defendant Emanuel Cabral in the amount of $100,092.07. b) Default judgment against the defendant Sherif Behiry in the amount of $100,092.07. c) On consent, an order dismissing the counterclaim of the defendant/plaintiff by counterclaim Emanuel Cabral against the plaintiff/defendant by counterclaim.

[71] If the parties are unable to agree on the issue of prejudgment interest and costs, the plaintiff shall make brief submissions to my chambers in Simcoe of no more than two pages in length together with a bill of costs and any relevant offers to settle within 15 days of the date of this decision. The defendant Cabral shall similarly be entitled to respond within 10 days thereafter.

[72] If no submissions are received within the timelines, the parties shall be deemed to have resolved the issue of prejudgment interest and costs.

The Honourable Mr. Justice R. J. Nightingale

Released: May 24, 2019