COURT FILE NO.: CV-19-00629731
DATE: 20210421
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Tribute (Grandview) Inc.
Plaintiff
– and –
Jin Xing Zhou
Defendant
Sarah Berhane, for the Plaintiff
Jin Xing Zhou, in Person
HEARD: February 3, 2021
REASONS FOR DECISION
NISHIKAWA j.
Overview
[1] The plaintiff, Tribute (Grandview) Limited, seeks an order granting summary judgment in the amount of $319,735.96 against the defendant, Jin Xing Zhou.
[2] Tribute alleges that Mr. Zhou defaulted on an agreement of purchase and sale for a new home.
[3] Mr. Zhou’s position is that he did not have sufficient time to review the agreement before he signed it and that he is currently under significant financial constraints. While Mr. Zhou seeks a refund of the deposit and upgrade fee paid on the property, he has not brought a counterclaim.
Issues
[4] The issues to be determined in this proceeding are as follows:
(a) Is there a genuine issue requiring a trial as to whether the defendant defaulted on the Agreement of Purchase and Sale?
(b) If there is no genuine issue requiring a trial, to what damages is the plaintiff entitled?
Factual Background
The Agreement of Purchase and Sale
[5] The plaintiff, Tribute, is the developer of a residential community of approximately 500 homes in the Park Ridge community in Oshawa, Ontario.
[6] On April 25, 2017, Mr. Zhou signed an Agreement of Purchase and Sale for the purchase of Lot 78, Phase 2, in the Park Ridge community, municipally know as 1761 Douglas Langtree Drive, Oshawa, Ontario (the “Property”) for a purchase price of $1,099,990 (the “APS”).
[7] At the time, Mr. Zhou was represented by a real estate agent named Qing Dong, who worked for Homelife Landmark Realty.
[8] The APS was also signed by Jeffrey Morrison, a sales representative with Tribute.
[9] The APS had a tentative closing date of September 17, 2019. The balance of the purchase price was payable on the closing date.
[10] Under Schedules ‘L’ and ‘M’ to the APS, Mr. Zhou had two days to have the APS reviewed by a lawyer and to arrange for financing. The APS was conditional for those two days. Schedules ‘L’ and ‘M’ stipulated that unless Mr. Zhou provided written notice by April 27, 2017 at 5:00 p.m. of his lawyer’s disapproval or that he was unable to arrange mortgage financing, the conditions were deemed to be waived.
[11] It is undisputed that Mr. Zhou did not, before the end of the conditional period, provide written notice that he was unable to arrange financing or that his lawyer did not approve the APS. After the end of the conditional period, the APS became binding on him.
[12] The APS provided a schedule for the payment of the deposit. Mr. Zhou provided post-dated cheques, and the deposit of $110,000 was paid in full.
[13] Between October 4, 2017 and July 8, 2019, Mr. Zhou selected various upgrades and modifications to the Property. The total cost of the upgrades was $50,125, excluding taxes. Tribute extended an incentive amount to Mr. Zhou. After applying that amount, Mr. Zhou agreed to pay a total of $46,641.26 for the upgrades. Mr. Zhou paid $7,084.16 toward the upgrades. The balance of $39,557.10 was payable on the closing date.
The Parties’ Correspondence Before the Closing Date
[14] In March and April 2019, Mr. Zhou advised Tribute that he was facing financial difficulty because he had injured his hands and lost his job; his father had passed away; and he was unable to obtain mortgage financing. Mr. Zhou requested that Tribute adjust the purchase price.
[15] Tribute refused to adjust the purchase price but suggested that Mr. Zhou try to obtain mortgage financing as soon as possible. In subsequent correspondence, Tribute advised Mr. Zhou that it would not release him from his obligations under the APS. Tribute proposed other alternatives, including Tribute extending a first or second mortgage on the Property.
[16] Between July and September 2019, Tribute advised Mr. Zhou that Tribute could offer him a first mortgage if he increased the deposit amount to 25 percent of the purchase price. Tribute confirmed again that it would not release Mr. Zhou from his obligations under the APS.
[17] In August and September of 2019, Mr. Zhou did not respond to Tribute’s attempts to schedule an inspection of the Property. Mr. Zhou also failed to provide his lawyer’s contact information to facilitate the closing of the sale.
[18] On August 31, 2019, Mr. Zhou sent an email to Tribute requesting that Tribute release him from the transaction and return part of the deposit.
[19] On September 1, 2019, Tribute responded that it would provide a vendor take-back mortgage if Mr. Zhou increased his deposit to 25 percent of the purchase price.
[20] On September 6, 2019, Mr. Zhou sent an email to Tribute requesting that Tribute allow him to purchase a two-bedroom condominium instead of the Property or that Tribute return half of the deposit to him.
The Transaction Fails to Close
[21] On September 17, 2019, Tribute tendered its documents on Mr. Zhou by email and regular mail.
[22] Mr. Zhou failed to close the transaction on the closing date.
[23] On September 18, 2019, the day after the closing date, Tribute offered to extend Mr. Zhou, on a without prejudice basis, a vendor take-back mortgage if Mr. Zhou were able to pay 25 percent of the purchase price.
[24] On the same day, Mr. Zhou advised Tribute that he could not afford the house and requested that Tribute find another purchaser or allow him to move into a small townhouse or condo instead.
[25] On September 23, 2019, Mr. Zhou advised Tribute that he would try to find an assignee and requested a price adjustment on the Property. Tribute responded that the price would not be adjusted.
The Termination of the APS
[26] On September 30, 2019, Tribute sent Mr. Zhou a termination letter. The total amount due on the closing date was $1,031,561.77.
The Resale of the Property
[27] On November 19, 2019, Tribute listed the Property internally at its sales office at a price of $829,990. The average list price of comparable re-sale properties was $839,394 and the average sale price of comparable re-sale properties was $810,000.
[28] On December 16, 2019, the Property was sold through a real estate agent for $815,000. The total commission was $23,650. The sale of the Property closed on May 22, 2020. The closing balance was $736,132.94.
Analysis
The Principles Applicable to Summary Judgment
[29] Rule 20.04(2)(a) of the Rules of Civil Procedure states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[30] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims:” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5 [Hryniak]. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact and (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.
[31] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before them, without using fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the following powers under rr. 20.04(2.1): (i) weighing the evidence; (ii) evaluating the credibility of a deponent; and (iii) drawing any reasonable inference from the evidence: Hryniak, at para. 66.
[32] The court is entitled to assume that the record on a summary judgment motion contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97 (9 July 2015). See also: Crescent Hotels and Resorts Canada Company v. 2465855 Ontario Inc., 2018 ONSC 5508, at para. 23, 297 A.C.W.S. (3d) 312; aff’d 2019 ONCA 268, 304 A.C.W.S. (3d) 730. It is a “well-established rule that both parties on a summary judgment motion have an obligation to put their best foot forward:” Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753, 62 B.L.R. (5th) 211, at para. 9.
Did Mr. Zhou Default on the APS?
[33] Based on the evidentiary record, there is no genuine issue requiring a trial as to whether Mr. Zhou defaulted on the APS.
[34] Under s. 3(a) of Schedule ‘C’ to the APS, the purchaser is deemed to be in default upon the non-payment of any portion of the purchase price or any amount due under the APS. Mr. Zhou failed to pay the purchase price on the closing date and is thus in default of the APS.
[35] Mr. Zhou does not dispute that he failed to close the transaction on the closing date. In his defence, Mr. Zhou raises two arguments. First, he alleges that he signed the APS quickly and was not given enough time to read it. Mr. Zhou alleges that the APS was not explained to him, that he had no opportunity to obtain legal advice and that he was not advised of his right to do so. Second, Mr. Zhou submits that he is suffering from significant financial constraints that prevented him from being able to close the transaction.
[36] On the first point, Mr. Morrison, the Tribute sales representative who signed the APS, detailed in his affidavit how Tribute’s sales representatives are trained to review the APS and its attached schedules with purchasers. The purchasers are asked to initial the APS and schedules to signify their understanding of the document. Mr. Zhou initialled the APS and all of the attached schedules.
[37] On cross-examination, Mr. Zhou confirmed that although both he and his real estate broker, Mr. Dong, spoke Mandarin, he did not ask Mr. Dong to explain the APS to him. He admitted that this was “careless.” He further admitted that when reviewing the APS, the only things he checked were his name, the purchase price and the lot number. He stated that he was confused about the APS but did not ask for an explanation.
[38] In 1468025 Ontario Ltd. v. 998614 Ontario Inc., 2015 ONSC 7216, at paras. 172-173, Fregeau J. held that a party cannot claim not to have understood an agreement where they failed to read it or request an explanation as to its meaning.
[39] In addition, the APS provided Mr. Zhou with two days to take the APS to a lawyer to seek legal advice and to obtain mortgage financing. It does not appear from the evidence that Mr. Zhou took either of those steps. In any event, Mr. Zhou could have terminated the APS before the end of the conditional period by giving notice in writing. However, he did not provide such notice and the conditions were deemed waived.
[40] Moreover, Mr. Zhou’s conduct after signing the APS is consistent with an intent to be bound by the agreement. Between October 2017 and July 2019, he selected upgrades to customize the Property to his preferences and paid an amount toward the upgrades. In his correspondence with Tribute before and after the closing date, Mr. Zhou requested that the purchase price be adjusted or that he be allowed to purchase a smaller property instead. At no time did he dispute that he was bound by the APS. In fact, he said he would try to find an assignee.
[41] On Mr. Zhou’s second argument, based on his evidence, Mr. Zhou’s personal and financial circumstances took an unfortunate turn. His father, who was to help him pay for the Property, was diagnosed with cancer and died in January 2019. Mr. Zhou, who was working in home renovation, injured his hand and was terminated by his employer in May 2019. Since then, he has been unable to find employment. One of his sons and his ex-wife suffer from medical issues. His mother, who lives in China, fell and Mr. Zhou needs money to pay the hospital bills.
[42] The amount that Mr. Zhou paid toward the deposit was his life savings. He has no assets. He did not qualify for financing and was unable to close the transaction.
[43] Mr. Zhou’s personal and financial circumstances resulted in hardship, and his inability to complete the purchase of the Property. While this is unfortunate, the APS is nonetheless binding on him. In failing to pay the outstanding balance on the closing date, Mr. Zhou defaulted on the APS.
[44] Tribute attempted, on a without prejudice basis, to find a way to extend financing to Mr. Zhou so that he could close the sale. Unfortunately, Mr. Zhou was not in a position to meet the financial condition that he pay 25 percent of the purchase price. Tribute was not obligated to negotiate with Mr. Zhou and it did not waive its rights under the APS.
To What Damages is Tribute Entitled?
[45] In November 2019, Tribute listed the Property internally at a purchase price of $829,990. The Property did not sell.
[46] The Property was listed with a real estate agent on the multiple listing service and sold for $815,000 on December 16, 2019.
[47] Mr. Zhou alleges that, given that the Property was sold to him for $1,099,990, it ought to have been sold at a higher price.
[48] The retrospective appraisal conducted by William Ly of Acuity Professional Appraisals assessed the fair market value of the Property, as of the closing date, at $800,000.
[49] Mr. Zhou bears the burden of demonstrating that Tribute has not reasonably mitigated its damages. Mr. Zhou has not submitted any evidence that would support his position that the Property could have been sold at a higher price.
[50] Tribute took reasonable steps to mitigate its damages by first attempting to sell the Property internally to avoid having to pay a commission, by subsequently putting the Property on the market for a reasonable period of time, and by reducing the list price in line with comparable properties.
[51] Schedule ‘C’ to the APS contains additional purchaser covenants, conditions and restrictions, including the vendor’s remedies in the event of default by the purchaser. In his Statement of Defence, Mr. Zhou denied having received or initialled Schedule ‘C’. However, a copy of Schedule ‘C’ with Mr. Zhou’s initials was included in Tribute’s Supplementary Motion Record.
[52] Under s. 3(c) of Schedule ‘C’, in the event of default by the purchaser, all monies paid are forfeited to the vendor as liquidated damages. The $110,000 deposit paid by Mr. Zhou is therefore forfeited to Tribute.
[53] Under s. 3(e), the vendor is entitled to be reimbursed for costs and expenses arising from the purchaser’s default, which “shall be increased by an administration fee of 15 percent of the total of such costs and expenses….” I am satisfied on the evidence that Tribute has incurred carrying costs and expenses in the total amount of $24,009.49, including HST. The costs include property taxes ($481.30), hydro ($171.82), gas ($601.98), landscaping ($85.88), cleaning ($143.51), commission ($21,875) and a termination fee ($650). At the hearing, counsel advised that Tribute was prepared to waive the 15 percent administrative fee, in the amount of $3,601.42.
[54] Pursuant to section 3(e) of Schedule ‘C’, in the event of default, Tribute is entitled to charge an interest rate of the prime rate plus five percent on the closing balance.
[55] Tribute has calculated interest at various times using the prime rate at the time plus five percent.
• From the closing date, September 17, 2019, to the resale date, December 16, 2019, the interest rate on the closing balance was 8.95 percent (3.95 plus 5 percent). The interest during that period is $25,294.46;
• From December 17, 2019 to the resale closing date, May 22, 2020, Tribute calculated interest using the lowest prime rate during that period of time, 2.45 percent, for a total of 7.45 percent. The amount of interest on the closing balance, minus the deposit of $80,500, between the resale date and the resale closing date is $36,846.73; and
• From May 23, 2020 to the hearing date, February 3, 2021, Tribute applied an interest rate of 7.45 percent to the balance (the closing balance minus the resale closing balance). The interest during that period is $15,436.76.
[56] The total interest owing by Mr. Zhou is $77,577.95.
[57] Tribute’s total damages are therefore the purchase price of the Property, including upgrades, minus the price at which the Property was sold, minus the deposit and amount paid toward upgrades, plus costs and expenses and interest. The total amount is $316,134.54.
[58] Accordingly, Tribute is entitled to $316,134.54 in damages.
Conclusion
[59] Based on the foregoing analysis, I grant summary judgment to Tribute in the amount of $316,134.54.
[60] Tribute seeks costs of the motion on a substantial indemnity basis in the amount of $15,302.91. There is no allegation of reprehensible or egregious conduct that would justify an award of substantial indemnity costs. Tribute’s partial indemnity costs are $10,706.75, including disbursements and HST. The amount included fees for two counsel at a four-hour hearing. The hearing was significantly shorter than anticipated and attended by one counsel. Accordingly, I fix costs of the proceeding at $7,500.
Nishikawa J.
Released: April 21, 2021
COURT FILE NO.: CV-19-00629731
DATE: 20210421
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Tribute (Grandview) Inc.
Plaintiff
– and –
Jin Xing Zhou
Defendant
REASONS FOR DECISION
Nishikawa J.
Released: April 21, 2021