Court File and Parties
COURT FILE NO.: CV-22-087 DATE: 2023/10/17 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JEFFREY KENNETH GIBSON and LISA MARY GIBSON Plaintiffs – and – ERIN CHRISTINE SMITH, RYAN MICHAEL SMITH and PREMEX REALTY GROUP Defendants
Counsel: Benjamin E. Jefferies, for the Plaintiffs Michael Odumodu, for the Defendants Erin and Michael Smith
HEARD: June 16, 2023
TRANQUILLI J.
Introduction
[1] This is a tale of parties recently caught in the volatile residential real estate market.
[2] The defendant purchasers contracted with the plaintiff vendors to buy a home. The deal did not close. The plaintiffs contend it was because the defendants could not sell their existing home. The defendant purchasers do not deny they had difficulties selling their home, but claim the contract is void because the plaintiffs misrepresented the illegal condition of an “in-law” suite in their home. The plaintiff vendors soon resold their home to another party, but at a lesser price than the unconditional agreement with the purchaser defendants.
[3] The plaintiffs commenced this Rule 76 proceeding to claim the difference in net sale proceeds plus carrying costs from the defendant purchasers. The defendant realtor is named only for the purpose of obtaining an order permitting the agency to pay the defendant purchasers’ deposit to the plaintiffs.
[4] This motion turns on the question of whether summary judgment is appropriate in the context of this simplified procedure action, where no cross-examinations have taken place.
The Motion
[5] The plaintiffs ask the court to resolve this question by way of summary judgment in their favour. They submit this is a document-driven case that is appropriate for summary judgment. The defendant purchasers’ reliance on a material misrepresentation is meritless as the record shows they never expressed such concerns before the closing date.
[6] The defendant purchasers resist summary judgment as premature and inappropriate in a Rule 76 proceeding. They submit there are genuine issues requiring trial regarding the allegations of misrepresentation and whether the plaintiffs acted reasonably in the subsequent resale of the property.
[7] The plaintiffs also seek to amend the pleadings to correct a misspelling of the middle name of the individual defendant Ryan “Michael Smith” to Ryan “Michial” Smith.
[8] The defendant realtor takes no position on the relief sought on this motion.
Issues
[9] The issues for determination on this motion are:
- Are the plaintiffs entitled to leave to amend their claim to correct the defendant’s name?
- Is this an appropriate case for summary judgment?
[10] The first issue can be quickly addressed. The defendant purchasers opposed the amendment in written submissions; however, confirmed at the hearing they would not oppose amendment. However, they advised there would be “consequences” in terms of an intention to amend the action to commence a third-party claim against their realtor. The court does not see a connection between these two issues; however, it is plain and obvious that the amendment should be permitted. It is a simple spelling error in one of the two defendant purchaser’s middle names. The plaintiffs clearly intended to sue Ryan Michial Smith. The statement of claim clearly points the “litigation finger” at both he and his defendant spouse as being the parties who contracted to purchase the plaintiffs’ home. Notwithstanding the misnomer, Ryan “Michial” Smith and his spouse defended the action: Loy-English v. The Ottawa Hospital et al, 2019 ONSC 6075 at para. 21. Leave is accordingly given to the plaintiffs to amend the title of proceeding to correct this error.
[11] The material issue for this court’s determination is whether this is an “exceptional” case where summary judgment is appropriate for a Rule 76 proceeding.
[12] The plaintiffs make a compelling case for summary judgment in their favour. However, for the following reasons, I find I am restricted in the exercise of summary judgment powers on this record. In summary, without cross-examination, which is not permitted under Rule 76, the court is not able to reject the defendant purchasers’ evidence as meritless. Evidence from other parties, such as the realtor(s) and counsel involved in the failed transaction may also be necessary. Moreover, additional information is required to support the plaintiffs’ damages claim.
Background
The Agreement & Subsequent Events
[13] The following background comes from affidavits sworn by the plaintiff Jeffrey Gibson and the defendant Erin Smith. There is no affidavit evidence from the other plaintiff vendor and defendant purchaser. Nor is there evidence from other witnesses to the transaction, such as the realtors and counsel for the vendors and purchasers.
[14] On March 13, 2022, the plaintiffs Jeffrey and Lisa Gibson entered into an agreement of purchase and sale of their residential property municipally known as 739 Glenwood Road, Woodstock, to the defendants Erin and Ryan Smith for a sale price of $1,071,000.00. The terms of the agreement were detailed in an Ontario Real Estate Association Agreement of Purchase and Sale (“APS”) signed by the parties. Of note, the APS did not stipulate any conditions. It also provided for a closing date of June 10, 2022. The Smiths paid a deposit of $15,000.00 pursuant to the APS, which is still held in trust by the listing agent and defendant Premex Realty Group.
[15] Of purported note for the defendant purchasers, the MLS listing included this description of the property: “The lower level was professionally finished and is a perfect in-Law [sic] suite with a bright kitchen, inviting family room, full bathroom and 2 bedrooms.”
[16] The Smiths immediately listed their existing home for sale following entering into the agreement, however, they advise they had no success given a shift in the real estate market with weakening demand and prices.
[17] By email of May 7, 2022, the Smith’s real estate agent asked the Gibson’s agent if an extension could be given for closing as “A couple of things have come up on there [sic] end...”. It emerged the defendants were having difficulty selling their existing home. The plaintiffs initially rebuffed the defendant purchasers’ extension request. Counsel became involved.
[18] By letter of May 20, 2022, the plaintiffs’ lawyer advised they would agree to an extension of the closing date to June 30, 2022, for an additional payment of $7,500 representing an additional non-refundable deposit, an extension fee and projected out of pocket carrying costs.
[19] On May 26 and 27, 2022, the Smiths, first through their agent and then through their counsel, asked if the plaintiffs would enter into a mutual release and later clarified the terms of the mutual release would include the defendants’ forfeiture of the $15,000 deposit. The plaintiffs rejected this proposal.
[20] According to Ms. Smith, the defendants’ real estate lawyer began requisitioning “all necessary work orders, building permits and deficiency notices” for the closing. Ms. Smith deposed her belief that her lawyer specifically requested the plaintiffs to confirm that the in-law suite was legal, and the basement was, in fact, professionally finished. The plaintiffs’ lawyer advised the defendants were to satisfy themselves with respect to whether there were any outstanding building permits affecting the property.
[21] By emails of June 9, 2022, the plaintiffs’ lawyer advised that the Gibsons remained ready, willing, and able to close on June 10, 2022, per the APS and presented the closing documents executed by the vendors.
[22] On the morning of June 10, 2022, the Smiths’ lawyer advised the vendors’ lawyer: “Please be advised we will not be in a position to close the transaction today.”
[23] By responding letter of the same date, the vendors’ lawyer advised that the defendants’ failure to close the transaction constituted anticipatory breach of the APS and put the defendants on notice that the plaintiffs were entitled to the deposit and that the plaintiffs would be mitigating their damages by re-listing the property as soon as possible.
[24] On June 18, 2022, the plaintiffs entered into a new APS with new purchasers for a sale price of $1,000,000. That sale closed on July 18, 2022.
[25] The plaintiffs accordingly claim they suffered damages of $68,870.00, being the difference in the net sale proceeds they would have realized from the failed transaction as compared to what they realized from the completed sale. They also claim additional expenses incurred from carrying the property during the period of June 10 to July 18, 2022, in the amount of $3,803.30, comprised of legal expenses for the failed transaction and payments for mortgage, property tax, insurance and utilities. The total damages claimed are $72,673.30.
The Pleadings
[26] The plaintiffs commenced this action under the simplified procedure on August 2, 2022. In addition to claiming these damages from the Smiths for the failed closing, the plaintiffs seek orders directing Premex Realty Group to pay the defendant purchasers’ $15,000 deposit to the plaintiffs along with accrued interest.
[27] In their statement of defence and counterclaim delivered in October 2022, the defendant purchasers allege the plaintiffs breached the contract, thereby releasing the defendants from their obligation to close the transaction. In their counterclaim, the purchaser defendants also seek relief by way of rescission and damages, in the form of the return of their $15,000 deposit.
[28] Relevant to this motion, in their pleading the purchaser defendants allege they are entitled to treat the agreement as void and to the return of their deposit on the following grounds:
a. They relied upon the MLS representation that the “in-law” suite was professionally finished; b. It was an express or implied term that the plaintiffs must deliver the properly free of any defect in title, free from work orders and in a condition that would pass regulatory requirements; c. The plaintiffs failed to bring these deficiencies in respect of the in-law suite into good order; d. The plaintiffs are in breach of contract as a result of their inability to deliver good title; and e. In the alternative, the transaction was not completed due to frustration or force majeure rendering the agreement null and void due to the unforeseen economic circumstances beyond the parties’ control that led to an increase in interest rates and changes in lending criteria to slow the real estate market.
[29] By Reply and Defence to Counterclaim, the plaintiffs plead the Smiths’ pleading is “completely divorced from the factual reality of the dealings between the parties and is no more than a bad faith effort to delay and defer timely adjudication of what is an otherwise simple breach of contract claim.” The plaintiffs maintain there was an anticipatory breach of contract with the following assertions:
a. The plaintiffs deny having made any representations or warranties and that the APS confirms none were given; b. The defendant purchasers did not raise any issues with the condition of the property, such as the legal conformity of the in-law suite, before the closing date; c. The clear terms of the APS are enforceable; and d. The defendant purchasers did not raise defects as the reason for not closing;
[30] It appears no examinations for discovery have taken place.
[31] The defendant Premax Realty Group takes no position on this motion.
Analysis
Is this an appropriate case for summary judgment?
[32] This court’s exercise of its discretion and its powers on a summary judgment motion under Rule 20 are well established and need not be repeated at length in these reasons: Hyrniak v. Mauldin, 2014 SCC 7, paras. 65-68. There is also no question that in general, the motion judge is entitled to assume the record contains all the evidence the parties would present at trial. The parties must put their best foot forward and “lead, trump or risk losing”: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 27; Boland v. Lyle, 2016 ONSC 7418 at para. 13.
[33] However, the application of these principles is attenuated when considering the appropriateness of a summary judgment motion in the context of a simplified procedure action under Rule 76.
[34] In Manthadi v. ASCO Manufacturing, 2020 ONCA 485, the Court of Appeal reminded us that while a motion for summary judgment can be appropriate in Rule 76 proceedings, such cases remain “exceptional”. Rule 76 procedures are designed to get the parties to trial with a minimum of delay and costs. Discovery is restricted and cross-examination on affidavits are not allowed. The motion judge must assess the relative efficiencies of proceeding by way of summary judgment as opposed to trial. The simplified procedure rules are designed to allow the matter to be determined in an expedited fashion; however, this constrains the parties’ ability to marshal evidence on a summary judgment motion and meet their obligation to put their best foot forward. The risk of inappropriate use of Rule 20 is heightened in Rule 76 actions, where such motions can have the perverse effect of creating delays and wasting costs associated with preparing for, arguing, and deciding a motion for summary judgment, only to see the matter sent on for trial: Manthadi, paras. 32-39.
[35] The plaintiffs submit the defendants’ responding affidavit fails to raise any genuine issue requiring a trial.
[36] First, the assertion of an unforeseen downturn in the real estate market is not a radical change that transforms the nature of the contract and amount to frustration: Forest Hill Homes v. Ou, 2019 ONSC 4332 at para 6.
[37] Second, the defendants’ contention of a misrepresentation as to the legality of the in-law suite that voids the contract is suspect. There was no mention whatsoever of any concerns about the condition of the premises in the communications between real estate agents and counsel for the contracting parties in the weeks leading up to the defendants’ failure to close. The communications were focussed first on extending the closing date and then in trying to negotiate a mutual release. The expressed concerns at the time appeared to relate only to the purchaser defendants’ inability to sell their existing home and not the condition of the premises. Moreover, the effect of a material misrepresentation is to make an executory contract voidable, not void. On acquiring knowledge of the misrepresentation, the deceived party has the right to elect to affirm or rescind the contract within a reasonable time after the misrepresentation is discovered: Issa v. Jarrah, 2019 ONSC 6744 at para. 17, aff’d 2020 ONCA 756. On this record, the defendants’ allegations of misrepresentation and the ostensible illegality of the in-law suite only surfaced in the statement of defence and counterclaim, months after the aborted transaction. They did not communication any intention to treat the contract as void prior to closing on these alleged grounds. Even then, the assertions in Ms. Smith’s affidavit are vague as to when and with whom they first raised these alleged concerns. Finally, if the misrepresentation is said to arise from the description of the “professionally finished” in-law suite in the real estate listing, there is a question as to whether such a statement was an actionable misrepresentation or a statement of opinion: Forest Hills, supra at paras. 11-13.
[38] However, the court’s overarching concern is that there was no cross-examination on the affidavits. It would also appear the parties have yet not undertaken their limited rights of examination for discovery under Rule 76. Given the limits on the court’s summary judgment powers under Rule 76, I am not satisfied it is appropriate for the court to weigh the evidence and make findings of credibility on this limited record.
[39] There are also gaps in the evidence as to the measure of the plaintiffs’ damages. In the context of an aborted sale of real estate, the plaintiff must prove that its efforts to resell were reasonable and timely: Madison Homes v. Ng, 2021 ONSC 3104 at para. 18. It is evident the plaintiffs relisted and resold their property within approximately one week of the failure to close. However, that does not necessarily end the analysis of whether they took reasonable steps to minimize their loss. The untested affidavit does not answer other questions, such as when it was relisted, how it was marketed, the relisted price, the number of offers and the particulars of offers: Rosehaven Homes, at para. 73.
[40] The plaintiffs point to several recent decisions where breach of contract claims arising from failed real estate transactions were found to be well suited for disposition on summary judgment. However, none of those appeared to be Rule 76 proceedings. In Paradise Homes North West Inc. v. Sidhu, 2019 ONSC 1600, the amount in issue appeared to be within the simplified procedure jurisdiction; however, there were cross-examinations on affidavits. Forest Hill Homes v. Ou, 2019 ONSC 4332 was not a simplified procedure action and cross-examinations on the defendant’s affidavit laid bare their bald assertions as to frustration of contract. Finally, Rosehaven Homes et al. v Aluko et al, 2022 ONSC 1227 was also not a Rule 76 proceeding.
[41] The plaintiffs’ motion for summary judgment is accordingly dismissed. I am mindful that the amount in question is significant to the parties but is relatively modest, particularly when contemplating the cost of trial. In my view, this summary judgment record lends itself to being put to use at trial, with supplementary affidavit evidence at the discretion of the parties and those affidavits being used as examination in chief followed by cross-examination. This trial could be conducted quite efficiently as a one-day hearing via Zoom.
[42] I have made inquiries of the Woodstock trial coordinator and anticipate that such a trial could likely be scheduled to be heard in the first quarter of 2024.
[43] I accordingly instruct the parties to contact the trial coordinator for the purposes of scheduling a 50.13 case conference before me for the purpose of finalizing what steps need to be completed before this trial and scheduling same. The parties should first confer on a draft timetable for the remaining steps, including whether examinations for discovery will be undertaken.
[44] The parties should contact the trial coordinator by October 26, 2023 for the purpose of scheduling the case conference before me. I am not seized of the matter for trial considering our current court resources, but if the trial can be scheduled before me without excessive delay to the parties, I am prepared to preside.
[45] In light of this disposition, I reserve the costs of this motion to the disposition of the trial of the action.
Justice K. Tranquilli
Released: October 17, 2023