COURT FILE NO.: CV-23-43 DATE: 2024/09/11

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Michael Wayne Van Hove and Yvonne Florence Van Hove, Plaintiffs

– and –

Samuel Klaas Druyff otherwise known as Samuel Klass Druyff, and Colleen M. Lindsay otherwise known as Colleen Mary Lindsay otherwise known as Colleen Mary Druyff otherwise known as Colleen Mary Lindsay-Druyff, Defendants

COUNSEL: P. Karsten, for the Plaintiffs D. Touesnard, for the Defendants

HEARD: June 19, 2024

AMENDED REASONS FOR JUDGMENT

THE HONOURABLE JUSTICE A.D. HILLIARD

Background

[1] The Plaintiffs, Michael Wayne Van Hove and Yvonne Florence Van Hove, are husband and wife. They jointly owned a property located at 228 Charlotteville Road #10, Simcoe, Ontario. On or about March 26, 2023, the Van Hoves entered into an Agreement of Purchase and Sale with the Respondents, husband and wife Samuel Klaas Druyff and Colleen Mary Druyff. The APS provided that the Druyffs would purchase the Simcoe property from the Van Hoves for $2,355,000. The closing date initially agreed to was September 2, 2022.

[2] A $50,000 deposit was paid by the Druyffs to the Van Hoves as per the APS.

[3] The Druyffs’ real estate lawyer sent a requisition letter to the Van Hoves’ lawyer within the prescribed time period. The requisition letter included a demand to remove all oil and gas leases registered on title. The oil and gas leases were not removed from title prior to the anticipated closing date. The last written correspondence between the parties on this issue was August 31, 2022, where the lawyer for the Druyffs reiterated to the lawyer for the Van Hoves that the Druyffs’ position was the oil and gas leases were “of significant concern” and constituted encumbrances which need to be removed as they “go to the root of title.”

[4] Subsequently the closing date was extended by agreement to September 16, 2022 for a reason unrelated to the oil and gas leases.

[5] On September 16, 2022, the Druyffs failed or refused to close the deal. No specific reason was provided at the time. The Van Hoves then tendered on the Druyffs and subsequently commenced this litigation for damages.

[6] The Van Hoves sold the Simcoe property to another purchaser on February 15, 2023 for $1,850,000.

[7] The Van Hoves now move for summary judgment on the issues of both liability and damages. For the reasons that follow, the motion is granted.

Summary Judgment

[8] The law on summary judgment is well established. Summary judgment shall be granted if I can be satisfied on the evidence before me that there is no genuine issue for trial concerning the Druyffs’ defence. Summary judgment is an appropriate way to resolve a matter if the written record allows me to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieving a just result. [1]

[9] The Van Hoves argue that oral evidence at a trial will not supplement or enhance the evidence upon which the issues will be decided. I agree.

[10] On the issue of liability, the question is whether or not the Druyffs have a valid defence. There is no dispute about the facts. The deal did not close. The events leading up to the failure to close are not contested. There is no issue as to the timing of the requisition upon which the Druyffs wish to rely in their defence. Findings of fact in this case do not turn on the credibility of the parties or witnesses.

[11] On damages, not every dispute about the damages claimed will raise a genuine issue for trial. As I will expand upon below, the damages are sufficiently particularized so as to enable me to make the appropriate findings of fact based on the record before me. In addition, all of the arguments made by the Druyffs on the damages claimed can be determined based on the evidence filed. There are no issues of credibility that would impact the assessment of damages such that a trial is necessary.

[12] I find that this is exactly the type of case where summary judgment is appropriate.

Liability

[13] For the Van Hoves to be successful on their motion for summary judgment they must first demonstrate that the Druyffs had no valid justification for failing to close on the APS.

[14] The Druyffs defence is that they made a valid requisition seeking to have the Van Hoves remove the oil and gas leases prior to closing. This requisition was never fulfilled and so the Druyffs now are raising this failure as a complete defence to their refusal to close on the deal.

[15] The Druyffs argue that whether or not the oil and gas leases go to the root of title is irrelevant. [2] I disagree.

[16] The caselaw relied on by the Druyffs address situations where an issue arises that was not objected to prior to the requisition deadline but nevertheless goes to the root of title. In those situations, Courts have found that if the issue is so significant that it results in a total failure of consideration and the purchaser not receiving what they had contracted for, then not raising such issues prior to the requisition deadline is not fatal. That is not the situation here.

[17] I agree with the caselaw that stands for the proposition that some issues that go to the root of title can be raised as a valid defence even if those objections were not made prior to the requisition deadline. However, I do not accept the argument that any unfulfilled requisition will justify failing to close on a real estate deal. If any unfulfilled requisition made within the timeline could be a valid defence to a failure to close, the results could be absurd. There are requisitions for which a perfectly valid response is “please satisfy yourself”. If such a response were to provide a full defence against a failure to close on an APS, the result would be unjust. A requisition must be on an issue that goes to the root of title for it to be a valid defence against a failure to close.

[18] The question as to whether there is a genuine issue for trial in this case turns on whether or not registered oil and gas leases go to the root of title. If they do not, then the Druyffs were obligated to close the deal and cannot now raise as a defence the unfulfilled requisition.

[19] In this case, there is no evidence to demonstrate that the gas well on the property and the three expired oil and gas leases registered on title would result in a total failure of consideration. To put it another way, there is no evidence before me to support a conclusion that the Druyffs would not be able to receive possession of the property if they closed the deal without the oil and gas leases being discharged.

[20] The onus is on the Druyffs to put their best foot forward. They have raised the unfulfilled requisition regarding the oil and gas leases as their defence to failing to close on the APS. In order to successfully defend against this motion for summary judgment, there must be some evidence to support their argument that they have a valid defence. There is no such evidence before me and I find that there is no genuine issue for trial on liability.

Damages – Genuine Issue for Trial

[21] The law on damages for a breach of an APS is that the innocent party, the Van Hoves in this case, be put in the same financial position they would have been had the deal closed. The Van Hoves have an obligation to take all reasonable steps to mitigate their damages. However, the onus is on the Druyffs to lead evidence on the issue of a failure to mitigate if the Van Hoves have demonstrated reasonable efforts to sell the property after the failure of the APS. As Nicholson J. found in Switzer v. Petrie, 2023 ONSC 4609, at para 25, “[t]he plaintiffs are not required to obtain the best possible price in re-selling their property. It is not a standard of perfection.” [3]

[22] None of the arguments made by the Druyffs raise a genuine issue for trial regarding a failure to mitigate.

[23] The Druyffs argue that the Van Hoves waited rather than immediately relisting after the APS did not close. The anticipated closing date was extended to September 16, 2022. Two letters were exchanged after the closing date on September 20 and September 23, 2022 respectively. The Van Hoves ultimately re-listed the property on September 25, 2022. A delay of nine (9) days does not raise a triable issue. The property was listed within a reasonable time after the failed APS. I am not satisfied that a trial is necessary to determine the reasonableness of the time it took for the Van Hoves to relist the property for sale. This issue does not turn on credibility such that oral evidence is required.

[24] Another argument advanced on the motion is that the Van Hoves did not take the advice of their real estate agent to re-list the property at a lower sale price and then subsequently failed to take his advice in lowering the sale price sooner and in greater amounts. The Van Hoves cannot be faulted for attempting to get the highest possible purchase price, particularly in light of the failed APS and this litigation. Had the Van Hoves immediately listed at a lower price and then aggressively dropped the purchase price, undoubtedly the Druyffs would be arguing that the Van Hoves did not sufficiently mitigate their damages by settling for a much lower sale price rather than waiting to see if they could get closer to the price in the APS.

[25] This argument about dropping the sale price sooner also fails in light of the evidence that there were no other offers forthcoming in September, October or November. The first offer on the property was made after two (2) reductions in the listing price. There is no evidence that there were any offers made at a price higher than the ultimate sale price other than the offer that was accepted by the Van Hoves. The first offer received was for a purchase price of $1,700,000, which is $150,000 less than what the property ultimately sold for. The evidence supports the conclusion that there was little interest in the property at any price for the first few months following the failed APS.

[26] There is no genuine issue for trial on the Van Hoves attempts to mitigate their damages in relation to the re-list price and subsequent reduction in the list price. In my view, the steps the Van Hoves took in attempting to get the highest possible purchase price demonstrates their honest and reasonable attempts to mitigate their damages.

[27] Regarding the argument that expert evidence is required to determine the date for the assessment of damages, I have considered two (2) recent cases: Marshall and Meirik and Switzer v. Petrie.

[28] In the Marshall case, Kimmel, J. directed further evidence to be tendered and expert evidence was ultimately led by the parties, however, she specifically noted at paragraph 10 of the decision, “my initial endorsement was not intended to be read as a general requirement that vendors who have re-sold a property are required to provide appraisal or expert evidence, in addition to the re-sale price, to establish the market value of the property to prove their damages.” [4] Kimmel J. went on to find that the damages assessment date was the date of the subsequent APS. Following the dicta in 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401 (Ont. C.A.) [5], Kimmel J. held that there was no evidence to “justify departing from the norm of accepting the purchase price under the New APS to be the market value of the Property on that day.” [6] The decision of Kimmel J. on the motion for summary judgment was upheld by the Court of Appeal. [7]

[29] Nicholson J. in Switzer relied on the comments at paragraph 10 in Marshall and found that expert evidence was not necessary to determine the fair market value of the property. The Court of Appeal upheld Nicholson J. on that point. [8]

[30] I find that there is no requirement for the Van Hoves to provide expert evidence on the issue of the market value of the property and therefore this argument fails.

[31] The other arguments made regarding the damages claimed in addition to the difference in the purchase prices do not raise a genuine issue for trial because those arguments are not based upon issues of credibility or findings of facts that can only be made after a trial. The arguments are based upon the Druyffs’ position that the additional expenses claimed are neither reasonable nor justifiable in the circumstances. Those are legal arguments that can be adjudicated on the basis of the affidavit evidence filed.

[32] Therefore, I find that there is no genuine issue for trial on damages. I can make a determination on damages summarily without further oral evidence being called.

Damages – Assessment

[33] The starting point for the assessment of damages in cases of breach of contract was reaffirmed in the Court of Appeal’s decision in Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONSC 1498, at para 22:

It has long been the case in the real estate context that the starting point for the assessment of damages for breach of contract is the date of breach. This principle was set out in 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401 (Ont. C.A.) and reaffirmed in Fleischer. In Fleischer, at para. 41, Laskin J.A. summarized the six propositions articulated by Morden J.A. in Main Street as follows:

(1) The basic principle for assessing damages for breach of contract applies: the award of damages should put the injured party as nearly as possible in the position it would have been in had the contract been performed.

(2) Ordinarily courts give effect to this principle by assessing damages at the date the contract was to be performed, the date of closing.

(3) The court, however, may choose a date different from the date of closing depending on the context. Three important contextual considerations are the plaintiff's duty to take reasonable steps to avoid its loss, the nature of the property and the nature of the market.

(4) Assessing damages at the date of closing may not fairly compensate an innocent vendor who makes reasonable efforts to resell in a falling market. In some cases, the nature of the property -- for example an apartment building-- hampers the vendor's ability to resell quickly. Thus, if the vendor takes reasonable steps to sell from the date of breach and resells the property in some reasonable time after the breach, the court may award the vendor damages equal to the difference between the contract price and the resale price, instead of the difference between the contract price and the fair market value on the date of closing.

(5) Therefore, as a general rule, in a falling market the court should award the vendor damages equal to the difference between the contract price and the "highest price obtainable within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commencing on that date"

(6) Where, however, the vendor retains the property in order to speculate on the market, damages will be assessed at the date of closing. [9]

[34] I find that assessing damages as of the date of closing would not fairly compensate the Van Hoves who were innocent insofar as the breach of the APS.

[35] In this case I find that the Van Hoves made reasonable efforts to re-sell the property. The Van Hoves’ position that damages should be assessed as the difference in the ultimate sale price and the price in the failed APS is based on their undisputed evidence that there was little to no interest in their property upon it being relisted. It is an undisputed fact that there were no offers made on the property at the original price agreed to in the APS.

[36] There is no evidence the Druyffs have led that contradict the evidence of the Van Hoves and their real estate agent that the property was listed in the usual course and after a number of drops in price, ultimately sold for $1,850,000. There is no evidence before me to satisfy me that there should be a departure from the norm set out in 100 Main Street insofar as accepting the new purchase price as the fair market value of the property.

[37] The Court of Appeal also recently re-affirmed that an appropriate way in which to assess damages in failed real estate transactions is to compare the difference in sale prices:

Where a purchaser fails to close a real estate transaction and the vendor takes reasonable steps to sell the property in an arm’s length sale to a third party in mitigation of damages, and there is nothing improvident about the sale, the difference between the two sale prices will be used to calculate the damages. [10]

[38] There is nothing in the evidence before me to suggest that there was anything improvident about the Van Hoves subsequent sale of the property, or that the sale was to anyone other than an arm’s length third party. Therefore, I find that the damages should be calculated as the difference between the two sale prices, which in this case amounts to $505,000.

[39] Turning to the claims made for related expenses, I am satisfied that the Van Hoves unnecessarily incurred legal fees for two real estate transactions. However, I find that had the APS closed, the Van Hoves would have been liable to pay their own real estate lawyer to close the transaction. It is the second invoice from February 2023 for the subsequent real estate transaction that are the fees unnecessarily incurred as a result of the breach. Therefore, I find that the additional legal expenses are quantified by the invoice rendered for the subsequent sale in the amount of $4,016.36.

[40] With regard to the claim for interest accruing on the Van Hoves’ secured line of credit and bridge financing, the undisputed evidence of the Van Hoves is that both their secured line of credit and bridge financing were expected to be paid out of the proceeds of sale. The sale of this property was intended to allow the Van Hoves to enjoy their retirement. When the Druyffs failed to close on the deal the Van Hoves were left to service both the secured line of credit and the bridge financing unexpectedly and for the entire time it took to re-sell the property. The argument by the Druyffs that the Van Hoves should have used other financial assets available to them such as savings or investments to service the line of credit and bridge financing is without merit nor any evidentiary basis. Furthermore, the evidence of Michael Van Hove is that the bridge financing was being forcibly serviced through CIBC diverting funds from the Van Hoves secured line of credit to service the bridge financing debt. The interest on both the secured line of credit and the bridge financing had to be paid as a direct result of the failure to close on the APS. I find that the claim for the interest accruing on both the secured line of credit and the bridge financing are damages directly connected to and incurred as a result of the failed APS.

[41] Additional insurance and property taxes are also legitimate damages for which the Van Hoves are entitled to reimbursement. The property would not have had to continue to be insured nor would the Van Hoves had to continue to pay property taxes had the APS closed.

[42] However, I find that the expenses claimed for mileage and property inspections, maintenance of the property and office time and supplies is not reasonable or justifiable in the circumstances. The Van Hoves have not provided any legal authority for their claim to be reimbursed for time spent maintaining the property themselves calculated at a rate of minimum wage. I am not satisfied that the Van Hoves are entitled to be reimbursed for their time at any monetary rate in order for them to be put in the same position they would have been had the sale closed.

[43] Similarly, the claim for office time and supplies is not justifiable in my view, nor is the claim for mileage for driving to and from the property. The claim for mileage is contingent upon the claim for reimbursement for property maintenance which I find is not justified in the circumstances.

[44] I am also not satisfied that the claim for storage is justified. Mr. Van Hove’s initial affidavit filed on the motion indicates that the storage container was anticipated to be required until October 31, 2022, even prior to the failure of the Druyffs to close on the APS. The renting of the storage unit therefore does not appear to be directly related to the failure of the APS. Furthermore, there is nothing in the evidence to satisfy me that there were no other options available to the Van Hoves other than continuing to rent a storage container after the failed APS. Specifically, I note that they had possession of the property that is the subject of these proceedings until the subsequent sale closed in February of 2023 and yet there is no evidence as to why the items stored in the rented storage container could not be maintained at the subject property at least until the new owners took possession.

[45] As for the claim regarding utilities, I am satisfied that utilities would need to be continued at the property so that it could be maintained in good condition for showings. I therefore find that the claim for additional utilities at the property is justified. Similarly, and it does not appear to be significantly disputed, the expense for the water hoses was necessary to maintain the property in good condition and is a justified additional claim for damages.

[46] The claim for lost interest on investment opportunities was withdrawn at the motion hearing, as was the claim for outstanding real estate commission.

[47] Therefore, I find overall that the damages to be awarded to the Van Hoves are as follows:

1. the difference in the sale price ($505,000)
2. legal fees for the subsequent sale ($4,016.36)
3. property taxes ($3,421.82)
4. property insurance ($1,310.55)
5. water hoses ($408.04)
6. utilities ($1,843.75)
7. interest on CIBC secured line of credit ($10,094.42)
8. interest on CIBC bridge financing loan ($66,536.82)

Conclusion

[48] For all of these reasons, I am satisfied that the Van Hoves have met their onus to demonstrate that there is no genuine issue for trial. The Druyffs have not demonstrated that they have a valid defence to failing to close the APS and therefore I find that they are liable. Overall, the damages are assessed at $542,629.76 after taking into consideration the $50,000 deposit forfeited by the Druyffs.

[49] Pre-judgment interest will accrue on the difference in sale price between September 16, 2022 and February 15, 2023 at 1.8% ($3,785.42), then on the total damages owing ($592,458.96) from February 15 to June 13, 2023 at 1.8%, and finally on the damages owing minus the deposit paid on June 14, 2024 ($542,629.76) at 1.8%. If counsel for the parties cannot agree on the calculation of pre-judgment interest to be set out in the draft order, they may contact the trial coordinator to arrange a brief appearance (½ hour) before me for submissions on this issue.

[50] On the issue of costs, the Plaintiff has been almost entirely successful and costs consequences will logically follow. However, if counsel are unable to resolve the issue of costs then submissions may be filed as follows:

1. The Plaintiffs may file primary costs submissions, no longer than three (3) pages in length, double-spaced, 12-point font, exclusive of Offers to Settle on or before September 23, 2024
2. The Defendants may file responding costs submissions, no longer than three (3) pages in length, double-spaced, 12-point font, exclusive of Offers to Settle on or before October 4, 2024
3. Reply by the Plaintiffs, no longer than two (2) pages in length, double-spaced, 12-point font, on or before October 11, 2024.

[51] Order to go on the motion:

1. Motion for summary judgment against the Defendants is granted.
2. Judgment granted in favour of the Plaintiffs in the total amount of $542,629.76.
3. Pre-judgment interest granted as calculated by counsel on the formula set out in paragraph 37 of this judgment.
4. Post-judgment interest pursuant to the Court of Justice Act.

A.D. Hilliard Released: September 11, 2024

Footnotes:

[1] Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87.

[2] After initial oral arguments on this matter, I reserved my decision. During my deliberations and after reviewing some additional caselaw, it became clear to me that this issue about whether the oil and gas leases go to the root of title could be determinative. Consequently, I released an endorsement inviting counsel to file further written submissions on this issue. This decision was only completed after all of those additional submissions were filed and considered.

[3] Switzer v. Petrie, 2023 ONSC 4609, at para 25.

[4] Marshall v. Meirik, 2021 ONSC 1687, at para 10.

[5] 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401 (Ont. C.A.).

[6] Marshall v. Meirik, supra, at para. 34.

[7] Marshall v. Meirik, 2022 ONCA 1554.

[8] Switzer v. Petrie, 2024 ONCA 474.

[9] Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONSC 1498, at para 22.

[10] Arista Homes (Richmond Hill) Inc. v. Rahnama, 2022 ONCA 759, at para 9.