Court File and Parties
COURT FILE NO.: CV-17-587517 DATE: 20210308
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ROBERT LEONARD MARSHALL and TRACEY DOROTHY HOYT Plaintiffs/Defendants by Counterclaim – and – JOHN PETER MEIRIK and AMBER MADELYNN MEIRIK Defendants/Plaintiffs by Counterclaim
Counsel: Fred Tayar, for the Plaintiffs/Defendants by Counterclaim David Windrim, for the Defendants/Plaintiffs by Counterclaim (post-hearing Notice of Change to Michael Bookman)
HEARD: January 14, 2021
Before: Kimmel J.
Reasons for Judgment
Background
[1] The plaintiffs move for summary judgment on their claim arising out of the defendants’ breach of an agreement to purchase the plaintiffs’ waterfront property (the “APS”) located at 12 Harris Street in Port Carling, Ontario (the “Property”). After the defendants informed the plaintiffs that they would not be proceeding with the purchase, the Property was relisted at the original list price. It was eventually re-sold approximately one month later, but at a price that was $325,000.00 less than what the defendants had agreed to pay and at a higher commission cost, with the result that the plaintiffs received $358,900.00 less than what they would have if the sale to the defendants had been completed. The plaintiffs claim this difference as their damages for breach of contract. The defendants argue that the market value of the Property was higher than what it was re-sold for and that the value considerations impact both the damages assessment as at the valuation date as well as the mitigation analysis.
[2] The plaintiffs’ summary judgment motion originally came before me for hearing on July 17, 2019. In an endorsement dated October 28, 2019 (Marshall v. Meirik, 2019 ONSC 6215), I directed that the parties could tender further evidence and argument on the issues of damages and mitigation before I decided the summary judgment motion (the “initial endorsement”). Costs were also reserved. There were various delays but the parties eventually tendered further evidence through experts and made further submissions on these issues. These reasons, which take into account the further evidence and submissions received, should be read together with my initial endorsement. Capitalized terms not defined herein have the meaning ascribed to them in my initial endorsement.
[3] The defendants do not dispute that they repudiated the APS on August 17, 2017 and that the plaintiffs accepted their repudiation on August 23, 2017 and re-listed the Property at the same original list price on August 25, 2017. They also do not dispute that when the Property was re-sold, the plaintiffs had to pay the extra 2.5% commission to the buyer’s agent under the New APS, calculated to be $33,900.00 (including taxes).
[4] However, the defendants do dispute the damages claimed. They contend that the purchase price differential of $325,000.000 between the APS and the New APS is not a fair or reasonable reflection of the plaintiffs’ unavoidable losses arising from the defendants’ repudiation of the APS. The defendants argued at the first hearing in July 2019 that these issues could not be decided on a summary judgment motion and that they required a trial. I ruled that they were amenable to determination by summary judgment with the use of the court’s fact-finding powers under Rule 20 and with the benefit of the further evidence and submissions that I invited the parties to provide in my initial endorsement.
[5] The further evidence and submissions that the court invited were as a result of certain unusual features of this case, namely that:
a. the time in between the date of the APS (offer accepted on August 4, 2017 with conditions waived on August 13, 2017) and the New APS (offer accepted on September 20, 2017 with conditions waived on September 30, 2017) was approximately six weeks; b. the plaintiffs conditionally re-sold the Property within a month of the defendants’ repudiation of the APS on August 17, 2017; c. the sale price under the New APS was almost 18% lower than the sale price under the APS; and d. the New APS closed on October 24, 2017, which was earlier than the intended (extended) November 6, 2017 closing date under the original APS.
[6] At the initial hearing, the defendants argued that the Muskoka cottage market had not dropped in the August to September 2017 timeframe and that the New APS must have been “improvident”. Conversely, the plaintiffs suggested that there was evidence that the market was soft and declining in the late summer and fall of 2017. They argued that, in any event, there was no reason for the court to depart from the traditional approach of accepting the arm’s length re-sale price as the market value of the Property for purposes of the assessment of their damages arising from the defendants’ breach of the APS.
The Initial Endorsement
[7] In my initial endorsement, I found that there was a genuine issue requiring a trial on the question of the plaintiffs’ damages. I also found that there was a genuine issue requiring a trial on the question of whether the plaintiffs took reasonable steps to mitigate their damages. I concluded that these issues existed because of evidentiary gaps in the record that was before me. The plaintiffs carried the onus to prove their damages with respect to the first question. With respect to the second question, the defendants carried the onus to prove that the plaintiffs failed to mitigate their damages.
[8] At the initial hearing, the plaintiffs contended that they had met their onus of establishing their damages because they had re-sold the Property and the damages in such circumstances could be determined with regard to the purchase price differential. The defendants argued that in the unusual circumstances of this case (the Property having been re-sold within a month for a significantly lower price), the court should not accept the evidence of the re-sale price as necessarily reflective of the market value of the Property. The defendants argued that these circumstances gave rise to a triable issue. I did not have before me any admissible expert or other evidence about the market value of the Property aside from the re-sale price. There was only the prospect of such having been raised by the evidence of Mr. Meirik (who is a real estate agent) and some letters from Mr. Payerl, an appraiser who had been engaged by the defendants but who had not provided an expert report or any direct evidence.
[9] In my initial endorsement, I decided that it would be prudent to give the parties the opportunity to provide additional evidence, including evidence of market value, before deciding the summary judgment motion. It was contemplated that there might be overlap between any further evidence tendered about the market value of the Property on the damages issue and about the reasonable time for exposure of the Property to the market to sell it under the market conditions existing at time that might also inform the mitigation analysis. The invitation was open for other evidence on the mitigation issue to be provided as well.
[10] To be clear, my initial endorsement was not intended to be read as a general requirement that vendors who have re-sold a property are required to provide appraisal or expert evidence, in addition to the re-sale price, to establish the market value of the property to prove their damages. The decision to allow for this additional evidence of market value before deciding this summary judgment motion was a function of the unique circumstances of this case.
[11] In my initial endorsement, I invited the parties to submit further evidence and argument and provided directions under Rule 20 in this regard. It was my view that, with the benefit of any additional expert or other evidence the parties chose to provide, it would be in the interests of justice for me to use the fact-finding powers available under Rule 20.04(2.1) to adjudicate the issues of damages and mitigation by summary judgment, based on the extensive factual record that had already been developed and the submissions already made.
[12] I determined that to proceed in this manner would be consistent with the culture shift encouraged by the Supreme Court of Canada for courts to interpret and apply the summary judgment rule to promote proportionality and fair access to the affordable, timely and just adjudication of claims (see Hyrniak v. Mauldin, 2014 SCC 8, at paras. 2-5). It was anticipated that this further evidence would be provided in relatively short order. Unfortunately, various circumstances intervened which resulted in a much longer than anticipated delay between the release of my initial endorsement on October 28, 2019 and the hearing that took place on January 14, 2021. [1]
The Further Evidence Submitted
[13] The further evidence tendered after my initial endorsement consists of the following expert appraisal reports dealing with the value of the Property:
a. Affidavit of Kimberly Dickinson sworn September 11, 2020, attaching reports outlining her opinions and her acknowledgement of expert’s duty dated April 28, 2020, including her appraisal of the Property dated June 15, 2020 with an effective date of November 6, 2020 (also confirmed as at September 20, 2017), indicating an estimated appraised value of $1,500,000.00. This evidence was tendered by the plaintiffs. b. Retrospective Appraisal Report of Daniel Payerl dated October 5, 2018 with an appraisal date of August 1, 2017 indicating an appraised value of $1,900.000.00 (confirmed to be valid for three months after the effective date), that had been previously submitted but had been ruled inadmissible as an expert report by me in paragraphs 31-32 of my initial endorsement. Mr. Payerl subsequently affirmed the contents of the Report under oath during a cross-examination held on October 1, 2020 after having provided an acknowledgement of expert’s duty Form 53 dated September 15, 2020. This evidence was tendered on behalf of the defendants. c. Appraisal/Valuation Report of Ben Lansink dated May 28, 2020, including acknowledgement of expert’s duty dated May 28, 2020, with an effective valuation date of November 6, 2017 and indicating an estimated value with a 5.0% variance in the range of $1,900.000.00 to $2,000,000.00. This evidence was tendered by the defendants.
[14] All three experts were cross-examined.
[15] Mr. Payerl had provided a letter to defendants’ counsel dated April 1, 2019 commenting on, among other things, the average market exposure times of lakefront Muskoka properties and the list price to sale price ratios in 2017. I had issued a clear direction prior to the January 14, 2021 hearing that any material from the previous record that any party sought to rely upon in connection with the further submissions made at the January 14, 2021 hearing was to be uploaded onto Caselines in advance of the hearing. This letter was not part of the material uploaded onto Caselines by the defendants and was not referred to during any of the submissions on January 14, 2021.
[16] This April 1, 2019 letter from Mr. Payerl (together with two other documents) was uploaded onto Caselines after the hearing (on January 19, 2021). When questioned about it following an objection raised by plaintiffs’ counsel, defendants’ counsel eventually advised as follows on January 22, 2021: “The materials were part of the Responding/Cross Motion Record filed by previous counsel, David Rose. That Responding/Cross Motion Record, to our knowledge, was filed and included the Affidavits of Amber and John Meirik. That record also includes the list of exhibits for both affidavits.”
[17] The defendants did not make any further submissions about this April 1, 2019 letter beyond what was said about it at the original hearing. Significantly, the defendants chose not to provide an affidavit from Mr. Payerl, despite having been given the opportunity to do so. As far as I am aware, Mr. Payerl has provided no sworn testimony about the contents of the April 1, 2019 letter. [2] The views that he expresses in that letter are not properly in evidence before me, as I previously ruled in paragraph 40 of my initial endorsement. A party seeking to introduce expert evidence on a summary judgment motion generally must comply with the requirements of Rule 53.03. See Sanzone v. Schechter, 2016 ONCA 566, 402 D.L.R. (4th) 135, at para. 16, leave to appeal to SCC refused, [2016] S.C.C.A. No. 443.
[18] The problems with the admissibility of the April 1, 2019 Payerl letter are not solved by his September 15, 2020 acknowledgement of expert’s duty (which does not identify what opinions it is in relation to). Expert opinion evidence must be sworn. This is trite and, if it was not obvious to the defendants, they needed to look no farther than paragraph 16 of the Sanzone case that was referenced in my initial endorsement. The Court of Appeal in that case set out the ways in which expert evidence can be put before the court on a summary judgment motion: “A party can file either an affidavit from the expert containing his or her opinion or an affidavit from the expert with the report attached.” Mr. Payerl provided neither.
[19] Mr. Payerl attended on a cross-examination at the request of the plaintiffs and provided sworn testimony about his October 5, 2018 appraisal report. Thus, despite the defendants’ decision not to tender any evidence from Mr. Payerl, the court had the benefit of his evidence but only insofar as what he was asked on cross-examination.
The Issues to be Decided
[20] The defendants concede that they breached the APS. The issues to be determined pertain only to damages and mitigation.
[21] In my first endorsement, I identified the following questions to be decided on this summary judge motion:
a. What is the proper date of assessment of the plaintiffs’ damages? Should it be the date of the defendants’ repudiation of the APS (August 17, 2017), the date on which the plaintiffs accepted the defendants’ repudiation of the APS (August 23, 2017), the date the offer price under the New APS was accepted (September 20, 2017), the date the New APS became binding (September 30, 2017), the date the New APS closed (October 24, 2017), the intended closing date under the APS (November 6, 2017), or some other date? b. Can the plaintiffs rely solely on the re-sale price under the New APS to prove their damages, or is some other evidence of the market value of the Property on the assessment date required? c. Do any of the plaintiffs’ claimed damages include losses that could reasonably have been avoided and should their damages be reduced on account of any such avoidable losses (e.g. due to their failure to take reasonable steps to mitigate their losses)?
[22] I will consider each of these questions in turn, having regard to the evidence and argument presented, including the additional expert reports that have been tendered and supplemental written and oral argument received.
What is the Proper Date of Assessment of the Plaintiffs’ Damages?
[23] In a case of an accepted anticipatory repudiation, such as this, the Court of Appeal has identified the proper date for assessment of damages to be the time fixed by the original agreement for completion. In my initial endorsement I observed that, in this case, that would be the intended closing date under the APS of November 6, 2017. See 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401 (C.A.), at para. 57. [3]
[24] However, it was argued on behalf of the defendants that the damages assessment date could be subject to adjustment in the discretion of the court (relying upon the Court of Appeal’s confirmation of DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONSC 2432, 279 A.C.W.S. (3d) 296, at para. 15; rev’d on other grounds, at 2017 ONCA 961). The defendants suggested that this was justified because of the unusual circumstances of this case in which the Property was re-sold and the closing of the New APS occurred on October 24, 2017, prior to the intended closing date under the APS at a significantly lower price. It was further suggested that, before determining the appropriate valuation date, the court should be informed about whether there had been market fluctuation during the relevant time period, between the plaintiffs’ acceptance of the APS on August 4, 2017 and their acceptance of the New APS approximately six weeks later, or if there was some other reason for the purchase price differential.
[25] In my first endorsement, I allowed for the possibility that this could be one of the situations the Court of Appeal had in mind in DHMK that would warrant a departure from the norm and the exercise of the court’s discretion to consider an alternative damages assessment date. If the value of the subject property has fluctuated, the Court of Appeal observed in DHMK (at para. 15) that the determination of the assessment date might be informed by evidence of market value on the different possible assessment dates.
[26] Ultimately, this became a moot point. None of the experts who provided evidence after the initial hearing testified that the market value of the Property was different on any of the potential damage assessment dates that I identified. The possible assessment dates that had been identified at the first hearing included: the intended closing date of November 6, 2017, the re-sale date of September 20, 2017, the date of the defendants’ repudiation of the APS (August 17, 2017), the date on which the plaintiffs accepted the defendants’ repudiation of the APS (August 23, 2017), the date the New APS became binding (September 30, 2017), and the date the New APS closed (October 24, 2017). Each of the three experts provide different opinions as to the market value of the Property during the August to November 2017 timeframe, but none have suggested that the market value fluctuated during this timeframe.
[27] Nothing in the further evidence or submissions informs the determination of the damage assessment date. In the particular circumstances of this case, where the New APS was entered into prior to the intended closing date under the APS, I find the damage assessment date to be the date that the New APS was entered into, which was September 20, 2017. That is the date on which the arm’s length negotiated price under the New APS was determined and the plaintiffs’ damages crystalized.
What is the Proper Measure of the Plaintiffs’ Damages?
[28] To assess damages for breach of contract, the court must strive to put the plaintiffs in the position they would have been in if the contract had been performed and the APS had closed.
[29] The damages formula is relatively straightforward. It is the original purchase price under the APS (which is known) less the market value of the Property on the assessment date, and then subject to further adjustment to account for mitigation considerations, if applicable. See 100 Main Street at para. 55. In describing the onus on a plaintiff to prove their damages, the Court of Appeal in 100 Main Street said (at para. 81):
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.
[30] There is no question that the plaintiffs crystalized their losses when they re-sold the Property on September 20, 2017. The plaintiffs have consistently argued on this motion that an arm’s length sale to a third party is prima facie evidence of the market value of the Property on the date of that re-sale and that they had no obligation to provide to the court expert appraisal evidence of market value where there had been a re-sale. They rely on 100 Main Street for this proposition, and on more recent cases that have followed it, such as Bang v. Sebastian, 2018 ONSC 6226, at para. 46, Zou v. Sanyal, 2019 ONSC 738, at paras. 45 and 51-56 and Elliott v. Montemarano, 2020 ONSC 6852 at para. 80 citing Cuervo-Lorens v. Carpenter, 2016 ONSC 4661 at para. 6, aff’d at 2017 ONCA 109. They note, in contrast, that the cases in which the court received expert evidence of market value were ones in which there had been no re-sale of the subject property when the parties were before the court. See for example, Arista Homes (Boxgrove Village) Inc. v. Lakhany, 2019 ONSC 5189, at para. 22.
[31] The defendants argued at the initial hearing that, while it may be the norm to accept the re-sale price as evidence of market value and not require any expert evidence when the subject property has been sold, the significant difference between the two purchase prices for the same Property within such a short timeframe raised a triable issue as to whether the re-sale price truly did reflect the market value of the Property. Speculation and conjecture was offered about the possibility of market instability/fluctuations or broker collusion.
[32] Having now received the further evidence and submissions of the parties that I provided for in my initial endorsement, none of the experts have said that there were market fluctuations or instability during this timeframe that might call into question the presumption that the purchase price under the New APS was indicative of the market value of the Property at the time it was re-sold on September 20, 2017. To the contrary, the evidence of the defendants’ own experts is that the market value of the Property was constant during the period in question. [4] Nor was any further support provided for the suggestion of broker collusion.
[33] The essence of the defendants’ argument is that the best evidence of the market value of the Property is the higher price of $1,850,000.00 that they offered to pay and that was accepted by the plaintiffs on August 4, 2017. They say that this higher market value is supported by the evidence the court has now received from their two experts. But that is not the test. The Court of Appeal in 100 Main Street and the many cases that have followed it presumptively determine the market value to be the re-sale price, unless there are some unusual or special circumstances that might, for example, suggest a different damages assessment date and, with that different date a different market value for purposes of the damages calculation. None of this has been borne out on the further evidence submitted in this case.
[34] I have determined the damage assessment date to be the date of the New APS. I find that the market value of the Property on the assessment date of September 20, 2017 was the arm’s-length negotiated purchase price under the New APS of $1.525 million. I have not been presented with any evidence that would justify departing from the norm of accepting the purchase price under the New APS to be the market value of the Property on that day. Although the plaintiffs did not have to provide a market value opinion to establish this to be the market value of the Property, this determination is supported by the opinion of Ms. Dickinson, who testified that the market value of the Property was approximately $1.5 million on both November 6 and September 20, 2017.
[35] I find Ms. Dickinson’s appraisal report and opinion as to the market value of the Property to be reliable. The fact that the defendants’ experts have provided different (higher) opinions of the market value of the Property does not negate Ms. Dickinson’s opinion.
[36] The differences in the appraised values that the experts have offered can be accounted for by differences in their approaches. Even though they all used the same appraisal methodology, they approached the appraisal exercise differently. Mr. Payerl and Ms. Dickinson each looked at select features of the Property and the comparable sale properties and made itemized, albeit subjective, adjustments for purposes of comparing the sale prices. Ms. Dickinson emphasized that the Property was on a river as opposed to other comparable sales of lake front properties, and she looked at water accessibility, water frontage, boathouses, acreage, vistas, and considered the impact of the principle of progression on the value of the Property that was situated on a street where no other property had sold for more than $800,000. Mr. Payerl placed less emphasis on the waterfront considerations, and more on the house and its features and the accessibility of the property to municipal services and amenities.
[37] A significant distinguishing feature in Mr. Payerl’s valuation is that he used an earlier effective date of August 1, 2017. While he said that his valuation was valid for three months after the valuation date, the effective date excluded a subsequent sale in the area that Ms. Dickinson did consider. Mr. Payerl also acknowledged having missed an earlier sale of the adjacent property (that Ms. Dickinson considered). During his cross-examination, Mr. Payerl declined to comment on whether the sale price of this neighbouring property would have impacted his valuation.
[38] Mr. Lansink adopted a different, more high-level approach to his comparable sales adjustments. He made subjective qualitative adjustments to sale prices of other properties for comparison purposes but did not allocate values for specific features like the other two experts did. He is a very experienced appraiser but is admittedly less familiar than the other two appraisers with the Muskoka cottage country area in which the Property is situated.
[39] The subjective variability of the expert appraisal evidence that was proffered in this case can be readily illustrated by one comparable property that was common to each of the three of the expert’s analyses. 1103 Island Park Road sold for $1,845,000: (i) Ms. Dickinson made downward value adjustments to this property for purposes of comparing it to the Property based on the features that she considered important; (ii) Mr. Payerl provided no details or indication of having made any value adjustments to this property for comparison purposes, even though it had three times more water frontage and six times the acreage of the Property, a double boat house and was located on the other side of locks; (iii) Mr. Lansink increased the value of this comparable property for purposes of his analysis, but without identifying the specific features that he considered in making this adjustment.
[40] Ms. Dickinson provided her opinions and comments on the approaches taken by Mr. Lansink and Mr. Payerl and explained why she disagreed with certain of aspects of what they had done. Neither Mr. Lansink nor Mr. Payerl offered any criticism or commentary on Ms. Dickinson’s approach. Counsel for the defendants argued that Ms. Dickinson’s opinion was biased because a colleague and mentor of hers had done an appraisal of the Property previously that she was aware of when she did her appraisal. The same could be said of Mr. Lansink, who had Mr. Payerl’s report when he prepared his appraisal. Ultimately, all three are professionals and signed the acknowledgment of their duties to the court. Their differences in opinion can be attributed to the subjective nature of their work, and their different points of emphasis.
[41] Mr. Payerl acknowledged on cross-examination that there were subjective elements to the approach adopted in any appraisal analysis that could lead two reasonable appraisal experts to reach different market valuations for the same property. This potential for divergent expert views reinforces the rationale for the norm of accepting the re-sale price as the market value.
[42] In the end, the expert valuation evidence does not change my determination of the market value of the Property on the assessment date to be the re-sale price under the New APS. Applying the damage formula prescribed in 100 Main Street, the difference between the purchase price under the APS and the purchase price under the New APS was $325,000.00. The plaintiffs also had to pay the extra 2.5% commission to the buyer’s agent under the New APS, calculated to be $33,900.00 (including taxes). The plaintiffs have proven their damages to be $358,900.00.
Did the Plaintiffs Fail to Mitigate their Losses – were some of their claimed losses avoidable?
The Defendants’ Onus to Show the Plaintiffs’ Failure to Mitigate
[43] In my first endorsement, I indicated that the relevant question on mitigation was whether any part of the loss suffered by the plaintiffs upon the re-sale of the Property was avoidable, and if so, what portion of it. According to the Court of Appeal in 100 Main Street (at paras. 81-82), the onus with respect to the issue of mitigation is squarely on the defendants once the plaintiffs have proven their damages.
[44] The plaintiffs rely on 100 Main Street and cases that have interpreted and applied it (including Malatinszky v. Miri, 2020 ONSC 16, at paras. 81-82, Novotny v. Ahmaddi, 2018 ONSC 7310, at paras. 18-20, and Zou, at para. 45). These cases describe the defendants’ onus to be to satisfy the court, on a balance of probabilities and without the use of hindsight, both that:
a. the plaintiffs failed to make reasonable efforts to mitigate, based on evidence identifying certain reasonable steps that they failed to take, or identifying some step that was taken that was not reasonable; and b. mitigation was possible.
[45] This court has found that “the absence of evidence from a professional which opines that the shortcomings in the sale process alleged by the purchasers actually had an impact on the final sale price…” is fatal to a defendant’s position that a plaintiff (vendor) failed to mitigate the damages. See Elliott, at para. 80, citing Cuervo-Lorens, at para. 6. The plaintiffs argue that the defendants failure to present any expert evidence on mitigation is fatal to their assertion that the plaintiffs failed to mitigate their damages.
The Expert Evidence
[46] In this case, the defendants have presented evidence from two experts about the market value of the Property, but neither of those experts have provided any testimony about identified reasonable steps that the plaintiffs failed to take, or identified steps that were taken by the plaintiffs that were not reasonable, nor have either of these experts testified that the plaintiffs’ losses could have been reduced if different steps had been taken.
[47] My initial endorsement made the following observations about the defendants’ mitigation argument (at paras. 39-41):
a. The defendants’ contention is that the plaintiffs failed to market the Property for sufficient time. They contend that market exposure after or at the end of the high selling season for less than 30 days following the date the plaintiffs accepted the repudiation of the APS (August 23, 2017) before entering into the New APS with the first buyer to make an offer (September 20, 2017) is not reasonable mitigation. However, there is no evidence properly before me about this. b. The defendants point to some select statistics and a letter “opinion” from Payerl about the average time properties were on the market, and about the market generally, that they have presented in an effort to show that the average selling period for comparable properties (that sold for higher prices) was much longer than 30 days. However, this evidence suffers from the same deficiencies as the Payerl retrospective appraisal report (discussed above). This evidence is not properly before me and I cannot make a finding that the plaintiffs failed to take reasonable steps to mitigate their damages based upon it. The plaintiffs also quite properly point out that the defendants have not said how much longer the Property should have been exposed to the market. The defendants have suggested a wide range of possibilities, including that the plaintiffs should have waited until the statistically generated average listing price of 63-70 days, the end of 2017 and/or the spring of 2018. c. The mitigation argument in this case is the reverse of what is often argued. Normally, the argument is that the plaintiff waited too long and the eventual sale (if there is one) was at a lower price as a result, but that if the plaintiff had acted more quickly and sold closer to the original APS closing date, they could have achieved a higher price. d. The plaintiffs have understandably raised the same concerns that have been voiced in other cases that, no matter what they did, the defendants would have complained. (See Gamoff v. Hu, 2018 ONSC 2172, at para. 39).
[48] I concluded that the record that was before me at the initial hearing was not sufficient for the defendants to meet their onus on the mitigation argument. They were given the opportunity to supplement that record. They have provided certain limited further evidence on the mitigation issue.
[49] All three valuation experts testified about the number of days that a property is typically marketed. Their evidence is as follows:
a. Mr. Lansink said 2 days to 2 months; b. Mr. Payerl said up to 90 days; and c. Ms. Dickinson said 1-3 months.
[50] Prior to selling to the defendants, the Property had only been listed for approximately 3 days. After the APS was breached, the Property was marketed for approximately 35 days until the New APS became unconditional (and firm). A marketing period of 35 days is within the timeframe suggested by all three experts, is within the timeframe of the sale of many of the comparable properties that the experts relied upon in their reports and is also within the timeframe of the experience of the parties leading up to the APS. The defendants rely on various other averages of marketing periods that are based on hindsight statistics that were put to the plaintiffs’ real estate agent in cross-examination, but these statistics were not affirmed by the sworn testimony of any expert witness. The expert testimony about typical marketing periods is as outlined above.
[51] The defendants point out that the experts all presumed for purposes of their analyses that reasonably diligent efforts were taken to achieve the sale prices for the comparable properties they considered and that such efforts would be taken to achieve the market value that they ascribe to the Property. Most importantly with respect to the issue of mitigation, none of them have testified that the Property was not on the market for long enough before it was re-sold or that reasonably diligent efforts were not taken by the plaintiffs.
The Justice of Case and the Defendants’ Onus
[52] Mitigation is a doctrine of fairness and common sense that seeks to do justice between the parties in the particular circumstances of the case. See DHMK, at paras. 70-74.
[53] In this case, there was a binding APS, the defendants waived all of the conditions in their favour, extended the closing date and then got cold feet and changed their minds about this purchase. Under contract law principles, the vendors are entitled to the benefit of that contract which was breached. They are entitled to be put in the position they would have been in if the contract had been performed. The fact that the APS was breached only days after the deal went firm does not change this.
[54] The defendants continue to argue, as they did at the initial hearing, that the failure to obtain a sale price close to what they agreed to pay under the APS and within the range of the market values that their two experts have indicated (of between $1,945,064.00 and $2,000,000.00) indicates an unreasonably inferior effort to obtain the best value (highest obtainable price). That argument is circular. The onus requires the identification of the failed mitigation efforts. No expert has testified that these steps taken by the plaintiffs were unreasonable or that there were other steps that should have been taken, and that behaving differently would have led to a higher re-sale price. That is the evidence that the defendants needed to present to meet their onus. They have not done so.
[55] Beyond the circularity of this argument, the market value opinions of the defendants’ experts do not carry the day simply because they are two experts put up against the plaintiffs’ one expert (who has opined that the market value of the Property was very close to the sale price under the New APS). I have commented earlier in this endorsement about these three valuations and some of the reasons for the differences, including that reasonable appraisers can come to different opinions on market value because of the subjective nature of their assessments.
[56] Mitigation is not a standard of perfection. Justice Perell described the standard as follows in Malatinszky (following 100 Main Street) at para. 82:
In assessing the innocent party's efforts at mitigation, the courts are tolerant, and the innocent party need only be reasonable, not perfect; in deciding what is a reasonable way to mitigate the effects of a breach of contract, the innocent party is not to be held to too nice a standard; it need only act reasonably, using what it knows then, without hindsight, and it need not do anything risky.
[57] After the defendants’ anticipatory breach of the APS, the plaintiffs immediately re-listed the Property (as the defendants asked them to do), marketed the Property using MLS, traditional advertisements and social media and showed it to agents and interested prospective purchasers in a manner consistent with the first listing that resulted in the defendants’ offer. They waited beyond the cottage summer season to reduce the list price, after a few weeks of no offers and no real interest from other prospective buyers. In total, the Property was marketed for approximately 35 days after the APS was breached. The plaintiffs only received one offer. They negotiated with that buyer to increase the purchase price up from the only offer they received and entered into the New APS with a closing date in proximity (and prior) to the intended closing date under the APS so that they did not incur the ongoing expense of the monthly carrying cost of the Property.
[58] The defendants argue that the plaintiffs could have gotten a better price if they had paid to carry the Property over the winter and waited to sell it until the spring. The plaintiffs did not have a crystal ball and could not be expected to predict what the market would be like in the spring. “No one can tell the future. While hindsight tells us that the real estate market has been good, every prospective seller fears that the end of those good times is just around the corner.” (See Briscoe-Montgomery v. Kelly, 2014 ONSC 4240, at para. 20.) No expert has testified that this would have been a reasonable thing for the plaintiffs to do in the fall of 2017.
[59] The defendants have put forward a list of additional things that the plaintiffs did not do that Mr. Meirik, who is a real estate agent, says they should have done, such as: conduct an open house, advertise in certain local publications, attend the fall Cottage Life show, reach out to agents for previously interested buyers, put up water front signage, stage the property, enlist the assistance of Mr. Meirik, and/or hold out for the original sale price recommended by the plaintiffs’ agent, Mr. O’Hare, when the Property was first listed. However, no independent expert has testified that any of these steps should have been taken, or that taking such steps would have made a difference in the sale price of the Property.
[60] The defendants also complain that they were not contacted and asked to bring other buyers with better offers before the allegedly improvident deal under the New APS. Conversely, the plaintiffs point out that the defendants did not take any initiative to identify other prospective purchasers and bring them forward, nor did they express any wish or desire to be involved in the re-sale or consulted about it. No evidence or authority was presented for the proposition either way: that the defendants had a duty to look for other buyers or that the plaintiffs had a duty to put the defendants on notice and allow them an opportunity to find another buyer at a better price. I see no basis on which to find either party at fault for the lack of involvement of the defendants in the re-sale exercise in the circumstances of this case.
[61] The defendants have not met their onus on the mitigation issue. I am not satisfied, on a balance of probabilities:
a. that the plaintiffs failed to make reasonable efforts to mitigate, based on expert evidence identifying certain identified reasonable steps that they failed to take, or identifying some step that was taken that was not reasonable; or b. that mitigation was possible.
[62] I recognize that this outcome will result in a significant hardship for the defendants. However, that does not change the justice of the case. They are the ones who changed their minds and decided they did not want to complete the APS at the price that they had agreed to. This is similar to the circumstances in the case of O’Hare v. Wyton, 2018 ONSC 3946. The defendants breached the APS and, as between themselves and the plaintiffs, the law says that they are responsible to make the plaintiffs whole on the bargain they struck unless they demonstrate a failure to mitigate by the plaintiffs. They have not done so.
Summary Judgment Revisited
[63] The defendants have asked me to revisit the question of whether there is a triable issue on mitigation and whether summary judgment is appropriate. They argue that there could be further (unspecified) evidence about mitigation and that the court should receive that evidence before deciding the case on its merits.
[64] The defendants rely heavily on Tribute (Springwater) Ltd. v. Sumera Anas, 2020 ONSC 5277 (at paras. 26-29) in support of their re-argument of the summary judgment issue. However, that case is distinguishable from this one. In that case, when the vendor tried to re-sell the property, a decision was made not to list it on MLS, the most recognized listing service for residential properties. They had business reasons for not doing so (having to do with a concern about impacting sale prices of other homes in the same development and also about impacting their bank financing). The court was concerned that the business rationale for that decision was not necessarily consistent with the goal of obtaining the best price possible on an open market and determined that further evidence was required on that point to decide the mitigation question. The court had also determined that further evidence was required about certain upgrades to the property to calculate the damages, so a trial would be required in any event.
[65] In the Springwater case, the court determined that a trial was the appropriate manner in which to receive the further evidence. In this case, I decided in my initial endorsement that further evidence on mitigation could be received and the issue of mitigation could then be decided by way of summary judgment, without the necessity of a trial. Like the court in Springwater, I afforded the defendants the opportunity to provide the further evidence upon which I would then decide the issues using the fact-finding powers available under Rule 20.04(2.1). This was their opportunity to so.
[66] The defendants are making the same argument now that they made at the initial hearing, that the mere price differential is enough to either infer that reasonable efforts were not taken, or at least to raise a triable issue about the reasonableness of the plaintiffs’ mitigation efforts. I concluded in my initial endorsement that was not sufficient to meet the defendants’ onus on mitigation and gave them an opportunity to provide further evidence. The defendants had more than a year after my initial endorsement to provide that evidence. They provided some further evidence, but not enough to persuade me that the plaintiffs failed to mitigate their damages.
[67] There are many examples of cases where the court has granted summary judgment on a claim for breach of an agreement to purchase a property and ruled that the defence of a failure to mitigate had not been made out. The Arista case is one such example. The mere prospect that there might be further evidence to support an argument of a failure to mitigate is not a basis for denying summary judgment and ordering a trial.
The Defendants’ Post-Hearing Request for the Court to Re-open the Evidentiary Record on this Motion
[68] The defendants retained new counsel after the January 14, 2021 hearing. Their new counsel requested a chambers appointment and asked the court to consider re-opening the evidentiary record to permit the filing of possible further expert evidence on mitigation.
[69] In my endorsement of March 4, 2021 (Marshall v. Meirik, 2021 ONSC 1615) and for the reasons detailed therein, I declined to re-open the record to permit the filing of further expert evidence on the mitigation issue.
Conclusion
[70] As I said I would do in my initial endorsement, I have received and considered the further evidence and submissions of the parties. I have been able to decide the issues of damages and mitigation on this summary judgment motion without the necessity of a trial using my fact-finding powers under Rule 20.04(2.1). I have concluded that the plaintiffs have proven damages for breach of the APS in the amount of $358,900.00. I have concluded that the defendants have not established that any of the plaintiffs’ damages should be reduced as a result of failure to take reasonable steps to mitigate.
[71] Accordingly, I am granting summary judgment on the plaintiffs’ motion as follows:
a. Judgment is granted to the plaintiffs in the amount of $358,900.00, plus pre-judgment interest at the rate of 0.8% per year from November 30, 2017 to the date hereof; b. The $10,000.00 deposit (and any interest accrued thereon) being held in trust by Fred Tayar & Associates Professional Corporation in respect of the APS shall be released to the plaintiffs and credited against the judgment awarded in their favour; and c. The defendants’ counterclaim (which also relies upon the arguments made in defence of the action that have not been proven) is dismissed.
Costs and Implementation
[72] I agreed to allow the parties the opportunity to make written cost submissions after being advised of the outcome of this motion. There may have been written settlement offers that could impact the determination of costs.
[73] The parties agreed to exchange costs outlines and/or bills of costs for the summary judgment motion and for the action on all three scales (partial, substantial and full indemnity) by February 19, 2021. That date was extended at the request of the parties, in the context of the defendants’ request that I consider re-opening the evidentiary record to allow them to file fresh expert evidence on mitigation. In my March 4, 2021 endorsement and in accordance with their agreement, I directed that the parties exchange their costs outlines/bills of costs by close of business on March 5, 2021. I expect that the parties have now exchanged their costs outlines/bills of costs in accordance with my direction.
[74] Ordinarily, the successful plaintiffs would be entitled to costs. The parties are encouraged to try to reach an agreement on costs now that the outcome of this motion is known to them. If they do reach an agreement on costs, they should advise the court that they have settled the issue of costs by email to my assistant on or before March 19, 2021.
[75] If the parties are unable to settle the issue of costs, the plaintiffs may deliver a brief written submission on costs (not to exceed three pages double-spaced) with attached cost outline and/or bill of costs in respect of any step in the proceeding for which costs are sought and any relevant settlement offer(s) by March 29, 2021. The defendants’ responding cost submissions of no more than five pages double-spaced attaching their cost outline and/or bill of costs in respect of any step in the proceeding and any relevant settlement offer(s) may be delivered by April 9, 2021. A brief reply cost submission of no more than two pages double spaced may be delivered by the plaintiffs on or before April 16, 2021. All such submissions shall be provided to me by email to my assistant, linda.bunoza@ontario.ca and uploaded onto Caselines.
[76] This endorsement is an order of the court, enforceable by law from the moment it is released without the necessity of formal issuance and entry of an order or judgment.
Kimmel J.
Released: March 8, 2021
Footnotes:
[1] Although the fault for this is not relevant to the outcome of the motion, the delays were in large measure due to the defendants’ decision to change counsel and then to the COVID-19 pandemic and other health considerations that arose in that context.
[2] The defendants sought leave after the January 14, 2021 hearing to tender further expert evidence. This request was denied by me (see Marshall v. Meirik, 2021 ONSC 1615). Notably, the proposed fresh evidence on that motion was not from Mr. Payerl, but rather from a third proposed expert, Mr. Lebow.
[3] The pinpoint references to this case, 100 Main Street, come from the report included in the defendants’ book of authorities cited as, [1978] O.J. 3448. It is noted that the paragraph references are different from those in the report included in the plaintiffs’ book of authorities cited as 1978 CarswellOnt 1459. The numbering appears to be off between these two reports, but the content of the corresponding paragraphs referred to appears to be the same.
[4] Mr. Payerl testified during his cross-examination that he was surprised by some market statistics that he was shown for October and November of 2017 that suggested that there was a “trough” or dip in the market in this timeframe. These statistics and other comments about market fluctuations were referenced in the affidavit of Mr. O’Hare, the plaintiffs’ real estate agent, who is a fact witness and was not qualified as an expert to give opinion evidence about the market. The suggestion of possible market fluctuation in this time frame was not confirmed by any of the experts.
