Court File and Parties

COURT FILE NO.: CV-23-00090021 DATE: 2023/04/13 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Daniel Laflamme and Pamela Laflamme, Applicants AND Natasha Meikle and Chris Vigliotti, Respondents

BEFORE: Justice R. Ryan Bell

COUNSEL: Blake Bochinski, for the Applicants Stéphane MacLean, for the Respondents

HEARD: April 4, 2023

Endorsement

Overview

[1] This application arises from the respondents’ failure to close on a residential real estate transaction. The applicants seek a declaration that the $15,000 deposit be forfeited to them, damages in the amount of $300,000 representing the price difference between the contract price and the amount realized on resale of the property, damages for the loss of opportunity to invest the proceeds of sale, and damages for other consequential costs.

[2] The respondents now admit they breached the agreement of purchase and sale and the applicants are entitled to the $15,000 deposit as a credit towards their damages. However, the respondents dispute the scope and quantum of the applicants’ alleged damages and, in particular, maintain that the applicants failed to take reasonable steps to mitigate their loss. The respondents submit that the issues concerning the scope and quantum of the applicants’ damages should be dealt with in an action rather than in an application.

[3] The application is allowed to the extent the applicants are entitled to a declaration that the $15,000 deposit is forfeited to them as a credit towards their damages. For the following reasons, I am ordering a trial of the issues as to the scope and quantum of damages over and above the forfeited deposit suffered by the applicants as a result of the respondents’ breach.

Background Facts

[4] The following facts are relevant to my determination that there will be a trial of the remaining issues regarding damages.

[5] The applicants were the owners of 26 Snowberry Way, Ottawa. On February 8, 2022, the applicants and the respondents entered an agreement of purchase and sale for the property for a price of $1,650,000. The required deposit was $15,000.

[6] The transaction did not close as scheduled on April 29, 2022. The respondents admit they are liable for the breach of contract.

[7] The applicants relisted the property on May 2, 2022 for $1,650,000. In June 2022, the applicants reduced the asking price to $1,450,000. Ultimately, the property was sold at a price of $1,350,000.

[8] The applicants claim they incurred various out of pocket expenses in relation to the property after April 29, 2022 and before the new closing date of July 8, 2022. They also say they incurred losses as a result of their inability to place the proceeds of sale in a money market investment.

[9] The scope and quantum of the applicants’ alleged damages are disputed by the respondents. The respondents say the property could have sold before June 22, 2022 at a higher price and the applicants failed to take reasonable steps to mitigate their loss. The respondents challenge certain of the damages claimed on the basis that they were not foreseeable and/or are too remote. The respondents also maintain that the assessment of the applicants’ damages will involve matters of credibility.

General Principles

[10] The respondents submit that the issue of what damages the applicants are entitled to, and in what amount, should be converted to an action and proceed to trial under r. 38.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[11] The applicants rely on rr. 14.05(3)(d) and (h) which provide, respectively, that a proceeding may be brought by application where the relief claimed is the determination of rights under a contract, or where it is unlikely that there will be any material facts in dispute requiring a trial.

[12] In Przysuski v. City Optical Holdings Inc., 2013 ONSC 5709, Firestone J. set out the general principles the court is to consider in determining whether to convert an application to an action. First, an application should be used when there is no matter is dispute and when the issues to be determined do not go beyond the interpretation of a document: Przysuski, at para. 5.

[13] Second, where the legislature has stipulated that a proceeding may be brought by application, there is a prima facie right to proceed by application and the matter should not be converted into an action without good reason: Przysuski, at para. 6. A good reason to convert an application into an action is when the judge who will hear the matter cannot make a proper determination of the issues on the application record: Przysuski, at para. 7, citing Collins v. Canada (Attorney General), at para. 29.

[14] Third, when issues of credibility are involved the matter should proceed by way of action: Przysuski, at para. 8, citing Gorden Glaves Holdings Ltd. v. Care Corp. of Canada, at para. 30; and Cunningham v. Front of Yonge (Township), 73 O.R. (3d) 721 (C.A.), at para. 20.

[15] Fourth, a factual dispute simpliciter in itself is not sufficient to convert an application to an action. The fact or facts in dispute must be material to the issues before the court: Przysuski, at para. 9.

[16] Collins sets out the follow factors that are relevant:

(i) whether material facts are in dispute; (ii) the presence of complex issues that require expert evidence and/or a weighing of the evidence; (iii) whether there is a need for pleadings and discoveries; and (iv) the importance and impact of the application and the relief sought.

Analysis

[17] The applicants submit “there is no genuine issue requiring a trial regarding liability, mitigation, or damages” and there are no material facts in dispute. The applicants also say that by not delivering a responding affidavit on the application the respondents have provided “further proof” that there are no material facts in dispute. The applicants say the respondents’ failure to deliver any expert evidence demonstrates there is no requirement for the exchange of pleadings or discoveries.

[18] I disagree with the applicants’ position. The damages issue does not turn on the interpretation of the agreement of purchase and sale and there are material facts in dispute, particularly in relation to the issue of mitigation.

[19] The position taken by the applicants that the proceeding should not be converted to an action is the same as that taken by the vendor in Lin v. Brookfield Homes (Ontario) Limited, 2018 ONSC 7682. In Lin, Sachs J. rejected the vendor’s argument:

The last issue to be dealt with is the Vendor’s claim for damages in excess of the forfeited deposit. In my view, this is not a matter that is properly the subject of an application, as opposed to an action. The damages issue does not turn on the interpretation of the contract and there are material facts in dispute. Specifically, the Purchaser disputes whether the Vendor took all reasonable steps to mitigate its damages. The Vendor submits that without evidence that the Vendor got less than market value when it sold the property, the Purchaser cannot make this argument. There is no such evidence, and, according to the Vendor, the Purchaser had an obligation to put her best foot forward at the hearing of the application.

The application is not a summary judgment motion. Rule 20 and all that follows from it (including the obligation to put one’s best foot forward) does not apply to applications. In order to apply for summary judgment, the matter must be converted to an action. To apply the summary judgment rules to an application could work an unfairness on the Purchaser, who focused her material on demonstrating that there were material facts in dispute, not on defending what was, in effect, a motion for summary judgment. Thus, I am ordering a trial of the issue with respect to the issue of damages […].

[20] These observations of Sachs J. in Lin are apposite to the matter before me. The applicants’ claim for damages in excess of the forfeited deposit of $15,000 does not turn on the interpretation of a contract. Foreseeability and remoteness are in issue. The question whether the applicants took reasonable steps to mitigate their damages is very much a material fact in dispute: Lin, at para. 30; Grandfield Homes (Kenton) Ltd. v. Li, 2021 ONSC 2670, at paras. 58-59. Like the vendor in Lin, the applicants argue that because there is no responding affidavit and no expert evidence on the issue of mitigation, there are no material facts in dispute and no genuine issue requiring a trial. With respect, the application is not a summary judgment motion and the obligation to put one’s best foot forward does not apply.

[21] The respondents seek to distinguish Lin on the basis that, unlike the case before me, the purchaser in Lin filed a responding record. In fact, there were two applications before Sachs J., with the purchaser seeking a refund of the deposit on the basis that she had validly rescinded the purchase agreement. The respondents in the matter before me have acknowledged their breach of the contract and the applicants’ entitlement to the deposit monies.

[22] The applicants rely heavily on the Court of Appeal for Ontario’s decisions in Bilotta v. Booth, 2020 ONCA 522 and Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282. In my view, neither case assists the applicants.

[23] In Bilotta, the application judge declared that the respondents breached their agreement of purchase and sale with the applicants and ordered that the respondents return the applicants’ deposit. The Court of Appeal allowed the appeal and set aside the decision of the application judge, finding that the applicants’ refusal to accept an extension of the closing followed by their failure to close on the closing date was a clear repudiation of the contract. The respondents elected to accept the repudiation and terminate the contract. The Court of Appeal found that the respondents were entitled to recover the $100,000 difference in price, with the $30,000 deposit to be credited against that amount.

[24] Unlike the matter before me, there was no issue of mitigation in Bilotta: the difference between the contract price and the amount realized by the Booths on resale of the house was not in dispute. Because “it [was] not clear whether these [consequential] losses [were] contested,” the Court of Appeal permitted the parties to make brief submissions in the event they could not agree: Bilotta, at para. 29. In the case before me, the applicants’ claim for consequential damages is clearly contested.

[25] In Redstone Enterprises, the application judge found that the amount of the forfeiture was unconscionable in the absence of any evidence concerning damages suffered by the applicant. The Court of Appeal allowed the appeal from the application judge’s order granting partial relief from forfeiture and increased the amount of the forfeiture to the contractual amount. In the case at bar, the respondents have acknowledged their liability for breach of contract and the applicants’ entitlement to the deposit of $15,000. What remains in issue is the scope and quantum of the applicants’ claim for consequential damages.

[26] The respondents also maintain the record discloses credibility issues that should be determined in an action. In particular, they say the applicants’ real estate agent has provided conflicting evidence as to his opinion on the state of the real estate market before and at the time the property was relisted for sale. The respondents also submit Mr. Laflamme’s evidence that he would have invested the entire proceeds of sale conflicts with his evidence that he and Ms. Laflamme would have been jointly entitled to the entire proceeds. The applicants deny that the record discloses any credibility issues.

[27] I need not address this issue further because, in my view, the material facts in dispute in relation to mitigation and damages warrant an order that the remaining issues proceed to trial.

Conclusion

[28] There will be a declaration that the $15,000 deposit is forfeited to the applicants as a credit toward their damages.

[29] I order that the issues as to the scope and quantum of the applicants’ damages over and above the forfeited deposit and the issue of mitigation proceed to trial. These issues shall be converted into an action. The applicants shall be the plaintiffs and the respondents shall be the defendants. The plaintiffs shall deliver a statement of claim within 20 days. The defendants shall deliver a statement of defence within 20 days thereafter. If the parties require further assistance from the court regarding a timetable for the conduct of the action, a case conference may be requested. I am not seized of the matter.

[30] At the conclusion of the hearing, I heard from the parties on the issue of costs. The parties have provided me with costs outlines. Both the applicants and the respondents requested costs in the event I made an order converting the application to an action: the applicants on the basis of the respondents’ late admissions as to liability and forfeiture of the deposit, and the respondents on the basis that they were the successful parties in this step of the proceeding. The applicants submit in the alternative that costs should be determined in the action.

[31] Success has been mixed: while the respondents succeeded in their request that the application be converted to an action, the applicants have secured an order declaring they are entitled to a forfeiture of the deposit. I fix the costs to date in the amount of $15,000 all inclusive, payable in the cause.

Justice R. Ryan Bell Date: April 13, 2023