COURT FILE NO.: CV-00000282-0000

DATE: 20190121

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MARILYN MCKNIGHT, in her capacity as Estate Trustee for the Estate of Linda MacDonald

Plaintiff

– and –

TRACY MORRISON and COLDWELL BANKER RONAN REALTY LTD.

Defendant

Colleen Butler, counsel for the Plaintiff

Dale Lediard, counsel for the Defendant

HEARD: January 17, 2019

RULING ON MOTION FOR SUMMARY JUDGMENT

Healey J.

Nature of the Motion

[1] The plaintiff moves for summary judgment on the claim. Specifically, the plaintiff seeks an order requiring the defendant to pay damages for breach of contract totalling $78,376.85 plus pre-judgment interest. The plaintiff also requests an order directing the defendant Coldwell Banker Ronan Realty Ltd. to release a deposit in the amount of $10,000 to the plaintiff, to be applied against the judgment.

The Facts

[2] The plaintiff, Marilyn McKnight, is the estate trustee for the estate of Linda MacDonald. Linda MacDonald was Marilyn McKnight’s sister. Marilyn and her brother Paul Irwin are the two residual beneficiaries of Linda’s estate. Marilyn is hereafter referred to as the Vendor.

[3] One of the estate assets was a residence located at 91 Albert Street West, Alliston, Ontario (the “Property”), which is located in the municipality of the Town of New Tecumseth in the County of Simcoe.

[4] The Vendor listed the Property for sale on or around March 14, 2017. The defendant Coldwell Banker Ronan Realty Ltd. (“Coldwell Banker”) was the broker of record and Wayne McGilvray was the real estate agent for the listing. The Property was listed for $439,900.

[5] The uncontested evidence is that the spring of 2017 was a very heated real estate market in the New Tecumseth area. It was considered a seller’s market; properties were selling very quickly and often over the asking price. The Vendor listed the Property for sale when the real estate market was very active. In a five day period between March 14 and March 18, 2017 there were a total of 38 booked showings of the Property. Mr. McGilvray has been a licensed real estate agent for 30 years and broker for 29 years, working in Simcoe County throughout. In his experience, this was a lot of activity on one property in a short period of time.

[6] Mr. McGilvray accepted offers on the Property on March 18, 2017, and received five registered offers to purchase the Property. He reviewed those offers with the Vendor and her brother. The Vendor decided to proceed with the offer presented from the defendant Tracy Morrison, as it was the highest offer and contained no conditions. Tracy Morrison is hereafter referred to as the Purchaser.

[7] On March 18, 2017, the parties signed an Agreement of Purchase and Sale (“the Agreement”) for the Property to be sold for $532,500 with a closing date of June 30, 2017. The Purchaser paid a deposit in the amount of $10,000, which is currently being held by Coldwell Banker. The Purchaser was represented by a real estate agent throughout.

[8] Again, there were no conditions in the Agreement. Specifically, the Purchaser did not make the purchase conditional on financing or the sale of her home.

[9] The Purchaser owned a home in Brampton, Ontario (the “Brampton Property”). Despite signing the agreement on March 18, 2017, she did not list the Brampton Property until May 26, 2017. The Purchaser explains that because the real estate market was still very hot in April and May, 2017, her realtor expressed that there was no urgency to list the Brampton Property. There was also further delay attributable to contractors retained to make certain repairs and maintenance, presumably before listing for sale.

[10] On June 27, 2017, three days before the scheduled closing, the Purchaser requested an extension of the closing date to August 18, 2017.

[11] The Agreement provides that extensions could only occur if agreed to in writing by both the Vendor and Purchaser. Specifically, at paragraph 20 the Agreement provides:

20. TIME LIMITS: Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein may be extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically authorized in that regard.

[12] The Purchaser’s reason for needing the extension was that she needed to sell the Brampton Property before completing the purchase of the Property. Upon receiving this unexpected request, the Vendor was upset and concerned because of the risk that the Brampton Property would not be sold by August 18, and that it may then be difficult to sell the Property at the end of the summer if the Purchaser was still unable to close the deal. Also, as this was an estate sale, the Vendor did not want to maintain a vacant property and incur additional expenses to the estate without any certainty of a closing date.

[13] The Vendor consulted with the real estate solicitor who she had retained for the sale of the property, Mr. Gastaldi, and made an offer that the closing be extended to July 14 on certain conditions. Negotiations ensued, which included the Purchaser offering to move the closing date from August 18 to July 31, but the parties were unable to reach an agreement on the terms of an extension.

[14] On June 28, the Purchaser’s real estate solicitor, Mr. Khurana, delivered correspondence to Mr. Gastaldi that clearly confirmed that his client was not in a position to close the purchase on the Property in the absence of a sale of the Brampton Property.

[15] On June 30, Mr. Khurana advised that the Purchaser was pursuing all her options to sell the Brampton Property as quickly as possible, arguing that an extension was in everyone’s best interest. On that same date the Purchaser’s realtor wrote to Mr. McGilvray advising that the Purchaser was not arguing about the price, but simply required more time to sell the Brampton Property. Also, on that same date the Purchaser wrote directly to Mr. Gastaldi imploring the Vendor to provide a four-week extension, and again expressing her interest in the property and intention to complete the sale when she had funds from the sale of the Brampton Property.

[16] Instructed by his client to reject these requests once again, Mr. Gastaldi advised the Purchaser’s solicitor that the Vendor would have no choice but to relist the property as of 6:00 p.m. that day in an effort to mitigate her damages, should the Purchaser fail to complete the transaction. Mr. Gastaldi went on to advise that if the Purchaser was able to sell her property and wished to revive the purchase, his office should be contacted immediately.

[17] The Vendor executed documents for the sale of the Property and Mr. Gastaldi sent them to the Purchaser’s real estate solicitor on June 30. The Vendor was ready, willing and able to close on the sale of the Property.

[18] The Purchaser did not complete the transaction on June 30, and the deal did not close.

[19] The Vendor relisted the Property for sale on Sunday, July 2, 2017. Mr. McGilvray again acted as the real estate agent for the sale of the Property.

[20] The undisputed evidence is that the market had cooled since March. By July it was no longer a “seller’s market”. The Purchaser acknowledges this fact and attributes it as being one of the factors why the Brampton Property had not sold by June 30. In her letter to Mr. Gastaldi dated June 30, the Purchaser wrote “we know the real estate market softened, this happened almost the very day I listed my property in Brampton”. Similarly, Mr. Khurana’s correspondence to Mr. Gastaldi of June 30 stated “the market has undergone a drastic change in the last few months and my client has not been able to find buyers for her sale”.

[21] Prior to relisting the Property on July 2, Mr. McGilvray looked at comparables in the area to determine an appropriate listing price at that time. Based on the state of the home and the state of the market, the Property was listed for sale at $459,900, which was $20,000 higher than the list price in March.

[22] Mr. McGilvray contacted the real estate agents who had viewed the house in March to see if their clients were still interested in the Property. Showings ensued which resulted in an offer to purchase. After some negotiations, on July 3, 2017 the Vendor accepted an offer for the sale of the Property for $455,000, with a closing date of July 28, 2017.

[23] It is Mr. McGilvray’s opinion that the house was sold at fair market value. It is also his opinion that it was fortunate to be able to sell the house quickly given that the property was being listed in the summer market, which tends to be slower, and a large local employer, Honda, was on their regular one week shut down, which resulted in many people being away on holidays.

[24] The deal closed as scheduled on July 28. The estate claims damages for the difference in the purchase price of $77,500, utilities after June 30 in the amount of $135.45, property taxes in the amount of $232.90 calculated at a per diem rate for 28 days, and legal fees and disbursements for the aborted sale in the amount of $508.50. The total damages claimed amount to $78,376.85.

[25] Mr. McGilvray has investigated the status of the sale of the Brampton Property. He learned that the Purchaser had reduced the list price from $998,000 to $969,000 on June 29, 2017. She then cancelled the listing agreement with her agent and listed the Brampton Property with a new agent on June 30, 2017 for a sale price of $989,000. The listing expired August 29, 2017. The Brampton Property did not sell prior to the listing’s expiry.

[26] Although in her affidavit the Purchaser states that she was prepared to sell her home for as much as $200,000 less than her originally anticipated price, there is no evidence that she took such a step at any time.

The Position of the Defendant

[27] The Purchaser argues that the Vendor has not proven her damages, as she has failed to provide evidence that the Property sold for the highest price obtainable.

[28] The Purchaser asserts that it was unreasonable for the Vendor to have sold the property for $77,500 less than what she had agreed to pay, with essentially the same extended closing date that she had proposed during the negotiations. She believes it was unreasonable for the Vendor to have only listed the property for two days, which were a Sunday and a holiday Monday, before accepting the offer. In acting as she did, the Purchaser submits that the Vendor failed to mitigate her damages.

[29] The Purchaser also believes that it was unreasonable for the Vendor to sell the Property while she was still committed to purchasing it. Essentially, she argues that her good faith was demonstrated by the fact that she had lowered the asking price on her home by $29,000. Although the Purchaser states in her affidavit that she was prepared to reduce the asking price further if the Vendor agreed to extend the closing date to July 31, there is no suggestion of this in any of the letters delivered to Mr. Gastaldi. It is the Purchaser’s position that she has never attempted to renege on the purchase price, but simply required more time to sell the Brampton Property. It is her view that it was in the best interests of all concerned to provide an extension of the closing date given the market conditions at the time.

[30] Also, because this was an estate sale, the Purchaser submits that a sale of the Property was not urgent. She believes it would have been quicker and more cost-effective to have provided an extension to the closing date than pursue litigation.

Issues

[31] The issues to be determined are as follows:

(i) Is this an appropriate case for summary judgment?

(ii) Did the Purchaser breached the Agreement?

(iii) What damages were caused by the Purchaser’s breach?

(iv) Did the Vendor reasonably mitigate the estate’s damages?

Is This an Appropriate Case for Summary Judgment?

[32] Counsel for the Purchaser concedes that this is an appropriate case in which to resort to Rule 20.01.

[33] I am satisfied that there is no genuine issue requiring a trial in this case. Applying the test set out in Hryniak v. Mauldin, 2014 SCC 7, I find that I am able to reach a fair and just determination on the merits. First, as the Purchaser’s counsel concedes, there are virtually no facts in dispute. There is a complete documentary record. There are no significant credibility issues. Fact-finding is not hindered in any way. The facts can be readily applied to the applicable law, which is not in dispute.

[34] What is in dispute is whether the Vendor has proven her damages, and whether she took reasonable steps to mitigate. The parties disagree on whether the Vendor was required at law to extend the closing date.

[35] On the basis of the evidence before me, the issues of liability, mitigation and damages are able to be determined expeditiously, without need for an expensive trial. In short, none of these issues requires a trial to resolve.

Did the Purchaser breached the Agreement?

[36] Counsel for the Purchaser concedes that as a result of his client’s failure to close the transaction on the scheduled date, the Purchaser has breached the Agreement.

[37] I find that the purchaser has breached the Agreement and is liable to the Plaintiff for all damages that flow from that breach, subject to a consideration of mitigation.

[38] In Tse v. Sood, 2015 ONSC 755 (Ont. Div. Ct.), the court noted that there are four main legally acceptable justifications for a purchaser refusing to close a real estate transaction. None of those exist in this case. The four situations that entitle a purchaser to not close are:

1. Non-satisfaction of a condition precedent;

2. Breach of a fundamental promise;

3. Vendor’s failure to convey good title; and

4. Misrepresentation, along with the other elements of a claim for the equitable remedy of rescission being satisfied: Tse v. Sood, at paras. 8-10.

[39] The Agreement is unambiguous and unconditional. No agreement was reached to extend the closing date. The Purchaser breached the Agreement by failing to close. The Vendor was entitled to treat the Agreement as at an end and to sue for the estate’s damages.

The Plaintiff’s Damages

[40] The legal principle for the calculation of damages payable as a result of breach of contract is set out in Hadley v. Baxendale (1854) 9 Exch 341. The plaintiff is entitled to recover any reasonable damages that reasonably flow from the breach of contract by the defendant.

[41] The obligation of the Vendor to establish damages applies before any issue of mitigation arises: Holst v. Singh, 2018 ONSC 4220, at para. 13.

[42] In failed real estate transactions, the damages payable to the seller include 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 seller in mitigating her loss and dealing with the purchaser’s breach, including legal fees thrown away from the aborted sale: Bang v. Sebastian, 2018 ONSC 6226, at paras. 53, 57 and 59.

[43] I find that all of these losses were reasonably foreseeable to the Purchaser as a result of failing to close the transaction.

[44] Additionally, a purchaser’s deposit is to be credited against the damages proved by the vendor: Bang, at para. 68.

[45] I find that plaintiff has provided evidence to fully substantiate all of the damages claimed.

[46] The Purchaser argues that this motion must fail because the Vendor has failed to adduce evidence that the Property was sold for the highest price obtainable for the Property. But the Vendor is not required to obtain the highest possible price; the Vendor is required to obtain a price that is reasonable given all of the facts of the case including the current market conditions.

[47] There is obviously an interaction between a plaintiff’s requirement to prove damages, and the issue of mitigation. The law has been concisely stated in Holst, at paras. 8 and 9, as follows:

8 In 100 Main Street East Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 1630 (ON CA), 20 O.R. (2d) 401 (Ont. C.A.) at para. 73, the Court of Appeal noted the following in dealing with the assessment of damages in the case of breach of an agreement to purchase land:

The damages should have been calculated on the basis of a finding of 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. What is reasonable, in each instance, of course, is a question of fact to be decided on the basis of all relevant market circumstances.

9 The court went on at para. 81 to address the issue of mitigation as follows:

As I have said, with respect to the issue of mitigation, the onus is on the defendant. However, the onus on the defendant to prove failure to mitigate does not relieve the plaintiff from proving an obvious element in the calculation of his damages. McGregor on Damages, supra, at para. 212, page 149, puts the matter this way:

The onus of proof on the issue of mitigation is on the defendant. If he fails to show that the plaintiff ought reasonably to have taken certain mitigating steps, then the normal measure will apply.

Included in the "normal measure" is the difference between the contract price and the market price. Thus, I think that the proper courses for the plaintiff, in presenting its case, is to adduce evidence of the contract price and of the market price or resale price upon which he 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.

[48] It is the undisputed evidence of Mr. McGilvray, who has three decades of experience working in real estate in the area where the Property is located, that this was fair market value for the Property at the time given the state of the home and the market. The uncontested evidence presented on this motion is that by the end of June, 2017 the market had shifted from being that of a “seller’s market” to a “buyer’s market”. Given the undisputed evidence of Mr. McGilvray, who looked at comparable properties and assessed the condition of the Property and the market at that time, I find that the selling price of $455,000 was reasonable. It was only $4,000 under the list price of $459,900 which, even given the change in market, was $20,000 higher than its listing price at the time of the Purchaser’s offer.

[49] I find that the Vendor has met the onus of establishing the estate’s damages, subject to a consideration of mitigation.

[50] The estate’s damages include the difference in the purchase prices, carrying costs for 28 days, and legal fees thrown away. The difference between the original price and the price of the new sale was $77,500. The carrying costs were limited to gas bills and property taxes for the 28 day period. The gas charges from June 30 to July 27, 2017 totalled $135.45. The property taxes for 2017 were $3,036.06, or $8.32 per diem, totalling $232.90 for the 28 day. The legal fees and disbursements for the aborted sale were $508.50.

Did the Vendor Reasonably Mitigate Damages?

[51] A defendant who alleges that a plaintiff has failed to mitigate damages bears the burden of proof. The defendant needs to prove both that the plaintiff has failed to make reasonable efforts to mitigate, and that mitigation was possible: Southcott v. Toronto Catholic School Board, [2012] 2 S.C.R. 657, at para. 24.

[52] As set out in O’Hare v. Wyton, 2018 ONSC 3946, at para. 36:

Innocent parties need not demonstrate flawless efforts at mitigation. They need only act reasonably, in view of the prevailing circumstances known at the time to exist. See DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONSC 2432, reversed on other grounds, 2017 ONCA 961.

[53] What the Vendor knew on July 2 and 3, 2017 was that the market had dramatically shifted. She knew that the Purchaser would be unable to close the transaction until she sold the Brampton Property. She was aware from Mr. McGilvray that, in his opinion, the Brampton Property was priced well above market and would be difficult to sell. She knew that, despite the drop in selling price on June 27 by $29,000, the Brampton home had not sold. There was no guarantee when it would sell. She knew that she had an obligation to act in a fiduciary capacity toward preserving the estate assets. The property was sitting vacant and the estate was incurring expenses pending its sale. She consulted with her real estate agent. She was aware that there had been others offers on the home presented on March 18 and considered whether any of those potential purchasers were still interested. Significantly, she left open to the Purchaser the opportunity to revive the deal if she was able to sell the Brampton Property. The Vendor listed the Property at a price $20,000 over what she had in March, and negotiated before agreeing upon a final sale price. She accepted a closing date only 25 days later, thereby reducing the carrying costs.

[54] The Vendor was not required at law to wait for the Purchaser, who had already breached the Agreement, to sell the Brampton Property and attempt to revive the repudiated contract, regardless of how sincere the Purchaser’s intentions may have been.

[55] The Purchaser’s argument is that in this case “reasonable mitigation” was for the Vendor to extend the closing, in which case the estate allegedly would have no losses. The Purchaser presents the following position in her Statement of Defence and Crossclaim regarding the issue of mitigation:

In failing to complete the purchase of the Property on June 30, 2017, the Defendant was in breach of contract as a result of the Plaintiff’s unwillingness to accept reasonable terms of extension requested by the Defendant. Such an extension would have allowed for the sale of the Property and a full mitigation of losses. There were no reasonable grounds for denial of this extension.

[56] There are several problems with such a position. First, it fails to recognize that the Vendor had absolutely no obligation to extend the closing date to accommodate the Purchaser, particularly in the face of an unconditional agreement. There is nothing in the Agreement that obligated the Vendor to even attempt to negotiate an extension. It was entirely the Purchaser’s failure to list the Brampton Property in a timely manner that was the cause of her own need for an extension.

[57] Second, it is clear on the evidence that even if an extension had been granted, there is no guarantee that the Brampton Property would have sold by July 31. In fact, the evidence is that the Brampton Property had not sold by August 29, 2017.

[58] Third, there were reasonable grounds for denial of the extension, as previously described.

[59] The most fundamental flaw in the Purchaser’s argument concerns her submission that the estate could have received $532,500 had the Vendor conceded to her proposal to extend the closing date to July 31, 2017. The evidence demonstrates the false logic in this argument, as no offer had even been accepted on the Brampton Property by July 31. The Purchaser’s affidavit is silent as to whether any offers were even made on the Brampton Property during July and August, 2017. And as previously noted, there is no evidence that she intended to reduce the asking price after listing it again on June 29, 2017. Her reduction of $29,000 lasted only one day.

[60] Criticism presented by the Purchaser is that the property was listed on July 2, 2017 and sold the next day, which was a holiday, for $455,000. Again, it is the undisputed evidence of Mr. McGilvray that this was fair market value for the Property at the time. As the party bearing the onus, any allegation that the property sold for less than fair market value should have been backed up with evidence presented by the Purchaser, of which there is none.

[61] I find that the evidence supports a finding that the Vendor reasonably mitigated the estate’s damages.

[62] I find that the estate has proven that it has suffered damages as a direct result of the Purchaser’s breach of the Agreement totalling $78,376.85.

[63] The plaintiff shall have its costs of the action. I have reviewed the Bill of Costs of the plaintiff. The plaintiff seeks $10,113.65 in costs inclusive of disbursements, calculated on a partial indemnity basis, using a rate of $200 per hour. The total hours indicated are 40.5, which includes all preparation for and attendance at the motion for summary judgment, which I find to be reasonable for the necessary steps required to be taken. These costs are in line with these presented in the defendant’s Bill of Costs, which to this point in the action, are $8,092.07 inclusive of disbursements and HST. The hourly rate for the defendant’s solicitor is $275 per hour. All of this reflects upon what the defendant could reasonably expect to pay if she lost the motion; I find that she would have anticipated the amount claimed by the plaintiff. Overall, I find the costs claimed by the plaintiff to be fair and reasonable given the steps necessary to obtain judgment.

[64] Judgment shall issue in the following terms:

1. The plaintiff’s motion for summary judgment on the claim is granted.

2. The $10,000 deposit being held by the defendant Coldwell Banker Realty Ltd. shall be released to the plaintiff.

3. The plaintiff shall have judgment in the amount of $78,376.85 plus prejudgment interest, against which the $10,000 deposit shall be credited.

4. The defendant Tracy Morrison shall pay costs of this action to the plaintiff fixed in the amount of $10,000.

Healey J.

Released: January 21, 2019