Superior Court of Justice
COURT FILE NO. CV-17-132289
DATE: 20211229
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Rafiuddin Sheik
Plaintiff
– and –
Lebovic Enterprises Limited
Defendant
Shahzad Siddiqui, for the plaintiff
Jason Cherniak, for the defendant
Heard: May 25, 26, 27 & 28, 2021
S.T. Bale J.
- This action arose from a failed real estate transaction.
Background facts
The plaintiff and his wife and three children had been sharing a home with cousins and were looking for a home to buy for themselves.
In May 2014, the plaintiff entered into an agreement to purchase a home to be built by the defendant. The purchase price was $392,918, subject to adjustments. Pursuant to the provisions of the agreement, the plaintiff paid a deposit of $40,000. The agreement was to be completed on August 19, 2015.
The plans and specifications included in the agreement provided for a door from the garage into the house, if the grade permitted. The grade had not been determined at the time the agreement was signed. In mid-July 2015, the plaintiff visited the site and noticed that there was no door from the garage into the house. He made inquiries of the municipality and was informed that the bylaw provided that “[i]f more than two steps are required to access the door from the garage into the house, then the grade is not suitable to permit garage door access into the house.”
The agreement of purchase and sale provided that “[d]ue to safety and insurance reasons, the Purchaser agrees not to enter the construction site or area.”
On July 14, 2015, the plaintiff sent an email to the defendant saying that he had visited the construction site and was surprised that there was no door access from the house to the garage. He said that he had measured the garage and enclosed copies of the information that he had received from the municipality. He said that he had spoken with his lawyer about the issue and suggested that the house he had paid for included the door.
On July 15, 2015, the plaintiff raised the issue with Harry Lebovic by telephone, and the following day, Mr. Lebovic responded by email saying that his site superintendent had determined that more than three steps would be required and that as a result, the grade did not permit garage door access to the home.
On July 23, 2015, the plaintiff again visited the site and took various measurements and photographs. He then emailed the information to Harry Lebovic requesting the “legal reason or measurement details in writing from you, which is not permitting you to build.”
The following day, the plaintiff sent the following email to Mr. Lebovic:
Harry,
Since the time is ticking for closing (August 19th 2015), I am not treated fairly, issue not resolved in adequate time, and no response are the reasons to make me knock the justice door of legal this coming Monday. All the rest of the evidences, I have collected will be shared with you inside the court premises.
I will be sending a notice to you on undermining my issue and my rights to know the proper truth, getting stressed and discrimination with other home owners.
Copy will be sent to -
-City of Pickering (Witnesses)
-Tarion Warranty
-Salim Momin - Lawyer (For house closing)
-Centre for Immigrant and Community Services
Original copy -
Will be handed to Civil Court case as per R.R.O. 1990, Reg 194:
RULES OF CIVIL PROCEDURE.
Thanks
Rafiuddin Sheik
On July 27, 2015, the defendant’s solicitor wrote to the plaintiff’s solicitor saying that the plaintiff’s attendances at the property had been in breach of the agreement of purchase and sale. He also advised that he would no longer be representing the defendant on the transaction.
On August 13, 2015, the plaintiff’s solicitor sent a fax to the defendant’s solicitor advising that the plaintiff would be ready, willing and able to complete the agreement on the closing date and requesting contact information for the solicitor who would be acting for the defendant on the sale. In response, he received a handwritten note from the solicitor saying that he was no longer acting and providing the defendant’s fax number. On August 14, 2015, the plaintiff’s solicitor sent the fax to the number provided. He received no response.
On August 17, 2015, the defendant transferred title to the home to charitable foundations operated by the principals of the defendant corporation. The same day, title was transferred from the charitable foundations to the Jewish National Fund of Canada Inc. (“JNF”). The solicitor acting on those transactions was the solicitor that had been acting for the defendant on the sale to the plaintiff, but had advised that he would no longer be acting.
On August 18, 2015, the plaintiff, unaware of the charitable transfers, sent the following email to Harry Lebovic, to which he received no response:
The purpose of this email is to convey to you my sincere apologies for any inconvenience you may have experienced from the email I sent.
The only possible explanation I can give is that I was carried away from the bad advise, dream home emotions, and unclear on the grading rules. As a big builder you may know better than me. I am novice and normal person who is not familiar with house construction rules which might have resulted in your email being overlooked.
I just want my home to move in and live with the family peacefully. I am not a trouble maker and a good citizen. You have my huge deposit (-43000 including the upgrades) and it might not be huge (my big savings) for you. I have arranged all mortgage, insurance, appliances, notice, and I will be ruined if the closing does not take place. ONCE AGAIN, MY SINCERE APOLOGIES. Please accept my apologies. Please do talk to me and I respect you.
May the GOD make your heart soft. Please let me know the closing date and let the closing go smoothly. I need to do other essential formalities. Thanks in advance for your help.
If you have any questions please don't hesitate to call me at [phone number].
Sincerely,
Rafiuddin Sheik
On September 3, 2015, the plaintiff’s solicitor sent a fax addressed to the defendant but faxed to the defendant’s solicitor. In the fax, he confirmed that the plaintiff remained ready, willing and able to complete the agreement and that he had not been provided with the name of a new lawyer acting for the defendant. The only response received was a handwritten note from the solicitor saying “stop sending me faxes on this file.”
The following day, the plaintiff’s solicitor wrote to the defendant advising that the plaintiff would sign a mutual release in exchange for a return of his deposit. No response was received. The plaintiff then attended at the defendant’s offices but was refused audience. At that point, the plaintiff wanted to avoid litigation – he did not think that he could afford it.
In September 2015, the plaintiff filed a “Deposit Refund Proof of Claim” form with Tarion Warranty Corporation in an effort to recover his deposit. The defendant filed a response to the claim refusing to return the deposit and alleging that “[t]he claimant’s actions (emails) amount to a breach.”
In January 2016, Tarion ruled in favour of the plaintiff. The defendant then paid the $40,000 plus a penalty to Tarion and Tarion paid the plaintiff’s claim for a return of his deposit.
In February 2016, JNF sold the home to an unrelated third party for $460,000. In August 2016, the home sold again for $580,000.
The parties’ positions
The defendant’s position is that the plaintiff’s conduct constituted an anticipatory breach of the agreement of purchase and sale allowing it to treat the contract as at an end. The defendant argues that its actions in ignoring the plaintiff’s communications, failing to provide the necessary closing documents, and refusing to retain a solicitor to complete the agreement should be seen as an acceptance of the plaintiff’s repudiation.
The plaintiff’s position is that he was ready, willing and able to complete the agreement, and that the defendant repudiated the contract by failing to do so, and by transferring the home to the charities and subsequently to JNF.
Analysis
Whether the plaintiff repudiated the agreement of purchase and sale
- As explained by Gillese J.A. in Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721, at para. 37:
An anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due. See Pompeani v. Bonik Inc. (1997), 1997 CanLII 3653 (ON CA), 35 O.R. (3d) 417, [1997] O.J. No. 4174 (C.A.). To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it. See McCallum v. Zivojinovic (1977), 1977 CanLII 1151 (ON CA), 16 O.R. (2d) 721, [1977] O.J. No. 2341 (C.A.). Having said that, when determining whether such an intention has been evinced, the courts rely on much the same analysis as they do in respect of claims of fundamental breach. That is, in determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract.
- The defendant relies upon five points in support of its position that the plaintiff’s actions amounted to a repudiation of the contract:
• the plaintiff entered onto the construction site to measure the garage;
• he entered the garages of homes that others were buying;
• he committed an unlawful act – trespass;
• he sent an email that a reasonable person would have seen as a threat to sue the defendant;
• in the same email, he made what a reasonable person would have seen as an allegation of prejudice against the Lebovics.
I disagree.
At no point prior to the scheduled closing did the plaintiff evince an intention to repudiate the contract. Rather, at all times, it was clear that he wished to complete the purchase. His email of July 24, 2015 was nothing more than an idle threat. He says that he was not threatening litigation but acknowledges that it would have been reasonable for the defendant to take it that way. His intention was to get to the bottom of the issue relating to garage door access to the home. Neither his entering the site nor sending the email deprived the defendant of substantially the whole benefit of the contract. There is no evidence that it was dangerous for the plaintiff to enter the site when and where he did.
At the time, the defendant did not take the plaintiff’s actions to be a repudiation of the contract. Harry Lebovic took the email to his father, Wolf Lebovic, the president of the company, and asked him what he should do. Harry’s evidence was that he did so because he did not want to find himself in the position of completing the sale, and then having to answer to his father in the event that the defendant was sued following closing. Wolf’s instructions were to tell the plaintiff that he would not be selling him the house and did not want to talk to him. He did not want anything to do with the plaintiff. He did not like being threatened. He objected to the plaintiff’s suggestion that he was being discriminated against. It is clear that at the time, Wolf Lebovic believed that he was refusing to close with a purchaser who was willing to close. The fact that he may have been offended by the email did not justify his refusal to close.
Additional issues raised by the defendant
The defendant argues that the plaintiff’s conduct was in breach of his duty of good faith in performing the contract and may be relied upon by the defendant as a defence to his claim.
The leading Canadian authority on the duty of good faith in contractual performance is Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494. In that case, the court reviewed, at paras. 42-58, existing situations or relationships in which duties of good faith had been found to exist. The court then went on to take two incremental steps in the development of the law, at paras. 63 and 72-73:
The first step is to recognize that there is an organizing principle of good faith that underlies and manifests itself in various more specific doctrines governing contractual performance. That organizing principle is simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily.
The key question before the Court, therefore, is whether we ought to create a new common law duty under the broad umbrella of the organizing principle of good faith performance of contracts.
In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.
The defendant’s objection to the plaintiff’s conduct in the present case does not fit within any of the then existing situations or relationships identified in Bhasin. Nor can it be said that by attending at the site, or by sending the impugned email, the plaintiff breached the general duty of honesty in contractual performance. The garage door was important to him, he was dissatisfied with the explanation for the omission of the door given by Harry Lebovic, and was demanding that he be given the door, or a satisfactory explanation of why he could not have it. He may have been wrong in doing so, but his actions were not dishonest.
In his email of August 18, 2015, the plaintiff had apologized for sending his email of July 24, 2015. In his evidence, the plaintiff confirmed the apology. The defendant argues that pursuant to the exception in s. 2(4) of the Apology Act, 2009, the plaintiff’s apology is admissible as an admission of fault or liability. However, while the apology may be admissible, it does not follow that sending the email constituted a breach releasing the defendant from its future obligations under the agreement. It did not.
The defendant relies on the fact that the plaintiff did not tender on the date set for closing. However, as stated by Perell J. in Time Development Group Inc. (in trust) v. Bitton, 2018 ONSC 4384, at paras. 56-57:
Tender … is not a prerequisite to the innocent party enforcing his or her contractual rights. Tender is not required from an innocent party when the other party has clearly repudiated the agreement. Numerous cases have held that the law does not require what would be a meaningless or futile gesture. Moreover, when there is an anticipatory breach, the innocent party need not wait to the date for performance before commencing proceedings for damages or in the alternative for specific performance of the agreement. [Footnotes omitted.]
In the present case, it was not necessary for the plaintiff to tender. The defendant’s refusal to communicate, and its failure to provide a statement of adjustments and other information required by the plaintiff’s solicitor, amounted to a repudiation of the agreement. Further, it was clear that the defendant was not ready, willing and able to complete the agreement, given that it had already transferred the property to the charities, and the charities had transferred the property to JNF.
In the result, I find that the plaintiff was ready, willing and able to complete the agreement, that the defendant repudiated the agreement, and that the plaintiff is entitled to damages.
Damages
- The plaintiff claims damages for breach of contract, damages for loss of opportunity, and punitive damages.
Damages for breach of contract
The plaintiff initially argued that his damages should be assessed as of the scheduled closing date. The defendant agreed that if I were to find the plaintiff entitled to damages, such damages should be assessed as of that date.
Appraisal evidence tendered by the plaintiff suggests a value of $485,000, as of the scheduled closing date. No appraisal evidence was tendered by the defendant. The contract price was $392,918. Based upon those numbers, the plaintiff’s damages would be $92,082.
In the statement of claim, the plaintiff pleaded that the value of the home on the scheduled closing date was approximately $450,000. The defendant submits that the plaintiff is bound by that pleading and that damages should be calculated using that amount as the value on the date of breach. I disagree for two reasons. First, the pleading was “approximately”. Second, in the statement of defence, the defendant denied the plaintiff’s pleading of the closing date value, with the result that the value remained in issue.
In the alternative, the defendant submits that the closing date value should be set at $460,000, being the price for which JNF sold the property in February 2016. However, that price was evidently based upon the tax receipts given by JNF to the defendant’s charitable foundations. No evidence was tendered to support that valuation.
The plaintiff’s evidence was that he paid $2,600 to have the laundry room located on the second floor. He did not produce documentary proof of the payment. The Lebovics’ evidence was simply that they were unaware that such a payment had been made. The defendant produced no documents to indicate whether the laundry room had, in fact, been re-located, the cost of such a relocation, or the state of accounts as between the parties. In these circumstances, I accept the plaintiff’s evidence that the payment was made.
In the result, I find that if the plaintiff’s damages are to be assessed as of the date of breach, those damages would be $92,082, plus $2,600, for a total of $94,682.
Damages for loss of opportunity
In addition to damages calculated as of the scheduled closing date, the plaintiff argues that he is entitled to an additional amount based upon loss of opportunity. I disagree, for the following reasons.
In Harvin D. Pitch and Ronald M. Snyder, Damages for Breach of Contract, 2nd ed. (Lexis Advance Quicklaw), at § 4:1, damages for loss of opportunity or loss of chance are explained:
It is well established that a party who breaches a contract is liable to the innocent party for both (a) any resulting deprivation of promised benefits, and (b) in accordance with the principle in Hadley v. Baxendale, consequential losses directly flowing from the breach that were or ought reasonably to have been within the contemplation of the defendant at the time of contracting. In the vast majority of cases, the existence of such losses will be certain and readily demonstrable.
In other cases, however, the plaintiff may lose only a potential opportunity or “chance” to obtain a benefit, such that it remains irreducibly uncertain whether the plaintiff would have actually secured the benefit but for the defendant's breach. Where a contract is breached so that a party is deprived of an “opportunity” to obtain a benefit which was uncertain but potential at the time of the contracting, that party has suffered “a loss of chance” or “loss of opportunity”. In this situation, had the contract been completed, the wronged party may or may not have obtained the benefit sought, but since the party had been deprived of the “chance” of obtaining the benefit, that person may seek damages in court for the value of the loss of opportunity.
In the case of contracts for the sale and purchase of land, the issue arises where there is some doubt as to whether the agreement would have been completed, but for the breach. For example, in Kipfinch Developments Ltd. v. Westwood Mall (Mississauga) Ltd., 2010 ONCA 45, the agreement entitled the purchaser to carry out environmental testing as part of its due diligence. The vendor refused to allow the testing and as a result, the agreement came to an end. In assessing the purchaser’s damages, the court considered a number of contingencies, such as the risk that the testing would have revealed contamination that exceeded the threshold considered acceptable by the purchaser’s lenders, and concluded that had the breach not occurred, there was only a fifty per cent chance that the agreement would have been completed. The purchaser was therefore awarded fifty per cent of the damages that it would have received, had there not been a chance that even without the breach, the agreement would not have been completed.
As can be seen, the present case is not one of loss of opportunity or loss of chance, nor is it to the plaintiff’s advantage to argue that it is. However, during the course of argument, it became clear that what the plaintiff was really arguing was that damages should be assessed as of the date of trial, or some date between the date of breach and the date of trial.
Date for assessment of damages
The presumptive date for the assessment of damages is the date of breach. The presumption is not easily displaced; however, it is subject to exception where fairness requires it: Rougemount Capital Inc. v. Computer Associates International Inc., 2016 ONCA 847, at para. 50.
The rationale for the breach date rule was articulated by Laskin J.A. in Kinbauri Gold Corp. v. Iamgold International African Mining Gold Corp., 2004 CanLII 36051 (ON CA), [2004] O.J. No. 4568, at para. 125:
As Cronk J.A. points out, damages for breach of contract are generally assessed at the date of breach. An early crystallization of the plaintiff's damages promotes efficient behaviour: the litigants become as free as possible to conduct their affairs as they see fit. Early crystallization also avoids speculation: the plaintiff is precluded from speculating at the defendant's expense by reaping the benefits of an increase in the value of the goods in question without bearing any risk of loss.
- In Rougemount Capital Inc., at para. 52, the court went on to give examples of situations where the general presumption may be displaced:
Indeed, this general presumption should only be displaced in special circumstances, such as, for example, where no market exists to replace undelivered shares at the date of breach: Kinbauri, at para. 126; or in relation to "[s]ome classes of property, including shares, whose value is subject to sudden and constant fluctuations of unpredictable amplitude, and whose purchase is not lightly entered into": Asamera Oil Corp. Ltd. v. Sea Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, at pp. 664-65.
In support of his argument that the date of trial would be an appropriate date for assessment, the plaintiff relies on cases where specific performance, or damages in lieu of specific performance, were awarded. He says that the home in this case was unique, and that he would have been entitled to specific performance, had it not been transferred to the charities. However, this was never a case for specific performance – it was neither pleaded nor possible. No authority was cited for a trial date assessment in such circumstances.
In the result, I find that the presumption has not been displaced and that in this case, the proper date for the assessment of damages is the date of breach.
Punitive damages
- In support of his claim for punitive damages, the plaintiff submits that the defendant’s conduct was high-handed. While I agree that the conduct was high-handed, it was a reaction to the plaintiff’s ill-considered email threatening a lawsuit. In the circumstances, while I do not condone the defendant’s conduct, I do not find it to be such as to require denunciation and punishment, by way of an award of punitive damages.
Trespass
- The defendant counterclaimed for trespass. The damages alleged are the payment of the deposit and penalty to Tarion. However, given my finding that the defendant repudiated the contract, it follows that the plaintiff was entitled to a return of his deposit, in addition to the damages which I award for breach of contract.
Disposition
For the reasons given, the plaintiff will have judgment against the defendant in the sum of $94,682. The counterclaim will be dismissed.
If the parties are unable to agree on costs, I will consider brief written submissions, provided that they are delivered to my assistant, at monica.mayer@ontario.ca, no later than January 31, 2022.
“S.T. Bale J.”
Released: December 29, 2021
REASONS FOR JUDGMENT
S.T. Bale J.
Released: December 29, 2021