NEWMARKET COURT FILE NO.: CV-17-133004-00

DATE: 20200205

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

IL-JUNG JOO AND HAE-SUN JOO Plaintiffs

– and –

HONG PHAT TRAN AND THU THUY THI DINH Defendants

AND BETWEEN

HONG PHAT TRAN AND THU THUY THI DINH Plaintiffs by Counterclaim

-and-

IL-JUNG JOO, HAE-SUN JOO, ROCKY CHOW, LIVING REALTY INC., BROKERAGE, BONNIE WAN AND DANIEL WAN Defendants by Counterclaim

J.M. Friedman, for the Plaintiffs

D. Saverino, for the Defendants

D. Saverino, for the Plaintiffs by Counterclaim

J.M. Friedman, for the Defendants by Counterclaim, Il-Jung Joo and Hae-Sun Joo

HEARD: January 23, 2020

REASONS FOR DECISION ON SUMMARY JUDGMENT MOTION

MULLIGAN J.:

[1] The Plaintiffs as vendors bring a summary judgment motion against the Defendants as purchasers, seeking damages for a failed residential real estate transaction. The Defendants oppose the relief sought. Both parties filed factums, casebooks of authorities, and affidavits. Some of the parties were cross-examined and transcripts were filed on behalf of both the Plaintiffs and the Defendants.

[2] The factual history of this transaction is not in dispute. What is in dispute is whether or not the Defendants, as purchasers, raised valid requisitions to title which enabled them to terminate the transaction because the requisitions were not validly answered in accordance with the wording of the Agreement of Purchase and Sale (APS).

[3] Although not in dispute, the following facts will provide context for the discussion that follows. The Defendants as purchasers, submitted an offer to purchase the Plaintiffs’ residential dwelling at 691 St. John’s Sideroad West, Aurora, for $2,130,000. They paid a deposit of $100,000 to the broker. Their offer was accepted by the Plaintiffs on the 30^th day of April 2017. On May 4, 2017, the Defendants signed an Amendment to the Agreement of Purchase and Sale, which was accepted by the Plaintiffs as vendors on May 10, 2017. Significantly, a building location survey initialed by all parties was attached as Schedule “C” to this Amendment.

[4] The APS and its Amendment were set out on the standard Form 100 of the Ontario Real Estate Association. Paragraph 10 of the APS provided in part:

Title: Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances, except as otherwise specifically provided in this Agreement, and save and except for

(a) any registered restrictions or covenants that run with the land providing that such are complied with;

(b) any registered municipal agreements and registered agreements with publicly regulated utilities providing such have been complied with, or security has been posted to ensure compliance and completion, as evidenced by a letter from the relevant municipality or regulated utility;

(c) any minor easements for the supply of domestic utility or telephone services to the property or adjacent properties; and

(d) any easement for drainage, storm or sanitary sewers, public utility lines, telephone lines, cable television lines or other services which do not materially affect the use of the property…

[Emphasis added.]

[5] The APS provided at para. 8 that the Defendants as purchasers had until the 22^nd of August 2017 to search title and submit requisitions.

[6] On August 14, 2017, before the last date for submitting requisitions, a paralegal for the Defendant purchasers, upon receiving the survey from their agent, Rocky Chow, wrote:

It was discovered that four easements existed on the property. These easements are of material significance and never disclosed to the buyers until after the Agreement and Deposit were finalized. Had the Buyers been aware of the easements, they would not have entered into this Agreement. This was a material fact that was never disclosed and is a breach of fiduciary duty.

[7] On August 31, 2017, the solicitor for the Defendant purchasers submitted a formal requisition letter, requisitioning the removal of four easements which were registered on title on October 9, 2002. Those easements are noted on the parcel identification page (PIN page) for the subject property and are marked on the survey, which was Schedule “C” to the amendment to the APS. The easements can be described in part as follows:

YR216191

Transfer of easement to the Town of Aurora regarding water mains, sanitary sewers, stormwater drains.

YR216196

Transfer of easement to Bell Canada to construct and maintain telecommunication facilities.

YR216197

Transfer of easement to Aurora Hydro Connections Limited to construct and maintain services.

YR2116199

Transfer of easement to Aurora Cable TV to construct and maintain its system of services.

[8] In answer to the letter of requisitions, the Plaintiffs’ lawyer responded on September 3, 2017, suggesting that the requisitions were vague and were not a valid objection to title, making reference to paragraph 10 of the Agreement of Purchase and Sale and took no steps to remove the easements.

[9] The Plaintiffs, as vendors, having taken the position that the requisitions were not valid, tendered on the closing date that they were ready, willing and able to close the transaction. The Defendants, as purchasers, having taken the position that the requisitions were valid, refused to close the transaction. They did not tender any documents or funds to show that they were ready, willing and able to close the transaction, in the event the requisitions were removed. The affidavit of the Defendants filed in connection with this motion deposes that they did have funds available in the event that these requisitions had been removed.

Analysis

[10] Rule 20.04 of the Rules of Civil Procedure provide that:

(2) 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.

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

[11] Both parties made reference to the Supreme Court of Canada’s seminal decision on summary judgment motions, Hryniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7. Speaking for the Court, Karakatsanis J. provided the following guidance:

49. There will be no genuine issue requiring a trial where the judge is able to reach a fair and just determination on the merits of 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 the proportionate, more expeditious and less expensive means to achieve a just result.

50. On a summary judgment motion the evidence need not be equivalent to that at trial, but must be such that the judge is confident that she can fairly resolve the dispute. A documentary record, particularly when supplemented by the new fact-finding tools, including ordering oral testimony, if often sufficient to resolve material issues fairly and justly.

The Survey

[12] Schedule “C” to the Amendment to the Agreement of Purchase and Sale was a survey of the subject property. It was initialed by all parties. The survey, which was filed as an exhibit, was undated but shows the foundation of a home under construction in the centre of a residential lot. On the north limit of the property, shown as Part 7 thereon, easements in favour of the Town of Aurora and Bell Canada are noted. Just below that, on Part 66, an easement in favour of the Town of Aurora, Hydro and Cable TV are noted. On the south limit of the property, there is a further easement three metres in width along the southerly boundary noted as Part 19. There is no evidence before the court that the structure on the property in any way encroaches upon these easements.

[13] These easements appear to service the subject property, as well as adjacent properties.

[14] In my view, the discreet issue to be determined is whether or not these four easements shown on the survey as part of the Agreement of Purchase and Sale by way of Schedule “C” on the Amendment are minor utility easements falling within the paragraph 10 exception as minor easements for domestic utilities, telephone services, drainage and sewers, utility lines, telephone lines, and cable lines.

[15] Counsel for the Defendants submit that these easements take up approximately 27% of the land mass of this residential dwelling. In furtherance of their argument, the Defendants refer to Hallinan v. Coughlin, 2009 CarswellOnt 1687. In that case, the court deal with an easement over the driveway and backyard, enabling adjacent owners to use the easement. Justice Gray noted at para. 9:

There is no question, in my view, that the easement over the driveway and the backyard constitutes an “encumbrance” as contemplated in paragraph 10 of the Agreement. There is no dispute that the easement was not disclosed in the Agreement of Purchase and Sale.

The court determined that because there was a registered encumbrance that was not removed, the purchaser was entitled to rescind the contract.

[16] In Savo v. Moursalien, 2016 CarswellOnt 7932, Justice Charney dealt with a failed real estate transaction where the property was subject to two Trans Canada pipeline easements. It appears only one easement was referred to in the Agreement of Purchase and Sale. Justice Charney noted that the easement covered almost the whole backyard, potentially requiring the homeowner to remove a swimming pool and cabana, if requested by the pipeline authority. His Honour concluded by granting summary judgment in favour of the Defendant purchaser, terminating the transaction and ordering the return of the deposit.

[17] In Stefanovska v. Kok, 1990 CanLII 6848, Moldaver J. (as he then was) considered a situation where the property was subject to a storm and sanitary sewer easement. He noted that the easement only affects the westerly border of the lot, occupying approximately 3.5% of the total lot. With respect to this easement, he noted at p.7, “This easement, unlike others such as Hydro, Bell, gas and the like, which the purchasers might expect, was not foreseen by his clients (the purchasers).” In ruling in favour of the vendors, His Honour noted at p.11:

The true and overriding test to be applied in these cases is whether the impediment to title, in any significant way, affects the use and enjoyment of the property. As earlier indicated, I have found this not to be the case.

[18] In Ridgely v. Nielson, 2007 CanLII 14624, Her Honour Justice Forestell considered an easement regarding storm and sanitary sewers. She noted that the easement covered most of the rear garden and 26% of the property. She also noted that a two-storey gazebo encroached on the easement. Her Honour noted at para. 8:

Therefore, consideration as identified in the case law is relevant to determining materiality:

(i) the location of the easement;

(ii) the size of the easement;

(iii) the point of access; and

(iv) the owners’ enjoyment of the property.

On the facts of the case before her, judgment was granted in favour of the purchaser. The Requisition requiring removal of the easement was valid.

[19] In addition to cases submitted, the Defendants relied on commentary from Justice Paul Perell in his text Real Estate Transactions (Canada Law Book, 2014). On p.80 he noted:

Under the standard title of provision, the purchaser is entitled to a title free from all encumbrances “except as specifically provided”. This reference allows for the Agreement to specify encumbrances to be assumed or that run with the land. It is important to appreciate that the party’s contract about the quality of the purchaser’s title vis, the parties may agree that the title can have defects or encumbrances, or they may contract that the vendor remove the defects or encumbrances. This means that there is a contextual aspect to what are defects.

[20] The Defendants rely on additional wording in the Amendment to the Agreement of Purchase and Sale, which attached the survey. The wording referred to is as follows:

The seller agrees to discharge any existing mortgages or liens, or other encumbrances now registered against the property, on or before closing at his own expense, either from the proceeds of sale or by the solicitor’s undertaking.

In my view, that paragraph simply repeats the opening wording in paragraph 10 but enables the seller to discharge its obligations by a solicitor’s undertaking. It does not eliminate or remove the carved-out exceptions, for minor utility easements, specifically addressed in paragraph 10 of the Agreement of Purchase and Sale.

[21] Thu Thuy Thi Dinh filed an affidavit in support of this summary judgment motion as one of the named Defendants. Her affidavit explains the steps taken with respect to the Agreement of Purchase and Sale. With respect to financing, she stated at para. 40:

Despite not obtaining financing as promised and guaranteed by Rocky [Rocky Chow, a defendant by counterclaim], we were prepared to close the transaction and had resources to secure alternate financing.

With respect to the easements, she stated at para. 39:

Dora [Dora Smolarkiewicz, real estate solicitor] advised the solicitor for the vendors that we would only complete the Agreement if, among other things, all of the easements had been discharged, released or removed, as per the Agreement.

[22] The affidavit is significant for what it does not say. Although the proposed purchasers were offering to pay over $2,000,000 for this residential property, there is no indication as to how the property would be serviced by the utilities, including hydro, telephone or cable TV, if the easements were removed.

[23] In my view, the four easements are standard utility easements which are carved out as an exception in paragraph 10 of the Agreement of Purchase and Sale. Indeed, they are well illustrated on the survey, which was attached as Schedule “C” to the amendment to Agreement of Purchase and Sale. All parties executed and initialed it in May of 2017. It was not until August of 2017, that a paralegal for the purchaser first made reference to this issue. The standard municipal or utility easements run across the front of the land with a smaller easement across the back of the land. There are no encroachments of the structure into these easements, nor does it compromise a purchaser’s use of the backyard, unlike Ridgely. Although these easement holders can maintain and repair the easement lands, the general public does not have access to or use and enjoyment of these easements. Nor were these utility easements as broad as the easement in Savo, which had the potential to require the homeowner to remove a backyard pool and cabana, if necessary.

[24] Although these easements take up a significant percentage of the lot, I am satisfied that this has to be reviewed in context and in view of the actual location of the dwelling, the location of the easements, and the stated purpose of these easements. I adopt the wording of Moldaver J. in Stefanovska, that these are the types of utility easements that any purchaser might expect in a residential subdivision. I take further comfort in the fact that the easements are well illustrated on the survey, which became part of the Agreement of Purchase and Sale by reason of its attachment to the Amendment executed and initialed by all parties.

[25] I am satisfied that this is an appropriate case for the granting of summary judgment. I have a full evidentiary record before me. Affidavits have been filed and cross-examinations have been conducted.

[26] I therefore grant summary judgment to the Plaintiffs, finding that the Defendants have breached their contract.

Damages

[27] I now turn to the issue of damages. The Plaintiffs claim damages in the amount of $454,384. This claim is calculated based on a resale of the property of 1.7 million dollars, resulting in the vendors’ loss of $430,000, together with costs for mortgage interest, utilities and a roofing bill. Counsel for the Plaintiffs admit that their clients remained in possession until the property was resold. I therefore disallow their claim for damages for mortgage interest and utilities, and a roofing bill of $10,000, which was not substantiated other than by filing an invoice.

[28] I therefore turn to the Plaintiffs’ submissions with respect to resale. The affidavit evidence of the Plaintiffs is uncontroverted. They listed the property for sale, went through a period of negotiations with respect to price, and ultimately agreed on a sale price of 1.7 million dollars. The property sale closed on February 1, 2018. I am satisfied that the Plaintiffs took all reasonable steps to mitigate their damages by reselling the property on the open market. There may be many factors as to why the sale price was lower than the original price offered by the Defendants. Absent an evidentiary basis, it is not the role of the court to speculate on how the ultimate sale price was arrived at when offered through the open market.

[29] I therefore find that the Plaintiffs are entitled to a judgment for $430,000 in damages against the Defendants. As a consequence, the Defendants’ counterclaim against the Plaintiffs is dismissed.

[30] Because certain other Defendants by Counterclaim were not a party to this motion, I make no determination with respect to the Defendants’ counterclaim against those parties.

[31] The evidentiary record indicates that the agents, Living Realty Inc., hold the Defendants’ original deposit of $100,000 in trust. I am satisfied that these funds be paid to the Plaintiffs in partial satisfaction of their judgment herein.

Costs

[32] At the conclusion of the hearing, I asked for submissions on costs. Both counsel agreed that the successful party should be awarded $18,000 in costs. I therefore order costs payable to the Plaintiffs by the Defendants in the amount of $18,000, within 30 days of the release of this judgment.

MULLIGAN J.

Released: February 5, 2020