Michael Fulvio John De Rita v. 1266078 Ontario Inc.
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Michael Fulvio John De Rita, Applicant
AND:
1266078 Ontario Inc., Respondent
BEFORE: Justice M.A. Cook
COUNSEL: C. Mackenzie, Counsel for the Applicant N. Jomaa, Counsel for the Respondent
HEARD: May 31, 2023
ENDORSEMENT
Introduction
1By Notice of Application dated September 20, 2019, Michael Fulvio John De Rita (“Mr. DeRita”) sought orders permitting him to pay amounts owing to the Respondent, 1266078 Ontario Inc. under the terms of a mortgage made between the parties dated July 11, 2014; discharging the said mortgage from title to properties known municipally as 1250 and 1260 Ouellette Avenue, Windsor, Ontario (the “property”); and awarding him damages for the Respondent’s refusal to discharge the mortgage from the property and costs.
2The Respondent did not respond to the Application at first instance.
3On October 4, 2019, the Honourable Justice George made an order under s. 12(3) of the Mortgages Act, RSO 1990, c M.40 discharging the subject mortgage upon the payment into Court of the amount of $353,102.50 and adjourning the issues of damages and costs.
4On March 25, 2021, Mr. DeRita returned his Application to Court for an assessment of his damages and costs, on notice to the Respondent. Mr. De Rita seeks damages of $187,000.00 on account of the Respondent’s refusal to register the discharge in a timely manner, punitive damages, and his costs of this Application on a substantial indemnity scale.
5On April 15, 2021, the Respondent filed a Notice of Appearance and responding materials in the form of an affidavit of the Respondent’s directing mind, Anton Trojansek, Sr.
Background
6The parties entered into an agreement of purchase and sale for the subject property dated August 26, 2013. The transaction was to close on December 31, 2013.
7The Respondent failed to close the transaction. The Applicant sued for specific performance. The parties reached an out-of-court settlement by which the subject property was transferred to Mr. DeRita on July 11, 2014. As part of the consideration for the settlement and transfer, the parties entered into an interest-free vendor take-back mortgage (the “Mortgage”). The terms of the Mortgage were as follows:
Principal: $450,000
Balance Due: July 11, 2019
Interest: Nil
Payments: $1,500.00 per month payable on the 11th day of each month
First payment: March 11, 2015
Last payment: July 11, 2019
8The transfer and Mortgage transactions closed on July 11, 2014 in accordance with the terms of settlement of the action for specific performance. However, shortly after the transaction closed, Mr. DeRita discovered that the gas-fired boiler system in the subject property had been decommissioned, prior to closing and without notice to Mr. De Rita. Mr. DeRita commenced a second lawsuit, this time for damages (the “Windsor Action”).
9The trial of the Windsor Action was scheduled to begin on May 27, 2019. On the eve of trial, on May 24, 2019, the Windsor Action was pre-tried by Justice G. King. The Windsor Action was settled on terms that required the Respondent to pay Mr. De Rita the sum of $20,000.00, which would be set off against the amounts owing on the Mortgage.
10On May 24, 2019, Mr. De Rita delivered signed minutes of settlement prepared by Ms. Mackenzie, to reflect the resolution of the Windsor Action. The draft minutes stated:
The Defendants 166078 ONTARIO INC. shall pay to the Plaintiff, MICHAEL FULVIO JOHN DE RITA the sum of $20,000.00 inclusive of HST and disbursements in the manner set out at paragraph 2 herein.
The Defendant, 1266078 ONTARIO INC. shall satisfy the payment set out in paragraph 2 herein, by reducing the amount of the principal of the vendor take back mortgage owing by the Plaintiff to 1266078 Ontario Inc. …by $20,000.00 at the time of maturity of said mortgage (July 11, 2019). The Defendants shall produce a mortgage discharge statement which credits the Plaintiff for $20,000.00 at the time that the balance of the mortgage is paid out and discharged.
11On May 27, 2019, the Respondent’s lawyer of record in the Windsor Act, Mr. Reynolds, and Ms. Mackenzie exchanged email correspondence by which Mr. Reynolds confirmed the terms of settlement and addressed settlement mechanics. Mr. Reynolds wrote:
I have reviewed your draft settlement agreement. The only thing I would add is for the exchange of releases. This can be done now or at the time of the discharge if your client wants a release from the defendants. We will also need an order dismissing the action to be filed in July. I confirm that Justice King has advised the trial coordinator that our matter is settled and that our attendance is not required.
12Mr. Reynolds confirmed to Ms. Mackenzie that he would be acting for the Respondent with respect to the discharge and would prepare and deliver the discharge statement in due course as was contemplated by the minutes of settlement.
13In furtherance of the settlement, Mr. Reynolds delivered a letter to Ms. Mackenzie dated May 27, 2019 again confirming the settlement and enclosing draft releases and a consent to dismiss the Windsor Action.
14On June 7, 2019, Mr. Reynolds delivered to Ms. Mackenzie a draft mortgage discharge statement showing the amount payable on July 11, 2019, net of the settlement amount, was $341,972.05 including a discharge fee. Mr. Reynolds also delivered the draft discharge, signed by him for registration.
15On June 18, 2019, Mr. Reynolds met with Mr. Trojansek to review and execute the settlement documentation. Mr. Trojansek refused to sign the minutes of settlement or the discharge statement or the acknowledgment and direction in relation to the draft discharge.
16On June 19, 2019, Mr. Reynolds sent an email to Ms. Mackenzie asserting that there was an error on the draft mortgage discharge statement and that the principal amount owing on the Mortgage was $372,000.00. The adjustment came at the demand of Mr. Trojansek. Further discussions took place about the payout amount. Mr. Reynolds did not prepare an amended discharge statement because Mr. Trojansek was “simply…not going to sign another one”.
17On July 11, 2019, Mr. De Rita was unable to deliver funds set out in the draft discharge statement provided by Mr. Reynolds. Mr. DeRita sought an extension of time to deliver the payout amount, which was denied by the Respondent. The Respondent indicated that it would be “exercising its full rights” in light of Mr. De Rita’s default.
18On July 29, 2019, Mr. De Rita’s lawyer prepared and delivered an amended discharge statement showing the net amount owing to the Respondent as $353,102.05, which included the ‘correction’ to the principal amount owing to $372,000.00 as demanded by the Respondent, and adding interest for the period July 11 - 31, 2019 (the “De Rita Statement”.
19On July 31, 2019, Mr. De Rita delivered certified funds in the amount of $353,102.05 to Mr. Reynolds in accordance with the De Rita Statement.
20Mr. Reynolds met with Mr. Trojansek on July 31, 2019 to review the revised discharge statement and to confirm receipt of the $353,102.05. Mr. Trojansek refused to sign the revised discharge statement or to provide instructions to accept payment of the $353,102.05 in satisfaction of the Mortgage.
21On August 13, 2019, Ms. Mackenzie wrote an email to Mr. Reynolds demanding that the Mortgage be discharged and that the Respondent’s failure to discharge threatened Mr. De Rita’s ability to close three pending real estate transactions. Ms. Mackenzie further notified the Respondent that Mr. De Rita would hold the Respondent accountable for losses occasioned by the Respondent’s failure to discharge the Mortgage and for costs on a substantial indemnity scale if Mr. De Rita was forced to seek the assistance of the Court to discharge the Mortgage.
22On August 15, 2019, Mr. Reynolds advised Ms. Mackenzie that he was not retained by the Respondent in relation to the discharge and asserting that his retainer had concluded at the pre-trial of the Windsor Action. Mr. Reynolds further indicated that he was not aware until August 13, 2019 that there was any urgency to the discharge, and that he would “take another run at Mr. Trojansek” to see if he might sign off on it.
23Mr. De Rita commenced this Application for an order discharging the Mortgage from title upon him paying into court in funds sufficient to satisfy the underlying debt obligation. Mr. De Rita also sought damages from the Respondent caused by the Respondent’s refusal to discharge the Mortgage and costs on a substantial indemnity scale.
24The Respondent did not respond to the Application.
25On October 4, 2019, Mr. Justice J. George made an order discharging the Mortgage from title to the property upon Mr. De Rita paying the sum of $353,102.05 into Court. The Amended Order of George J. (as he then was) dated October 4, 2019 states:
THIS COURT ORDERS THAT the Applicant pay $353,102.50 into Court which represents the full amount due under the mortgage ($352,000) plus an additional amount of $1,102.50 to stand to the credit of this within Application pending the hearing of the Applicant’s damages on a date to be set pursuant to paragraph 3 herein:
THIS COURT ORDERS THAT the within Application shall be adjourned to a special appointment to be set by the Trial Coordinator for the purpose of an assessment of the Applicant’s damages and costs arising from the Respondent’s failure to discharge upon payment of the mortgage in full. The special appointment will be heard on November 13, 2019 at 10:00am for one hour.
THIS COURT ORDERS THAT the Applicant may proffer evidence on the damages assessment hearing by way of further Affidavit evidence, subject to cross examination if the Respondent elects to participate in these proceedings.
THIS COURT ORDERS THAT the costs of this Application are reserved to the Honourable Judge who presides at the damages assessment hearing.
26The discharge of the Mortgage was finally registered on October 5, 2019.
27On October 22, 2019, Mr. De Rita was able to complete a planned refinancing of the subject property.
28In March 2021, Mr. De Rita returned his Application to the Court, on notice to the Respondent, for an award of damages caused by the Respondent’s refusal to deliver the discharge, punitive damages, and costs.
29Mr. De Rita claims damages caused by the Respondent’s refusal to register the discharge in a timely manner. In particular, Mr. De Rita claims that the Respondent’s refusal to register the discharge prevented him from refinancing the subject property with the result that he failed to close an agreement to purchase an investment property at 953 Bruce Avenue, Windsor Ontario (the “Bruce Avenue deal”).
Analysis
30The only issues before me at this stage of the proceeding are the issue of damages and costs of the Application.
31Despite the narrow scope of the remaining issues in this Application, the parties filed extensive materials touching on matters well beyond the scope of assessment before me. In particular, the Respondent filed a responding affidavit from Mr. Trojansek by which Mr. Trojansek asserts that:
a. The Applicant did not pay a $5,000 deposit towards the purchase price of the property at the time the parties entered into the agreement of purchase and sale;
b. The Applicant was supposed to start making mortgage payments in March 2015 but did not do so until eight months later;
c. The Applicant did not pay the balance owing on the mortgage on July 11, 2019;
d. That the Respondent would be exercising “its full rights on default”;
e. That the Applicant is not entitled to damages of $188,000 for loss of profits and loss of deposit.
f. That the Respondent was not a party to the Bruce Avenue transaction.
32Given the Order of George J. dated October 4, 2019, most of Mr. Trojansek’s evidence is irrelevant. Justice George’s Order dated October 4, 2019 was a final determination of the amount owing on the Mortgage and of Mr. De Rita’s entitlement to a discharge. Justice George made his order on the strength of the unchallenged evidence of Mr. De Rita that:
a. the agreement of purchase and sale for the subject property was valid and enforceable;
b. the parties reached a settlement of the Windsor Action, the terms of which were set out in draft minutes of settlement that were reviewed and substantially approved by Mr. Reynolds on behalf of the Respondent;
c. the amount owing on the Mortgage as of July 11, 2019 was $352,000 (net of the settlement amount); and
d. Mr. De Rita could not pay the Mortgage until July 29, 2019, in part because he did not have a signed discharge statement from the Respondent.
33It is not open to the Respondent to challenge the validity of the real estate transaction or Mortgage (both of which closed in July 2014) or, importantly, Mr. De Rita’s entitlement to a discharge of the Mortgage on July 31, 2019 when he delivered payout funds by certified cheque.
34The Respondent did not appeal the Order of Justice George dated October 4, 2019, nor did it seek to set aside or vary the order. The issues of the amounts owing on the Mortgage as of July 31, 2019 and Mr. De Rita’s entitlement to a discharge as of payment on that date were finally resolved by the Order of Justice George dated October 4, 2019 and the subsequent registration of the discharge: Mortgages Act, R.S.O. 1990, c. M-40, ss. 12(9), 12(10).
35The only issues to be addressed are whether Mr. De Rita is entitled to damages as a result of the Respondent’s failure to discharge the Mortgage in a timely manner, and the issue of costs.
Mr. De Rita’s Claim for Damages
36In his Notice of Return of Application dated March 2021, Mr. De Rita seeks damages “arising from the Respondent’s failure to comply with a settlement” of the Windsor Action “including the Respondent’s refusal to sign a discharge statement and his refusal to authorize that a discharge of that mortgage be registered against the Applicant’s property…”.
37The Respondent denies any liability for damages and makes five submissions in support of its position:
a. The Respondent did not commit any actionable wrong that can sound in damages;
b. Mr. De Rita’s damages were not caused by the Respondent’s refusal to discharge the Mortgage;
c. Mr. De Rita failed to mitigate his losses; and
d. The damages suffered, if any, ought to be assessed as of the date of the breach and not as of September 2020 when the Bruce Avenue property was sold.
38With these issues in mind, I turn to the assessment of Mr. De Rita’s damages.
Issue 1: What damages have been properly claimed?
39The Respondent argues that Mr. De Rita’s request for relief, as it appears in the Notice of Return of Application, constitutes an improper amendment to Mr. De Rita’s initial Notice of Application, and that the Applicant’s alleged failure to comply with the settlement of the Windsor Action and the purported refusal to sign a discharge statement are irrelevant to an assessment of damages. The Respondent further argues that terms of the Order of Justice George dated October 4, 2019 restricts the damages available to Mr. DeRita. I disagree.
40A notice of application may be amended in the same manner as a pleading: r. 14.09. In an action, a statement of claim may be amended without leave or consent of the defendant before pleadings are closed as long as the amendment does not involve the addition, deletion, or substitution of a party: r. 26.02(a).
41In this case, Mr. De Rita’s Notice of Return of Application dated March 25, 2021 was served before the Respondent served a Notice of Appearance or any responding affidavit materials. The delivery of the Notice of Return of Application is analogous to a plaintiff delivering an amended pleading prior to the close of pleadings. Mr. De Rita had a presumptive right under r. 26.02(a) to amend the relief sought in his Application.
42In any event, pleadings in an application include the affidavits filed in support of the relief sought: Energy Probe v. Canada (Attorney General), 1989 258 (ON CA). In his affidavit sworn September 19, 2019, Mr. De Rita set out a chronology of the dealings between the parties, including the events giving rise to the real estate transaction, the later events giving rise to the Windsor Action, the fact that the Windsor Action was settled, the terms of the settlement of the Windsor Action as they were set out in the draft minutes of settlement circulated on May 24, 2019 and approved in principle by the Respondent’s lawyer on March 27, 2019, and the events relating to the Respondent’s sustained refusal to deliver a discharge statement or discharge of the Mortgage. All of those facts support a request for damages for breach of contract.
43Nor do I agree that Justice George’s Order limits the scope of relief available to Mr. De Rita. The Order of Justice George dated October 4, 2019 was made before Mr. DeRita amended the relief sought in his Application. There is no principled reason to read the Order of Justice George in a manner that defeats Mr. De Rita’s presumptive right to amend. The Respondent has not asserted lack of notice or other prejudice, and I find none.
44I am satisfied that it is appropriate in all the circumstances that I assess damages as requested in Mr. De Rita’s Notice of Return of Application for breaching the settlement of the Windsor Action, including the Respondent's refusal to sign a discharge statement and his refusal to authorize that a discharge of the Mortgage be registered against the Applicant's property.
Issue 2: Did the Respondent commit an actional wrong to support the damages claimed?
45The Respondent submits that its failure to deliver a discharge statement or discharge for registration does not constitute an actionable wrong that can support Mr. De Rita’s claim for damages. The Respondent submits that that section 12(3) of the Mortgages Act, RSO 1990, c. M40 provides a complete remedy to a party in Mr. De Rita’s position faced with a mortgagee’s refusal to discharge a paid mortgage.
46I disagree. The Mortgage, registered by the Respondent on title to the subject property, incorporated by reference standard charge terms no. 200023 which provides, at s. 23, that the “Chargee shall have a reasonable time after payment in full of the amounts secured by the Charge to deliver for registration a discharge…” This provision created a positive obligation on the part of the Respondent to deliver for registration a discharge within a reasonable time after Mr. De Rita paid the amounts secured by the Mortgage in full.
47What constituted a “reasonable time” for the Respondent to deliver a discharge? Where, as in this case, “a party to a contract undertakes to do an act, the performance of which depends entirely on himself and the contract does not specify a time of performance, the law implies an obligation to perform the act within a reasonable time having regard to all the circumstances”: Chitty on Contracts, 31st ed. (2012), Vol. 1, 21-012 at p. 1566.
48The reasonable expectation of the parties is a central consideration in evaluating what is a reasonable time for performance: Waterman v. IBM Canada Ltd. 2013 SCC 70 (S.C.C.) at para. 72. Section 23 of the charge terms expressly recognizes Mr. De Rita’s reasonable expectation that the Respondent would release any security it held upon Mr. De Rita’s payment of all amounts payable under the Mortgage. Given that the sole reason for the mortgage was to secure repayment of the underlying debt, it was reasonable for Mr. De Rita to expect a timely release of all security upon full payment.
49The time for the Respondent to deliver a discharge is also informed by the nature and purpose of the charge as it was registered in the Ontario land titles system. The purposes of the Act and the principles underlying it were summarized by Epstein J in Durrani v. Augier, 2000 22410 (ON SC), at paras. 41-42:
The essential purpose of land titles legislation is to provide the public with security of title and facility of transfer: Di Castri, Registration of Title to Land, vol. 2 looseleaf (Toronto: Carswell, 1987) at p. 17-32. The notion of title registration establishes title by setting up a register and guaranteeing that a person named as the owner has perfect title, subject only to registered encumbrances and enumerated statutory exceptions.
The philosophy of a land titles system embodies three principles, namely, the mirror principle, where the register is a perfect mirror of the state of title; the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register; and the insurance principle, where the state guarantees the accuracy of the register and compensates any person who suffers loss as the result of an inaccuracy. These principles form the doctrine of indefeasibility of title and [are] the essence of the land titles systems system: . . .
50The mirror principle is reflected in s. 78 of the Land Titles Act, RSO 1990, c. L-5 which states:
78(4) When registered, an instrument shall be deemed to be embodied in the register and to be effective according to its nature and intent, and to create, transfer, charge or discharge, as the case requires, the land or estate or interest therein mentioned in the register.
51The mirror principle demands that a mortgagee who has received full payment of amounts secured by the mortgage proceed with diligence to remove the charge from title. Otherwise, the register is not a mirror of the true state of title. I would expect that 7-10 business days would normally provide a mortgagee with ample time to deliver the discharge.
52Practically speaking, lenders are often slow discharge a charge after receiving payment of the underlying debt. If the owner is not intending to deal with the property, the delay does not cause concern. The situation changes, however, when a third party is basing decisions on inaccurate information on the register. Given the mirror principle, a cloud on title creates an immediate impairment to an owner’s ability to deal with their property. In a purchase and sale transaction, failure to remove a registered encumbrance on title defeats the ability of a vendor to deliver good title. In a lending transaction, a prior registered charge fixes priorities and implicates a lender’s willingness to advance funds.
53Thus, the reasonable time for performance accelerates once a mortgagee receives notice that a spent charge is clouding title and impairing the owner’s interests. If, upon receiving full payment and notice, a mortgagee fails to deliver a discharge, it may find itself liable for tortious slander of title in addition to breach of contract.
54Thus, the Respondent’s obligation to deliver the discharge crystallized on July 31, 2019, and it reasonably enjoyed 7-10 business days to perform. The evidence is that the Respondent’s lawyer had prepared a draft discharge statement and discharge as early as June 7, 2019 in anticipation of the payout and settlement of the Windsor Action. Mr. Trojansek simply refused to sign.
55I accept Mr. Reynold’s evidence that he was not aware until August 13, 2019 that the continuing registration of the Mortgage constituted a cloud on title which was impairing Mr. De Rita’s right and ability to deal with the subject property. This is a red herring. Notice was not a condition precedent to the Respondent’s obligation to deliver the discharge, it just created urgency to Mr. De Rita’s demand for performance.
56The Respondent did not deliver the discharge because it made an informed and strategic choice not to do what was required of it, within a reasonable time. The Respondent’s refusal to deliver a discharge statement or discharge for registration within two weeks of Mr. De Rita’s payment, or by August 14, 2019, breached the Respondent’s contractual obligation to deliver a discharge within a reasonable time.
57I further find that the Respondent’s sustained refusal to deliver either the discharge statement or discharge for registration after the August 13, 2019 demand letter constituted bad faith in its performance of his obligations under the terms of the Mortgage and the settlement of the Windsor Action, based on the reasoning in Bhasin v. Hrynew, 2014 SCC 71.
Issue 3: What is the correct measure of Mr. De Rita’s damages?
58There are four overarching principles in assessing Mr. De Rita’s damages claim.
59First, the amount of damages awarded to Mr. De Rita must be sufficient to put him in the same position as if the contract had been performed. Protection of the plaintiff’s expectancy interests is necessary if the law is to promote and facilitate reliance on business agreements in the commercial marketplace.
60Second, the damages which Mr. De Rita 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.” : Hadley v. Baxendale (1854), 9 Exch. 341 at 355, 156 E.R. 145 at 151:
61Third, the principle of mitigation imposes on Mr. De Rita the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps: British Westinghouse Electric and Manufacturing Company, Limited v. Underground Electric Railways Company of London, Limited, at p. 689, cited with approval in Asamera Oil Corporation Ltd. v. Sea Oil & General Corporation et al., 1978 16 (SCC), [1979] 1 SCR 633 at p. 660.
62Mr. De Rita bears the burden of proving his damages on the balance of probabilities. Where damages are difficult to assess, the court must do the best it can in the circumstances: Chaplin v. Hicks, [1911] 2 K.B. 786; Wood v. Grand Valley Railway Company, 1915 CanLII 574 (SCC).
(a) Loss of opportunity
63At the time of the Respondent’s breach, Mr. De Rita had entered into agreements of purchase and sale to acquire two investment properties in Windsor at 3135 Russell Street and 953 Bruce Avenue.
64I accept Mr. De Rita’s evidence that he planned to use the equity in the subject property to finance the purchase of both new properties. The agreement of purchase and sale for the Bruce Avenue property dated April 17, 2019 was scheduled to close on July 12, 2019, the day after the Mortgage matured. The agreement of purchase and sale for the 3135 Russell Street property dated July 6, 2019 was scheduled to close on August 20, 2019.
65When it became clear to Mr. De Rita that the Mortgage would not be discharged in time to allow him to refinance the subject property and close the two pending transactions, he sought to extend the closing for each of the transactions.
66The vendor of the Bruce Avenue property was Josef Sutherland. Mr. Sutherland’s evidence, which I accept, is that he consented to two extensions sought by Mr. De Rita and was prepared to close the Bruce Avenue transaction on July 11, 2019, August 28, 2019 and on September 30, 2019. When Mr. De Rita sought a third extension past September 30, 2019, however, Mr. Sutherland decided that the deal with no longer financially viable at the discounted $70,000.00 sale price and the deal terminated. Mr. De Rita lost his $1000 deposit on the Bruce Avenue deal.
67Mr. De Rita’s need for the first extension – from July 11, 2019 to August 28, 2019 - was unrelated to the Respondent’s conduct and breach of contract. Mr. De Rita needed more time to raise the funds necessary to pay out the Mortgage and free up the equity in the subject property to pursue the Bruce Avenue deal and other investment opportunities. Mr. De Rita did not secure that financing until July 26, 2019, and delivered certified funds to the Respondent on July 31, 2019. The Respondent refused instructions to its counsel to negotiate the certified cheque delivered and refused to deliver a discharge for registration.
68I find that the Respondent’s refusal to deliver a discharge statement and discharge for registration in a timely manner was the only reason that Mr. De Rita was unable to close the Bruce Avenue deal. Mr. De Rita’s lawyer provided the Respondent express written notice on August 13, 2023 that the charge constituted a cloud on title and threatened a pending transaction. Despite the notice, the Respondent did not deliver a discharge, and Mr. De Rita was unable close the Bruce Avenue deal without refinancing the subject property.
(b) Foreseeability/Remoteness
69In his submission, the Respondent denies liability for any the lost Bruce Avenue deal on the basis that such losses were not in the reasonable contemplation of the parties at the time the Mortgage agreement was made.
70The doctrine of remoteness excludes losses which were caused by the breach of contract, but which were not reasonably foreseeable when the contract was made. The rationale for the exclusion is that it would be unfair to require the defendant to pay such damages, when, if he had been aware of them, he might have declined the risk or made other arrangements: Hadley v. Baxendale (1854), 156 E.R. 145 at 151.
71A party registering a charge against title to property of another must foresee the consequences of continuing to encumber title once the charge is spent. Slander of title is a tort premised upon the foreseeability of such harm. As discussed above, a cloud on title may impact an owner’s interest in lands in any number of ways, but each is a foreseeable consequence of impairing title after the amounts secured by a mortgage have been repaid.
72The Respondent, and its directing mind, Mr. Trojansek, are experienced real estate investors and mortgage lenders. Mr. Trojansek knew that Mr. De Rita was earning a living buying, selling, and managing a portfolio of commercial real estate in Windsor, and that he was acquiring the subject property with a view to earning a profit. I find that it was reasonably foreseeable to the Respondent that unlawfully impairing title to the subject property would threaten Mr. De Rita’s access to the equity in his real estate and result in lost business opportunities.
73Due to his mitigation efforts, including bringing this Application to obtain an order for a discharge of the Mortgage, Mr. De Rita was able to complete the refinancing of the subject property and complete the purchase of 3135 Russell Street on October 23, 2019. His mitigation efforts were significant, but there were not enough to salvage the Bruce Avenue deal.
(c) Mitigation
74In Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 SCR 675, at para. 45, the Supreme Court confirmed that, “where it is alleged that a plaintiff has failed to mitigate damages, the onus of proof on a balance of probabilities lies with the defendant, who must establish not only that the plaintiff failed to take reasonable efforts to find a substitute, but also that a reasonable profitable substitute could be found.”
75The Respondent argues that Mr. De Rita did not reasonably mitigate his losses. I disagree.
76I accept Mr. DeRita’s evidence that he had to call on all his available resources to pay off the Mortgage. Indeed, he breached the terms of the Mortgage when he was unable to pay the outstanding balance upon maturity on July 11, 2019 because he needed additional time to raise the necessary funds. He was able to deliver the full amount payable under the Mortgage on July 31, 2019.
77After paying off the Mortgage, effectively all of Mr. De Rita’s available equity was tied up in the subject property. His ability to complete the purchase of 953 Bruce Avenue and 3135 Russell Street was dependent on his ability to refinance the subject property and use the proceeds to complete the pending deals.
78The Respondent has failed to demonstrate that Mr. De Rita had sources of funding other than the subject property that he could have used to purchase 953 Bruce Avenue or 3135 Russell Street. To the contrary, Mr. De Rita’s affidavit evidence and his financial records indicate that his various lending facilities were close to fully drawn.
79In mitigation of his situation, the Respondent was put to the time and expense of bringing this Application to clear title. Once he secured the Order of Justice George on October 4, 2019, Mr. De Rita completed the refinancing transaction on October 22, 2019, and used the proceeds to complete the purchase of 3135 Russell Street.
80By October 22, 2019, when he had the proceeds of the refinancing available to him. Mr. De Rita had lost the Bruce Avenue deal.
81There is no evidence that Mr. DeRita could have acquired a comparable investment property with the remaining available mortgage proceeds. He did not acquire any other investment property (other than 3135 Russell Street) in 2019. This may be because the Bruce Avenue deal was unique given that the property was being sold under distress for $7,000 less than Mr. Sutherland’s 2008 acquisition cost. There is no evidence before me to suggest that a comparable property was available to Mr. De Rita in mitigation, especially given his very limited resources. After completing the 3135 Russell Street transaction in October 2019, Mr. DeRita did not purchase another property until January 2021.
(d) Date of Assessment of Loss
82It is well settled that the date of breach “remains a starting point for the assessment of loss, modified only to the extent that the innocent party satisfies the court that a later date is appropriate on the grounds that it is the first date upon which the party could reasonably have expected to re-enter the market and mitigate its damages.”: Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259 (“Akelius”)
83Mr. De Rita argues that damages in this case should be assessed at the date of trial because the Bruce Avenue property was unique, and damages should be awarded notionally on the basis of specific performance. I disagree. While the Bruce Avenue deal was unique because the vendor was distressed and selling at a discounted price, there was nothing unique about the Bruce Avenue property. It was a commercial investment property. Mr. De Rita has led no evidence to support a finding that the property had a specific quality for which there was no readily available substitute: Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 S.C.R. 415, at paras. 21-22.
84I similarly cannot accede to the Respondent’s submission that there is no basis to assess damages from any date other than the presumptive date of breach. On the evidence before me, I find that the fairness of this case requires me to defer the assessment date to some point after from the date of the breach because:
a. The earliest date that Mr. De Rita could have re-entered the market to purchase a substitute property was on October 22, 2019 when Mr. De Rita was able to complete the refinancing of the subject property. Until that time, the Respondent’s conduct had effectively hobbled Mr. De Rita from re-entering the market;
b. There is no evidence that there was commercial real estate available for purchase in Windsor on or after October 22, 2019 that Mr. De Rita could have acquired in mitigation of his loss of the Bruce Avenue deal; and
c. Mr. De Rita had very limited resources with which he could realistically re-enter the market.
85In Asamera Oil Corporation Ltd. v. Sea Oil & General Corporation et al., 1978 16 (SCC), [1979] 1 SCR 633, the Supreme Court considered the appropriate date for the assessment of damages of an investor whose capital stock in a company were wrongfully withheld, causing a lost opportunity to sell shares in a fluctuating market. The Court held (at pp. 674-675) that the date of the breach of contract was the correct starting point but that the appropriate assessment date on the facts of the case was deferred to a later date because the innocent party would need some reasonable amount of time “to permit the organization of the finances and mechanics required for the careful acquisition of 125,000 shares”. The result was that the date for the assessment of damages was deferred by a year even in circumstances where a perfect substitute property was available to the innocent party.
86I find the reasoning in Asamera, supra, apposite in this case involving the assessment of damages for Mr. De Rita’s lost opportunity to acquire an investment property in a sharply rising market. While Mr. De Rita was under an obligation to mitigate his losses, I find that the circumstances were such that he would require a reasonable allowance of time in which to identify a reasonable substitute investment property and raise the necessary finances to purchase. This case is not like Akelius, supra, where the plaintiff had vast resources that it could immediately redeploy in the global commercial real estate market in mitigation of its loss. Mr. De Rita had very limited financial resources to redeploy because the Bruce Avenue deal was cheap and because Mr. De Rita’s other financial resources were very limited. In the circumstances, I find fairness requires the assessment date to be deferred by 6-12 months after October 22, 2019 (when Mr. De Rita had access to the equity in the subject property) to locate a substitute property, raise the necessary financing, and re-enter the market in a sharply increasing market. This time allowance is conservative given that Mr. DeRita did not actually re-enter the market until January 2021, but it is informed by the importance of timely mitigation.
(e) Estimate of Damages
87Mr. De Rita’s damages for lost opportunity falls into the category of cases where the assessment is difficult due to the nature of the loss to be proved. However, the difficulty of assessment is no ground for refusing Mr. De Rita substantial damages, even to the point of resorting to guess work: Eastern Power Ltd. v. Ontario Electricity Financial Corp., 2010 ONCA 467, at para. 75.
88I have found that Mr. De Rita had an obligation to mitigate his loss of opportunity, but that he would reasonably need about 6-12 months to acquire a substitute property because of the very low value of the Bruce Avenue deal combined with Mr. De Rita’s very limited financial resources.
89The only evidence of real estate value before the Court is the $257,000.00 price attained by Mr. Sutherland when he sold 953 Bruce Avenue in September 2020. That sale completed approximately 11 months after Mr. De Rita was able to access the equity in the subject property.
90I find that $257,000.00 is a reasonable, albeit imperfect, estimate of what a replacement property comparable to 953 Bruce Avenue would have cost Mr. De Rita approximately 11 months after he had access to the equity in the subject property. Using that figure results in estimated damages of $187,000 for the loss of the Bruce Avenue deal.
91For the reasons stated above, I find that 11 months is at the high end of a reasonable time allowance to permit Mr. De Rita to have found a substitute investment property outside of the allowance. By discounting the 11-month loss by 18.18%, I arrive at an adjusted figure of $153,000.00 based on Mr. De Rita re-entering the market 9 months after completing the refinancing transaction, or by the end of July 2020. Any loss of opportunity past that time is reasonably on Mr. De Rita.
92The Respondent relies on Akelius, supra, for the proposition that Mr. De Rita is not entitled damages reflecting the capital appreciation of the Bruce Street property because he intended to hold the Bruce Avenue property as a long-term investment rather than a speculative investment. Akelius does not stand for the proposition asserted by the Respondent. Rather, Akelius affirms that the presumptive date for assessment of damages for breach of contract is the date of the breach.
93In Akelius, this Court held that the plaintiff did not suffer any loss because it was in a position to immediately re-enter the market using the money it had to close the failed acquisition of commercial property in Toronto. The Court of Appeal upheld the trial court decision, affirming that the date of the breach was an appropriate assessment date, and finding that the claimed loss in capital appreciation in the property, “in and of itself” was not available on the facts of the case because it was not in the reasonable contemplation of the parties at the time of the agreement. The Court of Appeal wrote, at para. 32:
No doubt, the ultimate return on the properties is part of the long-term planning, but the capital appreciation in and of itself some two and a half years later does not, in these circumstances, prove the appellant’s loss or the earliest date it could have re-entered the market. The capital appreciation of the properties would be relevant to the extent that it was in the reasonable contemplation of the parties at the time of the agreement: see for example Kipfinch Developments Ltd. v. Westwood Mall (Mississauga) Limited, 2010 ONCA 45, at paras. 14-15. However, all the evidence indicates that, based on its business model, the appellant was not a property speculator but a long-term investor, and this would have informed the parties’ reasonable contemplation at the time of the agreement.
94Mr. De Rita does not seek damages for capital appreciation in the Bruce Avenue property. Rather, Mr. De Rita’s claim is for damages in an amount equal to his cost of acquiring a comparable investment property in the aftermath of the Respondent’s breach.
95I find it appropriate to discount the estimated loss of $153,000.00 to reflect Mr. De Rita’s failure to invest or otherwise utilize the excess available proceeds of the refinancing transaction to reduce his loss until he was able to acquire a substitute property. Using a 5% return on the $70,000.00 earmarked for the Bruce Avenue deal over 9 months, I reduce the global damages estimate by $2,625.00 to $150,375.00.
96While the damage award is substantial, I bear in mind that the Respondent had the opportunity to avoid Mr. De Rita’s loss at all times up until September 30, 2019 but chose not to do so.
Punitive Damages
97Mr. De Rita seeks punitive damages of $25,000.00 for what he describes as the Respondent’s arbitrary, high-handed, and bad faith conduct.
98The basic principles governing an award of punitive damages were concisely summarized by Cory J., speaking for the Court, in Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130 at para. 196:
Punitive damages may be awarded in situations where the defendant's misconduct is so malicious, oppressive and high‑handed that it offends the court's sense of decency. Punitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant. They are in the nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in this manner. It is important to emphasize that punitive damages should only be awarded in those circumstances where the combined award of general and aggravated damages would be insufficient to achieve the goal of punishment and deterrence.
99Punitive damages are rarely awarded in a case involving breach of contract. To attract punitive damages, the plaintiff must demonstrate a separate actionable wrong – i.e., the breach of a different obligation under the contract or other duty, such as a fiduciary obligation: Vorvis v. Insurance Corporation of British Columbia, 1989 93 (SCC); Whiten v. Pilot Insurance Co., 2002 SCC 18 [Whiten] and CivicLife.com Inc. v. Canada (Attorney General), (2006), 2006 20837 (ON CA), 215 O.A.C. 43
100In this case, I find that the Respondent’s misconduct was egregious, oppressive, malicious, and high handed. However, Mr. De Rita has not advanced any independent actionable wrong that could reasonably support an award of punitive damages in this case. There is no doubt in my mind that the Respondent’s refusal to deliver a discharge constituted bad faith conduct that was animated by a desire to recovery the subject property and perhaps out of retribution. However, I find that the breach of the Respondent’s contractual obligation of good faith cannot satisfy the requirement for an independent actionable wrong because it involves the very same conduct (refusal of discharge) as constituted the breach of contract. In any event, I am satisfied that the compensatory damages awarded to Mr. De Rita are sufficient to achive the goals of punishment and deterrence given the Respondent’s arbitrary, mendacious, and inexcusable conduct.
101Mr. De Rita’s claim for punitive damages is dismissed.
Disposition
102Mr. De Rita’s damages are assessed at $150,375.00.
103In light of these reasons, I exercise my discretion under s. 130 of the Courts of Justice Act, RSO 1990, c. 43 to award pre-judgment interest on the damages amount only from July 31, 2020 at the applicable statutory rate of 0.5% per year. To award interest from the date of the application would be duplicative.
104Damages and pre-judgment interest shall be paid out of court from the funds paid into Court on account of this application.
Costs
105During oral submissions, the parties agreed that it would be appropriate to address the issue of costs following release of my decision on damages. The parties joint request is consistent with the procedure contemplated under r. 57.01(5) which requires a party seeking costs to serve and file a Bill of Costs following disposition of the proceeding.
106If the parties are unable to agree on the costs of this Application, Ms. Mackenzie (or her agent) may file submissions concerning costs on or before October 17, 2023. Mr. Jomaa may file submissions concerning costs on or before October 24, 2023. Costs submissions of both parties shall be no more than five pages in length, plus any offers to settle and bills of costs, and shall be spaced one point five spaces apart, with no less than 12-point font. Any caselaw referenced in the submissions shall be hyperlinked and not filed as a separate book of authorities. Any evidentiary references shall be made to the Caselines Master page referencing.
Justice M.A. Cook
Date: October 3, 2023