COURT FILE NO.: CV-22-00003574-0000
DATE: 2023 12 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FRANKLIN, DONALD NEIL
R. Belsito, for the plaintiff
Plaintiff
- and -
STEWART, NICOLETTE
Self Represented
Defendant
HEARD: December 7, 2023
REASONS FOR DECISION
Emery J.
[1] The plaintiff Donald Neil Franklin brings this motion for default judgment under Rule 19.05, having properly serving the defendant Nicolette Stewart with the statement of claim and noting her in default.
[2] The claim arises out of the defendant’s breach of an agreement of purchase and sale she entered as the buyer, and did not close according to its terms, or at all. Ms. Stewart agreed to pay $3,660,000 for the house Mr. Franklin was selling. She paid a deposit of $100,000 at the time she entered the agreement as security to complete the transaction. After she failed to close the purchase, Mr. Franklin sold the property nine months later for the lesser price of $3,200,000.
[3] Justice McSweeney first considered this motion on November 14, 2023 and required the plaintiff to serve the defendant with the motion for default judgment, along with Her Honour’s endorsement containing that direction. The motion was then rescheduled for today.
[4] I am satisfied by the affidavit of service of Nicole Ferley that the defendant was served in accordance with the endorsement of McSweeney J. under Rule 16.01(4)(iv). Despite that service, Ms. Stewart did not appear in court today, or file any materials in response to the motion.
Principles for granting default judgment
[5] Rule 19.02(1) (a) provides that a defendant who has been noted in default is deemed to admit the truth of material facts alleged in the statement of claim.
[6] Rule 19.06 provides that a plaintiff such as Mr. Franklin is not entitled to judgment on a motion for default judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted. There must be facts that entitle her to judgment. Justice D.M. Brown, when a judge of this court, wrote on the process a judge must follow on a motion for default judgment in Elekta Ltd. v. Rodkin, 2012 ONSC 2062 at para. 14:
[14] Accordingly, on a motion for default judgment the inquiry undertaken by the court is the following:
(i) What deemed admissions of fact flow from the facts pleaded in the Statement of Claim?
(ii) Do those deemed admissions of fact entitle the plaintiffs, as a matter of law, to judgment on the claim?
(iii) If they do not, has the plaintiff adduced admissible evidence which, when combined with the deemed admissions, entitles it to judgment on the pleaded claim?
[7] Justice Strathy, as he then was, explained in Salimijazi v. Pakjou, 2009 CarswellOnt 2013 that the court has a duty to the plaintiff to dispense cost efficient justice, but also to the absent defendant and to the public to ensure that justice is done. This duty is part of the duty of the court to ensure the administration of justice. The court has the duty on a motion for default judgment to ensure that “manifestly unsustainable claims are not mechanically processed.”
[8] The most recent pronouncement of what must be proven to obtain default judgment is found in the recent decision of the Court of appeal in Paul’s Storage Inc. v. Immediate Logistics Limited, 2022 ONCA 573. In Paul’s Storage, a five-member panel was constituted to review whether the proposition in Umlauf v. Umlauf (2001), 2001 24068 that not only the facts pleaded in a statement of claim are deemed to be admitted on default, but also conclusions of law remains the law in Ontario. The Court of Appeal ruled they are not, explaining that:
[77] Accordingly, I return to the question of whether the Umlauf Proposition is good law. In my view, it is not, and the approach articulated in Segraves, Salimijazi, and Nikore should be followed. Conclusions of law, and of mixed law and fact, are not to be deemed admitted under r. 19.02(1) where a defendant has been noted in default. If the facts pleaded do not support the conclusion of law pleaded, the motion judge may decline to grant judgment despite the failure of the defendant to defend the action: Salimijazi, at para. 19. The motion judge is entitled to scrutinize both the deemed admissions in the pleading and any evidence tendered by the plaintiff to see whether the plaintiff is entitled to judgment: Salimijazi, at para. 28.
[78] This approach is compatible with a plain and harmonious reading of rr. 19.02(1)(a) and 19.06, whereas the Umlauf Proposition is not.
[79] For ease of reference, I reproduce those provisions here:
19.02 (1) A defendant who has been noted in default,
(a) is deemed to admit the truth of all allegations of fact made in the statement of claim[.]
19.06 A plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment. [Emphasis added.]
[80] On a plain reading of r. 19.02(1)(a), it applies to allegations of fact made in the statement of claim, not to conclusions of law or mixed law and fact. Rule 19.02(1)(a) does not deem everything in a statement of claim admitted, only allegations of fact. Rule 19.06 provides that a plaintiff is not entitled to judgment merely because the “facts alleged in the statement of claim” are deemed to be admitted. Again, there is no reference to conclusions of law or mixed law and fact. And, significantly, under r. 19.06, judgment is not to be granted unless the facts deemed to be admitted “entitle the plaintiff to judgment”. Giving effect to the two rules harmoniously requires distinguishing between allegations of fact and conclusions of law. The court must determine whether the deemed factual admissions in the pleading and any evidence tendered by the plaintiff entitle the plaintiff to judgment.
Forfeiture of deposit and damages
[9] In Gagliardi and Spillane v. Al-Karawi, 2023 ONSC 6853, Chown J. has provided a comprehensive review of the legal principles applicable to forfeiture of the buyer’s deposit and damages to which a seller is entitled for breach of contract on the sale of land. Chown J. prefaced his review by stating that “These rules are always subject to the language in the contract: March Brothers & Wells v. Banton, (1911) 1911 74 (SCC), 45 S.C.R. 338, at p. 340; and the possibility of relief from forfeiture: Azzarello v. Shawqi, 2019 ONCA 820, at paras. 45 and 47, leave ref’d [2019] S.C.C.A. No. 521; Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 28.” As part of the review, he noted the following:
a. According to the law of vendor and purchaser the inference is that … a deposit is paid as a guarantee for the performance of the contract, and where the contract goes off by default of the purchaser, the vendor is entitled to retain the deposit": Collins v. Stimson (1883), 11 Q.B.D. 142 at 143, as cited in Howe v. Smith (1884), [1881-5] All E.R. Rep. 201, at p. 204.
b. The classic statement of the purpose of a deposit is that of Fry L.J. in Howe v Smith, at p. 208: “It is not merely a part payment, but is then also an earnest to bind the bargain so entered into; and creates, by the fear of its forfeiture, a motive in the payer to perform the rest of the contract.” In Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, at para. 6, the Ontario Court of Appeal identified the rationale for forfeiture of a deposit in these terms:
The deposit stands as security for the purchaser’s performance of the contract. The prospect of its forfeiture provides an incentive for the purchaser to complete the purchase. Should the purchaser not complete, the forfeiture of the deposit compensates the vendor for lost opportunity in having taken the property off the market in the interim, as well as the loss in bargaining power resulting from the vendor having revealed to the market the price at which the vendor had been willing to sell. [Emphasis added.]
c. These considerations were described as “the purposive underpinnings of forfeiture of deposits” in the recent Ontario Court of Appeal decision of Rahbar v. Parvizi, 2023 ONCA 522, at para. 51.
[10] Chown J. also addressed the interrelationship between the forfeiture of the deposit and its application to the outstanding damages awarded to the seller. He summarized the law (at para. 21) as follows: that where the seller sustains damages, the deposit is credited toward the damages. That is, the deposit is applied to reduce the damages that the seller can claim: Azzarello, at para. 55; Telsec Developments Ltd v. Abstak Holdings Inc., 2020 ABCA 40, at paras. 89 to 93, leave ref’d 2020 46155 (S.C.C.); 10068071 Canada Limited v. Bordbar, 2021 ONSC 4232, at paras. 38 to 47; Thangarasa v. Aziz, 2022 ONSC 6355, at para. 71 to 76; Bilotta v. Booth, 2020 ONCA 522, at para. 28.
The principles applied
[11] Ms. Stewart has been noted in default. I am satisfied on the deemed admissions to the material facts pleaded in the statement of claim and the supplementary affidavit of Mr. Franklin that the facts entitle him to judgment against Ms. Stewart for breach of contract. I find as a fact that Ms. Stewart did not complete her purchase of the property under the agreement of purchase and sale. I find as a further fact that Mr. Franklin suffered loss for which he must be compensated as a result. He is entitled to forfeiture of the $100,000 deposit in the hands of the real estate broker, as well as damages for loss of bargain and the carrying costs for the nine month delay in selling the property caused by her breach. The forfeited deposit will be applied to those damages as a credit.
[12] Mr. Franklin initially claimed damages as a result of Ms. Stewart’s breach:
(i) The difference in sale price: $460,000.00
(ii) Property Taxes: $11,579.64
(iii) Enbridge Gas: $1,265.94
(iv) Halton Hills Hydro: $1,408.39
(v) Insurance: $9,664.89
(vi) Property Maintenance: $5,266.40
(vii) Bell Home Security: 624.10
(viii) Interest on the bridge loan (Line of Credit): $58,736.20
(ix) Real Estate Legal Fees: 14,698.93
Total: $564,082.67
[13] In his submissions, Mr. Belsito waived the interest that accumulated on the bridge loan (line of credit) in the amount of $58,736.20. The damages claimed were therefore reduced to $505,346.47. After the $100,000 deposit is applied against those losses claimed as damages, the net amount owed by Ms. Stewart as the defendant to Mr. Franklin as the plaintiff is $405,346.47.
[14] Unopposed, judgement shall issue in the form of the draft, filed. I am satisfied by the evidence filed in support of the motion that the facts entitle Mr. Franklin as the plaintiff to the judgment granted.
[15] Costs of $7,500 all inclusive are awarded to Mr. Franklin for the motion and action.
[16] The plaintiff, Donald Neil Franklin, is granted judgment on the terms of the draft Judgment filed and signed by me.
Emery J.
Released: December 12, 2023
COURT FILE NO.: CV-22-00003574-0000
DATE: 2023 12 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FRANKLIN, DONALD NEIL
Plaintiff
- and -
STEWART, NICOLETTE
Defendant
REASONS FOR DECISION
Emery J.
Released: December 12, 2023