COURT FILE NO.: CV-19-4978

DATE: 2022 11 24

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lecco Ridge Developments Inc., Plaintiff

AND:

Dayr Alberto Mendoza Vaquero and Claudia Katheri Sandoval Rodriguez, Defendants

BEFORE: Coats J.

COUNSEL: Jonathan Barr, for the Plaintiff

Dayr Alberto Mendoza Vaquero and Claudia Katheri Sandoval Rodriguez, acting in person

HEARD: October 18, 2022

ENDORSEMENT

A. Overview:

[1] This is a summary judgment motion brought by the Plaintiff. The Plaintiff is seeking a determination that the Agreement of Purchase and Sale entered into on March 11, 2017 (the “APS”) was terminated by the Defendants’ breach and that the deposits paid by the Defendants are forfeited to the Plaintiff. The Plaintiff also seeks judgment against the Defendants for its damages, net of the forfeited deposits, plus interest in accordance with the APS, in the sum amount of $81,558.78. This is the amount set out in the Plaintiff’s factum and in the key affidavit filed on behalf of the Plaintiff in this motion.

B. Background Facts:

[2] This matter regards a real estate transaction that failed to close. The Plaintiff, Lecco Ridge Development Inc., alleges that the Defendant individuals breached the APS and claim resulting damages.

[3] The Plaintiff was in the process of building new homes in Milton, Ontario. On or about March 11, 2017, it entered into the APS with the Defendants, Ms. Rodriguez and Mr. Vaquero, with respect to a property located at 143 Bronson Terrace, Milton, Ontario (the “Property”), with a purchase price of $776,400.00. The Defendants paid a deposit in the total amount of $50,000 in three instalments. The parties agree as to the existence and contractual nature of the APS.

[4] The first tentative closing date for the Property was set for August 23, 2018. As permitted by the APS, and with notice to the Defendants, a second tentative closing date was set for December 6, 2018. Later, again with notice, a firm closing date was set for March 28, 2019. At the request of the Defendants, the parties then agreed to extend the final closing date to May 28, 2019.

[5] On that day, the Defendants failed to provide the funds and documents to uphold their end of the contract. The Plaintiff advised the Defendants that as a result of the Defendants’ default, the APS was terminated and their deposit was forfeited to the Plaintiff.

[6] Within three days, the Plaintiff referred the Property to a real estate broker, Homelife Metropark Reality Inc. (“Homelife”), in order to re-sell the Property. Homelife advertised the Property for sale at $729,900.00. On June 13, 2019, the Property was listed on MLS at $699,900.00. It received one offer at that price and then entered into an Agreement of Purchase and Sale with the new purchaser with a closing date of September 18, 2019.

[7] The Plaintiff brought this claim against the Defendants. It seeks damages for the loss it suffered as a result of the lower sale value it obtained after the Defendants allegedly breached the APS. It seeks the difference between the original purchase price ($776,400.00) and the subsequent sale price ($699.900.00) minus the forfeited deposit ($50,000), which is $26,500.00.

[8] It seeks further damages for the additional real estate commission fees incurred as a result of the need to re-sell the Property. Whereas the original commission fee the Plaintiffs would have incurred for a new home sale was to be 0.9% of the original sale price, by re-selling the Property the Plaintiffs paid 4.9% of the resale price as commission between their broker and the new purchaser’s broker. It seeks the difference between these two values, which is $28,177.99.

[9] The Plaintiff also seeks additional damages as a result of related expenses incurred during the 113 days between the May 28, 2019 closing date and the closing date with the new purchaser. These include utilities, taxes, interest payments, management/supervision fees, legal fees and administration costs, and insurance costs.

[10] Altogether the Plaintiff claims damages of $81,558,78, calculated as follows:

Difference in purchase price: $26,500.00

Additional utilities: $299.39

Additional taxes: $383.07

Additional real estate commission fees: $28,177.99

Additional interest payments and losses: $13,493.33

Additional management/supervision fees: $11,300.00

Additional legal fees and administrative costs: $1130.00

Additional insurance costs: $275.00

Total: $81.558.78

[11] The Defendants argue that the contract was unenforceable as a result of the delays in closing, during which a drastic and unforeseeable drop in the real estate market resulted in them being unable to obtain the necessary financing. They submit that this rendered performance of the contract impossible. They also question the validity of the APS itself, on the basis that they were not provided an opportunity to review the APS with a real estate lawyer, and were not made aware of the consequences of a default. They argue that there was misrepresentation by sales agents involved. They also challenge the legitimacy and reasonable foreseeability of some of the Plaintiff’s claimed damages.

[12] The Plaintiff brought the present motion for summary judgment.

C. Issues:

[13] While the three central issues on this motion are breach, mitigation, and damages, several sub-issues have emerged from the parties’ submissions. In particular, the Defendants suggested new issues in their factum which were not pleaded in their Statement of Defence, and to which the Plaintiff responded in a reply factum on the motion.

[14] The live issues and sub-issues can subsequently be organized as follows.

1. Did the Defendants breach the APS?

a. Was there a misrepresentation by sales agents involved?

b. Can an unforeseen drop in real estate market frustrate a contract?

2. Did the Plaintiff make reasonable efforts to mitigate damages?

3. What are the damages?

a. Was the interest provision in the APS onerous or otherwise unenforceable?

b. Were the real estate commission damages reasonable and foreseeable?

c. Were the management/supervision fees reasonable and foreseeable?

[15] The Plaintiff’s counsel raised concerns that some of the Defendants’ possible defences to the claims were raised for the first time in their factum. Plaintiff’s counsel did address all of these issues in its reply factum and so I will address them in this Endorsement.

D. Positions of the Parties:

1. Breach

[16] The Plaintiff argues that the APS was a valid contract, and that on the final closing date it was ready, willing, and able to close. It points out that the Statement of Defence contained an admission that the “Defendants do not deny entering into an Agreement of Purchase of Sale with the Plaintiff on or about March 14, 2017. The Defendants also do not deny been [sic] unable to close at the extended closing date.” The Plaintiff argues this proves breach of contract.

[17] The Defendants argue that the APS was unenforceable. The Defendants’ principal submissions, and the Plaintiff’s response are as follows:

a. Whether there was no binding APS as a result of misrepresentation or lack of legal advice

[18] The Defendants deny that the APS is binding and enforceable as a result of one or another irregularities during the formation of the contract. They claim they were the victims of predatory tactics by a real estate agent acting on behalf of the Plaintiff who convinced them to enter the agreement without explaining the consequences of defaulting, and that they signed the APS without having had the opportunity to properly read it or take it home and review it with a lawyer.

[19] The Plaintiff summarily dismisses the Defendants’ allegations of misrepresentation, which it notes in fact lie against the Defendants’ own real estate agent, and not against anyone associated with the Plaintiff or its broker Homelife. It also argues that the Defendants’ claim of lacking understanding of the contract or legal advice is meritless: the Defendants were under no compulsion or duress to sign the contract. The Defendants had every opportunity to obtain legal advice or to review the terms of what was a relatively standard purchase and sale agreement. They came to the Plaintiff’s office on their own time and of their own volition to sign the APS.

b. Whether the APS was frustrated by an unforeseen decline in the real estate market

[20] The Defendants submit that if there was a valid agreement, then it was nonetheless frustrated by the decline in real estate market which coincided with the Plaintiff’s delay in closing. The Defendants were ready willing and able to close by the first tentative closing date, and it was the Plaintiff’s delay that pushed the final closing date back seven months. By this time, the real estate market had dropped significantly. To obtain a mortgage, the Defendants received a home appraisal, which valued the Property at $600,000.00. The Defendants state that the difference between the appraisal price and the purchase price ($776,400.00) meant they could not obtain the financing necessary to close on the Property, rendering performance impossible.

[21] The Plaintiff first notes that it was contractually permitted to extend the tentative closing date, as it did so twice, and that it was the Defendants who requested the closing date be further extended by two months on top of that.

[22] The Plaintiff further submits that case law is clear that unexpected drops in the real estate market do not frustrate a contract for property. It cites a “trilogy of cases” in which arguments near identical to those raised by the Defendants were summarily dismissed:

• Bang v. Sebastian, 2018 ONSC 6226 (affirmed, 2019 ONCA 501)

• Paradise Homes North West Inc. v. Sidhu, 2019 ONSC 1600

• Forest Hill Homes v. Ou, 2019 ONSC 4332

2. Mitigation

[23] The Plaintiff submits that it made all reasonable efforts to mitigate its damages. The onus is on the Defendants to demonstrate otherwise: Southcott Estates Inc. v. Toronto Catholic District School Board, 2021 SCC 51, at para. 73. Further, a Plaintiff is not required to act perfectly, nor take all possible steps to reduce its loss, so long as it acted reasonably in view of circumstances at the time: O’Hare v. Wyton, 2018 ONSC 3946, at para. 36. As evidence of its reasonable steps, the Plaintiff points out that it began internally advertising the Property for resale just days after the Defendant’s breach. It accepted the first and only offer it received, and ultimately sold for just 10% under the original sale price, despite the steeply declining market to which the Defendants refer. It observes that the Property even sold above the value quoted by the Defendants’ appraisal report – refuting any claim of improvident sale.

[24] The Defendants submit that the Plaintiff did not advertise the Property for resale on MLS until June 13, 2019, over two weeks after the initial agreement failed to close. The new purchaser would also not close until September 18, 2019. They submit damages could have been reasonably mitigated by advertising the Property sooner or setting an earlier closing date.

[25] The Plaintiff submits in response that a 90-day closing window is standard in the industry, and that it was a term specifically put in the offer by the new purchaser.

3. Damages

[26] The Plaintiff submits that it is entitled to recover any damages that reasonably flow from the breach of contract: Bang v. Sebastian, 2018 ONSC 6226, at para. 53. This includes the difference between the original purchase price and the ultimate sale price, plus any additional carrying costs incurred as a result of the breach or of efforts to mitigate: Azzarello v. Shawqi, 2019 ONCA 820, at para. 21.

[27] The Defendants assert that the Plaintiff’s damages were not reasonably foreseeable as they were not made aware that there would be ancillary costs in the event of a default. They make more focused arguments with respect to the three of the Plaintiff’s claims, as follows:

a. Whether the interest provision in the APS was onerous or otherwise unenforceable

[28] The APS included a provision allowing the Plaintiff to charge 15% interest per annum on all additional costs, loss and damages. The Defendants submit that this was not brought to their attention. They argue that this provision is an example of an onerous and unexpected provision which the courts have found cannot be enforceable. They refer to three recent cases in which provisions allowing 20% interest were all ruled unenforceable:

• Forest Hill Homes v. Ou, 2019 ONSC 4332, at paras. 18-22.

• Madison Homes v. Yiman Shi, 2020 ONSC 7810, at paras. 31-34.

• Madison Homes v. Ng, 2021 ONSC 3104, at paras. 39-49.

[29] These cases also stand for the proposition that such a clause is all or nothing – either it is enforceable or it isn’t. A plaintiff cannot rely on the provision to seek less than the stated amount – such an act would be an implicit admission of the provision’s onerous nature: Ou, at para. 22; Yiman Shi, at para. 34; and Ng, at para. 45. The Defendants submit that an appropriate interest rate is that which is regulated by the Courts of Justice Act, R.S.O. 1990, c. C-43, s. 128.

[30] The Plaintiff distinguishes the present case from the three cases cited by the Defendants. It notes that in those cases:

1. the interest rate was 20%, while in the present agreement it is 15%;

2. the interest attached to the outstanding purchase price, while in the present agreement it attached to damages; and

3. the interest compounded monthly, whereas in the present agreement it does not.

[31] The Plaintiff further submits that the three cases do not provide any sort of test or principles for determining whether a provision is onerous, and any such determination based on these cases would be arbitrary. It cites Arista Homes (Kleinburg) Inc. v. Sarah Igbinedion, 2019 ONSC 7086, at para. 26, in which the court declined to find that 12% interest rate was onerous, noting that there was no evidence before the court on whether 12% is unusual in the industry or not, but that certainly it was less onerous than the 20% rate claimed in Ou. The Plaintiff similarly submits that there isn’t enough evidence before this court on which to exercise the discretion to declare a term unenforceable, but even if there were, the 15% in the present case is closer to the 12% in Arista Homes than it is to the 20% in the cases relied upon by the Defendants.

[32] In any case, the Plaintiff notes that there is evidence that the clause was brought to the Defendants’ attention. The Defendants stated in their affidavit that the only part of the APS they understood was the provision regarding deposits. The Plaintiff points out that the interest provision and the deposits provision are one and the same: paragraph 63 of Schedule “X” to the APS.

b. Whether the real estate commission damages were reasonable or foreseeable

[33] There was initially some confusion over what was actually being claimed as damages for the real estate commission fees. First, the Defendants accused the Plaintiff of “double-dipping” by claiming commission fees for both the first purchase (that never closed) and the subsequent resale. The Plaintiff’s counsel clarified that they are in fact only seeking the difference between these two commissions, as the second fee was higher than the first would have been, as noted above. Second, there appears to have been a typo in one or another places, where the Plaintiff claims to have paid the purchasing broker a 3% commission on the resale. The Plaintiff’s counsel clarified that this was a clerical error, and that they are only claiming 2.5% paid to the purchasing broker, in addition to the 1.5% paid to their own broker. To be clear, the Plaintiff is claiming $24,936.28, plus HST, as set out in the Affidavit of Sandra Aversa, sworn March 7, 2022. Apart from those concerns, the only remaining issue is whether it was reasonable and foreseeable that the Plaintiff would have to pay a higher commission fee in order to relist the property following the breach.

[34] The Defendants submit that it was not reasonably foreseeable that the Plaintiff would pay a 4% commission to re-sell the Property, when the original commission in the APS with the Defendants was 0.9%. They rely again on Madison Homes v. Yiman Shi, at paras. 28-29, where the court wrote:

[28] In the original APS, entered into in 2016, the real estate agent commission was $16,502.92 inclusive of HST. By the time of the failed APS the real estate market had cooled and the real estate agent charged commission in the amount of $30,375. The plaintiff claims the difference between the two in the amount of $13,865.08. In my view, these damages are not reasonably foreseeable. There is no reason why at the time the APS was entered into the defendants would have expected that if the APS failed to close, commission fees would almost double. The defendant references Forest Hill Homes v. Ou, 2020 ONSC 6321, at para. 60, in support of its argument that it should be entitled to increased commission costs, but it is not clear to me the basis upon which the commission was ordered in that case, whether it was increased commission and further it does not appear that the commission cost was challenged.

[29] The defendants had purchased their home directly from the developer and as such there was no MLS Listing agreement fee in respect of the initial APS. The plaintiff says that because the market had cooled by the time of the failed closing (which is evidenced by the affidavit of the appraiser), it entered into the listing agreement and incurred this cost in order to expose the Property to more buyers and thereby obtain a better price. In my view, given that the defendants purchased the Property from the developer without the Property having been listed, it was not reasonably foreseeable that the developer would incur costs of an MLS Listing if the APS did not close.

[35] The Plaintiff submits in response that Yiman Shi was wrongly decided, that its findings regarding commission fees were arbitrary and not consistent with the long-established principles regarding foreseeable damages. It submits that the proper question is whether commission fees are the type of thing that arise fairly, reasonably and naturally “in the usual course of things” as a result of the breach of contract: Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, at para. 36. It argues that it is reasonable and natural that if a purchaser fails to close on a pre-built home, the builder will have to make reasonable efforts to re-sell the property. In the usual course of things, they will retain a real estate agent and list the property on the MLS. The Plaintiff invites this court to take judicial notice of the fact that a 5% commission fee is standard in the industry.

c. Whether the management/supervision fees were reasonable or foreseeable

[36] The Defendants submit that the $11,300 claimed by the Plaintiff for “management/supervision fees” was not foreseeable, and that the Plaintiff has adduced no evidence of incurring said costs.

[37] The Plaintiff notes that the APS provided that the Plaintiff would have the right to recover from the Defendants “all additional costs, losses and damages” arising out of any default. They submit that it is natural and expected that in the event of breach, the Plaintiff would be left with an unoccupied property which they would be responsible to insure, maintain, and protect until they can sell it again. The claimed damages were for that purpose; the Plaintiff’s insurers required onsite management and supervision of the unoccupied property, which the Plaintiff calculated at $100 a day for each of the 113 days. They further note that the Defendants acknowledge that additional insurance fees were reasonably foreseeable; the Plaintiff submits that if these fees were foreseeable, then management/supervision fees were foreseeable as well.

E. Analysis:

i) Principles Applicable to Summary Judgment

[38] The Plaintiff’s motion for summary judgment was brought under Rule 20.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[39] The principles applicable to a summary judgment motion are set out at paras. 17-23 of Bang v. Sebastian, 2018 ONSC 6226 (affirmed, 2019 ONCA 501):

[17] The plaintiffs’ motion for summary judgment is based on Rule 20.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides as follows:

A plaintiff may, after the defendant has delivered a statement of defence or served a notice of motion, move with supporting affidavit material or other evidence for summary judgment on all or part of the claim in the statement of claim.

[18] Rule 20.04(2) directs as follows:

20.04(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or …

20.04(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial;

1. Weighing the evidence.

2. Evaluating the credibility of a deponent.

3. Drawing any reasonable inference from the evidence.

20.04(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.

[19] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court emphasized that the important objective of ensuring access to justice requires an effective and accessible process for the enforcement of rights. The procedural tool refined in Hryniak, the summary judgment motion, was emphasized as a means to achieve timely and efficient adjudication in certain, but not all, cases. In Hryniak, the Supreme Court provided the template by which Rule 20 is to be applied.

[20] In Hryniak, at para. 66, the court sets out a two-part test for considering summary judgment under Rule 20.04(2)(a), termed the “Roadmap”. The first step is that the motion judge must determine whether there is a genuine issue requiring trial based only on the evidence contained in the motion record, specifically without using any of the powers set out in Rule 20.04(2.1). There will be no genuine issue requiring trial where the evidentiary record on the motion provides the judge with the evidence necessary to reach a fair and just determination in a process that is timely, proportionate and affordable, as is stated in Hryniak at paras. 4, 28, 66 and specifically at 49. Paragraph 49 states:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[21] The second step in the “Roadmap” is activated when a judge finds that there is a genuine issue requiring a trial. The court should then determine whether the issue can be decided using the powers set out in Rules 20.04(2.1) and (2.2). These powers are to be employed where they will lead to a fair and just result but not where they do not serve the goals of affordability and proportionality, as stated in Hryniak at para. 66:

She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[22] The foundational themes in Hryniak focus on the goals of proportionate, cost-effective and timely adjudication on an evidentiary record and in a process that allows for a fair and just determination. The Supreme Court emphasized that when a judge can fairly and justly adjudicate a case using the new powers under Rules 20.04(2.1) and (2.2), it will be in the interest of justice to do so. The decision to use these powers is within the discretion of the judge: Hryniak at para. 68.

[23] The initial task on this motion is to analyze the record to determine whether there is an evidentiary basis on which the plaintiffs can establish an entitlement to judgment without requiring a trial. If there are genuine issues for trial, the next step would be to determine whether they are capable of adjudication using the tools set out in Rules 20.04(2.1) and (2.2).

[40] In my view, as set out below, there is no genuine issue requiring a trial. There are no significant facts in issue on this motion. I make this determination based on the affidavit materials filed. There is no need for me to use any of the powers set out on Rule 20.04(2.1). The evidentiary record in the affidavits filed provides the evidence necessary for me to reach a fair and just determination, and the written factums and oral argument of the motion provide a timely, proportionate and affordable process for the resolution of this matter. The facts are not in dispute. I have been provided with the appropriate case law from both sides with which to apply the law to the facts. The summary judgment process is a proportionate, more expeditious and less expensive means to achieve a just result.

ii) Did the Defendants breach the APS?

[41] I find that the APS was a valid contract and that on the final closing date the Plaintiff was ready, willing and able to close. The Defendants did not dispute that the Plaintiff was ready, will and able to close. The Plaintiff was at all times compliant with the provisions of the Tarion Warranty Corporation Addendum that formed part of the APS, and specifically with the timelines and deadlines set out in the Tarion’s Statement of Critical Dates. The Defendants were kept apprised of any extensions to the closing dates as required. The last extension to the closing was requested by the Defendants.

[42] On the closing date, I find that the Defendants breached the APS. On May 29, 2019, the final closing date, the Defendants’ solicitor attempted to terminate the transaction over technical violations of the Planning Act, R.S.O. 1990, c. P.13 and the occupancy permit, which were unfounded. In response, the Plaintiff’s solicitor clarified the inaccuracies and specifically stated that the Vendor (the Plaintiff) remains ready, willing and able to complete the transaction and expects the Purchasers (the Defendants) to do the same.

[43] In the first paragraph of their Statement of Defence, the Defendants do not deny being unable to close on the extended closing date of May 28, 2019. There has been no suggestion or evidence from the Defendants that the Plaintiff was not ready, willing and able to close on May 28, 2019 and the evidence supports that the Plaintiff was. On May 28, 2019, the Defendants failed to deliver the required funds and documents to close the transaction and by failing to complete the transaction, I find that the Defendants were in breach of the APS.

[44] I also find that as a result of the Defendants’ breach of the APS, the Plaintiff terminated the APS and the Defendants forfeited the deposits to the Plaintiff. On or about May 28, 2019, the Plaintiff’s solicitor advised the Defendants’ solicitor that the Defendants were in default and that as a result of their default and that tender had been effected upon them, the APS was terminated. Paragraph 63 of Schedule “X” to the APS provided that deposit monies are forfeited upon Defendants’ breach the APS.

[45] I will now deal with the two specific issues raised by the Defendants.

a. Whether there was no binding APS as a result of misrepresentation or lack of legal advice

[46] The Defendants claim that they were the victims of predatory tactics by a real estate agent acting on behalf of Plaintiff who convinced them to enter the APS without explaining the consequences of defaulting and that they signed the APS without having had the opportunity to properly read it or to take it home and review it with a lawyer. I find that neither position has any merit.

[47] A careful review of the affidavit filed by the Defendants in response to the motion shows that the complaints they have about a real estate agent are in fact complaints regarding their own agent. The Defendants had their own real estate agent, Ehtesham Chaudhry, who is not associated with the Plaintiff or the agent used by the Plaintiff. It was Mr. Chaudhry who introduced them to the Property. The Defendants say that he assured them that this was a safe investment and that they would be able to assign their interest to another buyer that would ultimately close the APS and that the Defendants would make money on the assignment. They allege that they were later informed that Mr. Chaudhry had “ulterior motives” and that he swindled them into signing the APS. They say that up to a few weeks prior to the closing they were assured by Mr. Chaudhry that he would be able to find them buyers for the APS so that it could be assigned. He then “disappeared and stopped responding” to their messages. The Defendants’ complaints are with their own agent. Mr. Chaudhry is not a party to this litigation. There is no evidence that he is or was in any way associated with the Plaintiff. The Plaintiff had its own separate agent.

[48] The Defendants were under no compulsion to sign the APS. They relied on the advice of their own agent. There is no evidence put forward by the Defendants that they were rushed. There is no evidence that any action of the Plaintiff or its real estate agent contributed to the Defendants not taking the opportunity to obtain independent legal advice or to carefully review the APS. It appears that the Defendants wanted to sign the APS. Based on advice they had received from their own agent, they thought that they would make money on the assignment.

[49] Part of the APS is an Agency Disclosure Acknowledgment, which informs the Purchasers (the Defendants) of the agency agreement between the Plaintiff’s agent, Homelife, and the Vendor (the Plaintiff), and explains that the agent acts only for the vendor and must represent the vendor’s best interests at all times. The Defendants signed this Agency Disclosure Acknowledgment on March 11, 2017.

[50] Further, the Defendants did not provide any case law which has held that a vendor’s agent has any obligation or duty to a purchaser to recommend or insist upon the purchaser obtaining legal advice or to advise the prospective purchaser of the consequences of defaulting on the terms of an agreement of purchase and sale.

b. Whether the APS was frustrated by an unforeseen decline in the real estate market

[51] Between the signing of the APS on March 11, 2017 and the closing date of May 28, 2019, the real estate market had declined. In an attempt to obtain a mortgage, the Defendants received an appraisal of the Property, which valued the Property at $600,000. The Defendants claim that the difference between the purchase price of $776,400 and the appraised value of $600,000 meant that they could not obtain the financing necessary to close the transaction, rendering performance impossible.

[52] The Plaintiff had a retrospective market value assessment done by an appraiser, who appraised the Property at $685,000 as of May 28, 2019.

[53] I find that the Plaintiff was contractually permitted to extend the closing date as it did. The Plaintiffs were permitted to set a First Tentative, Second Tentative, and Firm Closing Date, with notice, per the Tarion Freehold Form (Tentative Closing Date), Addendum to the APS. A further extension of the firm closing date was agreed upon at the request of the Defendants.

[54] The trilogy of cases referred to by the Plaintiff makes clear that an unexpected drop in the real estate market does not frustrate a contract for property.

[55] The doctrine of frustration and the application of the doctrine to contracts affecting land is set out at paras. 27-36 of Bang v. Sebastian, 2018 ONSC 6226:

[27] The doctrine of frustration operates to relieve parties of their bargain because a supervening event has occurred, without the fault of either party, which renders the performance of the contract substantively different than the parties had bargained for. This is seen in Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 53:

Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”: Peter Kiewit Sons Co. of Canada v. Eakins Construction Ltd., 1960 CanLII 37 (SCC), [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Farehan Urban District Council, [1956] A.C. 696 (U.K. H.L.), at p. 729.

[28] The Supreme Court canvassed earlier cases of frustration that assessed the contractual obligations on an “implied term” theory, namely: “if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end”: Naylor Group at para. 54. This approach was discarded in favour of a preferred analysis, referred to by the Court as the “radical change in the obligation” approach, namely: has a supervening event occurred that has altered the contract to such an extent that to compel performance would cause one of the contracting parties to do something that is “radically different” than what the parties had agreed to under the contract: Naylor Group at para. 55.

[29] Both approaches, however, share a common element: there can be no frustration if the supervening event was contemplated by the parties at the time of contracting and was provided for or, as in the present case, deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 1975 CanLII 726 (ON CA), 9 O.R. (2d) 617, at p. 626 (C.A.).

[30] A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Gerstel v. Kelman, 2015 ONSC 978, 40 B.L.R. (5th) 314. I have determined that the purchaser defendant has failed to do so.

[31] The doctrine of frustration applies to contracts affecting land: Capital Quality Homes, at p. 629; Dinicola v.. Huang & Danczkay Properties (1996), 1996 CanLII 8000 (ON SC), 29 O.R. (3d) 161 (Gen. Div.), aff’d (1998), 1998 CanLII 4462 (ON CA), 40 O.R. (3d) 252 (C.A.).

[32] The purchaser defendant must establish that the Agreement of Purchase and Sale is frustrated because an unforeseen supervening event took place without the fault of either party that radically altered the contractual obligations and thereby made it impossible for her to carry out the purchase of the Glasshill Grove property.

[33] Ms. Sebastian relies on two events that she claims constitute unforeseen supervening events: her inability to qualify for financing at the level required for her to complete the purchase transaction and, as a sub-element of this event, a fall in the value of real estate in the area of the Glasshill Grove property. Neither of these events were established as an unforeseen supervening event in the circumstances of this case.

[34] Ms. Sebastian knew at the time she was making her offer to purchase that she would need to obtain mortgage financing to complete the purchase of the Glasshill Grove property. She also knew what a failure to obtain the required financing would mean for her ability to complete the purchase transaction, as is evidenced by her inclusion of a financing condition in the first draft of her offer to purchase. Deleting the financing condition shows that Ms. Sebastian accepted the risk that she could obtain mortgage financing as part of her offer to purchase the Glasshill Grove Property. In her words, she submitted the offer to purchase with the financing condition deleted because the property market was “hot”, and she wanted to make her offer more attractive. There is nothing unforeseen about the complication that occurred when she failed to qualify for the level of financing required to purchase the plaintiffs’ property.

[35] Further, Ms. Sebastian has not established that there was any decline in real estate values in the time period between her execution of the Agreement of Purchase and Sale (May 7, 2017) and the closing date (August 7, 2017). No expert evidence was presented on this issue. Rather, the purchaser defendant relies on an appraisal received by her institutional mortgage lender that, she says, assessed the value of the Glasshill Grove property in May 2017 as $920,000. Aside from the reliability of this evidence as hearsay, this evidence does not, on its own, establish that the value of this property fell in the weeks after Ms. Sebastian offer to purchase the property for the amount of $995,000. If anything, this evidence shows only that Ms. Sebastian overpaid when offering to pay $45,100 above the property’s listing price of $949,900.

[36] However, even if the purchaser defendant had established a fall in real estate values in Mississauga in the period from May to August 2017, this would still not have constituted an “unforeseen supervening event” of the nature required to invoke the doctrine of frustration in this case. Ms. Sebastian was the owner of real estate at the time that she offered to purchase the Glasshill Grove property. She had listed her property for sale in order to have sufficient capital on hand to purchase the Glasshill Grove property. She timed the sale of her property with the acquisition of a new property. She knew that property values could go up, and from this she knew that property values could go down. Ms. Sebastian deposed that the decrease in values was beyond her control and not what she expected would occur, but this does not make it “unforeseen”.

[56] This was followed in Paradise Homes North West Inc. v. Sidhu, 2019 ONSC 1600, at paras. 20-22:

[20] Similarly, in this case, the fall in the market does not trigger the defence of frustration. The defendant did not provide any expert evidence as regards the fall in the markets.

[21] Further, even in the case of Folia v. Trelinski, supra, relied upon by the defendant, the defendant does not satisfy the five-part test set forth therein as regards frustration. The five-part test is as follows:

1.The event in question must have occurred after the formation of the contract and cannot be self-induced;

2.The contract must, as a result, be totally different from what the parties had intended;

3. The disruption must be permanent and not temporary or transient;

4.The change must totally affect the nature, meaning, purpose, effect, and consequences of the contract so far as concerns either or both parties; and

5. The act or event that brought about such radical change must not have been foreseeable.

[22] In this case, the defendant defaulted because he was not able to borrow the amount of money he required to close the deal. He only consulted one mortgage broker and no one else. While he states that he was unable to borrow the money because the market prices fell and that this was unforeseen and such a radical change that it completely changed the nature of the APS, I do not find that to be the case. The contract was not rendered totally different from what the parties had intended. The parties had intended that 10 Truro Circle would be sold by the plaintiff to the defendant for the agreed-upon amount of $819,990. The contract did not change and was not altered. The “change did not totally affect the nature, meaning, purpose, effect, and consequences of the contract”. The “disruption”, as used in the case of Folia v. Trelinski, supra, was not permanent. The event that brought the default was not unforeseen. Indeed, I find it difficult to accept that it was unforeseen by Mr. Sidhu, given that he had graduated with a post-secondary business diploma. The reason that he defaulted was that he was unable to borrow a sufficient amount to close the deal. This does not amount to frustration as set forth in Bang v. Sebastian, supra.

[57] Paragraphs 5-6 of Forest Hill Homes v. Ou, 2019 ONSC 4332 provide:

[5] Defendants’ counsel submits that the Defendants’ performance of their obligations under the APS was made impossible by a drastic and unforeseeable drop in the real estate market which made it impossible for them to obtain the financing they needed. I note that the onus is on the party claiming frustration of a contract: Bang v Sebastian, 2018 ONSC 6226, at paras 27, 30. Despite this, the Defendants have not obtained any appraisal of the Property, nor have they submitted any other real estate market evidence. They simply say they could not get financing, and they subjectively attribute this to a change in the market.

[6] Even if there were evidence to support the Defendants’ assertion, there is nothing about a change in the market that amounts to an unforeseen event that substantially changes the agreement. This was confirmed in Paradise Homes North West Inc. v Sidhu, 2019 ONSC 1600, at para 11, where the court reasoned that a change in the market is not the kind of radical change that transforms the nature of the contract:

In this case, the defendant defaulted because he was not able to borrow the amount of money he required to close the deal…. While he states that he was unable to borrow the money because the market prices fell and that this was unforeseen and such a radical change that it completely changed the nature of the APS. I do not find that to be the case. The contract was not rendered totally different from what the parties had intended. The parties had intended that 10 Truro Circle would be sold by the plaintiff to the defendant for the agreed-upon amount of $819,990. The contract did not change and was not altered.

[58] The onus is on the Defendants who are claiming frustration of a contract. In my view they have not met this onus. In their Affidavit they say that when they applied for a mortgage the appraisal value of the Property was $600,000. They did not provide a copy of same. There was no expert evidence on the decline in the market. The reference to a mortgage appraisal is hearsay and does not on its own establish the fall in the market.

[59] Even if the mortgage appraisal is taken as evidence of a declining real estate market, such a decline would not be enough to satisfy the doctrine of frustration as established in the trilogy of cases above. As set out at para. 32 of Bang, frustration occurs where “an unforeseen supervening event” takes place that “radically alter[s] the contractual obligations,” thereby making it impossible to carry out the purchase of the property. As noted at paras. 34 and 37 of Bang, “there is nothing unforeseen about the complication that occurred when [the defendant] failed to qualify for the level of financing required to purchase the Plaintiffs’ property … [and] any fall in real estate values did not “radically alter” the obligations that [the defendant] had agreed to in the Agreement of Purchase and Sale.” As stated conclusively at para. 20 in Paradise Homes v. Sidhu: “the fall in the market does not trigger the defence of frustration.”

[60] Therefore, the Defendants have not established that the APS was frustrated.

iii) Did the Plaintiff reasonably mitigate its damages?

[61] The Defendants bear the burden of establishing that the Plaintiff failed to reasonably mitigate. At para. 73 of Southcott Estates Inc. v. Toronto Catholic District School Board, 2023 SCC 51:

[73] The defendant, having breached the contract, bears the onus of proving that the plaintiff unreasonably failed to mitigate its loss: Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324, at pp. 330-31; Roper v. Johnson (1873), L.R. 8 C.P. 167. This entails establishing, on a balance of probabilities: (1) that opportunities to mitigate the loss were available to the plaintiff; and (2) that the plaintiff unreasonably failed to pursue these opportunities.

[62] The Plaintiff is not required to act perfectly. Paragraphs 35-36 of O’Hare v. Wyton, 2018 ONSC 3946 describe the onus and what is required of the innocent party:

[35] Following a repudiation of a contract, innocent parties have a duty to reasonably mitigate their losses. The onus is on Mr. Wyton, however, to establish, on a balance of probabilities, a failure to reasonably mitigate.

[36] Innocent parties need not demonstrate flawless efforts at mitigation. They need only act reasonably, in view of the prevailing circumstances known at the time to exist. See DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONSC 2432, reversed on other grounds, 2017 ONCA 961.

[63] In my view the Defendants have not established that the Plaintiff failed to reasonably mitigate. The Plaintiff began to internally advertise the Property for resale within just days of the Defendants’ breach. The Plaintiff’s uncontroverted evidence is that Homelife added the Property to their marketing materials on or about May 29, 2019. Homelife advertised the Property on MLS on June 13, 2019. It was reasonable to wait two weeks to see if the Property could have been sold by an internal listing. The Plaintiff accepted the first and only offer it received and ultimately sold the Property for just 10% under the original sale price, despite the declining market to which the Defendants refer. The Property was sold for an amount significantly above the value at which it was appraised for approval of the Defendants’ mortgage.

[64] The new purchase did not close until September 18, 2019. The Defendants submit that the Plaintiff could have reasonably mitigated damages by setting an earlier closer date. The Defendants provided no evidence that a 90-day closing is an unusual delay between the signing of an Agreement of Purchase and Sale for the resale and the closing. This is distinguishable from the situation in Madison Homes v. Ng, 2021 ONSC 3104, where a 5-month delay between the agreement and closing was viewed as unusual.

iv) What are the Damages?

[65] The Plaintiff is entitled to recover any reasonable damages that foreseeably flow from the breach of the contract by the Defendants. This is set out at para. 53 of Bang:

[53] The plaintiffs are entitled to recover any reasonable damages that foreseeably flow from the breach of contract by the defendant: Hadley v. Baxendale, at p. 151. In Kasekas v. Tessler (1989) 4 R.P.R. (2d) 110 (Ont. C.A.), the Court of Appeal upheld a trial judge’s finding that the vendor plaintiff’s damages included the carrying costs, including financing costs, arising from the purchase of a second property. I agree with the statement by Morgan J. in Goldstein v. Goldar, 2018 ONSC 608, at para. 25, that the “damages amount will be the difference between the price under the Agreement and the price of the new sale of the property once it closes, plus any additional carrying costs incurred by the Vendor in mitigating her loss and dealing with the Purchaser’s breach.”

[66] Damages will be the difference between the price under the APS and the price of the new sale, plus any additional carrying costs incurred by the Plaintiff in mitigating its loss.

[67] The Defendants assert that the Plaintiff’s damages were not reasonably foreseeable as they were not aware that there would be ancillary costs in the event of a default. The Defendants focus their argument specifically on three of the Plaintiff’s claims for damages: 1) the Plaintiff’s claim to interest under the APS; 2) the additional real estate commission paid on the resale; and 3) the management/supervision fees. I will deal with each of these in turn.

a. Whether the interest provision in the APS is onerous or otherwise unenforceable

[68] The APS includes a provision allowing the Plaintiff to charge 15% interest per annum on all additional costs, loss and damages arising from the breach. This is set out in paras. 56 and 63 of Schedule “X” to the APS.

[69] In the Affidavit of Sandra Aversa sworn March 7, 2022, at para. 38(c), the Plaintiff states that it is seeking the amount of $13,493.33 for interest. The Affidavit makes clear that the Plaintiff is seeking only 6% interest, as opposed to the 15% to which it claims it is otherwise entitled. The Plaintiff took the original purchase price of $776,400.00, subtracted the deposit of $50,000, and took 6% of this figure, which amounted to $43,584.00 in interest for one year. The Plaintiff then calculated the per diem amount of $119.41 and multiplied that by the 113 days between May 28, 2019 and September 18, 2019.

[70] That the Plaintiff is only seeking less than the interest provided for in the APS does not make enforceable an interest provision that is surprisingly onerous and unenforceable. Paragraph 22 of Forest Hill Homes v. Ou provides:

[22] Further, the fact that the Plaintiff is not seeking to enforce it to its fullest extent does not, in my view, counter the fact that it was not agreed to and is therefore unenforceable. A party cannot try to sneak an onerous term by the other contracting party and then as if make up for it by only asking for part of the onerous relief. The clause is either enforceable or it is not. To the extent that interest is owed to the Plaintiff on any unpaid amount, the interest rates prevailing from time to time under the Courts of Justice Act apply.

[71] This is also expressed at para. 34 of Madison Homes v. Yiman Shi and para. 45 of Madison Homes v. Ng. As such, I must determine if the interest provision is enforceable or not.

[72] In terms of the cases referred to on this issue, paras. 18-21 of Ou held:

[18] The APS provides that the Plaintiff can charge interest in the amount of 20% of the purchase price if the Defendants fail to pay the balance due on closing. The Defendants state that this is excessively onerous and as a consequence ought not be enforceable. Defendants’ counsel submits that the exorbitant rate of interest was never drawn to the Defendants attention, which would be required if this kind of surprisingly onerous term is to be enforced.

[19] It has been four decades since the Ontario Court of Appeal held that a surprisingly onerous term of a contract may be unenforceable if it cannot be presumed that the non-drafting party had actually agreed to it: Tilden Rent-a-Car v Clendenning, (1978), 1978 CanLII 1446 (ON CA), 83 DLR (3d) 400. As Dubin CJO put it, at 408-9:

In many cases the parties seeking to rely upon the terms of the contract know or ought to know that the signature of a party to the contract does not represent the true intention of the signer, and that the party signing is unaware of the stringent and onerous provisions which the standard form contains. Under such circumstances, I am of the opinion that the party seeking to rely on such terms should not be able to do so in the absence of first having taken reasonable measures to draw such terms to the attention of the other party, and, in the absence of such reasonable measures, it is not necessary for the party denying knowledge of such terms to prove either fraud, misrepresentation or non est factum.

[20] I am not convinced that a party in the Plaintiff’s position – a subdivision builder with a standard form of contract for each of its purchasers – can enforce a surprisingly onerous and unexpected term in that contract without at least drawing it to the other party’s attention. The record indicates that indeed the high interest rate was not called to the Defendants’ attention, and there is nothing to suggest that the Defendants, who signed the APS on the same day that it was presented to them and without any legal advice, understood or were cognizant of this term.

[21] As this court stated in Aviscar Inc v Muthukumaru, 2009 CarswellOnt 4003, at para 23, “The law is that if a person signs a contract without reading it, that person is bound by the terms of the contract. That is the general rule. There are exceptions if the signing person can establish that there was fraud, misrepresentation, or there was a very onerous term that a reasonable person would not expect to be in the contract.” In my view, this is one of those cases that falls into the latter category.

[73] Paragraphs 31-34 of Yiman Shi provide:

[31] Section 34 of the APS provided that any monies not paid to the plaintiff when due would accrue interest at the rate of 20 % per annum, compounded monthly:

Any monies owing by the Purchaser not paid when due, shall accrue interest at the rate of twenty percent (20 %) per annum compounded monthly until paid.

[32] The plaintiff argues that technically it is entitled to this interest on the amount which the defendants were require to pay on closing, $1,593,224.57. However, the plaintiff is only claiming 20 % interest on the loss of bargain which has been calculated to be $350,260.46.

[33] The defendant argues that the interest provision is unenforceable as it is excessively onerous. I agree. In Ou, at paras. 19-20, Morgan J. held that a similar interest provision in a real estate sale agreement was unenforceable…

[34] Although this case is somewhat different than Ou, since there was evidence in that case that the interest provision was not drawn to the purchaser’s attention, in my view, given that on its face the term is onerous, the absence of evidence that it was drawn to the defendants attention is fatal to the claim for this interest. The plaintiff is implicitly agreeing that the term is onerous and unenforceable given that it does not even claim the full interest which the provision would permit. If the provision is unreasonable and unenforceable, this is not cured by the plaintiff agreeing to apply the interest rate to a lesser sum. See also Hon, at paras. 62-65.

[74] Paragraphs 39-49 of Ng provide:

[39] The first is the claim for 20% compound interest calculated monthly on the differential in price from the original agreement with the Defendant and on the resale price of $199,167.33. This claim for $46,626.82 is based upon a buried standard clause in the builders’ agreement signed by the Plaintiff.

[40] I note that counsel for the Plaintiff did not argue that the 20% interest rate should be applied in his oral submissions before me, although it was pleaded in his factum.

[41] There is no evidence that this onerous clause was brought to the Defendant’s attention, when documentation was signed and he did not have legal advice.

[42] Courts have declined to enforce prejudgment interest at a rate stipulated by contract in a number of recent cases where that rate was found to be surprisingly onerous and unexpected, and in particular where the clause was not drawn to the attention of the defendant. In Forest Hill Homes v. Ou, 2019 ONSC 4332, Morgan J. considered a comparable case relating to the breach of an agreement of purchase and sale with a contractual interest rate of 20%.

[43] I adopt the reasoning of Morgan J. …

[44] This reasoning was followed in Madison Homes v. Yiman Shi, 2020 ONSC 7810…

[45] In both cases, as in this case, the court noted that the plaintiff was seeking interest only on the “loss of the value of the bargain” rather than on the outstanding purchase price, as provided for in the agreement of purchase and sale. The court found in Shi, at para. 34, that this was an implicit agreement that the term is onerous and unenforceable. In both cases, the court applied the Courts of Justice Act, R.S.O. 1990, c. C.43, rate.

[46] Similarly, in Forest Hill Homes (Cornell Rouge) Limited v. Wei, 2020 ONSC 5060, Myers, J. refused to enforce a “20% interest rate buried in one of the standard form schedules to the agreement of purchase and sale”. He confirms the finding in Ou, that such a clause was unenforceable, at para. 55, and again orders prejudgment interest in accordance with the Courts of Justice Act.

[47] I decline to apply the cases cited by the Plaintiff that enforced an exorbitant and unfair contractual rate: Wang; Arista Homes (Kleinburg) Inc. v. Sarah Igbinedion, 2019 ONSC 7086.

[48] I will not enforce the onerous unexpected term of a 20% rate of interest compounded monthly.

[49] The Plaintiff is entitled to prejudgment interest on the loss of bargain as requested, but in accordance with the Courts of Justice Act at the applicable rate of 2%: Courts of Justice Act, s. 128(1) calculated from the date of the aborted sale on December 2018.

[75] The Plaintiff noted that in Arista Homes (Kleinburg) Inc. v. Sarah Igbinedion, 2019 ONSC 7086, the court declined to exercise its discretion to deem a similar term unenforceable. Eberhard J. held, at para. 26:

[26] Although this Plaintiff is a builder of homes and agreement of purchase and sale is thick with documentation of this home in a subdivision context, I know little about the parties. The Defendant had the benefit of counsel when she entered into the same terms a second time. It is certainly a standard form contract but I had no evidence before me whether 12% is an unusual interest rate in the industry. I cannot really assess whether the terms are “stringent and onerous provisions” or “that the party signing is unaware”. 12% of damages is not as onerous on its face as “interest in the amount of 20% of the purchase price if the Defendants fail to pay the balance due on closing” in the Forest Hill case.

[76] In my view Ou, Yiman Shi, and Ng cannot be distinguished in the manner the Plaintiff submits. The Plaintiff argued in its factum they are distinguishable because the clauses in those cases sought interest on the purchase price or outstanding monies owed, whereas the Plaintiff in this case is seeking interest only on damages arising from breach. However based on the Plaintiff’s own affidavit evidence of how it calculated the amount owed in interest, this is not the case. It is seeking the same sort of interest as in these three cases.

[77] In Ou, the Plaintiff was seeking interest in the amount of 20% of the purchase price. In the case before me, the Plaintiff is claiming interest on the purchase price minus the deposit, which amounted to $726,400.00. It is not just claiming interest on the “damages,” being the difference between the original purchase price and the resale price. There is also no indication in Ou that the interest was being compounded.

[78] In Yiman Shi, the interest was 20% and compounded monthly. In that case, the relevant clause attached interest to the amount owed by the purchaser at closing, however the plaintiff argued that it only claimed interest on the price differential. This is exactly how the Plaintiff in the case before me has framed its claim, but I would again note that based on its own evidence, it is in fact still calculating interest on the amount owed at closing, and not the differential. And to reiterate, the court held in that case that a plaintiff choosing to pursue a lesser sum does not cure an onerous clause.

[79] In Ng, the rate was 20% compound interest calculated monthly. In that case, the interest did in fact attach to the difference in price between the original agreement and the resale price. This is a less onerous interest clause than the Plaintiff in the present case has invoked, and even so, that clause in Ng was nonetheless deemed onerous and unenforceable.

[80] I find that the interest provision in the APS is surprisingly onerous, and that it is unenforceable. I am also not persuaded that the difference between 20% and 15% is a basis on which to distinguish this case from Ou, Yiman Shi, and Ng.

[81] There is no indication that the interest term was drawn to the Defendants attention. The absence of evidence that it was drawn to the Defendants attention is fatal to the claim: Ou, at para. 20; Yiman Shi, at para. 34. The Plaintiff is implicitly agreeing that the term is onerous given that it is not claiming the 15% provided for in the APS. The interest term was buried in the standard form schedules. Just because the Defendants knew to pay the deposits required does not mean that they knew of the interest provision. I am not satisfied that just because the interest and deposit provisions were both in para. 63 of Schedule X that the Defendants understood the interest provisions.

[82] Similar to Wilson J. in Ng, at para. 47, I decline to apply Arista Homes v. Sarah Igbinedion. In that case, there was no indication of what the 12% interest rate was to be calculated in respect of. In Arista the Defendant had the benefit of counsel when she entered into the same terms a second time. This is unlike the Defendants in the case before me.

b. Whether the real estate commission damages are reasonable and foreseeable

[83] As set out above, the Plaintiff clarified that it was seeking only the difference between the two commission fees and that the commission paid to the new purchaser’s broker was 2.5% and not 3%. The issue is whether it was reasonable and foreseeable that the Plaintiff would have to pay a higher commission fee in order to relist the Property following the Defendants’ breach of the APS.

[84] I take a different approach to that which was taken in Yiman Shi. In order for damages to be awarded on the breach of contract, the damages must not be too remote. This is described at paras. 34-35 of Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519:

[34] The first two sentences from this portion of the trial judge’s decision are correct. The balance of that portion, however, reflects an error by the trial judge. As I have already set out, the law is clear that what the appellants are liable for are the rental payments that they did not make, subject to Saramia’s duty to mitigate and the expenses Saramia avoided by selling the Property. Whatever “but for” capital appreciation there may, or may not, have been in the Property going forward, it is not a proper head of damages for which the appellants are liable through their repudiation of the Lease, if those losses are too remote – an issue to which I now turn.

[35] In order for a party to be liable for damages for the breach of a contract, the damages must not be too remote. The test for remoteness of contract damages was set out in the seminal decision of Hadley v. Baxendale (1854), 156 E.R. 145 (U.K. Ex. Ct.), at p. 151 per Alderson B.:

Now we think the proper rule in such a case as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

This test has been expressly adopted by the Supreme Court of Canada in several cases, including Honda Canada Inc. v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362, at para. 54.

[85] In my view, the increased commission fees are the type of damages that arise fairly, reasonably and naturally in the course of things when a purchaser fails to close on a prebuilt home. The builder will have to make reasonable efforts to re-sell the property. In the usual course of things, the builder will retain a real estate agent and list the property on the MLS. This is exactly what the Plaintiff did. In fact, the Defendants complain that the Plaintiff did not list the Property on MLS earlier and yet indicate that the additional real estate commission was not reasonably foreseeable. The increased realtor costs were allowed as part of the damages claim in Madison Homes v. Ng, at paras. 37-38, and in Forest Hill v. Wang, 2020 ONSC 556, at paras. 16-19.

[86] It is not necessary for me to consider the issue of whether to take judicial notice of a standard commission fee.

c. Whether the management/supervision fee damages are reasonable or foreseeable

[87] Case law has established that the Plaintiff is entitled to reasonable and foreseeable carrying costs: Forest Hill v. Wang, at para. 19; Bang v. Sebastian, at para. 58.

[88] The Plaintiff has claimed a number of carrying costs:

1. Additional utilities: $299.39

2. Additional taxes: $383.07

3. Additional legal fees and administrative fees: $1000 plus HST

4. Additional insurance: $275

5. Additional management/supervision fees: $11,300

[89] Only item 5 is in dispute although I have limited the legal fees and administration fees to $500 as this is the amount claimed in the Statement of Claim and Notice of Motion. In my view the costs claimed under items 1-4 were reasonably foreseeable.

[90] In my view, the Plaintiff has failed to establish the Management/Supervision fee. No invoices were provided. The Plaintiff claims it employed a site supervisor and handyman to satisfy the insurance company’s requirement of onsite management and supervision of the Property. The Plaintiff provided no invoices in respect of the $100 per day it claims to have paid. On a motion for summary judgment, the Supreme Court has noted that each side must put “its best foot forward” with respect to the existence or non-existence of material issues to be tried: Canada (Attorney General) v. Lameman, 2008 SCC 14, at para. 11. Also in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, at para. 56: “On a motion for summary judgement, a party is not “entitled to sit back and rely on the possibility that more favourable facts may develop at trial.” Both cases cite Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423 (SCJ).) The Plaintiff has not done so in regard to these fees.

F. Conclusion:

[91] In conclusion, the APS was terminated by the Defendants’ breach. The deposits paid by the Defendants are forfeited to the Plaintiff.

[92] The Plaintiff is entitled to the following damages:

1. $26,500.00 which is the differential between the purchase price and the resale price less the deposit;

2. $24,936.28 plus HST, which is $28,177.99, for the increased real estate commission;

3. $299.39 for utilities;

4. $383.07 for taxes;

5. $500.00 for legal fees and administrative costs;

6. $275.00 for additional insurance fees;

7. Pre-judgment interest under the Courts of Justice Act from May 28, 2019 to September 17, 2019, on the sum of $726,400; and

8. Pre-judgment interest under the Courts of Justice Act on items 1-6 herein, from September 18, 2019 to today.

[93] The Plaintiff shall serve and file to my attention an affidavit with the pre-judgment interest calculations and a draft judgment.

G. Costs:

[94] I encourage the parties to resolve the issue of costs of the summary judgment motion. If they are unable to do so, the Plaintiff shall serve and file brief written submissions as to costs, limited to two pages (double spaced with regular font and margins), with a bill of costs attached, to be served and filed within 30 days of today.

[95] The Defendants shall serve and file brief written responding submissions as to costs, limited to two pages (double spaced with regular font and margins), to be served and filed within 60 days of today.

[96] The Plaintiff may serve and file a one-page submission in reply (double spaced with regular font and margins), within 75 days of today.

Coats J.

Date: November 24, 2022