COURT FILE NO.: CV-19-00624162-0000

DATE: 20201109

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CHRISTINE ELLIOTT Plaintiff

– and –

SAVERIO MONTEMARANO Defendant

Kenneth Prehogan, Lia Boritz and Kayla Theeuwen for the Plaintiff

Arnold B. Schwisberg and Kaleigh Sonshine, for the Defendant

HEARD: October 13, 2020

papageorgiou j.

Nature of the Case and Motion

[1] This is a motion for summary judgment brought by the plaintiff, the vendor of property known as 780 Garden Street, Whitby, Ontario (the “Property”) against Saverio Montemarano, who entered into an agreement of purchase and sale (the "APS”) to purchase the Property. As set out below, the plaintiff claims that the defendant breached the APS by failing to complete the transaction.

[2] The defendant has been a land developer for approximately 30 years and he and the plaintiff were long-term friends. He says that it was not he who breached the terms of the APS, but rather the plaintiff through bad faith performance, misrepresentation and “breach of duty.” In essence, the defendant says he wanted to build a retirement home, the plaintiff knew this, withheld critical information regarding the by-law restrictions affecting the Property, and failed to agree to reasonable extension requests to allow him to address such by-law restrictions.

[3] The defendant objects to the motion for summary judgment on the basis that there are important credibility issues which require a trial.

[4] I find that there is no genuine issue requiring a trial. The defendant is a sophisticated land developer. The terms of the APS are clear and unambiguous. The defendant’s allegations regarding pre-contractual representations cannot stand in light of the clear and unambiguous terms of the APS, which includes an entire agreement clause, a provision which specifically states that there is no representation as to the possible use of the Property and another provision that states that the Property is sold on an “as is whereas” basis. In any event, the defendant has made significant admissions which show that he was not relying on anything the plaintiff said or did not say about the zoning of the Property.

[5] For the reasons that follow I am granting the plaintiff summary judgment in the amount of $1,014,398.34.

The issues

[6] In arriving at the above decision, I have considered the following issues:

a. What is the test on a summary judgment motion?

b. What was the zoning of the Property and was it hidden?

c. What are the relevant terms of the APS?

d. Did the defendant fail to close the purchase of the Property?

e. Did the plaintiff misrepresent the zoning of the Property?

f. Did the plaintiff violate a fiduciary duty owed to the defendant?

g. Did the plaintiff breach the terms of the APS by refusing any further extensions beyond October 13, 2017?

h. Did the plaintiff breach a duty of good faith by refusing to provide further extensions?

i. Did the plaintiff reasonably mitigate her damages?

j. What are the plaintiff’s damages?

What is the test on a summary judgment motion?

[7] In accordance with Rule 20.04(2), of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), the court shall grant summary judgment if:

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[8] In determining whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and a judge may exercise any of the following powers under Rule 20.04(2.1): (1) weighing the evidence; (2) evaluating the credibility of a deponent; and (3) drawing any reasonable inference from the evidence.

[9] The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49, succinctly explained when there will be no genuine issue for trial:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process: (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[10] In order to defeat a motion for summary judgment, the responding party must put forward some evidence to show that there is a genuine issue requiring a trial. A responding party on a summary judgment motion cannot rest solely on allegations in a pleading. Each side must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753, 62 B.L.R. (5th) 211, at para. 9.

[11] “The motion judge is entitled to presume that the evidentiary record is complete and there will be nothing further if the issue were to go to trial”: Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 54. “A summary judgment motion cannot be defeated by vague references as to what may be adduced if the matter is allowed to proceed to trial”: Diao v. Zhao, 2017 ONSC 5511, at para. 18.

[12] I have determined that there is no genuine issue requiring a trial based on the evidence filed on the motion, much of which is uncontroverted. Although there are some differences in the accounts of the pre-contractual discussions and dealings which took place, the differences are not material and in any event, I am able to decide this matter without any need to choose between the two accounts, relying upon uncontradicted evidence and admissions made by the defendant. I have determined that there is sufficient evidence to fairly and justly adjudicate the issues in dispute, and a summary judgment motion is an affordable and proportionate procedure.

What was the zoning of the Property and was it hidden?

[13] The Property was zoned Development Zone, Institutional and R2A Residential.

[14] There is a site-specific By-Law No 3228-92, dated December 14, 1992 (the “By-Law”), which defined the term “Institutional” as permitting only a church. Specifically, the By-Law provided as follows:

(b) No person shall use any lot or erect or alter or use any building or structure in any ‘I’ Zone as shown on Schedule “a-1” annexed to By-law 3228-92 except in accordance with the following uses and zone provisions:

‘I’ Institutional’

(i) Use Permitted

A church

[15] The defendant alleges the By-Law was “hidden” without any evidence apart from his assertion that it was. A municipal by-law is a matter of public record. Subsection 34(18) of the Planning Act, R.S.O. 1990, c. P.13 requires notice of the enactment of a zoning by-law to public bodies, including a municipality within 15 days of its passing. The evidence is that both the plaintiff and the defendant were able to obtain a copy of the By-Law from the municipality by email after making inquiries about the zoning.

[16] As I will discuss below, the defendant had a land use planner, Bousfields Inc., (the “Defendant’s Land Use Planner”), who made inquiries with the municipality both before and after the defendant executed the APS. There is no sworn evidence from the Defendant’s Land Use Planner regarding this issue which I would have expected if there was something unusual about the By-Law which made it hidden or difficult to find. I draw an adverse inference pursuant to Rule 20.02(1) from the defendant’s failure to provide an affidavit from his planner on this critical issue: see e.g. Mazza, at para. 9; Diao, at para. 39.

[17] I find that the By-Law was publicly available and there is no genuine issue in this respect which requires a trial.

What are the relevant terms of the APS?

[18] The APS is the pre-set Ontario Real Estate Association (“OREA”) contract with a Schedule attached. The written terms of the APS and the fact that the defendant executed it are undisputed. Relevant terms of the APS dated February 28, 2017 include the following:

a. The purchase price was $5,000,000;

b. The defendant submitted a deposit of $25,000;

c. The closing date was August 31, 2017;

d. Time was of the essence. Section 20 stated:

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 their respective lawyers who may be specifically authorized in that regard. (“Time Is Of The Essence Clause”);

e. The closing date could be adjusted by mutual agreement. Clause 3 of Schedule “A” of the APS states:

The Buyer and Seller agree that the Closing Date may be adjusted, as mutually agreed between the parties. (“Extension Clause”);

f. 9. FUTURE USE: Seller and Buyer agree that there is no representation or warranty of any kind that the future intended use of the property by the Buyer is or will be lawful except as may be specifically provided for in this Agreement. (“Future Uses Clause”);

g. Clause 3 of Schedule A: The Buyer and Seller agree that the subject property is being sold on an “as is whereas” basis and that no warranties will be given on closing (“As Is Whereas Clause”); and

h. 26: AGREEMENT IN WRITING: If there is any conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provisions 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.

Did the defendant fail to close the purchase of the Property after the plaintiff tendered?

[19] As noted above, the Closing Date was August 31, 2017.

[20] On July 17, 2020, the Defendant’s Land Use Planner contacted the municipality to make inquiries regarding his proposed development. The municipality forwarded the By-Law by email on or about July 20, 2017 in response to this inquiry. The municipality also advised the Defendant’s Land Use Planner that there were issues with the proposed parking for his development and that he would require a zoning by-law amendment to permit the proposed seniors residence as well as the parking. The municipality advised him that a pre-consultation meeting was required for the proposed land use. There is no evidence on the record that the defendant took any steps to pursue the issues raised by the municipality prior to the Closing Date.

[21] Thereafter, the defendant requested and the plaintiff agreed to many daily extensions of the Closing Date through counsel. In this proceeding, the defendant says that these extensions were required for him to deal with the By-Law which he had just discovered, but as I will explain, none of the requests for extension made any reference to the By-Law or any difficulties which the defendant was having with the municipality.

[22] The last extension agreed to by the plaintiff was to October 13, 2017.

[23] The defendant says that he required more time. However, the plaintiff was not prepared to provide any additional significant extensions without the payment of a significant additional deposit.

[24] The plaintiff tendered on the defendant on October 13, 2017 and the defendant failed to close.

[25] There is no genuine issue as to the plaintiff having tendered on the defendant and his failure to close the purchase transaction which requires a trial.

Did the plaintiff misrepresent the zoning of the Property

[26] It is uncontradicted that the plaintiff was aware of the By-Law.

[27] Up until June 2020, the defendant defended this proceeding on the following basis: when the APS was drafted, it was understood that the purchase price was premised on obtaining approval from the Town of Whitby for a subdivision zoning scheme which would involve a lengthy process and that in exchange for the Offer’s significant premium on purchase price, the Vendor would cooperate and be flexible regarding the closing date to allow the Purchaser to secure financing required to purchase the Property: Original Statement of Defence, at para. 15. In this Original Statement of Defence, the defendant asserted the following:

a) That extensions of the Closing Date “were ultimately required in order to determine the viability of the Development Plan and to secure financing required for the purchase of the Property”: at para. 18;

b) That pursuant to the Extension Clause, he “could adjust the closing date at any time, as mutually agreed between the parties”: at para. 16;

c) That “had the extension…been granted by the Vendor, as was contemplated at the time the original APS was executed, the Purchaser would have been in possession of additional financing required to close the sale of the Property and that the sale would have closed”: at para. 25; and

d) That the plaintiff failed to mitigate her damages.

[28] There is no mention of the By-Law or any problems posed by it in the Original Statement of Defence.

[29] In or around June 2020, the defendant amended his defence to allege that he had been misled by the plaintiff during pre-contractual negotiations about the zoning of the Property. For the first time, the defendant raised the issue of the By-Law, which he now claimed doomed the defendant’s intended development altogether. He asserted that because of his long-term friendship with the plaintiff, there was a sufficient relationship of trust and confidence such that he could rely upon her to make full disclosure about the By-Law and that her failure to do so constituted a material misrepresentation by omission which entitles him to recission or which renders the APS unenforceable.

[30] The plaintiff disputes this and asserts that she specifically advised him that his plans would be difficult. She says that the defendant had told her that he knew about the By-Law as he had discussed it with her late husband some years ago. The defendant admits that he had discussions with the plaintiff’s late husband about the Property and was told by him that there was approval for a church to be built but he didn’t understand that it was only a church which was allowed.

[31] The defendant asserts that the issues with the By-Law were only raised in June 2020 because he did not realize that the plaintiff was aware of the By-Law until he received a copy of an appraisal from Antec Appraisal Group (the “Antec Appraisal”) in her possession dated 2016 which referenced the zoning and By-Law as an answer to an undertaking made on her cross-examination. This was the “Aha” moment for him.

[32] In my view, I can decide this matter without choosing between the parties’ evidence on the basis of the clear wording of the APS which contains the Entire Agreement Clause, the Future Uses Clause, and the As-Is-Whereas Clause, all of which specifically provide that there are no representations or warranties of any kind, specifically none with respect to the future uses of the Property.

[33] Although the pleadings are restricted to contractual defences, and there is no counterclaim, in argument, the defendant appeared to argue tortious misrepresentation as a means of taking this issue outside the contractual bar. In considering whether entire agreement clauses preclude negligent misrepresentation, so as to preclude alleged pre-contractual representations, courts consider:

a. whether as a matter of interpretation, the clause applies to representations alleged;

b. whether the exclusion clause was unconscionable at the time. Such unconscionability may arise if there is unequal bargaining power or one party has abused its negotiating power to take undue advantage of the other: Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2014 SCC 4, [2010] 1 S.C.R. 69, at paras. 122-123, cited in Chandler v. Hollet, 2017 ONSC 2969, at para. 54. As noted by Kristjanson J. in Chandler, at para. 55, “courts have routinely given effect to such clauses in the face of allegations based on pre-contractual representations, particularly in situations involving commercial contracts between sophisticated businesspeople represented by competent counsel”; and

c. whether there is an overriding public policy reason to not enforce the term: Chandler, at para 54.

[34] In my view, the Entire Agreement Clause is clear and unambiguous and excludes the type of representations alleged, in particular given the other provisions of the APS, including the Future Uses Clause which specifies that there is no agreement as to the possible uses of the Property and the As Is Whereas Clause.

[35] The defendant has not demonstrated any unconscionability. At common law, one negotiating party is under no general duty to supply factual information to another party, even if that party has information he or she knows would be considered most vital to the other party: Bruce MacDougall, Mistake in Contracting (Toronto: LexisNexis Canada, 2018) at p. 103, citing Keates v. The Earl of Cadogan (1851), 10 C.B. 591 (CP); Pan Atlantic Insurance Co. v. Pine Top Insurance Co., [1994] 3 All E.R. 581 (HL).

[36] Generally, parties negotiating a contract expect that each will act entirely in the party’s own interests: 978011 Ontario Ltd. v. Cornell Engineering Company Ltd. (2001), 2001 CanLII 8522 (ON CA), 198 D.L.R. (4th) 615 (Ont. C.A.), at para. 32.

[37] The defendant is a sophisticated property developer with over 30 years’ experience in property development. He admitted that his usual practice when purchasing real estate is to ensure there is a period during which he satisfies himself with respect to the development potential of Property. He knows how to check zoning. Indeed, when he was cross-examined, the defendant admitted that he engaged his own planner prior to executing the APS to make inquiries with the municipality:

57

Q. And did you have meetings with the Town of Whitby before you signed the offer?

A. My planner checked it out with the Town and says, “Everything is fine.”

[38] The defendant cannot hold the plaintiff responsible for his and his own planner’s failure to properly investigate the Property.

[39] In my view, this late amendment of the theory of the case three years after the failure to close the APS based upon the contents of the Antec appraisal is an artifice created after the fact for the following reasons:

a. All of the extensions of the Closing Date were documented by 30 letters between the parties’ respective lawyers. None of these letters express any concerns about the By-Law;

b. There is not one single email or text message or any other contemporaneous documentary evidence where the defendant complains about being misled by the plaintiff or being surprised by the By-Law. He refers to one text message from him which says he wanted to talk to the plaintiff without referencing what it was about. He also says that he tried to telephone the plaintiff to discuss this but that she did not return his calls. I note he does not say that he ever left her any messages telling her what his calls were about. Again, given that he was represented by counsel who was dealing with requisitions before closing, as well as multiple requests for extensions, one would have expected some written communication about this issue if the defendant had truly been surprised and unable to close the APS because of the By-Law.

c. As I will further discuss below, the defendant made a fresh offer to purchase the Property in December 2017, after he failed to close the APS on almost the exact same terms as the APS (same price, deposit, Entire Agreement Clause, Future Uses Clause, As Is Whereas Clause and Extension Clause). At that point the defendant knew about the By-Law. If the By-Law had truly been the reason for his failure to close the transaction, and it prevented him from pursuing his intended development, why would he have made the very same offer?

[40] Finally, it is trite that one of the elements of negligent misrepresentation is reasonable reliance. In my view the defendant would be unable to establish the element of reasonable reliance given his admission that he had his own planner who made inquiries with the municipality prior to executing the APS who told him that everything was fine. The fact that he went to the trouble of engaging his own planner to make these inquiries shows that he was behaving as an ordinary commercial party, protecting his own interests, and that he was not relying on anything the plaintiff said or did not say.

[41] Like Kristjanson J. in Chandler, a similar case involving alleged pre-contractual misrepresentations which were not consistent with the terms of the subsequent agreement, I find that the defendant’s allegations lack an air of reality when viewed in the context of the evidence which is not in conflict, without even taking into account the plaintiff’s version of events filed on this motion: Chandler, at para. 52.

[42] I find that there is no genuine issue regarding the alleged misrepresentation by omission which requires a trial.

Did the plaintiff violate a fiduciary duty owed to the defendant?

[43] In its factum, the defendant argued that the plaintiff breached her fiduciary duty to him, although as noted above, he did not have any counterclaim against her. He did not provide any law on the impact of a breach of fiduciary duty on issues of contractual enforcement. Even if the defendant can proceed in this matter, he has not provided evidence which supports his argument that the plaintiff owed him any fiduciary duties.

[44] The defendant’s argument that the plaintiff owed him a fiduciary duty to disclose the By-Law is based upon the long-standing friendship which he and the plaintiff had which he describes as one of trust and confidence, which included supporting her and her late husband’s political career in the past, as well as family dinners. The defendant relies upon the plaintiff’s cross-examination wherein she agreed that she and the defendant had a relationship of trust and confidence. This is not sufficient to establish a fiduciary relationship. The defendant cited no case law for the proposition that the existence of a prior friendship establishes that one contracting party owes another fiduciary obligations during contractual negotiations to act in the other party’s interests.

[45] In Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, at para 145, the Court set out the three characteristics where fiduciary obligations have been imposed:

a. The fiduciary has scope for the exercise of some discretion or power;

b. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and

c. The beneficiary is peculiarly vulnerable to or may be at the mercy of the fiduciary holding the discretion or power.

[46] Sopinka J., dissenting in part, at para 34 indicated that one of the indispensable features of a fiduciary relationship is that of dependency or vulnerability. In this case the fact of their prior friendship did not create dependency or vulnerability in their negotiations. The plaintiff had no power or discretion over the defendant that she could unilaterally exercise. The defendant was sophisticated, not forced to enter the APS, and he was at liberty to have the APS reviewed by a lawyer. He was at liberty to conduct any searches he wished before executing the APS and he did.

[47] I find that there is no genuine issue regarding the alleged breach of fiduciary duty which requires a trial.

Did the plaintiff breach the terms of the APS by refusing any further extensions beyond October 13, 2017?

[48] In his first affidavit sworn April 17, 2020, the defendant makes reference to the Extension Clause and says that he advised the plaintiff that he “thought the Property might have economic potential to allow [him] to pay a higher price. [He] told the Plaintiff that if she gave [him] a flexible closing, [he] could make it work”: at para. 6. In his supplementary affidavit, sworn after the defendant amended the defence and its theory of the case, he says he accepted the drafting of the Extension Clause which required the parties’ mutual agreement because “it was understood from our earlier discussions that there would likely need to be such an adjustment”: at para. 10.

[49] The defendant also relies upon the following evidence which the plaintiff gave when she was cross-examined:

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Q: Okay, and by inserting this term, being clause 3, into the schedule you opened yourself up to the likelihood that there could be an adjustment to the closing date, correct?

A: Yes, because the Town of Whitby’s requirements, not Mr. Montemarano’s financing requirements.

[50] The defendant says that I ought to take into account these conversations as part of the surrounding circumstances in interpreting the Extension Clause so as to imply the term that the plaintiff had to be reasonable and grant any extension requests related to issues with the municipality. He says the Extension Clause must be given meaning and without reading in the requirement for reasonable extensions, it is meaningless since the parties could always have mutually agreed to extend the closing even in the absence of this provision as a result of section 20 of the APS.

[51] He relies upon Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, and specifically referred me to the following passage, at para. 47, as supporting his argument that all discussions and circumstances of the negotiation of the APS as well as his personal beliefs about what its provisions meant are admissible to essentially alter the precise wording of the APS through the interpretive process:

Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed. . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[52] In my view, the Court in Sattva did not direct that courts interpreting contracts take into account the evidence of the nature urged upon me. Indeed, Sattva confirms that courts should not deviate from the words of an agreement where they are clear and unambiguous. In later passages, at paras. 56-58, the Court confirmed:

I now turn to the role of the surrounding circumstances in contractual interpretation and the nature of the evidence that can be considered….

While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker's understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 1997 CanLII 4085 (BC CA), 101 B.C.A.C. 62).

The nature of the evidence that can be relied upon under the rubric of "surrounding circumstances" will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parole evidence rule discussed below, this includes, in the words of Lord Hoffmann, "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man" (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

[53] The Court confirmed that the parole evidence rule still applies and that it precludes the admission of evidence outside the words of the written contract which would add to, subtract from, vary, or contradict a contract which is in writing and also precludes evidence as to the subjective intention of the parties: Sattva, at para. 59.

[54] The wording of the APS is clear and unambiguous. Any extensions were to be mutually agreed. The interpretation urged upon me would arguably add to, subtract from, vary and contradict the clear wording of the Extension Clause. Furthermore, the interpretation raised by the defendant now was never raised by him or his counsel at the relevant time when the defendant sought extensions, which one would have expected if this alleged understanding was a foundational aspect of the APS.

[55] In its factum the defendant also alleges that the parties were under a mutual mistake as to the meaning of the Extension Clause. I presume that he is seeking to rectify the APS to specifically state that the plaintiff was required to grant reasonable extension requests, but he did not provide any authority on the issue.

[56] I accept the plaintiff’s assertion in its factum that a mutual mistake occurs when the parties are under the same misunderstanding of true facts at the time of contracting and that when the parties share this same false and fundamental assumption that goes to the root of the contract the contract itself will be said to be void ab initio: Frolick v. Frolick, 2007 BCSC 84, 68 B.C.L.R. (4th) 334, at para. 42.

[57] While the defendant has provided evidence of his intentions, or interpretation of the APS, he has not provided evidence of a shared misapprehension of facts which go to the root of the meaning of the Extension Clause.

[58] If I am wrong, and I took into account an implied requirement that the plaintiff act reasonably in granting extensions to deal with the municipalities’ requirements, I find that the plaintiff’s conduct was reasonable. There was no evidence that the defendant told the plaintiff, at the time, that the extensions were requested for this purpose. None of the multiple letters requesting an extension referenced the By-Law or how it doomed the development.

[59] Furthermore, as I will discuss below, the plaintiff had obtained bridge financing to finance the acquisition of a new home. Her counsel advised the defendant’s counsel that she would need approval from her bank for extension requests because of this bridge financing. She provided approximately 1 ½ months of extensions and there were over 30 letters/emails between counsel in that regard. She was prepared to grant him further extensions if he increased the deposit. Although he promised to, he never provided any further deposits. Finally, as noted above, the defendant provided no evidence of any diligent steps which it was taking to resolve issues with the municipality after the municipality advised the Defendant’s Land Use Planner that the next step would be a pre-consultation meeting. See paragraph 20 above.

[60] In all the circumstances, I find that the plaintiff acted reasonably in refusing further extension requests.

[61] In my view, there is no genuine issue in respect of the interpretation of the Extension Clause which requires a trial.

Did the plaintiff breach a duty of good faith by refusing to provide further extensions?

[62] There is a general organizing principle of good faith that underlies contract law, which includes the duty of honest performance, requiring the parties to be honest with each other in relation to the performance of their contractual obligations: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras. 65, 93.

[63] The defendant argues that the plaintiff breached her duty of good faith by refusing to give sufficient extensions to the Closing Date.

[64] The defendant relied upon Ju v. Tahmasebi, 2020 ONCA 383, aff’g 2019 ONSC 5821, where the Court of Appeal upheld a trial judge’s finding that one party’s failure to agree to an extension violated the principle of good faith. The underlying facts of the Ju case are very different from this case. In that case the parties had entered into a real estate transaction which did not have a specific closing date because it depended on a severance application being made by the seller. The agreement required the purchaser to make a second deposit after the seller provided evidence of severance approval to the purchaser’s lawyer with the closing date to occur 60 days after the seller received the separate deed from the City. Time was stated to be of the essence. The seller obtained the severance of the property on December 15, 2017, but did not advise the purchaser despite 5 written inquiries from the purchaser from December 7, 2017 until March 12, 2018. Thereafter, on June 27, 2018 the seller advised the purchaser that the application had been granted, requested the further deposit, and advised that the closing date was in 60 days (September, 27, 2018). The purchaser requested an extension to close on the basis that the agreement had been outstanding for more than two years and the purchaser was out of the country. The seller refused, insisting that the second deposit be paid forthwith, and ultimately advising the purchaser that it was in default and terminating the agreement on August 7, 2018.

[65] The application judge in that case had relied upon established caselaw which holds that where a party to a contract is required to pay an amount and time for performance is not stipulated, it must be paid within a reasonable time which depends upon the facts: Ju (S.C.), at para. 35, citing Illidge v. Sona Resources Corporation, 2018 BCCA 368, at para. 61. Further, where a party has not acted in good faith, it cannot rely upon a “time of the essence clause”: Ju (S.C.), at para. 36, citing Deangelis v. Weldan Properties Inc., 2017 ONSC 4155, at para. 35. In that context, the Court held, and the Court of Appeal agreed, that the seller had violated its duty of good faith by failing to agree to a reasonable extension request.

[66] In my view, Ju is not applicable. In this case, there was a specific Closing Date and no evidence that during the performance of the APS, the plaintiff had failed to act honestly or failed to provide the defendant with any information necessary for him to perform his obligations. The allegations of the plaintiff’s alleged misleading conduct all concern her alleged conduct before the APS was entered into and the organizing principle of good faith does not apply to pre-contractual negotiations: 978011 Ontario Ltd., at para. 32, citing Martel Building Ltd. v Canada, 2000 SCC 60, [2000] 2. S.C.R. 860, at para. 73.

[67] There is no genuine issue regarding the alleged breach of the duty of good faith which requires a trial.

Did the plaintiff mitigate her damages?

[68] The vendor bears the initial onus of proving his loss. The onus then shifts to the purchaser to show, if he can, that the damages could have been reduced by reasonable mitigating steps. In 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 88 D.L.R. (3d) 1 (Ont. C.A.), at p. 23, the leading case on mitigation, Morden J.A. stated:

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, in para. 212, p. 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 course is for the plaintiff, in presenting its case, 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.

[69] What is reasonable is a question of fact to be decided on the basis of all relevant market circumstances: 100 Main Street, at para. 73.

The plaintiff’s failure to file an appraisal report

[70] The plaintiff has based its damages claim on the resale price of the Property which I will discuss below. As a preliminary matter, the defendant argues that the plaintiff has failed to prove she has mitigated her damages, because she has failed to prove the market value of the Property by not calling expert evidence.

[71] The defendant relies upon Marshall v. Meirik, 2019 ONSC 6215, a case involving a motion for summary judgment in respect of a failed real estate transaction where the motions judge, at para. 12, relied upon the case DHMK v. 2296608 Ontario Inc., 2017 ONSC 2432, at para. 56, for the proposition that generally the plaintiff must adduce an expert appraisal report to establish the market value of the property. DHMK was a case involving an anticipatory breach of a sale agreement where the plaintiff had not yet sold the property; accordingly, there was no resale which the plaintiff could base the market value on, and accordingly, it did provide an expert appraisal report. I do not take the Court’s comments in DHMK or anything in the leading case of 100 Main Street, to require the plaintiff to provide an expert report in circumstances where the seller has actually sold the property. Justice Morden clearly stated that the proper course for the plaintiff was to adduce evidence of the market price or the resale price after which the burden passes to the purchaser. I note that the decision in DHMK was overturned at 2017 ONCA 961 (although not specifically on this basis.)

[72] I was not referred to any appellate authority for the proposition that the seller must provide expert appraisal evidence in addition to evidence of the resale price. Such a requirement would be inconsistent with the express direction of the Court of Appeal in 100 Main Street, with the general case law apart from Marshall, and, in the circumstances of this case, would be inappropriate as it would place an additional burden on the seller who is the innocent party where the breach has been established. I note as well that in 100 Main Street, at para 65, Justice Morden adopted the views of McGregor on Damages, 13th ed. (1972), which states that the price at which the property has been sold affords good evidence of the market value. See also Briscoe-Montgomery v. Kelly, 2014 ONSC 4240, at para. 22, where the Court cited Rosenberg J. (as he then was) in Victorian (Ontario) Inc. v. DeFreitas et al., [1991] 16 R.P.R. (2d) 55 where he states, at para. 20, “…in my view, there is no better evidence to calculate the real damage suffered then the price that the plaintiff was able to obtain in the market for the resale for the home.”

The plaintiff’s marketing efforts

[73] As noted above, the APS had a purchase price of $5,000,000. Further, there was no commission payable as it was entered into without an agent. After the APS failed to close, the plaintiff re-listed the Property with an agent on November 27, 2017 for $3,950,000.

[74] When the plaintiff was cross-examined she indicated that she discussed the market with the agent, knowledgeable in the area, who advised her that the best value for the Property was under $4,000,000. He advised her that the Property was unusual. It was a very large property, but had a large historic home on it, there were issues with the municipality and as such she was unlikely to receive many offers based on his knowledge of similar homes in the area. He had several discussions with 3 or 4 potential purchasers who were not willing to pay the listed price. She advised her agent that she was not interested in accepting any offers from them as their offers would be below the list price. Strictly speaking, this is hearsay but I am not considering it for the truth of what the agent told her, but as part of the narrative to evaluate whether she acted reasonably in light of investigations she made and what she was told.

[75] On December 1, 2017, the plaintiff entered into an agreement of purchase and sale with 1608316 Ontario Incorporated Property to sell the Property for $4,300,000 (the “Third Party APS”). The plaintiff initially prepared an agreement with a price of $4,500,000, the purchaser signed it back for $4,200,000, the plaintiff signed it back for $4,400,000 and the purchaser then signed the offer back for $4,300,000 which was accepted by the plaintiff. Notably, the purchaser pursuant to the Third Party APS intends to build a subdivision and the Third Party APS contemplates severance and the need for approval from the municipality, but did not contain any conditions as to zoning.

[76] The Third Party APS ultimately closed on February 2, 2018.

The Fresh Offer

[77] On December 4, 2017, (three days after the plaintiff had already entered into the Third Party APS) the defendant made a fresh offer to purchase the Property for $5,000,000 with a closing date of January 31, 2018 (the “Defendant’s Fresh Offer”). As part of the Defendant’s Fresh Offer, he agreed to pay all of the plaintiff’s out-of-pocket expenses related to the Property as of the initial closing date of August 31, 2017 including property taxes, mortgage interest and penalties and legal fees (the “Fresh Offer”). The Defendant’s Fresh Offer included a deposit of $25,000, similar to the APS. He says that based on his review of the Third Party APS, it was conditional upon approval of the terms by the plaintiff’s solicitor. The plaintiff waived this condition on December 5, 2017, the day after the defendant had made the Fresh Offer. He points out that had she accepted the Defendant’s Fresh Offer, she would have received a higher purchase price for the Property with a better closing date. He argued that she could have and should have attempted to get out of the Third Party APS and accept the Defendant’s Fresh Offer instead.

[78] I need not consider whether she had the legal ability to terminate the Third Party APS; in my view, even if she could have, the plaintiff was under no obligation to potentially risk litigation and do so. The defendant had already defaulted. She had already agreed to many extensions. He had made two promises to increase the deposit during the negotiations for these extensions and never did. He did not provide any additional security. The Fresh Offer still contained an extension clause and there was no guarantee that if she accepted this Fresh Offer he would close without seeking extensions. Although the defendant says that at this point he had obtained financing to permit him to close, there is no evidence that he made the plaintiff aware of this. She had no confidence in the defendant’s ability to follow through. In similar circumstances in Arista Homes (Kleinberg) Inc. v. Igbinedion, 2019 ONSC 7086, at para. 14, and Malatinszky, at para. 83, the Court held that it was reasonable for the innocent party to decline to accept the breaching party’s offer to reinstate and complete the transaction.

[79] Second, he criticizes her for the length of time that the Property was listed and the fact that she accepted the first offer, but he did not provide any evidence on this issue apart from the defendant’s belief, set out in one paragraph of his affidavit sworn April 17, 2020, that this demonstrates she did not mitigate:

48. I also note that the Plaintiff listed the Property with a broker on November 27 and accepted an offer four days later on December 1. It appears to me that the plaintiff took the first offer that came in, which was not representative of the best value she could obtain for the Property. This is especially the case considering she was in possession of the Fresh Offer and knew she could get the additional $700,000 from me by signing it back. I do not believe the Plaintiff adequately tested the market to determine the best price she could get for the Property.

[80] The burden is on the defendant and he has not put his best foot forward to establish that the plaintiff failed to reasonably mitigate by accepting the Third Party APS, for the following reasons:

a. Courts have held that accepting the first offer can be reasonable: Briscoe-Montgomery, at para. 21

b. The defendant has not provided any market valuation or expert report or evidence from a realtor regarding the value of the Property or any evidence that in this particular market, she would have obtained a higher offer had she waited or taken any additional steps. In Gamoff v. Hu, 2018 ONSC 2172, at para. 37, the Court held that the purchaser could not rely upon vague assertions that the resale price was below market value and that expert evidence was required citing, at para. 35, the decision in Cuervo-Lorens v. Carpenter, 2016 ONSC 4661, at para. 6, aff’d 2017 ONCA 109:

…Of greater significance, however, in the context of a summary judgment motion, is the absence of evidence from a professional which opines that the shortcomings in the sale process alleged by the purchasers actually had any impact on the final sale price. It is not enough for the purchaser, upon whom the onus rests, to plainly and merely state, for example, that the six or seven day “delay” in the relisting of the property must have negatively affected its market price. The purchasers, it must be assumed, have put their “best foot forward” and it is lacking….In the absence of a qualified appraiser’s opinion that she did so, I am not convinced that a trial is required to determine whether she undersold the property. There is little better evidence of market value than the price at which the property actually sold following what appears to be appropriated and apparently motivated marketing.

The decision of Pavareski J. was upheld by the Ontario Court of Appeal at 2017 ONCA 109 at para 2 & 3 as follows:

[3] The appellants did not file opinion evidence on the summary judgment motion indicating the steps taken on the resale were unreasonable or concerning the $50,000 price differential. In the absence of such evidence, we see no basis on which to interfere with the motion judge’s decision to dismiss the action as against the vendor.

c. The defendant relies upon offers to purchase the Property during the fall of 2017 which he never told her about at the time. He obtained an offer to purchase part of the Property for $2,000,000 and an offer to purchase another part of the Property for $4,300,000, and together these offers were higher. Apart from the fact that he never told her, these offers were conditional and premised on the development potential of the Property and obtaining severance. In my view, the plaintiff was not obliged to enter into risky conditional agreements to mitigate her losses in respect of the APS which were unconditional. Since the defendant takes the position that there are such significant zoning problems that the Property cannot be developed, then these offers would have been extremely risky for the Plaintiff; and

d. Until the Property sold, the plaintiff would have to continue paying interest on bridge financing which she obtained to finance the purchase of her new home in reliance on her anticipated closing of the APS on August 31, 2017, which would have continued to increase her damage claim.

[81] In my view, in all the circumstances the defendant has failed to raise any genuine issue with respect to the plaintiff’s mitigation efforts which requires a trial.

What are the plaintiff’s damages?

Difference between the sale price under the APS and the Subsequent Sale

[82] There was very little, if any, evidence or argument made by the defendant which challenged the damages claimed.

[83] The plaintiff is entitled to be compensated for her loss of bargain which means she is entitled to be put in the same position she would have been in had the APS been performed: 100 Main Street, at. pp. 22-23. It is trite that damages for breach of contract must be reasonably foreseeable. The proper time at which damages should be calculated is generally the date of default, but the trial judge has discretion to choose another date on proper reasons which must be set out: 100 Main at p. 22. In this case there is no reason to depart from this general rule and as such, the date at which the plaintiff’s damages should be calculated is October 13, 2017.

[84] I note that the heads of damages claimed by the plaintiff are the usual heads of damages which courts ordinarily award in such cases and that the plaintiff provided documentary evidence for these: 100 Main Street, at pp 17, Briscoe, at para 23, Arista, at para 28.

Difference between APS purchase price and Third Party APS purchase price

[85] First, the plaintiff sold the property for $4.3 million and thus difference between the APS and the Third Party APS is $700,000. These damages were reasonably foreseeable.

Carrying costs

[86] The plaintiff claims carrying costs and expenses incurred in respect of the Property between September 1, 2017 and February 2, 2018 in the total amount of $14,144.16 including insurance premiums, property taxes, Enbridge, hydro, and utility payments. These carrying costs were reasonably foreseeable; indeed, as part of the extension requests and the Fresh Offer, the defendant offered to pay them.

[87] The plaintiff can only claim carrying costs from the extended closing date October 13, 2017. I have calculated a daily cost for these items as $91.85 and multiplied by 112 days which is the number of days between October 13, 2017 and February 2, 2018. I calculate these damages to be $10,287.20.

Legal Costs

[88] The plaintiff has claimed legal costs for both the aborted sale and in respect of the resale. The plaintiff may not claim both as she would have been required to pay legal costs in any event had the defendant not closed. (Again, legal costs associated with the Third Party APS were reasonably foreseeable.) Accordingly, I am awarding only the costs in respect of the Third Party APS in the amount of $488.50.

Real Estate Commission

[89] There was no real estate commission payable pursuant to the APS but there was for the Third Party APS in the amount of $242,950.00. In my view, even though the APS did not provide for commission, it was reasonably foreseeable that if the defendant failed to close the APS, she could have to engage an agent to sell the Property. The defendant complained about this but provided no authority for the proposition that such damages may not be awarded. I would add, that had the plaintiff not engaged an agent to assist with the re-sale, the defendant could have complained that this constituted a failure to mitigate. In my view, these damages were reasonably foreseeable and I award them.

Bridge Loan Financing

[90] In anticipation of the closing of the Property, the plaintiff entered into an agreement of purchase and sale for another property to live in (the “Toronto Property”). The plaintiff completed the purchase of the Toronto Property on August 25, 2017. She already obtained a personal loan secured by a second mortgage on the Property in the amount of $1,000,000, but had intended to use the proceeds from the sale of the APS to discharge the mortgage on the Toronto Property

[91] The defendant objects to this interest claimed because the closing of the Toronto Property occurred prior to the scheduled closing date for the APS. That may be, but had the APS closed, she would have had funds to pay off that mortgage as she intended after the APS closed. The plaintiff is entitled to be put in the same position she would have been in had the APS closed. Given that the defendant knew the Property was her personal residence, it was reasonably foreseeable that she would have made arrangements to live elsewhere whether by renting or the purchase of another home and there would have been costs associated with that.

[92] She also obtained a mortgage on the Property in the amount of $500,000 and a bridge loan secured by the Toronto Property in the amount of $1,878,727.38. She claims as damages the interest that she had to continue paying on these loans as a result of the failed APS, in the amount of $87,700.71.

[93] I note that the total of all three loans in respect of which she claims interest is $3,378,727.38—significantly less than the $5,000,0000 she would have received had the APS closed on the final extended closing date of October 13, 2017.

[94] If the APS had closed, she would have had $5,000,000 which she could have used to pay off these loans. The plaintiff has not requested any damages for the opportunity lost of having had the $5,000,000 which she could have invested. Instead, she has claimed interest on a lesser amount, $3,378,727.38, which is more than reasonable and may even be to the benefit of the defendant instead of claiming the opportunity lost.

[95] I find that these financing charges were reasonably foreseeable; indeed, it was obvious that if the APS did not close, the plaintiff would lose the use of the $5,000,000 in closing funds.

[96] The plaintiff’s calculation of the interest she is entitled to uses the original closing date of August 31, 2017 instead of the extended closing date of October 13, 2017. The daily interest costs of all three loans is $541.72 and multiplied by 112 days (the days between October 13, 2017 and February 2, 2018) is $60,672.64.

[97] I find that there is no genuine issue regarding the liability for or calculation of damages which requires a trial.

[98] Therefore, I calculate the total damages as $700,000 + $10,287.20 + $488.50 + $242,950 + $60,672.64 for a total of $1,014,398.34. I also find that the defendant has forfeited the $25,000 deposit, that such amount is to be paid to the plaintiff and is to be credited against the damages awarded: Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, 86 B.L.R. (5th) 1, at para. 6.

Conclusion

[99] I am granting the plaintiff summary judgment in the amount of $1,014,990.96, from the date of breach, October 13, 2017.

[100] If the parties cannot agree on interest and costs they may make brief written submissions, no longer than 5 pages as follows:

a. Plaintiff within 15 days after the receipt of these reasons

b. Defendant within 15 days thereafter.

Papageorgiou J.

Released: November 9, 2020

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CHRISTINE ELLIOTT Plaintiff

– and –

SAVERIO MONTEMARANO Defendant

REASONS FOR JUDGMENT

Papageorgiou J.

Released: November 9, 2020