Court File and Parties

COURT FILE NO.: CV-18-604851

DATE: 20210504

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Burkshire Holdings Inc. Plaintiffs

AND:

Joseph Nnamdi Ngadi Defendant

BEFORE: Pollak J.

COUNSEL: Emily Hives for the Plaintiffs Domenic Saverino, for the Defendant

HEARD: September 4, 2019 & November 17, 2020

ENDORSEMENT

[1] There are two motions for summary judgment which the parties submit are appropriate for summary judgment.

[2] The plaintiff/defendant to the counterclaim, Burkshire Holdings Inc. (the “Vendor”), seeks summary judgment against the Defendant/Plaintiff by counterclaim, Joseph Nnamdi Ngadi, (the “Purchaser”) for payment of $272,967.91 for damages for failure to close a real estate transaction, with prejudgment and post-judgment interest at the rate set out in the Agreement of Purchase and Sale (“APS”) or alternatively, prejudgment and post-judgment interest in accordance with the Courts of Justice Act, R.S.O. 1990, c. C. 43, as amended.

[3] The Purchaser seeks summary judgment on his counterclaim for the reimbursement of $160,000.00 in deposit money. The parties oppose each other’s motion for summary judgment.

[4] The issues in dispute on these motions are:

a. the Vendor’s entitlement to damages claimed for the Purchaser’s failure to close the transaction;

b. the Purchaser’s entitlement to a return of his deposits

[5] The Vendor’s position is that the Purchaser who did not close the transaction, forfeited the deposit and is liable for the damages incurred by the Vendor pursuant to both the terms of the APS. In correspondence dated February 7, 2018, the Vendor accepted the Purchaser’s anticipatory breach of the APS, thereby bringing it to an end. The Vendor advised the Purchaser that he would be held responsible for all additional costs, losses and damages arising out of his default.

[6] The Vendor mitigated its damages and resold the Property for $1,242,000.00. After applying the deposit paid by the Purchaser, the realized purchase price is $233,121.20 less than the purchase price agreed to by the Purchaser. As well, the Plaintiff incurred expenses in the amount of $30,317.70, during the time between the Closing dates for carrying costs, maintenance costs and higher real estate commission fees. Interest claimed on those amounts is $9,133.51 and legal fees of $395.50 which the Purchaser had agreed to pay in exchange for the extension of the closing date to February 9, 2019.

[7] Specifically, in the Action, the Vendor seeks summary judgment for:

a. $272,967.91, for damages;

b. Pre-judgment and post-judgment interest in accordance with the rate prescribed in the APS at 20 per cent per annum, calculated daily as:

i. $107,383.32 in interest on the outstanding amount owing from February 9, 2018 to June 20, 2018; and

ii. $68,952.44 in interest on the loss amount of $272,967.91 owing from June 21, 2018 to the date of these motions;

c. Alternatively, prejudgment and postjudgment interest in accordance with the Courts of Justice Act;

d. All applicable taxes with respect to the amounts claimed above (these amounts are not specified);

e. The dismissal of the defendant’s counterclaim.

[8] The Purchaser’s position is that he signed the APS without reading it or understanding it and did not agree to all the provisions of the APS. It is submitted that the Vendor cannot rely on unusual and onerous printed terms that were not drawn to his attention. The Purchaser submits that an “uncontemplated event or circumstance occurred” after he signed the APS that made the performance of the contract impossible or made performance a radically different thing than what was promised or intended by the parties. “As such, strikes at the root of the APS, both parties can be discharged from further performance and moneys paid may be restored to the party who paid them”.

[9] The parties agree that on a motion for summary judgement, the court should first determine if there is a genuine issue requiring a trial based only on the evidence in the motion record, without using the fact-finding powers enacted under Rule 20.04 (2.1). The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting the summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[10] If, however, there appears to be a genuine issue requiring a trial, the Court should determine if a need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2). As a matter of discretion, the motion judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[11] The court should “assume that the record contains all of the evidence that would be introduced at trial.” Both parties have an obligation to put their best foot forward.

[12] I have considered and find that the requirements for summary judgment that are set out by our Supreme Court in the case of Hryniak v. Mauldin, 2014 SCC 7, 2014 S.C.C. 7 and most recently by our Court of Appeal in Royal Bank of Canada v. 1643937 Ontario Inc. 2021 ONCA 98, have been met.

[13] I agree with the parties that the documentary record is sufficient for the Court to make the necessary findings of fact and to fulfill the requirements of the goals of summary judgments so that I can fairly and justly adjudicate this dispute.

[14] The facts necessary to adjudicate the claim and counterclaim are largely not in dispute. In particular, the following facts are clear from the record:

(i) the parties entered into the APS to purchase the Property for a purchase price of $1,635,121.20;

(ii) the APS did not permit the Purchaser to unilaterally amend the purchase price for the Property at any time after the APS was executed;

(iii) the Purchaser paid deposits of $160,000.00;

(iv) the APS required the Purchaser to pay the balance of the purchase price along with any adjustments thereto on the closing date;

(v) the Purchaser requested, and the Vendor agreed, to extend the closing date in exchange for the Purchaser paying interest and legal fees for the extension in the amount of $9,133.51 and $395.50;

(vi) the Purchaser advised the Vendor of his intention not to close the transaction on February 7, 2018; and

(vii) the Vendor accepted the Purchaser’s anticipatory breach of the APS on February 7, 2018.

[15] By email correspondence dated February 7, 2018, the Purchaser’s lawyer stated that “…I hereby inform you that due to deliberate inflation of the price, we are not closing on Friday.”

[16] The Vendor submits that this was an anticipatory breach of the APS. The Purchaser was obligated to close the transaction on the date scheduled for closing and did not have the right to unilaterally refuse to do so. For the reasons that follow, I agree with this submission.

[17] In his Statement of Defence, the Purchaser pleads and relies on the doctrines of: frustration, force majeure, impossibility and impracticality. “He pleads that these doctrines vitiate the APS and relieve him of his obligations under it”.

[18] The Defendant seeks Judgment by counterclaim in the sum of $160,000.00 for the return of the deposit paid. He relies on the significant decrease in value in real property in the GTA, which he submits caused the APS to become radically different from the one that the parties entered into.

[19] As a result of the decrease in value in real property in the GTA, he was unable to secure financing, which resulted in a remarkable hardship making the APS commercially impractical for the Purchaser to complete.

[20] He submits that these unforeseen events resulted in the obligations under the APS of being radically different from those contemplated by the parties to the APS, resulting in a frustration of the APS, which relieved his of his obligations pursuant to the APS. He emphasizes the drop in the real estate market was outside of his control.

[21] He further submits that the drop in the GTA real estate market was not anticipated by the parties to the APS.

[22] Our Courts have held that a decrease in real estate values is not “unforeseen” nor does it “radically alter” one’s obligations in a real estate transaction as required by the doctrine of frustration/impossibility. I agree that these doctrines do not apply.

[23] The Purchaser claims for a return of the deposit on the ground that that the APS was terminated as a result of the operation of the doctrine of frustration, impossibility, force majeure and impracticality.

[24] The Purchaser’s obligations under the APS did not change, nor did the purpose of the APS. The Purchaser contracted to pay a price for the Property, regardless of whether he could obtain financing. Even if the Purchaser was unable to borrow a sufficient sum of money to close the transaction of purchase and sale, (the Purchaser has not adduced any evidence to support his assertion that he was unable to secure financing), such does not absolve him for his liability pursuant to the APS.

[25] The Purchaser did not make financing a condition of his offer to purchase the Property.

[26] I find that as the Vendor accepted the Purchaser’s anticipatory breach of the APS, it resulted in the APS being at an end.

[27] The Purchaser’s evidence is that the APS was prepared by the Plaintiff and included a number of pre-printed pages attached as Schedules. The pre-printed form Schedules attached to the APS were in a small print and difficult to read. His attention was not directed to the terms included in the Schedules to the APS. He was told to initial the bottom of each page without further advice or information from the Vendor and told that absolutely no amendments could be made to the Schedules as they were standard terms to the APS and that the Vendor would not enter into the APS if all Schedules exactly as printed were not included. The Purchaser therefore submits that he did not specifically agree to the pre-printed Schedules.

[28] The Purchaser does not claim that he did not read the schedules or that he was unaware of the terms therein.

[29] The Purchaser has never objected to any provision of the APS or its schedules. These issues were raised for the first time in the Amended Statement of Defence and Counterclaim, which was served following the adjournment of this summary judgment motion on September 24, 2019.

[30] I find that the Defendant has not established that the terms of the APS are unenforceable.

[31] The Defendant argues that the Default Clause is very onerous and unusual. I do not agree. Such provision is consistent with the Vendor’s common law entitlement to claim damages to be put in the position it would have been in had the Defendant not defaulted on the transaction. The principle of forfeiture of deposits when a purchaser defaults is a presumption at common law, which is rebuttable only by explicit contractual language to the contrary. The Vendor is compensated for lost opportunity in having taken the property off the market in the interim, as well as the loss in bargaining power resulting from the vendor having revealed to the market the price at which the vendor had been willing to sell.

[32] The Purchaser submits that many standard form printed documents are signed without being read or understood. In many cases, the parties seeking to rely on the terms of the contract know or ought to know that the signature of a party to the contract does not represent the true intention of the signer, and that the party signing is unaware of the stringent and onerous provisions which the standard form contains. Under such circumstances, the party seeking to rely on such terms should not be able to do so in absence of first having taken reasonable measures to draw such terms to the attention of the other party.

[33] The “stringent and onerous” contractual provisions in the cases relied upon by the Purchaser, Richardson-Watson v. 443496 Ontario Inc., 2005 6383, and also the case which Richardson-Watson cites, Tilden Rent-a-Car Co. v. Clendenning, (1978) 1978 1446 (ON CA), 18 OR (2d) 601, considered barely legible liability exclusion clauses in car rental insurance contracts that were inconsistent with what the plaintiffs in those cases expected to receive under the insurance contracts. This case is distinguishable.

[34] In particular, the exclusion clauses were inconsistent with what the plaintiff had been told about the contract by the defendant or with other express terms on the front of the contract, and importantly, were inconsistent with the overall purpose for which the transaction was entered into by the plaintiffs. In both cases, the Court also found that the defendant knew that the plaintiffs had not read the contracts before signing them and there was evidence that the plaintiff would have approached the contracts “radically differently[ly]” or would not have entered them at all if they had known of the provisions. The circumstances and nature of car rental transactions were examined, which are typically concluded in a “hurried, informal manner” and indeed, are often advertised as quick and easy transactions. These circumstances are very different.

[35] The APS is for a purchase price of over $1.6 million. It is a significant transaction, with the Purchaser having a lawyer to assist him. Further, there is no evidence that the Purchaser did not read the APS before he signed it or that he was rushed into the APS.

[36] On January 15, 2018 the Vendor, at the Purchaser’s request, agreed to extend the closing date on terms, which included, among other terms, the following:

“No further extensions will be granted and if the transaction is not completed on February 9, 2018 the transaction will be automatically terminated without further notice to you and all monies paid will be forfeited to the Vendor.”

[37] The Purchaser accepted the Amended Terms and accepted the terms for the extension. The Purchaser now argues that the letter dated January 15, 2018, amended the terms of the APS, specifically the default terms. He submits that the letter of January 15, 2018 sets out the true intentions of the parties in the event of default of the APS. The Vendor notes that as the Extension Agreement was made at the Purchaser’s request, to accommodate his need for financing, and not at the request of the Vendor. I agree that the Purchaser’s submission that the Vendor intended to unilaterally and for no additional compensation limit its rights and entitlements in the Agreement makes no commercial sense. I agree with and accept the Vendor’s argument. The terms of the APS and subsequent correspondence extending the closing date, do not support the Defendant’s argument.

[38] The Vendor is entitled to be put in the financial position that it would have been in had the Purchaser not breached the APS. The Vendor is entitled to be compensated for the difference in purchase prices in the two Agreements, as well as the damages that reasonably flowed from the Purchaser’s failure to provide the closing funds on the Extended Closing Date, such as carrying costs between the Closing Dates, utility expenses, realty taxes, and home maintenance expenses, as well as the interest and legal fees which the Purchaser agreed to pay in exchange for obtaining an extension of the closing date to Feb. 9, 2019. Further, the Vendor claims damages for the extra real estate commission it was required to pay in the Second APS. I find that these damages were reasonably foreseeable.

[39] The plaintiff seeks summary judgment for an award of:

a. $272,967.91 on account of damages;

b. Prejudgment and postjudgment interest in accordance with the rate prescribed in the plaintiff’s Schedule X to the Agreement, that is, 20 per cent per annum, calculated daily, which is:

i. $107,383.32 in interest on the outstanding amount owing from February 9, 2018 to June 20, 2018; and

ii. $68,952.44 in interest on the loss amount of $272,967.91 owing from June 21, 2018 to the date of this motion;

c. Alternatively, prejudgment and postjudgment interest in accordance with sections 127, 128, and 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended;

d. All applicable taxes with respect to the amounts claimed above;

e. The dismissal of the defendant’s counterclaim; and

f. The plaintiffs’ costs of this motion, the defendant’s cross-motion, and the plaintiff’s action and its defence to the counterclaim on a substantial indemnity basis.

[40] After applying the deposits paid by the Purchaser, the new purchase price in the Second Agreement is $233,121.20 less than the purchase price agreed to by the Purchaser. In addition, the plaintiff incurred expenses in the amount of $30,317.70 for the time between the Extended Closing Date and the closing date of the new transaction of carrying costs, maintenance costs and higher real estate commission fees. In addition, the Vendor is owed interest in the amount of $9,133.51 and legal fees in the amount of $395.50 which the Purchaser agreed to pay in exchange for the extension of his closing date to February 9, 2019.

[41] I agree that the Vendor is entitled to be paid for all of these damages. After the deposits are credited against these damages, the Purchaser must pay the Vendor $272,967.91 plus interest.

[42] The Plaintiff on this motion seeks interest (at the rate of 20% per annum) calculated as set out in paragraph 39 as follows:

a. Prejudgment and postjudgment interest in accordance with the rate prescribed in the plaintiff’s Schedule X to the Agreement, that is, 20 per cent per annum, calculated daily, which is:

i. $107,383.32 in interest on the outstanding amount owing from February 9, 2018 to June 20, 2018; and

ii. $68,952.44 in interest on the loss amount of $272,967.91 owing from June 21, 2018 to the date of this motion.

[43] There is a dispute is with respect to the interest/financing charge of 20% interest per year that the Defendant submits is onerous, excessive and unenforceable, and therefore no interest should be awarded. Alternatively, interest should only be awarded at the Courts of Justice Act, R.S.O. 1990 c. C.43 (“CJA”), pre-judgment interest rate.

[44] In Forest Hill Homes v. Ou, 2019 ONSC 4332, the court held that the provision for 20% interest was a surprisingly onerous term that was not called to the defendant’s attention and was therefore unenforceable.

[45] In the case of Madison Homes v. Yiman Shi, 2020 ONSC 7810, the court held that the burden of proof was on the vendor to prove that it brought the particularly onerous term to the defendant’s attention.

[46] There is no such evidence in this case. I agree that the court’s analysis in the Ou case should be applied and therefore award the Plaintiff pre-judgment and post-judgment interest at the applicable rate set out in the CJA.

[47] The Vendor is entitled to be awarded the damages claimed and outlined above, at the interest rate prescribe by the CJA.

Costs

[48] The successful party, the Vendor, is therefore entitled to its costs on a partial indemnity basis, as claimed.

Pollak J.

Date: May 4, 2021