Court File and Parties

COURT FILE NO.: CV-18-00610728

DATE: 20210702

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Country Wide Homes Upper Thornhill Estates Inc., Plaintiff

– AND –

Ying Cui and Xu Zhou, Defendants

BEFORE: E.M. Morgan J.

COUNSEL: Emilio Bisceglia and Sonja Turajlich, for the Plaintiff

Sara Erskine and Fraser Dickson, for the Defendants

HEARD: May 28, 2021

SUMMARY JUDGMENT MOTION

[1] Plaintiff moves for summary judgment in respect of its claim relating to an aborted sale of a luxury home in Thornhill, Ontario.

[2] The Defendant, Xu Zhou, signed an Agreement of Purchase and Sale dated December 4, 2016 to purchase the home for $3,778,990 (the “APS”). The home was in a new neighbourhood that had yet to be built. Ten months later, on September 29, 2017, Ms. Zhou assigned the APS to her husband, the Defendant, Ying Cui. The Defendants failed to close on the appointed closing date, November 16, 2018.

[3] It is the Defendants’ position that they were pressured to buy the house by the Plaintiff’s representatives, and that they are unsophisticated purchasers that did not really understand or have a chance to carefully review the APS. They also indicate that there was a language barrier and that they did not fully comprehend the APS. They further argue that there were representations made to them by the Plaintiff about the quality of the property that were really misrepresentations, in particular with respect to certain environmental issues. The Defendants have counterclaimed in respect of the alleged misrepresentations by the Plaintiff.

[4] In my view, none of these contentions are credible. The Defendants were sophisticated purchasers of a high value property, they understood English albeit not at mother-tongue level, and they were presented the offer by their own English and Mandarin-speaking real estate agent who testified that she went over the entire APS with them clause by clause. The APS contains a prominent warning clause in respect of a Ministry of the Environment certificate accompanying the property, as discussed below. In addition, every page of the APS contains the following notice, in all capital letters, advising that the written agreement is what governs, as follows:

ORAL REPRESENTATIONS DO NOT FORM PART NOR CAN THEY AMEND THIS AGREEMENT.

[5] The Defendants were not new to the real estate market. This was the fourth Ontario property that they bought. There was also a 5-day “cooling off” clause in the APS that allowed them to cancel the deal if they concluded they had signed it in haste. The Defendants deposed that they not only had explanations and advice from their experienced real estate agent, but they had a real estate lawyer on retainer when they signed the APS and for the weeks thereafter, as they were at the same time negotiating another property deal. They deposed that they decided not to consult their lawyer with respect to this purchase as they did not think it was necessary and did not consider that they needed anything further explained to them. They therefore had access to timely legal advice and consciously declined it.

[6] The Defendants’ central argument is not so much that they did not understand the ordinary terms of the APS. As indicated, they were experienced property buyers and generally knew what to look for in a real estate purchase. Indeed, they initialed every page of the APS. Rather, they contend that the existence and meaning of a Certificate of Property Use (“CPU”) issued by the Ministry of the Environment (“MOE”) with respect to the property in issue were not properly disclosed to them. They contend that they only understood later that this related to tainted groundwater that might limit certain uses of the property.

[7] Section 197 of the Environmental Protection Act, RSO 1990, E. 19 (“EPA”) imposes disclosure requirements with respect to a CPU, and section 168.1(4) of the EPA requires this disclosure to be made on an ongoing basis to everyone who acquires or occupies the property. Defendants’ counsel stresses that the real question here is whether these statutory disclosure obligations were fulfilled by the Plaintiff prior to the Defendants entering into the APS.

[8] The EPA question is a novel and interesting one, or at least I thought so when I first approached this motion. Late in the oral argument, however, it was revealed to me that the issue is not so novel at all.

[9] During the course of addressing Defendants’ counsel’s argument about the meaning of the CPU and the issue of historic groundwater contamination on the property referred to by the CPU, counsel for the Plaintiff made reference to the Court of Appeal’s decision in Country Wide Homes Upper Thornhill Estates Inc. v. Ge, 2020 ONCA 400. For reasons which elude me, this case was not cited in either side’s factum and was raised at the hearing as if it were an afterthought. But the Court of Appeal’s decision is so on point that to use the commonplace expression that it is on “all fours” with the case at bar would be an understatement. The Defendants’ arguments before the Court of Appeal were as close as one can get to being an exact replica of the arguments made in the present motion. I will hasten to add that those arguments by the Defendants and their counsel were dismissed out of hand by the Court of Appeal.

[10] Country Wide Homes v. Ge involved the very same Plaintiff as here, where it was also in the role of vendor of a high value home. The Court considered not only the very same arguments about whether otherwise knowledgeable Defendants/purchasers understood what they were buying, but addressed the identical EPA question about the identical CPU as at issue here. At paras 10-12, the unanimous Court of Appeal addressed the issues raised by the Defendants in both cases:

[10] The appellant points to the fact that the APS contained a clause, required by the Ministry of the Environment, that warned about the ground water in the subdivision, and remediation efforts of lands within the development. The appellant argues that the import of that clause was not explained to him. As a Mandarin speaking purchaser, he says that he did not understand the clause. He also argues that he was pressured into the purchase, having been told that an offer would only be considered if there were no conditions attached. Accordingly, the appellant suggests that he was deprived of the ability to have a solicitor review the agreement.

[11] The motion judge correctly concluded that these arguments did not support the suggestion that there had been misrepresentations.

[12] In any event, the appellant had a Mandarin-English speaking real estate agent with whom he was able to fully communicate. He is not a novice to the real estate market. He initialed every page of the APS and its schedules, including the pages containing the Ministry of Environment warning. He also specifically initialed the crossing out of the condition involving solicitor review. Finally, each page of the APS contained the following block letter phrase: ‘oral representations do not form part nor can they amend this agreement.’ These factors undermine the appellant’s position that he did not know and was misled about the contents of the APS.

[11] There is nothing to the Defendants’ case that was not already considered by the Court of Appeal in Country Wide Homes v. Ge. The Defendants fit the Court of Appeal’s description in terms of their experience with real estate, the type of property they were buying, their real estate agent advisor, their review of the APS, the availability of having a solicitor review the APS, the warnings and advisories on the APS, the impact of the Environmental issues in view of the Ministry of Environment warning on the APS, the availability of a bilingual Mandarin-English real estate agent. As the Court concluded, all of these factors combine to counter the Defendants’ position that they were not advised of or were misled as to the terms of the APS.

[12] Under the circumstances, I do not think that one needs to go further than Country Wide Homes v. Ge to find case law that supports dismissing the Defendants’ arguments. That said, two other recent cases cited by Plaintiffs’ counsel also go a long way to answering the Defendants’ complaints about the APS.

[13] In Tribute (Grandview) Inc. v. Zhou, 2021 ONSC 2994, the purchaser, like here, claimed a language barrier to fully understanding an agreement of purchase and sale. The Court found that the fact that the purchaser had an English-Mandarin speaking real estate agent sufficed to counter his defense of non-comprehension of the terms of the agreement.

[14] Similarly, in Grandfield Homes (Kenton) Ltd. v. Li, 2021 ONSC 2670, the Court held that the buyer was sophisticated and experienced in the real estate market. He had previously purchased several properties before contracting for the current valuable property. The Court also noted that he was advised by his own real estate agent, all of which went a long way toward undermining the buyer’s argument that he was not capable of comprehending the agreement of purchase and sale.

[15] I have no doubt from the evidence in the record that the Defendants knew what they were signing and agreed to buy the property under the terms of the APS, including the CPU and the Ministry of Environment advisories. Ms. Zhou executed, and passed on to Mr. Cui (who concedes that when he took his assignment, he inherited all of the terms to which Ms. Zhou had agreed), an Acknowledgement document with respect to disclosure of the environmental issues on the property.

[16] More specifically, in the Acknowledgment the Defendants acknowledge and confirm having received from the Plaintiff (a) the Ministry’s Certificate of Requirement in respect of the property, (b) the Certificate of Property Use, and (c) the Ministry’s Warning Clauses. It also advised then that they must give notice to the Ministry of Environment of any future ownership transfers and advise any future buyer from them to provide notice to the Ministry of all future ownership transfers. It further acknowledged that the Certificate of Requirement is registered on title to the property. This was all explained to the Defendants by the Plaintiff’s agent, Riccardo Del Rosso, before they signed.

[17] During the many months between signing the APS and the closing date, the Defendants never complained about any aspect of the transaction nor sought any more disclosure of the environmental issues. In the meantime, they ordered from the Plaintiff over $160,000 of special changes in the construction. These included a custom-made kitchen area, a master ensuite bathroom, an elevator, a built-in wet bar, etc. These specifications were all to the Defendants’ taste and were built for them; during all of that construction, the Defendants never intimated that they had a complaint that would prompt them not to close and take possession of the home.

[18] As indicated at the outset, the Defendants – or, more accurately, Mr. Cui – failed to close on the appointed closing date. For its part, the Plaintiff was ready, willing, and able to close.

[19] Having lost the sale of the property, the Plaintiff was of course obliged to mitigate its losses. It did so by ultimately re-selling the property. The Plaintiff contends that the built-in specifications ordered by the Defendants made the property more difficult to sell. In addition, beginning in March 2020 the market for real estate was depressed due to the COVID-19 pandemic; this timing is unfortunate but is nevertheless a reality. By the time the property sold, it had lost considerable value.

[20] On July 18, 2020, the Plaintiff re-sold the Property to new purchasers for a purchase price of $3,100,000.00, or $478,773.00 less than the purchase price agreed to by the Defendants under the APS.

[21] The Plaintiff calculates its loss as follows:

Original purchase price with Defendants $3,778,990

Upgrades and extras 161,460

Total Purchase price with Defendants 3,940,450

New purchase price 3,100,000

Difference btw original price and new price 840,450

Less: deposits received including on extras (342,636)

Loss on re-sale $ 497,814

[22] In addition, Plaintiff’s counsel sets out in his factum a calculation of carrying costs of the property pending its re-sale. The total carrying costs are calculated at $380,743.20.

[23] Defendants’ counsel complains that the Plaintiffs have simply stated their carrying costs without presenting any supporting evidence that those costs were incurred or that the amounts are correct. That is not quite accurate. The affidavit of the Plaintiff’s Vice President, Sam Balsamo, speaks to these expenses, or, more accurately, lists them. That is, of course, some evidence.

[24] Having said that, Mr. Balsamo’s narration of expenses is not conclusive. There are no invoices, receipts, or proofs of payment appended to Mr. Balsamo’s affidavit which could verify the expenses claimed. Considering that these are commonplace expenses for which such documentation is not generally hard to come by, it is odd that the Plaintiff has asked the Court to just take Mr. Balsamo’s word for it.

[25] Most of the expenses that Mr. Balsamo lists are modest and credible, as follows:

Commission $55,292

Property Taxes 7,300

Utilities 6,000

Cleaning 2,000

Humidifier 1,300

Insurance 5,000

Lawn Maintenance 5,000

House Maintenance 12,000

Upgraded Appliances 3,100

Insurance 1,500

Total $86,492

[26] In addition to the above, the Plaintiff has added as a carrying cost the cost of interest calculated at Prime +1%. The total interest charge comes to $282,251.20. Mr. Balsamo deposes that this is how interest is to be calculated, but he gives no explanation for it. I do not know if that is the rate the Plaintiff was actually paying on borrowed funds during the relevant time, or if it is the rate that the Plaintiff would have expected to earn had the Defendants closed the transaction in a timely fashion.

[27] I am willing to take Mr. Balsamo’s list at face value with respect to the carrying costs other than the interest charge. As I said, the itemized list shows modest expenses that are well within the reasonable range that one would expect to find. The Defendants object to the Plaintiff’s entire approach to proof of expenses, but raise no serious argument about any particular one of them. The $86,492 in carrying expenses is to be added to the Plaintiff’s loss on the sale of the property, for a total loss of $584,306.

[28] The interest charge is a different matter. This needs explanation and evidentiary backup, without which I am not inclined to accept it. In the ordinary course, Plaintiffs who are awarded damages are also awarded interest at a standard rate. In the absence of evidence supporting a higher rate, the Plaintiff is entitled to pre and post judgment interest at the standard Courts of Justice Act rate.

[29] The interest charge applies to the entire missed purchase price of $3,597,814 (calculated as $3,940,450 purchase price plus $161,460 in extras, less deposits of $342,636), and will run on that amount from the aborted closing date of November 16, 2018 until the re-sale date of July 18, 2020. From July 19, 2020 forward, interest will run on the Plaintiff’s total proven loss of $584,306.

[30] The Defendant’s counterclaim is dismissed.

[31] The Plaintiff shall have judgment in the amount of $584,306, plus pre and post judgment interest at the Courts of Justice Act rates as explained in para. 29 above.

[32] The parties may make written submissions on costs. I would ask Plaintiff’s counsel to send to my assistant by email short submissions (3 pages maximum) within two weeks of today, and for Defendants’ counsel to send to my assistant equally short submissions within two weeks thereafter. There is no need to deliver copies of authorities with these submissions, provided that any cases are cited with full citations so that they can be found online.

Date: July 2, 2021

Morgan J.