Court File and Parties

Court File No.: CV-20-641297 Date: 2021-06-22 Ontario Superior Court of Justice

Between: Elizabeth McGregor and Rose Greenan Plaintiffs

-and-

John Tucci, Rose Tucci and Estate Realty Ltd. cob Royal LePage Estate Realty Defendants

Before: Justice Edward Belobaba

Counsel: Claudio R. Aiello for the Plaintiffs / Moving Parties Josh Suttner and Jacky Cheung for the Tucci Defendants / Responding Parties Joseph Juda for the Estate Realty Ltd. Defendant / Responding Party

Heard: May 28, 2021 via Zoom video

MOTION FOR SUMMARY JUDGMENT

[1] The plaintiffs’ motion for summary judgment arises out of failed residential property sale and a dispute about a $100,000 deposit that was paid by the defendant purchasers. When the defendant-purchasers failed to close the transaction, the plaintiffs accepted the breach and sold the property to another buyer at a higher price. Both sides now claim the deposit that is being held by the defendant real estate brokerage pending court order.

[2] As I explain below, the plaintiffs are entitled to the deposit. There are no genuine issues requiring a trial. The defendants attempt to manufacture credibility issues that require in-court adjudication does not succeed. The plaintiffs’ motion for summary judgment is granted with costs.

Background

[3] Rose Greenan, who is 97, had lived in her family home at 9 Barbara Crescent in the East York area of Toronto for more than 60 years. Recently, as part of her estate planning, she made her niece, Beth McGregor, age 80, a joint owner. In the fall of 2019, Rose had to move into an assisted living facility. Rose and Beth decided to sell the Property to provide the financial support that Rose required.

[4] As it happened, Beth knew a local real estate agent. The real estate agent recommended that the Property be listed at $1.199 million. Beth thought the market value was much higher (she was proven right) but agreed to list at the recommended price. The real estate agent told a colleague about the Property and the colleague, who knew and had worked with John Tucci on other property deals, told John Tucci.

[5] The defendants John and Rosa Tucci (“Tucci”) are experienced in buying and selling residential properties. They have been buying, renovating and building residential homes for more than 30 years. They have their own construction company. Tucci was interested in this Property. On January 14th, 2020, about ten days before the listing agreement took effect, Tucci offered to purchase the Property for $1.2 million.

[6] The Tucci offer provided that the closing date would be April 16, 2020, that time was of the essence, and that if the offer was accepted it could only be altered by written agreement signed by all parties. Before presenting the offer to the plaintiffs, Tucci deliberately struck out the clauses making the offer conditional on financing and a home inspection. The unconditional offer was accepted by the plaintiffs. The defendants’ $100,000 deposit would be held by the real estate agent pending completion of the transaction.

[7] As the closing date approached, Tucci was having difficulty vacating and selling another property that would have provided the funding for the purchase of the plaintiff’s Property. Tucci wanted the plaintiffs to extend the closing date. The lawyers on each side exchanged several faxes negotiating the terms of such an extension.

[8] The plaintiffs were ultimately willing to extend the closing date if Tucci would pay the $500 (plus tax) that would be incurred in related legal costs. Tucci refused to do this.

[9] The plaintiffs’ solicitor tendered on the closing date as required but Tucci failed to close and continued to press for an extension. The Tucci solicitor advised the plaintiffs’ solicitor by fax that:

If your clients are not willing to grant an extension to July 15, 2020 … my clients have indicated that they will be taking further action to ensure the property cannot be sold.

[10] Tucci proceeded to register a Notice on title. The improper Notice was removed by the Director of Land Titles. Next, Tucci registered a Caution which was only withdrawn after the plaintiffs began taking steps to remove it by court order. Rosa Tucci agreed on cross-examination that these steps to cloud the title were taken deliberately to prevent the plaintiffs from selling the Property to anyone else. As it turned out, the plaintiffs relisted the Property at $1.199 million using a different real estate agent. Within a matter of days, the Property sold for $1.35 million.

[11] The plaintiffs say they are entitled to the $100,000 deposit that is being held by the real estate brokerage. They have limited their claim to this single issue and move for summary judgment.

No genuine issues requiring trial

[12] As set out in Hryniak v. Mauldin,[^1] the motion judge must first determine whether there is a genuine issue requiring trial based only on the evidence contained in the motion record and without using the enhanced powers set out in Rule 20.04(2.1). I can make this determination here in a fair and just fashion. Based on the admissible evidence that is before the court, I am satisfied that there are no genuine issues requiring a trial.

[13] For the reasons that follow, the plaintiffs are entitled to the $100,000 deposit.

Discussion

(1) A “true deposit”

[14] The agreement of purchase and sale as drafted by Tucci or their agent was silent about what would happen to the $100,000 deposit if Tucci did not complete the transaction. The law however is clear that where a purchaser repudiates an agreement to purchase lands and fails to close the transaction, the deposit is forfeited without proof of any damage suffered by the vendor.[^2]

[15] This well-established point of law was most recently affirmed by the Divisional Court in Grandeur Homes Inc. v Zeng:

A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and is not dependent on proof of damages by the other party.[^3]

[16] The $100,000 at bar is a true deposit and is prima facie forfeited.

(2) No basis for relief against forfeiture

[17] Under section 98 of the Courts of Justice Act,[^4] a court may grant relief from the forfeiture of a deposit if: (1) the forfeited deposit was disproportionate to the damages suffered; and (2) it is unconscionable for the seller to retain the deposit.[^5] In my view, neither of these requirements are established on the evidence herein.

No disproportionality

[18] The $100,000 deposit represents 8.3 per cent of the $1.2 million sale price. The size of the deposit falls within the reasonable range accepted in the caselaw and indeed is smaller than deposits in other cases which have been found to be proportionate even where no damages have been sustained.[^6]

No unconscionability

[19] A finding of unconscionability must be an exceptional one, strongly compelled by the facts of the case.[^7] Where there is no disproportionality in the size of the deposit, the court must consider other indicia of unconscionability such as inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach, and the conduct of the parties.[^8]

[20] None of these indicia favour the Tucci defendants. John and Rose Tucci were sophisticated and experienced real estate investors; the plaintiffs were elderly, aged 80 and 97 respectively, and had no such experience. Nor does it help the defendants’ claim for equitable relief when their conduct was less than clean-handed and certainly not in good faith — the evidence shows after they failed to close, they tried to block the resale of the Property with two highly questionable attempts to cloud the title.

[21] Tucci may well be right that their difficulties in securing the required financing were tied in part and even in large part to the spread of the COVID-19 pandemic in the days leading up to the April 16, 2020 closing date. They were unable to finalize the eviction of over-holding tenants and sell the property they needed to finance this purchase. And at one point, John Tucci was delayed in returning from Aruba to deal in person with these financing issues when flights were cancelled.

[22] I note that Tucci (wisely) does not argue the doctrine of frustration. This is not a case where a supervening event has “radically altered” the contractual obligations and has made it impossible for Tucci to carry out the purchase of the property.[^9] Real estate agreements continued to be performed during the pandemic — in fact, the plaintiffs were able to relist and sell the Property for a higher price just days after Tucci failed to close.

[23] Nonetheless, says Tucci, it would be unconscionable in these circumstances if the deposit is forfeited. I do not agree. The risk that materialized here — difficulties in securing financing — was a risk that Tucci decided to personally assume when they deliberately deleted the “conditional on financing” provision in their offer to purchase. Moreover, and at root, the closing of this $1.2 million transaction failed because Tucci refused to pay $500 plus tax (or $565 in total) to reimburse the plaintiffs’ related legal costs. Had they paid this modest amount, the closing date would have been extended. The plaintiffs acted reasonably; the Tucci defendants did not.

[24] The submissions about unconscionability do not succeed.

[25] Nor does the defendants’ suggestion that there are credibility issues that require a trial.

No credibility issues.

[26] Rosa Tucci says in her affidavit that she was told by her real estate agent (Chris) based on what he was told by the plaintiffs’ agent (Ana) that the plaintiffs had orally agreed to the requested extension. Counsel for Tucci submits that the court needs to hear Chris and Ana’s in-court testimony. Apart from the obvious point about double-hearsay, the plaintiffs are right to point out (i) that Tucci themselves could have adduced this evidence by examining Chris and Ana under Rule 39.03, and (ii) in any event, oral reassurances are not enough — any agreed-to extension to be effective had to be in writing.[^10] The ‘in writing’ requirement was fully understood by Tucci.

[27] Rosa Tucci also asserts that on April 15 or 16, 2020 she asked their lawyer, Mr. Dashwood, to advise the plaintiffs’ lawyer, Mr. Boardman that Tucci would now agree to the $500 plus HST; and that Mr. Dashwood told her that Mr. Boardman wouldn’t return his calls. When asked about this, Mr. Boardman denied receiving any such calls or voice mail messages. And if Mr. Dashwood couldn’t get through by phone, why didn’t he simply use the fax as was done many times before?

[28] Here again, Tucci could have adduced admissible evidence directly on point from their solicitor but chose not to do so. And if it was their solicitor who failed to carry out their instructions about the $500, then he should be the target of their complaint not the plaintiffs’ solicitor. I note, in any event, that Rosa Tucci herself acknowledged on cross-examination that she may not even have given these instructions:

Q. …. Surely Mr. Dashwood could have sent an additional fax that simply said, we accept, but it didn’t happen because you didn’t instruct it to happen; isn’t that true?

A. I’m not sure. I can’t answer that.

[29] It is elementary that on a motion for summary judgment, both sides must put their best foot forward or risk losing. The Tucci defendants did not do so here. There are no credibility issues and no genuine issues requiring trial.

Disposition

[30] The motion for summary judgment is granted.

[31] The plaintiffs are entitled to the $100,000 deposit. The real estate brokerage shall immediately forward this amount, plus any accumulated interest, to the plaintiffs.

Costs

[32] I have reviewed the parties’ cost submissions.

[33] The plaintiffs made a formal settlement offer on December 18, 2020 — $95,000 plus discounted costs. The offer was not accepted. The plaintiffs have now obtained a more favourable judgment and ask for costs on a substantial indemnity basis from the date of the offer. Even though the plaintiffs’ costs outline is imprecise about what costs were incurred after the date of the offer, it appears that the bulk of the legal work was done after the date in question.

[34] When their costs outline is adjusted to comply with the Grid (by reducing counsel’s hourly rate from $450 to $350) the plaintiffs ask for $25,749 in partial indemnity (plus $1969 in disbursements and applicable taxes) and $38,623 on a substantial indemnity basis (using the 1.5 multiplier prescribed by the Rules) plus disbursements and taxes.

[35] The Tucci defendants say that these amounts are excessive and unreasonably disproportionate to the amount at issue. They point to their own cost outline which shows only $12,317 on a partial indemnity basis inclusive of disbursements and taxes. They also point to similar cases involving forfeiture of deposits resolved via motions or applications where the costs awarded were proportionate and did not exceed $15,000 inclusive of disbursements and taxes.[^11]

[36] These are compelling submissions. Taking into account the defendants’ cost outline, the comparable caselaw on the recovery of deposits and the need to inject a reasonable measure of substantial indemnity to reflect the consequences of the rejected settlement offer, I find it fair and reasonable to fix the costs payable to the plaintiffs by the Tucci defendants at $20,000 all-inclusive.

[37] The defendant brokerage took no position on the motion but made the following submission on costs. Because they were required to file a statement of defence, they ask for $1742 in partial indemnity costs. In my view, it is fair and reasonable to fix these costs at $500 all-inclusive payable by the plaintiffs. Counsel for the plaintiffs argues that these costs should be paid by the Tucci defendants. I understand the submission but, on balance, I am not persuaded.

[38] In sum, the plaintiffs are entitled to the $100,000 deposit plus related interest. The Tucci defendants shall pay $20,000 in costs to the plaintiffs within 30 days The plaintiffs shall pay $500 in costs to the real estate brokerage.

[39] Order to go accordingly.

Signed: Justice Edward Belobaba

Notwithstanding Rule 59.05, this Judgment [Order] is effective and binding from the date it is made and is enforceable without any need for entry and filing. Any party to this Judgment [Order] may submit a formal Judgment [Order] for original signing, entry and filing when the Court returns to regular operations.

Date: June 22, 2021

[^1]: Hryniak v. Mauldin, 2014 SCC 7. [^2]: Azzarello v Shawqi, 2019 ONCA 820, [2019 O.J. No. 5206 (C.A.) at paras. 45-46. [^3]: Grandeur Homes Inc. v Zeng, 2021 ONSC 4005 (Div. Ct.) at para. 21. [^4]: Courts of Justice Act, R.S.O. 1990, c. C.43. [^5]: Redstone Enterprises Ltd v. Simple Technology Inc., 2017 ONCA 282 at para. 15. [^6]: Wang v. 2426483 Ontario Ltd. 2020 ONSC 3368, at para 40; Redstone, supra, note 5, at paras16-17. [^7]: Wang, at para 40; Redstone, at para. 18. [^8]: Redstone, supra, note 5, at paras. 28-30. [^9]: Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, at para. 55. The doctrine of frustration is discussed in some detail in Bang v. Sebastian, 2018 ONSC 6226. [^10]: Xu v 2412367 Ontario Ltd., 2017 ONSC 4445, at para. 54. [^11]: Mikhalenia v. Drakhshan, 2015 ONSC 1048 ($6000 agreed-to in costs re $100,000 deposit); Azzarello v. Shawqi, 2018 ONSC 5414 ($11,000 in costs re $75,000 deposit); and Signal Chemicals Ltd. v. Dew Man Marine Trade Inc., 2011 ONSC 3951 ($7815 in costs re $50,000 deposit). Arguably, this last cost award would have been larger on a $100,000 deposit — thus my extrapolated upper range of $15,000.