COURT FILE NO.: CV -17-3807-00 and CV-17-3807-A1
DATE: 2021 06 10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
10068071 CANADA LIMITED
A. Sidhu, Counsel for the Plaintiff
Plaintiff
- and -
FARZIN BORDBAR and ATEFEH KERMANI
Ms. Kermani appearing in person
Defendants
- and -
BANK OF MONTREAL and SOLIDIFI CORP.
M. Doherty for the Third Party, Bank of Montreal
A. Wood and J. Green for the Third Party, Solidifi Corp.
Third Parties
HEARD: May 18, 2021 via Zoom
SUMMARY JUDGMENT RULING
Justice Thomas A. Bielby
introduction
[1] This ruling is in regard to summary judgment motions brought by the Plaintiff and both Third Parties.
[2] The Statement of Claim in this matter was issued on August 30, 2017. The Plaintiff’s summary judgement motion was originally served on September 6, 2019. The Third Party motions followed. There have been various adjournments, cross-examinations on affidavits, and the imposition of the Covid-19 pandemic, all of which lead to significant delay.
[3] The motions were first before me on January 20, 2021, at which time the Defendants sought an adjournment on the grounds that their counsel had been suspended from practising law by the Law Society of Ontario. The Defendants sought time to retain alternate counsel and file responding material. The other parties opposed an adjournment given the ages of the motions and a concern for delay and the possible dissipation of assets by the Defendants.
[4] I granted the adjournment on terms and the matters were adjourned to April 6, 2021, pre-emptory against the Defendants, who were to file their responding material on or before March 1, 2021.
[5] The Defendants failed to file any material within the deadline.
[6] On April 6, 2021, the Defendants, through their agent Mr. Schifman, again asked for an adjournment alleging the Defendant Bordbar had health issues. The adjournment was opposed but nevertheless I granted it, again on terms. The matter was adjourned to May 18, 2021, pre-emptory against the Defendants, who were required to serve and file their responding material on or before April 30, 2021. The Plaintiff and the Third Parties were each awarded costs, in the amount of $1,500.00, payable on or before May 12, 2021. If the Defendants failed to meet the terms of the order, the matter would proceed as a default hearing.
[7] As of May 18, 2021, the Defendants had not filed any material, nor had they paid the costs.
[8] The Defendants are husband and wife but are apparently separated. When the matter was before me on May 18, 2021, the Defendant Kermani appeared in person. The Defendant Bordbar was not in attendance. Mr. Schifman again appeared, this time as an officer of the court. He advised the court that he had spoken to Mr. Bordbar on April 19, 2021, who advised Mr. Schifman he would be in to see him the following week. However, April 19th was the last time Mr. Schifman spoke to or heard from, Mr. Bordbar.
[9] After hearing submissions on the part of the Plaintiff, the Third Parties and Ms. Kermani, given my last endorsement, I ruled that the motions would proceed and I heard submissions from all parties in attendance, including Ms. Kermani.
[10] For the reasons set out below, I will allow all three summary judgment motions. The Plaintiff is entitled to a monetary judgment and the Third Parties are entitled to a dismissal of the Third Party Claims. As a result of their default, the Defendants have not put their “best foot forward” and there are no genuine issues requiring a trial.
[11] I accept as true all of the facts set out in the affidavits filed on behalf of the Plaintiff and the Third Parties. The evidence is unchallenged; there is no sworn evidence otherwise.
THE FACTS
[12] On or about the 31st day of January 2017, the Plaintiff purchased 129 Vista Drive, Mississauga, Ontario (the property). It was the Plaintiff’s intention to “flip” the property and it was again listed for sale on February 28, 2017 with McDadi Real Estate Inc. The real estate salesperson retained was Maryam Kermani, the sister of the Defendant Kermani.
[13] The Plaintiff and the Defendants, on March 10, 2017, entered into an unconditional Agreement of Purchase and Sale (the agreement) by which the Defendants would purchase the property. The purchase price to be paid to the Plaintiff was $870,000.00, with a down payment of $40,000.00 (currently held in trust) and a closing date of May 31, 2017.
[14] In order to purchase the property, the Defendants required mortgage financing. Upon the acceptance of their offer to purchase the property, the Defendants applied for a mortgage with the Third Party, Bank of Montreal (BMO) and received conditional approval. Two of the conditions to be fulfilled were the receipt of an appraisal satisfactory to BMO, and the verification of the information provided by the Defendants in their mortgage application i.e., a credit check.
[15] BMO, after its preliminary approval, retained the Third Party, Solidifi Corp. (Solidifi) to have the property appraised.
[16] Solidifi is an appraisal management company which BMO contracted with to arrange appraisals. Solidifi then contracted an independent appraiser to complete the appraisal from which Solidifi generated an appraisal summary.
[17] The summary was prepared using a computer program and pre-set forms provided by BMO. The program utilized included predetermined texts when certain features are identified by the appraiser.
[18] In the original appraisal of the property, under the subtitle, “Floor Plan” the box marked “Poor” was checked. When this notation was imputed into the program used to produce an appraisal summary, under the heading “Risks”, the following was automatically generated:
“Interior and/or exterior has evidence of major derogatory feature(s): mould, asbestos insulation, pyrite, insulbrick, leakage, moisture in the basement, structural damage, foundation cracks, needs major repairs, dysfunctional design or evidence of grow operation/meth lab or any illegal activity.”
[19] Solidifi then delivered the appraisal summary to BMO, which concluded the appraisal was “not satisfactory”.
[20] To be clear, there is no evidence any of the deficiencies existed, specifically that the property had been used as a grow house. The Defendants, during discovery, admitted they had no such proof.
[21] At the request of the Defendants, the date of closing was extended twice, the last closing date was to be June 5, 2017. On June 2, 2017 the real estate lawyer for the Defendants advised counsel for the Plaintiff that the deal was off because the mortgage was cancelled due to the property having been used as a grow house.
[22] In a letter to counsel for the Defendants, dated June 5, 2017, counsel for the Plaintiff denied such a use and noted that regardless, the agreement was unconditional, and the property was to be purchased, “as is”.
ANALYSIS
[23] Without financing the Defendants were unable to close the purchase of the property on June 5, 2017. While counsel for the Plaintiff did not tender documents on closing, the Plaintiff is entitled to rely on the principle of, “anticipatory breach”, given the correspondence received on June 2, 2017.
[24] While it can be argued that to deny mortgage funding without actual proof of such deficiencies, seems unfair, I accept that the finding of whether the appraisal summary is “satisfactory” or “not satisfactory” is within the sole discretion of BMO.
[25] Further, and regardless of the information included in the appraisal, BMO was entitled to deny mortgage funding because the information provided by the Defendants on their mortgage application could not be verified. The failure to comply with either one of these conditions was fatal to the Defendants’ application for a mortgage.
[26] On these facts and having had regard to Rule 20.01(1), as noted above, there are no genuine issues requiring a trial. The Defendants, without having the funds to close the deal, breached the unconditional agreement of purchase and sale and the Plaintiff is entitled to a judgment awarding damages and a dismissal of the counterclaim.
[27] In regard to the Third Party Claims, the result is the same. There is no genuine issue requiring a trial. The Defendants have failed to establish a “claim over”.
[28] By failing to file any responding material, the Defendants failed to put their “best foot forward”.
[29] The Plaintiff claims damages in the amount of $128,861.31, broken down as follows (para. 8 of the Statement of Claim):
Difference in sale price ( $870,000.00 - $750,000.00) $120,000.00
Interest paid on the mortgage between
May 31, 2017, and August 1, 2017 ($32.21 X 62 days) $1,997.02
Property Taxes May 31, 2017 to August 1, 2017 $707.32
Staging and relisting fees paid $2,034.00
Fire insurance $316.00
Electrical bill $256.97
Bridge Financing fees and interest $2,500.00
Additional lawyer’s fees paid $750.00
Property inspection fees $300.00
Total $128,861.31
[30] The calculation of these damages was not challenged.
[31] The next issue to be determined is whether the deposit of $40,000.00, is to be credited to the amount of damages claimed or is forfeited to the Plaintiff, over and above the claim for damages.
[32] The Plaintiff argues that the case law supports the proposition that where a purchaser has breached an agreement of purchase and sale, the vendor is entitled to the deposit without having to prove damages and submitted that the same logic applies where damages have been claimed and proven. The Plaintiff relies on the authority of Pleasant Developments Inc. v. Iyer 2006 CanLII 10223. Brown J., as a single judge of the Divisional Court, at para. 5 set out the issues as follows:
Was it necessary for the Appellant to prove damages in order to forfeit the Respondents’ deposit? and
Were the Respondents entitled to relief against forfeiture?
[33] At para. 7 Brown J. stated:
“The law is clear that a deposit may be forfeited without proof of damages… In other words even in a case where the vendor resells at a purchase price that is high enough to compensate for any loss from the first sale, the vendor may nevertheless retain the deposit.”
[34] Brar v. Smith, 2014 ONSC 5030 is a decision of Barnes J. and is also relied on by the Plaintiff. Therein, as a result of the purchaser’s breach the plaintiff/vendor sought forfeiture of the deposit. No claim was made for damages. The deposit was order paid to the plaintiff and it was said that the word “deposit” implies a right of forfeiture (para. 22).
[35] In the matter before me the Plaintiff suffered a financial loss as a result of the breach. He resold the property for a lower purchase price and suffered damages as set out above.
[36] Found at Exhibits AA and D, to the affidavit of Rakesh Kumar, sworn December 14, 2019, are found copies of the agreement dated March 10, 2017. The agreement is made up of a series of “form” documents approved for use by the Ontario Real Estate Association and the Toronto Real Estate Board. In reference to the deposit the following wording is used:
“…to be held in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion.”
[37] The deposit remains in the trust account of the Defendants’ real estate lawyer.
[38] A decision not included in the Plaintiff’s books of authorities is Azzarello v. Shawqi 2019 ONCA 820. This decision came to my attention subsequent to the hearing of the motions. Via email, my office advised counsel of the authority and invited written submissions as to its applicability to this matter. No such submissions were received. In Azzarello, the defendant, a purchaser of real property, breached the Agreement of Purchase and Sale, by failing to complete the transaction. The summary motions’ judge awarded damages and ordered the deposit forfeited to the plaintiff, without it being credited against the damages sought and awarded.
[39] In Azzarello, the appellant argued that the motion judge erred by not ruling the deposit was to be credited to the damages. The Court of Appeal agreed. In the ruling of the Court, Feldman J.A. noted that the agreement of purchase and sale included the standard preprinted form language which provided for the deposit to be held in trust pending completion or other termination of the agreement and was to be credited against the purchase price on completion (para. 24). This wording is identical to the wording in the matter before me and as set out in para. 36, above.
[40] Commencing at para. 43, Feldman J.A. wrote,
“The agreement of purchase and sale specifically provides for the disposition of the deposit upon completion of the agreement: if the agreement is completed, the amount of the deposit is to be credited toward the purchase price. The agreement does not, however, specifically state what happens to the deposit where there is an “other termination” of the agreement” (para. 43).
“It is well-established by case law that when purchaser repudiates the agreement and fails to close the transaction, the deposit is forfeited, without proof of any damage suffered by the vendor…Where the vendor suffers no loss, the vendor may nevertheless retain the deposit, subject to relief from forfeiture” (para. 45).
[41] Feldman J.A. then went on to consider the circumstances in which damages are claimed and proven.
[42] Reference was then made to the case of Bang v. Sebastian 2018 ONSC 6226, aff’d 2019 ONCA 501, in which the trial judge rejected the vendor’s argument that the deposit ought to be forfeited without being credited to the damages (para. 50).
[43] At para. 52, Feldman J.A. set out paras. 69 and 71 in Bang which read:
“Real estate transactions routinely involve the payment of deposits. The proper application of the deposit in circumstances where the purchaser fails to complete the transaction is governed by the parties’ agreement. Here, the wording of the Agreement of Purchase and Sale, states expressly that the deposit is to be “credited towards the purchase price” on completion of the transaction.
I find that the wording of the deposit term in the Agreement of Purchase and Sale, clearly and unambiguously reflects the parties’ intention that the deposit would be applied as a credit to the payment obligation owed by the purchaser defendant to the vendor plaintiffs on completion of the transaction. There is no difference to the use of the deposit in the event of termination of the agreement as opposed to its successful completion. Rather, it was intended to be applied as a credit to the obligation of the purchaser to the vendors: whatever form that obligation might take. I conclude that the $35,000 paid by the purchaser defendant is to be paid to the vendor plaintiffs and credited against the damages that they have proven.”
[44] At para. 53, Feldman J.A. stated,
“I agree with this analysis. While the agreement only specifically calls for the deposit to be credited to the purchase price on completion of the agreement, the measure of damages is based on the difference between the purchase price and the lesser amount that the property sold for after the purchaser’s default. In other words, it is based on the vendor receiving the purchase price that was bargained for. One can infer that the intent of the parties was that the deposit to applied to the purchase price whether received on completion or as damages.”
[45] Feldman J.A. went on to say that cases such as Benedetto v. 2453912 Ontario Inc. 2019 ONCA 149, in which the deposit was forfeited, are limited to cases where the vendor suffers no loss (para. 54).
[46] The appeal on the quantum of damages was allowed and the deposit of $75,000.00, was credited to the damages awarded.
[47] With the greatest respect to counsel for the Plaintiff, the Azzarello decision of the Court of Appeal is on “all fours” with the matter before me. The deposit will be credited towards damages.
[48] The Plaintiff will be awarded damages of $128,861.31, as claimed, less the deposit amount of $40,000.00, which will be ordered released to the Plaintiff.
[49] On the issue of costs, the Plaintiff and both Third Parties filed cost outlines. All were successful and are entitled to costs, which I will award on a partial indemnity basis and with respect to the fees, on an equal basis.
RULING
[50] I order,
The deposit in the amount of $40,000.00 held in the trust account of Sam McDadi Real Estate Inc., Brokerage, since March 11, 2017, is hereby forfeited and is to be paid to the Plaintiff, 10068071 Canada Limited or as it directs.
The Plaintiff is awarded damages, net of the deposit, in the amount of $88,861.31, together with pre-judgment interest, on the full amount of damages, $128,861.31.
The Defendant’s counterclaim, and the Third Party Claim(s) are dismissed.
The Plaintiff is awarded costs as against the Defendants on a partial indemnity basis, totalling $21,849.19, made up as follows:
a. Fees in the amount of $17,000.00 plus HST in the amount of $2,210.00; and
b. Disbursements, inclusive of HST in the amount of $2,639.19
- The Third Party Solidifi Inc. is awarded costs as against the Defendants, on a partial indemnity basis, totally $21,099.00, made up as follows:
a. Fees in the amount of $17,000.00 plus HST of $2,210.00; and
b. Disbursements of $1,889.00, inclusive of HST.
- The Third Party Bank of Montreal is awarded costs as against the Defendants, on a partial indemnity basis of $20,859.12, made up as follows:
a. Fees in the amount of $17,000.00 plus HST in the amount of $2,210.00; and
b. Disbursements, inclusive of HST, in the amount of $1,649.12
Bielby J.
Released: June 10, 2021
COURT FILE NO.: CV -17-3807-00 and CV-17-3807-A1
DATE: 2021 06 10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
10068071 CANADA LIMITED
Plaintiff
– and –
FARZIN BORDBAR and ATEFEH KERMANI
Defendants
– and –
BANK OF MONTREAL and SOLIDIFI CORP.
Third Parties
SUMMARY JUDGMENT RULING
Bielby J.
Released: June 10, 2021