NEWMARKET COURT FILE NO.: CV-18-0138598-00
DATE: 20191205
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ARISTA HOMES (KLEINBURG) INC
Plaintiff
– and –
SARAH IGBINEDION
Defendant
Daniel McConville, Counsel for the Plaintiff
Ralph Swaine, Counsel for the Defendant
HEARD: December 4, 2019
REASONS FOR DECISION
EBERHARD J.
[1] The Plaintiff moves for Summary Judgment for damages arising from a real estate transaction that did not close.
[2] There were two agreements of purchase and sale. After the first transaction failed to close on April 27, 2017 the parties attended arbitration but after mediation, both represented by counsel, they entered Minutes of Settlement agreeing to the same terms of agreement of purchase and sale except at a higher price and with a new closing date.
[3] Notwithstanding the disputes raised in the factum of the Defendant, in argument it was acknowledged that the court is not to go behind these Minutes of Settlement and as such, there was no argument before me based on alleged misrepresentations by the vendor resulting in an elevated purchase price. Nor was there argument based on a duty of good faith advanced.
[4] Both parties reviewed the history for context: the vendor to demonstrate reason for growing impatience with the purchaser and the purchaser to demonstrate that the vendor was uncooperative throughout. Such attitudes do not bare on the decision before me.
[5] The argument centered on the refusal of the vendor to extend the second closing date.
[6] The facts are not in dispute as the events on the closing day are recorded in correspondence showing that at 11:44 a.m. the purchaser’s solicitor advised of a “last minute …extra cost of $24,000 for HST rebate” and “requesting an extension for four weeks”.
[7] The solicitor for the vendor responded at 12:38 p.m. with an offer of extension for one week at $50,000 increase in deposit or two weeks for an increase of $100,000. By 3:12 p.m. the vendor inquired which option was the purchaser wanting, answered at 3:19 p.m. that the purchaser was trying for $100,000 but if not $50,00, then an inquiry at 4:42 p.m. whether the purchaser would be responding, which the solicitor for the purchaser answered at 5:10 p.m. He was waiting for his client’s instructions.
[8] At 5:51 p.m. the vendor terminated the transaction noting that he has tendered and was at all times ready, willing and able to complete.
[9] Time was of the essence in paragraph 11 of the agreement of purchase and sale. The Defendant does not pursue an argument that the vendor was under any obligation to extend.
[10] However, in a mighty effort to rescue his client from the inevitable result, counsel for the Defendant argues that the refusal to consider an extension amounts to a failure to mitigate. He reasons that the vendor could have had the same purchase price had he accepted an extension and let the purchaser complete the transaction at the agreed price.
[11] He could not provide evidence that after the transaction terminated the purchaser made any attempt to bring forth funds to offer to purchase the property.
[12] The argument must fail on the facts and on the reasoning in Azzarello v Shawqi 2019 ONCA 820 where Feldman J.A states:
[37] However, even if the appellant had made an offer to pay 10% less for the property and not be released from his obligation under the agreement of purchase and sale, I would reject the suggestion that the duty to mitigate obliges a vendor to accept an offer from the defaulting purchaser for less than the agreed price and then to have to sue the purchaser for the difference from the original agreed price.
[38] While a vendor may choose to accept such an offer, for example in a declining market, the vendor cannot be obliged to do so.
[39] The duty to mitigate is derived from the proposition that the wronged party cannot recover from the defaulting party for losses that could reasonably have been avoided: S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017), at p. 529. It cannot be reasonable for a vendor to be obliged to reduce the loss it claims from the defaulting party by reselling the property to that party, then suing him or her for the difference. This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way. Yet the defaulting party would secure a significant tactical and procedural advantage over the innocent vendor.
[40] The effect of endorsing the proposition advanced by the appellant would be to undermine the sanctity of the bargain by encouraging purchasers to default, particularly in a falling market, and to offer a lower price for the same property, leaving vendors with the risk and expense of recovering the balance of the original contract price in an action. The duty to mitigate does not go that far.
[13] Although that case had the component that the offer from the defaulting purchaser was to pay less than the terminated agreement, other facts were similar in that there had been a request for extension by the purchaser, a counter offer for increase in deposit, no response, termination and then sale to a new buyer.
[14] I find that a mitigation requirement to sell to a purchaser who had failed to come up with funds on the date of closing would encourage purchasers to ignore time of the essence clauses, would introduce uncertainty into conveyancing practice and would very likely put the innocent vendor into the risk and expense of recovering damages through litigation.
[15] Here there is no evidence that the vendor’s mitigation efforts were otherwise inadequate.
[16] There is no dispute before me on the requirements of a summary judgment. Here there are no genuine issues requiring a trial as to the Plaintiff’s entitlement to damages and the Plaintiff has provided 15 examples from caselaw where summary judgment has been granted in similar agreement of purchase and sale circumstances. It is a proportionate process for such scenarios.
[17] There is no dispute about nature of damages, that “the Plaintiff is entitled to be put in the position it would have been if the contract had been performed, so far as money can do it….the normal measure of such damages is the contract price less the market price of the land.” 100 Main Street East Ltd. v W.W. Sullivan Construction 1978 1630 (ON CA), 1978 CarswellOnt 1459 (C.A.) at para 55.
[18] There is dispute about the quantum of damages but no issues requiring trial.
[19] The first dispute is whether the costs of arbitration are recoverable as damages. I find they are not. Firstly, the parties agreed at the time they entered into Minutes of Settlement after mediation in that environment to bare their own costs. Secondly, I find the mediation/arbitration proceeding is a separate proceeding from this law suit. Dia el v Gore Mutual Insurance Co. et al 1993 8511 (ON SC), [1993] O.J. No. 644 (ONT Ct Gen, Div, decides such costs are not recoverable in this action and no contrary authority is placed before me.
[20] The Defendant also asserts that commission costs are not documented in the quantum argued by the Plaintiff. I find this submission does not survive examination of the summary and supporting documentation at Exhibit “O” of the Plaintiff’s affidavit in the Motion Record. Counsel has explained an error in calculation that results in a reduction in the Defendant’s favour and recalculated properly in argument.
[21] The parties agree that the deposit being held by the Plaintiff vendor is to be forfeited and applied to the damages. Azzarello v Shawqi supra para 42-55. The vendor also holds $14,848.40 which was paid for extras. I see no reason why this amount should not be dealt with in like manner to the $80,000 received and held as deposit. In effect, the extra amount increased the full contract price and that amount was paid to the vendor in like manner as deposit.
[22] The dispute is then whether the $94,484.40 should be deducted from the damages before Pre-Judgment Interest is calculated. The Plaintiff has had that money but has not made money on it. I have no authority before me that would justify depriving the successful Plaintiff of interest on funds he held but could not use.
[23] Finally, it is argued that 12% for PJI should be reduced. The parties agree I have the discretion to reduce PJI from the contract rate to the CJA rate.
[24] The standard form agreement of purchase and sale, signed the second time with the assistance of counsel after the Minutes of Settlement, states at clause 11:
This offer is to be read with all changes of gender or number required by the context and comma when accepted, shall constitute a binding contract of Purchase and Sale, and time shall, in all respects, be of the essence. The deposit monies are expressly deemed to be deposit monies only, and not partial payments. Default in payment of any amount payable pursuant to this agreement on the date or within the time specified, shall constitute substantial default hereunder, and the vendor shall have the right to terminate this agreement and forfeit all deposit monies in full without prejudice to be vendors rights as to forfeiture of deposit monies as aforesaid, and in addition thereto, the vendor shall have the right to recover from the purchaser all additional costs, losses and damages arising out of default part of the purchaser pursuant to any provision contained in this agreement, including interest thereon from the date of demand for payment at the rate of 12% per annum, calculated daily, not in advance, until paid.
[25] The Defendant asks me to find this 12% should attract the same approach as taken in Forest Hill Homes v Ou 2019 ONSC 4332
[18] The APS provides that the Plaintiff can charge interest in the amount of 20% of the purchase price if the Defendants fail to pay the balance due on closing. The Defendants state that this is excessively onerous and as a consequence ought not be enforceable. Defendants’ counsel submits that the exorbitant rate of interest was never drawn to the Defendants attention, which would be required if this kind of surprisingly onerous term is to be enforced.
[19] It has been four decades since the Ontario Court of Appeal held that a surprisingly onerous term of a contract may be unenforceable if it cannot be presumed that the non-drafting party had actually agreed to it: Tilden Rent-a-Car v Clendenning, (1978), 1978 1446 (ON CA), 83 DLR (3d) 400. As Dubin CJO put it, at 408-9:
In many cases the parties seeking to rely upon the terms of the contract know or ought to know that the signature of a party to the contract does not represent the true intention of the signer, and that the party signing is unaware of the stringent and onerous provisions which the standard form contains. Under such circumstances, I am of the opinion that the party seeking to rely on such terms should not be able to do so in the absence of first having taken reasonable measures to draw such terms to the attention of the other party, and, in the absence of such reasonable measures, it is not necessary for the party denying knowledge of such terms to prove either fraud, misrepresentation or non est factum.
[20] I am not convinced that a party in the Plaintiff’s position – a subdivision builder with a standard form of contract for each of its purchasers – can enforce a surprisingly onerous and unexpected term in that contract without at least drawing it to the other party’s attention. The record indicates that indeed the high interest rate was not called to the Defendants’ attention, and there is nothing to suggest that the Defendants, who signed the APS on the same day that it was presented to them and without any legal advice, understood or were cognizant of this term.
[26] Although this Plaintiff is a builder of homes and agreement of purchase and sale is thick with documentation of this home in a subdivision context, I know little about the parties. The Defendant had the benefit of counsel when she entered into the same terms a second time. It is certainly a standard form contract but I had no evidence before me whether 12% is an unusual interest rate in the industry. I cannot really assess whether the terms are “stringent and onerous provisions” or “that the party signing is unaware”. 12% of damages is not as onerous on its face as “interest in the amount of 20% of the purchase price if the Defendants fail to pay the balance due on closing” in the Forest Hill case.
[27] Accordingly, I decline to exercise my discretion and the interest rate for PJI set out in the agreement of purchase and sale shall prevail.
[28] I accept the Plaintiff’s recalculation of damages as $125,000, commission of $29,880, utilities and taxes of $5,673.73 for a total of $160,553.73
[29] Summary judgment is granted to the Plaintiff for damages in the amount of $160,553.73
[30] PJI of 12% is ordered on that amount.
[31] The deposit held by the Plaintiff of $94,484.40 shall be forfeited and applied towards the damages ordered herein.
[32] I have already received the Costs Outline from both counsel. Parties may address costs by written submissions of no more than 2 pages together with any offers sent electronically to the judicial secretary in Barrie, Kim.Fleet@ontario.ca
Plaintiff by Jan 6, Defendant response by Jan 10, and Plaintiff reply by January 15, 2020
[33] The file is to be held in Barrie for my attention until the costs issues are completed.
Eberhard J.
Released: December 5, 2019