Pomata Investment v. Yang, 2021 ONSC 6786

Court File and Parties

COURT FILE NO.: CV-20-00638530-00000

DATE: 20211014

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

POMATA INVESTMENT CORP. C.O.B. TREASURE HILL HOMES

Plaintiff

• and -

FUXIANG YANG and XIYE ZHAO

Defendants

AND BETWEEN:

FUXIANG YANG and XIYE ZHAO.

Plaintiffs by Counterclaim

• and -

POMATA INVESTMENT CORP. C.O.B. TREASURE HILLS HOMES

Defendant by Counterclaim

COUNSEL:

Stephen Brunswick and Jennifer J. Lake, lawyers for the Plaintiff

Peter Lulic, lawyer for the Defendants

Peter Lulic, lawyer for the Plaintiffs by Counterclaim

Stephen Brunswick and Jennifer J. Lake, lawyers for the Defendant by Counterclaim

HEARD: October 5, 2021

REASONS FOR DECISION

DIAMOND J.:

Overview

1On or about September 26, 2016, the plaintiff and the defendants entered into an Agreement of Purchase and Sale (the “Agreement”) for a pre-construction residential property in Vaughan, Ontario (the “property”). The purchase price for the property was $2,199,900.00.

2The defendants subsequently requested additional extras, options and upgrades increasing the total purchase price to $2,214,813.70.

3Pursuant to the terms of the Agreement, the plaintiff kept the defendants apprised of all interim and final closing dates. The final closing was scheduled to take place on April 5, 2018. Approximately six weeks prior to the final closing date, the defendants (through counsel) advised the plaintiff that they would be unable to close the transaction.

4The plaintiff accepted the defendants’ anticipatory breach, and ultimately commenced this proceeding seeking, inter alia, forfeiture of the defendants’ $150,000.00 deposit and general damages (now quantified in the amount of $616,601.13) for breach of contract together with pre and post-judgment interest and legal costs.

5The defendants refute the plaintiff’s allegations, and take the position that as early as the initial meeting between the parties (ie. September 26, 2016), the plaintiff knew that the defendants did not have the ability to close the transaction and were relying upon the Agreement being assigned prior to closing with any resulting profits paid to the defendants. The defendants allege that there was a separate, oral contract entered into at the time the Agreement was signed, and the plaintiff breached that oral contract. The defendants issued their own counterclaim seeking damages in the amount of $150,000.00 (i.e. the amount of their deposit) for breach of contract.

6The plaintiff brought a motion for summary judgment seeking judgment on its claim and an order dismissing the defendants’ counterclaim. The motion was argued before me on October 5, 2021, and at the conclusion of the hearing I took my decision under reserve.

Summary Judgment

7Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the Court shall grant a summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence.” As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.

8In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada held that on a motion for summary judgment, the Court must first determine whether there is a genuine issue requiring a trial based only upon the record before the Court, without using the fact-finding powers set out in the 2010 amendments. The Court may only grant summary judgment if there is sufficient evidence to justly and fairly adjudicate the dispute, and if summary judgment would be an affordable, timely and proportionate procedure.

9The overarching principle is proportionality. Summary judgment ought to be granted unless the added expense and delay of a trial is necessary for a fair and just adjudication of the case.

10As held in Sanzone v. Schechter 2016 ONCA 566, only after the moving party discharges its evidentiary burden of proving that there is no genuine issue requiring a trial for resolution does the burden then shift to the responding party to prove that its claim has a real chance of success. The Court must address the threshold question of whether the moving party discharges its evidentiary obligation to put its best foot forward by adducing evidence on the merits.

11Nothing in Hyrniak or the subsequent jurisprudence displaces the onus upon a party responding to a motion for summary judgment to “lead trump or risk losing.” The Court must assume that the parties have put their best foot forward and placed all relevant evidence in the record. If the Court determines that there is a genuine issue requiring a trial, the inquiry does not end there and the analysis proceeds to whether a Court can determine if the need for a trial may be avoided by use of its expanded fact-finding powers.

12As held in Crisafi v. Urban Landmark Realty Inc. 2018 ONSC 191, the Court should restrict itself from ordering a mini-trial when a party has chosen to tender a deficient evidentiary record on a motion for summary judgment; a mini-trial ought not to permit a party to buttress or “cooper up” its deficient record. If the record does not contain an affidavit from a key witness, or a relevant document, then a mini-trial should typically not be ordered to allow a party “a second kick at the can” when to do so would effectively permit a party to evade his/her well-established legal and evidentiary onuses on a motion for summary judgment. The mini-trial is not a tool available to a party. It is a power bestowed upon the Court to assist it with the potential fair and just resolution of a genuine issue which would otherwise require a full trial.

13As recently held by the Court of Appeal for Ontario in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, when hearing a motion for summary judgment, the Court must follow the analytical process set out in Hryniak and carefully analyze all the evidence relied upon by a responding party in his/her efforts to show the presence of a serious issue requiring a trial. First, the Court must consider whether there is a genuine issue requiring a trial based on the record alone and without utilizing the enhanced fact-finding powers in Rule 20.04 (2.1) of the Rules of Civil Procedure.

14If the Court finds the presence of a genuine issue requiring a trial on the record alone, then the second question is whether the need for a trial can be avoided by using the said fact-finding powers. In his recent decision Oxygen Working Capital Corp. v Mouzakitis 2021 ONSC 1907, Justice Myers posed the following (non-exhaustive) questions for the Court to consider at the second stage:

15Will making findings of fact on the evidence before the court provide a fair and just result as compared to a mini-trial or a trial?

a) Does the material before the court illuminate the factual issue sufficiently to allow the judge to make findings of fact and credibility?

b) Is there something missing that is needed for basic fairness despite the fact that the parties chose not to put that evidence forward?

c) Do considerations of the litigation as a whole mandate some further process before making factual or credibility findings?

16On my review of the evidentiary record submitted by the parties, the following issues require this Court’s determination:

1. Is there a genuine issue requiring a trial with respect to the breach of the Agreement?

2. Is there a genuine issue requiring a trial with respect to the plaintiff’s damages/mitigation efforts?

3. If the answers to Issues #1 and 2 are “no”, should summary judgment be granted in the face of the defendants’ pending Third Party Claim?

4. If summary judgment is granted, should enforcement of the judgment be stayed pending the disposition of the defendants’ Third Party Claim?

17I will now address each issue in turn.

Issue #1: Is there a genuine issue requiring a trial with respect to the breach of the Agreement?

18In both their Statement of Defence and Counterclaim and their responding affidavits, the defendants allege that they were introduced to the property, and the opportunity to “flip” the property for profit, by their longstanding family friend Joyi Zhang (“Joyi”).

19Joyi has been an active real estate agent in the Greater Toronto Area Chinese community for many years, and is employed by Homelife Landmark Realty Brokerage in Markham, Ontario.

20The defendants originally took the position that Joyi was acting at all times as the plaintiff’s authorized representative. As subsequently admitted at the defendants’ cross-examinations, at no time did Joyi act as the plaintiff’s representative in any capacity. On the contrary, the plaintiff retained the sales agent services of Lou Katsavos (“Lou”) from Homelife Metro Park Realty.

21As held by Justice Perell in S.G. Investment Group Ltd. v. Avison Young 2016 O.J. 1734 (SCJ), a real estate agent has a fiduciary duty to his/her own principal, owing the highest obligation for full disclosure and fair dealing. The defendants clearly retained and relied upon Joyi as their real estate agent, and thus Joyi’s actions (or inactions) cannot and do not bind the plaintiff.

22In any event, no affidavit from Joyi was ever tendered on this motion, and the defendants chose not to avail themselves of the provisions of Rule 39.03 of the Rules of Civil Procedure to examine Lou as a witness pending the hearing of the plaintiff’s motion for summary judgment.

23According to the defendants, Joyi was the one who advised them that as the real estate market was (at the time) “hot”, despite the defendants’ limited financial resources they could make money by entering into the Agreement and assigning it to a third party prior to closing for a profit. The defendants’ evidence is that Joyi “guaranteed” the property would be assigned to another purchaser at the time of closing.

24On September 24, 2016, the defendants attended the plaintiff’s sales office with Joyi. Their evidence with respect to their attendance that day is as follows:

“We were led to a counter in the sales office, where Zhang presented documents to us for signature, in the presence of an individual who identified himself as an employee of the Plaintiff Corporation (“the Employee”).

At the meeting, we repeatedly asked both Zhang and the Employee questions, specifically:

i) we do not have the ability to close on an almost $2.2 million property;

ii) we do not have the ability or resources to borrow sufficient funds to purchase the Property on closing;

iii) we have been orally reassured by Zhang and the Plaintiff Corporation that the Property will be assigned prior to closing, with profits to us, on top of deposits paid by us;

iv) mortgage commitment from us is not required by the Plaintiff Corporation, as the Property shall be assigned to another buyer.

Neither Zhang nor the Employee answered the above questions, instead, silence prevailed, which were construed by us as acceptance.”

25The employee described above was Lou (apparently the defendants did not know his name). At its highest, the defendants’ evidence suggest that they accepted both Lou’s and Joyi’s alleged silence as an affirmation of their alleged questions. I note that neither of the defendants speak English. Lou does not speak Cantonese or Mandarin. It is unclear how any conversation between the defendants and Lou could have ensued, unless Joyi somehow acted as translator. There is no evidence that such actions took place. This renders the defendants’ version of events somewhat suspect to say the least.

26In any event, the defendants are not raising any issue of misrepresentation - be it innocent, negligent or fraudulent - in their Statement of Defence and Counterclaim, or in responding to the plaintiff’s motion for summary judgment. Instead, the defendants (and the defendants alone) advance the head-scratching position that the alleged untranslated back and forth between themselves, Joyi and Lou somehow constituted an oral contract.

27The September 24, 2016 meeting at the plaintiff’s sales office is the only basis in fact and in law for the defendants’ resistance to the plaintiff’s motion. The complete lack of evidence from either Joyi or Lou creates substantive adverse inferences to be drawn against the defendants, as in the face of the clear and unambiguous language in the Agreement, they were under both a legal and evidentiary onus to “lead trump or risk losing.”

28The Court is entitled to proceed on the basis that the defendants have placed all relevant evidence in the record. A review of that evidence discloses that there is no genuine issue requiring a trial with respect to whether the defendants breached the Agreement. Whatever mistaken assumption the defendants may have been under leading up to the final closing date, they were very clear on cross-examination that they relied upon Joyi in coming to any such beliefs or conclusions. Presumably, this is the main reason why they commenced third party proceedings against Joyi, although I will have more to say about this in my disposition of issues No. 3 and 4.

29The plaintiff complied with all terms and obligations under the Agreement. They gave every required notice to the defendants, and granted the defendants’ requests for extras, options and upgrades as those requests were received.

30The defendants seek to avoid summary judgment by arguing that the plaintiff is the party saddled with the obligation to proffer the evidence of Lou and/or Joyi in pursing the relief on this motion. Such an argument completely misses the point of the Hryniak principles and the subsequent jurisprudence developed thereunder. A party who asserts must prove. The plaintiff’s case is straightforward: the parties signed an Agreement, the defendants breached the Agreement, and the plaintiff is entitled to resulting damages. The defendants are the parties raising the existence of an alleged “side oral agreement” based upon representations (albeit silent ones) made by Joyi and Lou. Other than the defendants’ own self-serving statements, there is no evidence in the record before the Court confirming the existence of any such misrepresentations and/or oral agreement, and the onus of proof (both legal and evidentiary) lays squarely at the feet of the defendants. They failed to discharge that onus of proof, and when faced with this reality during the hearing, their counsel requested a mini-trial so as to have another chance to deliver further evidence.

31As previously stated, the mini-trial is a tool available to the Court, and not a party. The defendants clearly breached the Agreement. There is no credible evidence in the record to support the existence of any alleged or side oral agreement. Misrepresentation is not raised as a defence to the plaintiff’s claim. There are thus no genuine issues requiring a trial,

32Accordingly, the answer to Issue #1 is “no”.

Issue #2: Is there a genuine issue requiring a trial with respect to the plaintiff’s damages/mitigation efforts?

33The plaintiff’s evidence is that by the spring of 2018, the real estate market had cooled considerably since the time that the Agreement was signed more than two years earlier. Obviously, the plaintiff is in the house constructing business and is at least somewhat familiar with real estate market trends.

34The plaintiff submits that in the spring of 2018, there were still a number of units on its development site that had yet to close, and if the plaintiff listed the property on the MLS system, it could have jeopardized those closings by drawing the other purchasers’ attention to a current drop in value/price for those other units yet to close. As a result, the plaintiff decided to list the subject property for sale privately, although it did engage a real estate agent to solicit potential offers.

35Only one offer to purchase was tendered for the property, and on October 25, 2018 the plaintiff accepted that offer in the amount of $1,500,000.00. That transaction closed in early January 2019.

36On cross-examination, the defendants confirmed that they were also aware that the real estate market had considerably fallen by the spring of 2018. There is thus no dispute that property values had significantly decreased from the time the Agreement was signed.

37The plaintiff produced a schedule of nine comparable properties sold in the general vicinity of the property from February 2018 to October 2108, and the average sale price for those nine properties was $1,475,750.00, approximately $24,250.00 less than the resale value of the property.

38It is trite to state that while the plaintiff was under a duty to mitigate its damages, the defendants are the ones charged with the legal onus to prove that the plaintiff did not discharge its duty to mitigate.

39The defendants argue that the plaintiff failed to take reasonable steps to market the property, and sold it for an unreasonably low price (30% less than the original sale price in the Agreement). The defendants take specific issue with the plaintiff’s decision to market the property privately, as those efforts allegedly led to a sale below market value. The defendants tendered no evidence in support of their position, yet candidly admitted on cross-examination that the market did significantly cool by the spring of 2018.

40There is no expert evidence tendered in the record as to whether the $1,500,000.00 resale price was unreasonable or inconsistent with market conditions at the time. The onus to tender that evidence rests on the defendants. and they failed to discharge their onus.

41I echo the comments Justice McKelvey in Miller v. Wang 2018 ONSC 7668:

“She is not alone in being caught up in a real estate market which quickly turned from a hot market into a slumping one. It stands as a cautionary tale for many who have only experienced increasing real estate property values. Markets can and do change suddenly. These changes carry with them not only the potential for significant gain, but also for very significant financial losses.”

42The defendants originally hoped to “flip” the subject property for profit. When they failed to close the transaction, they took the risk that the market may not stay “hot”. They in fact knew this to be true, which may have contributed to their decision to breach the Agreement and not close the transaction. There is no evidence for this Court to conclude that the plaintiff failed to take reasonable steps to mitigate its damages.

43Accordingly, the answer to Issue #2 is “no”.

Issue #3: If the answers to Issues #1 and 2 are “no”, should summary judgment be granted in the face of the defendants’ pending Third Party Claim?

44As stated, the defendants have issued (and presumably served) a Third Party Claim against Joyi. That pleading seeks contribution and indemnity from Joyi and her brokerage for any judgment found to be owing by the defendants to the plaintiff. The pleading is replete with allegations of misrepresentations by Joyi, and reliance upon those misrepresentations by the defendants to their detriment. Unlike their counterclaim (which advances a breach of the alleged oral contract as the only cause of action), the defendants’ Third Party Claim advances causes of action in fraudulent misrepresentation, gross negligence and breach of fiduciary duty.

45On their cross-examinations, the defendants were asked to provide copies of, inter alia, all correspondence between them and Joyi with respect to the introduction, purchase and potential assignment of the property. None of those questions were answered by the defendants, who also refused to provide a copy of Joyi’s Statement of Defence to the Third Party Claim.

46I also note that Joyi never defended the main action, which is her right but nevertheless quite telling.

47The defendants argue that the plaintiff’s motion for summary judgment is, in fact, a request for partial summary judgment, as the defendants’ Third Party Claim will continue. The defendants submit that based upon the jurisprudence decided after “Mason v. Perras Mongenais 2018 ONCA 978, as their Third Party Claim will continue, there is a risk of duplicative proceedings or inconsistent findings of fact. The defendants submit that as the Third Party Claim is derivative of the main action, the potential overlap of factual and legal issues is inescapable, and therefore summary judgment in this action is not appropriate or in the interests of justice.

48To begin, a Third Party Claim is a separate legal proceeding. Further, I do not find the presence of any findings that this Court has made on the plaintiff’s summary judgment motion that would be binding in the third party proceeding. The cause of action pursued by the defendants in their counterclaim is one of breach of an alleged oral contract. No such cause of action is being advanced in the third party action, relying instead upon alleged misrepresentations and breaches of fiduciary duty owed by Joyi to the defendants. The evidence in support of the causes of action in the third party proceeding are intra the defendants and Joyi, as the plaintiff was never a party to any of the events giving rise to the Third Party Claim.

49While there is no motion for summary judgment in the third party proceeding, the plaintiff and the defendants consented to the scheduling of the plaintiff’s motion for summary judgment. If Joyi (and even Lou) are potential witnesses at the trial of the Third Party Claim, I do not expect their testimony to overlap with the issues germane to the disposition of the main action. I do not find a risk of potentially different findings in the Third Party Claim, as the defendants cannot now create a defence out of whole cloth in order to defeat the plaintiff’s motion for summary judgment on some unsubstantiated promise to call evidence at a later date, especially in light of their legal and evidentiary onuses in response to the plaintiff’s motion.

50Joyi is not the plaintiff’s authorized representative. There can be no reliance by the defendants upon Lou who was the plaintiff’s authorized representative. The issues to be tried in the third party proceeding involve the relationship between the defendants and Joyi only.

51Accordingly, the answer to Issue #3 is “yes”.

Issue #4: If summary judgment is granted, should enforcement of the judgment be stayed pending the disposition of the defendants’ Third Party Claim?

52The defendants seek a stay of any judgment granted to the plaintiff pending the disposition of the Third Party Claim. They rely upon Rule 20.08 of the Rules of Civil Procedures in support of that submission.

53Granting a stay of execution of a summary judgment pending the determination of a Third Party Claim is a pure exercise of discretion. The exercise of that discretion is to be based upon several factors, including but unlimited to:

• The connection of the issues between the main action and the third party proceeding;

• The risk of inconsistent findings in the third party proceeding;

• The merits of the third party proceeding (i.e. has it been brought for tactical reasons?);

• Have the plaintiff’s actions in the main action been influenced by improper motives; and,

• What is the potential prejudice to the successful party on the motion for summary judgment if the stay is granted?

54While both the main action and the third party proceeding arise out of the same essential transaction (i.e. the Agreement), the third party proceeding is focused upon alleged misrepresentations and breaches of fiduciary duty by Joyi as the defendants’ real estate agent (which presumably induced the defendants into signing the Agreement). As stated above, the issues in the third party action are distinct from the issues in the main action, and I have already found there to be no risk of inconsistent findings between the two proceedings.

55While I have found the plaintiff’s claim to be meritorious, it is virtually impossible for this Court to draw any conclusions about the merits of the Third Party Claim. None of the remaining pleadings in the third party proceeding have been produced by the defendants, even though they were asked to do so on cross-examination. Further, and as stated above, the defendants refused to answer any questions put to them on cross-examination regarding the merits of their Third Party Claim.

56Clearly, the plaintiff is under no improper motive in pursuing its claim against the defendants. As I have already found, the plaintiff’s motion for summary judgment is entirely appropriate.

57There is no evidence that the defendants have any intention of moving their third party proceeding along promptly, reasonably or efficiently. In fact, the evidence (and their improper refusals on cross-examination) leads to the opposite conclusion. Conversely, the plaintiff has moved its action along with dispatch.

58The defendants have clearly breached the Agreement, and the plaintiff has effectively done nothing wrong. Taking all the circumstances into account, including the potential prejudice to the plaintiff in staying its ability to enforce its judgment, in my view it is in the interests of justice to decline the defendants’ request for a stay of execution.

59According, the answer to Issue #4 is “no”.

Costs

60I would urge counsel for the parties to exert the necessary efforts to try and resolve the costs of this motion and the action. If such efforts prove unsuccessful, they may serve and file written costs submissions, totaling no more than five pages including a Costs Outline, in accordance with the following schedule:

a) the plaintiff may serve and file its written costs submissions within ten business days of the release of these Reasons; and

b) the defendants may serve and file its responding written costs submissions within ten business days of the receipt of the plaintiff’s written costs submissions.

Diamond J.