NEWMARKET COURT FILE NO.: CV-23-5870-00 DATE: 20240716 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Wei Wei Plaintiff/Moving Party – and – Lingyu Meng Defendant/Responding Party

Counsel: G. Weedon, for the Plaintiff (Moving Party) S. Hsia, for the Defendant (Responding Party)

Heard: June 19, 2024

DECISION ON SUMMARY JUDGMENT MOTION

CAMERON J. :

Overview:

[1] The action arises from an aborted real estate transaction for the purchase of a new construction property municipally known as 33 Albert Firman Line, City of Markham (the “Property”) from Stateview Homes (On the Mark) Inc. (the “Builder”). The Defendant was the purchaser pursuant to an agreement with the Builder dated April 2, 2020 (the “New Build Agreement”). On September 26, 2021, the parties entered into an assignment of agreement of purchase and sale (the “Assignment Agreement”) for the assignment of the New Build Agreement and Property (the Plaintiff being the Assignee and the Defendant being the Assignor therein). The Builder subsequently went bankrupt and the receiver, via court Order, terminated all agreements in the project.

[2] The Plaintiff submits that the Assignment Agreement provides for the return of monies paid should the New Build Agreement be terminated or otherwise cancelled by the Builder. The Plaintiff seeks a declaration that the Defendant breached the Agreement and seeks an order for damages in the amount of $148,021.23 for breach, representing an Assignment Fee paid by the Plaintiff in connection with the Assignment Agreement.

[3] The Defendant maintains that the Assignment Agreement does not entitle the Plaintiff to a refund.

[4] The Plaintiff submits that this is an appropriate case to be determined by way of summary judgment motion. The Defendant disagrees. It is the Defendant’s position that fact finding and interpretation of various agreements, including the Assignment Agreement and the Builder’s consent, are required to fully adjudicate this dispute.

The Undisputed Facts:

[5] The Defendant purchased the Property, from Stateview Homes, in April 2020. The purchase price was 1.15 million dollars. The Defendant paid a deposit of $100,000.00. The Plaintiff and the Defendant executed the Assignment Agreement in September 2021. The Plaintiff purchased the Defendant’s legal interest in the Property for approximately 1.32 million dollars.

[6] The Assignment Agreement contained the standard OREA Form 150, and Schedule A (additional provisions), Schedule B (payment schedule), and Schedule C (the original purchase agreement between the Defendant and Stateview Homes).

[7] The relevant portions of the Assignment Agreement are:

2. ASSIGNMENT: the Assignor agrees to grant and assign to the Assignee, forthwith all the Assignor’s rights, title and interest, in, under and to the Agreement of Purchase and Sale attached hereto in Schedule “C” [the New Build Agreement].

3. ASSIGNOR COVENANTS: the Assignor covenants and represents that: … (d) after acceptance of this Assignment Agreement until the earlier of termination or completion of the Agreement of Purchase and Sale [the New Build Agreement], the Assignor will not further assign the Agreement of Purchase and Sale.

4. APPROVAL OF THE AGREEMENT: In the event that consent to this Assignment is required to be given by the [Builder] in the [New Build Agreement], the Assignor will apply, at the sole expense of the Assignor, forthwith for the requisite consent, and if consent is refused, then this agreement shall be null and void and the deposit monies paid hereunder shall be refunded without interest or other penalty to the Assignee.

5. AGREE TO CO-OPERATE: Except as otherwise expressed herein to the contrary, each of the Assignor and Assignee shall, without receiving additional consideration therefor, co-operate with and take such additional actions as may be requested by the other party, acting reasonably, in order to carry out the purpose and intent of this Assignment.

6. DEFAULT BY SELLER [BUILDER]: The Assignee and Assignor acknowledge and agree that if this Assignment Agreement is not completed due to the default of the seller [Builder] for the Agreement of Purchase and Sale that is the subject of this Assignment, the Assignor shall not be liable for any expenses, losses or damages incurred by the Assignee and this Assignment Agreement shall become null and void and all moneys paid by the Assignee under this Assignment Agreement shall be returned to the Assignee in full without interest. [Emphasis added]

[8] The Parties, at Schedule “A”, added the following covenants, representations, and warranties to the standard OREA provisions :

BALANCE OF PAYMENT UNDER THIS ASSIGNMENT AGREEMENT: the Assignee will deliver the balance of payment for this Assignment Agreement as more particularly set out in Item 6 on Schedule B, subject to adjustments, with funds drawn on a lawyer’s trust account in the form of a bank draft or certified cheque to the Assignor prior to completing the transaction in the [New Build Agreement] to be held in trust without interest pending completion or other termination of the [New Build Agreement]. …

5. The Assignee will solely benefit from any/all credits from Builder on final closing. …. The assignee agrees to pay the balance of Purchase Price in the Schedule C and all adjustments on final closing date to the Builder in accordance with the New Build Agreement. … Assignment closing date: the third business day following assignee’s lawyer receiving the Builder’s execute consent document. Deposit schedule by Assignee:

6. Assignee shall deposit $100,000 upon acceptance of Assignment to listing brokerage;

7. Assignee shall pay to assignor the balance indicated as Schedule B by certified fund on Assignment closing date. … The parties agree to the following funds releasing schedule: The sum equal to the real estate fees plus HST from Listing brokerage trust account shall be released to Listing brokerage commission account on assignment closing date, Both parties agree that Listing brokerage can distribute the real estate fees on assignment closing date. The sum made less real estate fees, from Listing brokerage trust account, shall be released to the assignor on the assignment closing date. The sum received by assignor’s lawyer shall be released immediately to the assignor on assignment closing date. [Emphasis added]

[9] The parties negotiated a refund provision into Schedule A of the agreement. That provision states:

If eventually, the Builder decides to cancel the project and the cancellation confirmation has been delivered to the purchaser, the assignor shall return the difference which is Item 1 sch. B minus Item 2 sch. B to the assignee instantly. Given the transaction is not completed when the assignee is in default on closing day with builder, both assignee and assignor agree the assignor shall NOT return the difference which is Item 1 schedule B minus Item 2 Schedule B and deposit ($100,000) to assignee instantly.

[10] In accordance with the Assignment Agreement, the Plaintiff paid a $100,000.00 deposit (“Assignment Deposit”) to the listing brokerage, 5i5j Realty Inc., Brokerage and an assignment fee of $148,021.23 ($167,624.00 less HST) (“Assignment Fee”) to the Defendant via his counsel, Realink Law Professional Corporation. The Assignment Fee represents the profit made by the Defendant on assignment of the New Build Agreement to the Plaintiff.

[11] The Defendant subsequently obtained the Builder’s consent. By way of a document entitled ‘Assignment of Agreement of Purchase and Sale’ (the “Consent Agreement”) executed by the Parties, the Plaintiff became the de facto purchaser of the Property.

[12] The Builder was petitioned into bankruptcy by its creditors in May 2023. On or about May 2, 2023, in accordance with an Order of the Honourable Justice Steele, KSV Restructuring Inc. was appointed as the receiver and manager (the “Receiver”) of the property, assets, and undertakings of Stateview Homes (On the Mark) Inc. The Builder did not complete the subject dwelling on the Property. The Builder’s debts exceeded its assets; there were not enough assets left to pay back deposits paid by purchasers in the project. The Receiver listed the lands (including the Property subject to the New Build Agreement) for sale to pay creditors in accordance with a court approved sale process.

[13] Pursuant to an Order of the Honourable Justice Cavanagh, dated September 14, 2023 (the “AVO”), the Builder corporation was assigned into bankruptcy under the BIA, with the Receiver appointed its trustee. The Court approved a stalking horse transaction between the Receiver and 2077060 Ontario Inc. (the “Stalking Horse Purchaser”) and vested the Builder’s title and assets to the Stalking Horse Purchaser.

[14] The Receiver was provided with the right to resile, terminate, and disclaim all purchase agreements, inclusive of the New Build Agreement with the Plaintiff, in accordance with paragraph 9(a) of the AVO and Section 65.11 of the Bankruptcy and Insolvency Act (“BIA”). Pursuant to the AVO, dated September 14, 2023, the New Build Agreement was terminated and disclaimed. The AVO motion was brought by the Receiver, on behalf of the Builder. The Builder, by the Receiver, brought and consented to the AVO.

[15] The Plaintiff was provided with an option to enter into a new agreement with the Stalking Horse Purchaser provided she pay an additional $113,000.00 towards the purchase price, lose the $10,000 (plus HST) credit and showroom incentive, and agree to use alternative vendors and materials to complete the Property.

[16] The Plaintiff did not agree to enter into a new agreement with the Stalking Horse Purchaser. On November 16, 2023, the Builder (through the Receiver) provided notice that the New Build Agreement was disclaimed and terminated and that all rights and obligations contained therein were at an end.

[17] The Plaintiff has mitigated damages by filing a claim with Tarion Warranty Corporation for the return of the $100,000.00 Builder Deposit (“Tarion Claim”). In or about February 2024 the Tarion Claim was approved.

The Issues:

[18] There are two issues to be determined in this case:

1. Is this an appropriate case to be determined by way of summary judgment?
2. Does Article 17 (the Default provision) in the Assignment Agreement and/or the negotiated refund provision in Schedule A to the Assignment Agreement allow for the return of the Assignment Fee?

The Position of the Parties:

[19] The Plaintiff submits that this is an appropriate case to be determined by way of summary judgment as there is no genuine issue requiring a trial. There are no issues of credibility. This is a case that can be resolved on well-established principles of contractual interpretation. The failure of the Builder to close the transaction is a situation contemplated in the Assignment Agreement that requires the return of the Assignment Fee. The Assignment Agreement, when properly interpreted, demands the return of this sum.

[20] It is the position of the Plaintiff that Article 17 of the Assignment Agreement, clearly states that if the Builder defaults, the Assignment Agreement becomes null and void and any money paid by the Assignee under the Assignment Agreement will be returned.

[21] The Plaintiff submits that in addition to Article 17 of the Assignment Agreement, the refund provision in Schedule A of the Assignment Agreement makes clear that the parties negotiated a return of the Assignment Fee should the builder cancel the project.

[22] The Defendant submits that this is not a case that ought to be determined by way of summary judgment for two reasons. First, the Defendant submits that Article 17 of the standard OREA Assignment Agreement contains ambiguous language that has yet to be the subject of judicial interpretation. Therefore, this is an unsettled and novel question of law that ought not to be determined in a summary judgment motion. Second, the Defendant submits that the evidentiary record is incomplete. The Plaintiff’s communications with Tarion in negotiating the return of the Builder Deposit are unknown to the Defendant. The Plaintiff has taken the position that these communications are the subject of litigation privilege. The Defendant submits that an undertakings motion may be required to compel the Plaintiff to disclose what representations were made by the Plaintiff to Tarion in support of her application for the return of the Builder’s Deposit. The Plaintiff may have made admissions regarding her legal interest in the Property that inform the issues in this case.

[23] Should this Court determine that it is an appropriate case to be determined by way of summary judgment, the Defendant submits that Article 17 of the New Build Agreement which does not contain a definition of “completed” is ambiguous, unconscionable or unenforceable.

[24] The Defendant also submits that the Plaintiff had the opportunity to close the deal with the Stalking Horse Purchaser. She was not entitled to reject the offer of the Stalking Horse Purchaser and then claim that the Builder had failed to complete the transaction as contemplated in either Article 17 of the Assignment Agreement or the refund provision in Schedule A.

The Law and Analysis:

Issue #1: Should this case be determined by way of summary judgement?

[25] On a motion for summary judgment, pursuant to Rule 20.04(2) of the Rules of Civil Procedure R.R.O. 1990, Reg. 194, the court must be satisfied that there is no genuine issue requiring a trial. The moving party bears the legal burden of showing that there are no genuine issues for trial. There will be no genuine issue for trial where a judge can reach a fair and just determination on the merits of the motion. A judge can make such a determination where the process allows the judge to make necessary findings of fact; where the process allows the judge to apply the law to the facts; and where the process is a proportionate, more expeditious and less expensive means to achieve a just result. Hryniak v. Mauldin, 2014 SCC 7, 2014 1 S.C.R. 87 at para. 49.

[26] On a motion for summary judgment under Rule 20.04, a judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the court, without using the new fact-finding powers. If there appears to be a genuine issue requiring a trial, the motion judge should then determine if the need for a trial can be avoided by using the enhanced powers under Rule 20.04(2.1) which allow for the weighing of evidence, the evaluation of the credibility of a deponent and the drawing of any reasonable inference from the evidence.

[27] There will be no genuine issue requiring a trial if the summary judgment process provides the judge with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure. Hryniak, at para. 66. The respondent to a motion for summary judgment must provide facts and coherent evidence showing that there is a genuine issue for trial.

[28] While summary judgment is an important tool for enhancing access to justice and achieving proportionate, timely, and cost-effective adjudication, there is no imperative on the court to use it in every case: Trotter Estate, 2014 ONCA 841, 122 O.R. (3d) 625, at para. 49; Lesenko v. Guerette, 2017 ONCA 522, 416 D.L.R. (4th) 349, at para. 30; Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98 at para. 25. As affirmed by the Supreme Court in Hryniak, at para. 28, the overarching goal remains to have “a fair process that results in a just adjudication of disputes.”

[29] In my view, this is a case that can be determined by way of summary judgment as it turns on contractual interpretation. The goal of contractual interpretation is to determine the intent of the parties and the scope of their understanding giving the words used their plain, ordinary and grammatical meaning, consistent with the circumstances known to the parties at the time of formation of the contract. As stated by Justice Rothstein in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (S.C.C.) at para. 47:

The overriding concern is to determine “the intent of the parties and the scope of their understanding.” To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.

[30] Although the parties were unable to direct me to a case that has interpreted the language in Article 17 of the Assignment Agreement, this does not equate with a new or novel question of law. Contractual interpretation is not a new or novel question of law. As in Ritchie v. Castlepoint Greybrook Sterling Inc., 2020 ONSC 3840, on a summary judgment motion, the Court held that a trial was not necessary to resolve a contractual interpretation issue where the record was complete and detailed.

[31] I do not agree with the Defendant that the evidentiary record before me is not sufficient to determine the issues in this case. Although the Plaintiff successfully negotiated the return of the Builder Deposit with Tarion paid by the Plaintiff pursuant to the payment structure in the Assignment Agreement, the representations made by the Plaintiff in her negotiations with Tarion are irrelevant to the issues to be determined in this case. This case must be determined by an interpretation of the contracts entered into by the parties.

Issue #2: Does Article 17 (the Default provision) in the Assignment Agreement and/or the negotiated refund provision in Schedule A to the Assignment Agreement allow for the return of the Assignment Fee?

[32] It is settled law that a contract is to be interpreted as a whole. Ventas Inc. v. Sunrise Senior Living Real Estate (2007), 2007 ONCA 205, 85 O.R. (3d) 254 (Ont. C.A.) at para. 24. Contractual terms should be interpreted on a plain, everyday reading. A dispute as to the language or a contract does not necessarily mean that a contract or contractual term is ambiguous. Sabean v. Portage LaPrairie Mutual Insurance Company, 2015 NSCA 53.

[33] Article 17 of the Assignment Agreement states:

The Assignee and Assignor acknowledge and agree that if this Assignment Agreement is not completed due to the default of the seller [Builder] for the Agreement of Purchase and Sale that is the subject of this Assignment, the Assignor shall not be liable for any expenses, losses or damages incurred by the Assignee and this Assignment Agreement shall become null and void and all moneys paid by the Assignee under this Assignment Agreement shall be returned to the Assignee in full without interest. [Emphasis added]

[34] On a plain reading of this Article, it is clear that both parties to the Assignment Agreement were protected by operation of this Article in the event that the Builder defaulted on the Agreement of Purchase and Sale. The Defendant would not be liable for any damages incurred by the Plaintiff and any money paid by the Plaintiff would be returned as the Assignment Agreement would become null and void.

[35] The Defendant submits that Article 17 only operates up to the time that the Assignment Agreement is completed. He argues that the Assignment Agreement was completed on the “Assignment Closing Date” as described in Schedule A as “the third business day following the assignee’s lawyer receiving the Builder’s executed consent document.” This date had long passed when the Builder defaulted on the Agreement of Purchase and Sale. Therefore, at the time of default, Article 17 was of no force and effect.

[36] In Schedule A, the parties added terms related to the timing of payment under the Assignment Agreement. The Assignee was required to deliver payment of the Assignment Fee prior to completing the transaction in the New Build Agreement to be held in trust pending “completion” or other termination of the New Build Agreement. This reiterates the understanding that “completion” in Article 17 means completion of the transaction between the Assignee and the Builder.

[37] The timing of payment is outlined in Schedule A. It reads:

Assignment closing date: the third business day following the assignee’s lawyer receiving the Builder’s executed consent document. Deposit schedule by Assignee:

1. Assignee shall deposit $100,000 upon acceptance of Assignment to listing brokerage;
2. Assignee shall pay to the assignor the balance indicated as Schedule B by certified fund on Assignment closing date.

[38] It is clear that the Assignment Fee was to be paid by the Plaintiff on the Assignment Closing Date which was three days after the consent of the Builder was received. It is therefore difficult to imagine why Article 17 would be necessary if it only operated up to the time of the Assignment Closing Date. If the Defendant is correct, then the parties would have included Article 17 to contemplate a situation where before the Plaintiff was contractually obligated to pay any money to the Defendant, the Plaintiff would be entitled to get that money back if the Builder defaulted. This makes no sense. Obviously the Plaintiff would not have paid the Assignment Fee if the Builder had already defaulted.

[39] In addition to Article 17, the parties negotiated a separate refund provision which provided that the Assignor would return the Assignment Fee if the Builder did not complete the project and cancelled the contract. There is no dispute amongst the parties that the Builder did not complete the project and defaulted on the New Build Agreement.

[40] This provision also protected both parties. In the event that the Builder cancelled the project, the Plaintiff was to receive the Assignment Fee back from the Defendant. In the event that the Plaintiff defaulted on the New Build Agreement, the Defendant was entitled to keep the Assignment Fee. It is difficult to accept the argument of the Defendant that this is ambiguous in any way. The inclusion of this provision, negotiated by both parties, confirms their intention that the Builder must close the deal with the Assignee or she was entitled to the return of the Fee as specified in Article 17.

[41] The Defendant raises the argument that the offer by the Stalking Horse Purchaser to sell the Property to the Plaintiff constituted a “completion” of the Assignment Agreement and the Plaintiff’s rejection of this offer resulted in a failure on her part to close the deal. Pursuant to the refund provision in Schedule A, this disentitled her to a return of the Assignment Fee. I disagree. The offer from the Stalking Horse Purchaser was materially different from that which she had accepted as Assignee in the New Build Agreement. This was a new offer that the Plaintiff was entitled to reject.

[42] Finally, the Defendant submits that the Plaintiff has failed to mitigate her damages. The Defendant submits that the Plaintiff ought to have attempted to negotiate with the Stalking Horse Purchaser a reduction in sale price. I do not accept this submission. Proof that the Plaintiff failed to mitigate her damages and that mitigation was possible lies with the Defendant. Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51 at para. 24. They have offered no such proof. Furthermore, the Plaintiff did mitigate her loss by negotiating the return of the Builder Fee from Tarion.

[43] For all of these reasons, I agree with the Plaintiff that she is entitled to the return of the Assignment Fee from the Defendant.

Conclusion:

[44] Summary judgment granted in favour of the Plaintiff. The Defendant shall pay damages in the amount of $148,021.23 to the Plaintiff forthwith. If the parties cannot agree on costs, the Plaintiff may submit submissions in writing of no more than two pages plus costs outline and any offers to settle within 15 days of the release of this Judgment. The Defendant may file written submissions of no more than two pages within 15 days thereafter.

Justice J. Cameron

Released: July 16, 2024