COURT FILE NO.: CV-22-90290 DATE: 2024/10/18 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

GURSHARAN SINGH and KULWINDER KAUR Plaintiffs – and – ZEINAB FENEICH Defendant

Counsel: Gregory Patrick Weedon, for the plaintiffs David Contant, for the defendant

HEARD: April 3, 2024 (By videoconference)

RULING

(Motion for Summary Judgment)

Corthorn J.

Introduction

[1] The plaintiffs’ claims against the defendant arise from a failed real estate transaction. In the spring of 2022, the parties entered into an agreement of purchase and sale for residential property owned by the plaintiffs (“the Agreement”). The defendant agreed to purchase the property for $1,252,500.

[2] The Agreement included a financing condition. The defendant waived the financing condition. The closing date was extended several times, to enable the defendant to obtain financing for the purchase. Ultimately, the defendant was unable to secure the necessary financing; she failed to close the transaction.

[3] The plaintiffs eventually found another purchaser. In March 2023, the plaintiffs sold the property to that individual for $965,000.

[4] The plaintiffs bring a summary judgment motion for the damages they allege they suffered as a result of the defendant’s breach of the Agreement. The plaintiffs seek damages of approximately $366,513.

[5] The defendant admits that she breached the terms of the Agreement and that she is liable to the plaintiffs for the reasonable damages flowing from the breach. The defendant denies the plaintiffs are entitled to damages in the amount claimed. The defendant asserts that the plaintiffs failed to act reasonably in an effort to mitigate their damages. In addition, the defendant disagrees with the method upon which the plaintiffs rely to calculate their damages.

[6] The defendant commenced a third party proceeding against the individual mortgage broker with whom she initially dealt when attempting to obtain financing to complete the transaction. The corporation through which the individual mortgage broker carries on business is also named as a third party.

[7] The third parties did not defend the main action. The issues raised in the pleadings in the third party proceeding are not before the court on the plaintiffs’ motion for summary judgment. Counsel for the third parties attended on the return of the motion in the role of an observer.

[8] The parties to the main action agree on the following matters:

• The primary issue to be determined on the motion for summary judgment is the assessment of the plaintiffs’ damages.
• The assessment of the plaintiffs’ damages does not give rise to a genuine issue requiring a trial.
• A just result of the proceeding can be achieved through the summary judgment process.

[9] I agree with the parties to the main action. The motion for summary judgment is a proportionate process by which to assess the damages to which the plaintiffs are entitled: Arista Homes (Kleinburg) Inc. v. Sarah Igbinedion, 2019 ONSC 7086, at para. 16.

[10] Before carrying out that assessment, I will briefly review the applicable legal principles.

The Law

[11] In Goldstein v. Goldar, 2018 ONSC 608, Morgan J. sets out the framework for assessing damages arising from a failed real estate transaction. At para. 25, Morgan J. describes the framework as follows: “The damages amount will be the difference between the price under the Agreement and the price of the new sale of the property once it closes, plus any additional carrying costs incurred by the Vendor in mitigating her loss and dealing with the Purchaser’s breach.”

[12] Where, as in the matter before this court, the defendant purchaser alleges that the plaintiff vendor failed to mitigate their damages, the defendant purchaser has the onus of establishing “both that the [vendor] failed to make reasonable efforts to mitigate and that mitigation was possible”: Southcott Estates Inv. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at para. 24.

[13] The steps that a plaintiff vendor must take to mitigate their damages are summarized in the decision of Phillips J. in Briscoe-Montgomery v. Kelly, 2014 ONSC 4240, at para. 16:

• The plaintiff vendor is not expected to pursue every possible avenue in an effort to reduce the loss caused by the defendant purchaser’s breach.
• The plaintiff vendor is required to take all reasonable steps in an effort to mitigate the loss caused by the defendant purchaser’s breach.

[14] Also, at para. 16, Phillips J. highlights that the plaintiff vendor is entitled to recover the expenses or costs they incurred in taking reasonable steps to mitigate, even if those steps did not lead to full mitigation of the loss caused by the defendant purchaser’s breach.

[15] Last, Phillips J. explains how the court is to approach assessing whether the plaintiff vendor’s conduct, in attempting to mitigate their losses, was reasonable. At para. 16, Phillips J. says that when considering the plaintiff vendor’s efforts to mitigate, “the reasonableness of the plaintiffs[’ ] decisions are not to be scrutinized too harshly by the defendant.” Justice Phillips concludes para. 16 by emphasizing that measured scrutiny is required because “it was the defendant’s breach that brought about the necessity to make the decisions and it does not therefore lie with the breaker of the contract to be overly critical.”

[16] I turn then to the assessment of the damages to which the plaintiffs are entitled.

Assessment of the Plaintiffs’ Damages

Background

[17] The terms of the Agreement include (a) a purchase price of $1,250,000; (b) a $50,000 deposit (which was paid by the defendant); (c) a financing condition; and (d) a closing date in early August 2022. The defendant waived the financing condition. She requested an extension of the closing date to the latter half of August 2022. The plaintiffs agreed to that extension in exchange for the defendant agreeing to increase the purchase price to the final, agreed-upon amount of $1,252,500.

[18] The defendant was unable to secure the requisite financing and failed to complete the transaction on the late August 2022 closing date.

[19] The plaintiffs re-listed the property in 2022. They ultimately accepted an offer of $965,000 for the property. Prior to accepting that offer, the plaintiffs accepted two other offers, with both of those deals falling through. In March 2023, the plaintiffs completed the sale of their property for $965,000.

[20] The plaintiffs claim damages totalling $366,513. There are three components to the damages claimed. First, the plaintiffs claim the difference of $287,500 between the purchase price agreed upon with the defendant ($1,252,500) and the price for which the property was ultimately sold ($965,000).

[21] Second, the plaintiffs claim the carrying costs for the property incurred between the late August 2022 closing date with the defendant and the March 2023 date on which the sale of the property to another individual was completed. Those costs total $31,906 and include utilities, property insurance premiums, property taxes, and mortgage interest.

[22] Third, the plaintiffs claim the additional interest, in the amount of $47,107, they were required to pay towards the financing of the new build home they had agreed to purchase in 2021. Without the proceeds of sale from the anticipated August 2022 transaction, the plaintiffs were required to obtain a high interest private loan to finance the purchase of the new build home. The plaintiffs claim, as damages, the difference between the interest paid on the high interest loan ($70,609) and the interest the plaintiffs would otherwise have paid on a mortgage for which they were pre-approved with Scotiabank ($23,502).

The Parties’ Respective Positions

The Plaintiffs

[23] The plaintiffs submit that they acted reasonably and with dispatch in their efforts to sell the property and to manage the financial consequences they faced after the defendant failed to complete the transaction in August 2022. The plaintiffs ask the court to conclude that there is no evidence to support a finding they failed to mitigate their damages.

[24] The plaintiffs’ position is that their damages are to be based on the March 2023 closing date and the amount they were ultimately paid for the property.

The Defendant

[25] The defendant makes three primary submissions. First, the defendant submits that the plaintiffs, by their conduct in the re-listing and sale of the property and in pursuing litigation before their damages crystallized, acted unreasonably and without compromise.

[26] Second, the plaintiffs acted unreasonably because they were not prepared to consider an offer to purchase made by the defendant subsequent to the August 2022 closing date. That offer was made in early 2023, after the plaintiffs commenced this action. The offer is set out in communication between the lawyers of record for the parties in this proceeding.

[27] Third, and regardless of the outcome on the issue of failure to mitigate, the defendant submits that the plaintiffs’ damages should be calculated based on a February 2023 closing date (i.e., premised on the defendant’s January 2023 offer to purchase the property).

Analysis

Failure to Mitigate

[28] The defendant acknowledges that she has not filed any independent, objective evidence in support of her position that the plaintiffs failed to mitigate their damages. For example, the defendant does not rely on affidavit evidence from a real estate broker as to reasonable listing prices for the property (i.e., throughout the re-listing period) or as to the nature of the real estate market in late 2022 and early 2023.

[29] The plaintiffs’ evidence is that, following the defendant’s failure to complete the transaction in August 2022, they relied on the recommendations of their real estate broker. An affidavit from that individual is before the court (“the broker’s affidavit”). The evidence, including as set out in the transcripts from cross-examinations, does not support a finding that the plaintiffs acted either unreasonably or without compromise in the re-listing and sale of their property.

[30] For the court to agree with the defendant’s characterization of the plaintiffs’ conduct, as unreasonable and without compromise, would require that inferences be drawn from the evidence. For example, the defendant asks the court to draw an inference that acting reasonably required the plaintiffs to re-list the property for lower prices than those at which they re-listed it over time. In support of the requested inference, the defendant points to an increase in interest rates, the impact of those increased rates on the real estate market, and a description of that market as a “falling market”—all in the relevant period.

[31] The evidence before the court simply does not support the requested inference. To draw the requested inference would require speculation on the part of the court.

[32] As of August 2022, the plaintiffs faced the unexpected burden and challenge of carrying two properties. I find that they acted reasonably in their efforts to re-list and sell their property and to obtain the financing they required to carry two properties.

The Defendant’s January 2023 Offer to Purchase

[33] The defendant’s January 2023 offer to purchase the property is set out in communication between the lawyers of record for the parties. The parties disagree as to whether that communication is subject to solicitor-client privilege. The dispute in that regard remains unresolved.

[34] For the purpose of the plaintiffs’ motion for summary judgment, it is not necessary to resolve that dispute. The plaintiffs were not required to engage in negotiations with an individual in whom they had little confidence could complete the purchase of the property: Azzarello v. Shawqi, 2018 ONSC 5414, at para. 48 and Darmanin v. Dhiman, 2024 ONSC 233, at para. 40. The court therefore does not need to consider the content of the communication described in the preceding paragraph (i.e., assuming that content were admissible as evidence).

[35] In any event, the defendant admitted during cross-examination that at no time following the August 2022 closing date did she provide the plaintiffs with evidence that she would be capable of completing the purchase of the plaintiffs’ property.

[36] I reject the defendant’s submission that the plaintiffs failed to mitigate their damages because they refused, after the August 2022 closing date, to enter into negotiations with the defendant for the sale of the plaintiffs’ property.

The Date by Which to Measure the Plaintiffs’ Damages

[37] The plaintiffs submit that their damages crystallized as of the March 2023 date on which they completed the sale of their property. The plaintiffs highlight that, in the calculation of their carrying costs, they do not extend every item to the March 2023 closing date. For example, the cost of certain utilities is not extended to that date. The plaintiffs submit that their approach to the calculation of their damages is reasonable.

[38] In support of her position that the plaintiffs’ damages should be calculated as of a February 2023 closing date, the defendant relies on the decision of the Court of Appeal for Ontario in 642947 Ontario Limited v. Fleischer et al. (2001), 56 O.R. (3d) 417 (“Fleischer”). At para. 41 of that decision, Laskin J.A. reviews the decision of Morden J.A. in 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401, 88 D.L.R. (3d) 1 (C.A.). Justice of Appeal Laskin describes the decision in 100 Main Street as “the principal authority in this court on the assessment of damages for breach of an agreement of purchase and sale.”

[39] In Fleischer, the main issue before the court was the date on which the plaintiffs’ damages should be assessed: at para. 41. Justice of Appeal Laskin summarizes six propositions derived from 100 Main Street, regarding the choice of date for assessing damages arising from a breach of an agreement of purchase and sale. Underlying each of those propositions is “the simple notion of fairness”: Fleischer, at para. 42.

[40] For the purpose of the motion before this court, it is not necessary to list each of the six propositions. Instead, I focus on the propositions relevant to the court’s decision whether to assess the plaintiffs’ damages as of August 2022 (when the Agreement was to be performed) or as of another date (March 30, 2023). The relevant factors are found in Laskin J.A.’s proposition nos. (3) to (6). I summarize those factors as follows:

• The court is to consider context, including “the plaintiff’s duty to take reasonable steps to avoid [their] loss”;
• The nature of the property and the type of market in which the plaintiff is required to re-list and sell the property are both relevant;
• Specific considerations apply in a falling market; and
• A plaintiff who retains the property solely for the purpose of speculation will be entitled to damages assessed as of the original (i.e., failed) closing date.

[41] The contextual considerations relevant to the assessment of damages on the motion before this court include the court’s finding that the plaintiffs acted reasonably in their efforts to mitigate their losses. In addition, I consider that the plaintiffs’ property remained on the market for a while because two deals fell through between August 2022 and March 2023. Last, I consider that there is no evidence to support a finding that the defendant was financially in a position to purchase the property in February 2023, had the plaintiffs accepted the defendant’s January 2023 offer.

[42] For those reasons, it is fair to assess the plaintiffs’ damages based on the March 2023 closing date.

Conclusion

[43] The plaintiffs’ damages are assessed at $366,513.

Disposition

[44] The plaintiffs’ motion for summary judgment is granted.

[45] The defendant’s production motion was adjourned in early 2024: Singh and Kaur v. Feneich (March 6, 2024), Ottawa CV-22-90290 (Ont. S.C.). The defendant’s production motion was to proceed only if the motion for summary judgment were dismissed in whole or in part. In light of the outcome on the motion for summary judgment, the defendant’s production motion is dismissed.

[46] The defendant shall pay to the plaintiffs damages in the amount of $366,513 arising from the defendant’s breach of the Agreement.

[47] The deposit of $50,000, paid by the defendant, shall, if not already released to the plaintiffs, be released to the plaintiffs. The defendant shall be credited with payment of $50,000 towards the damages for which she is liable.

[48] The amount awarded to the plaintiffs for damages does not include pre-judgment interest. The plaintiffs claimed and they are entitled to both pre-judgment and post-judgment interest. On the return of the motion for summary judgment, the parties did not address the issues of pre-judgment and post-judgment interest. The court is not in a position to determine the applicable interest rates or the amount of pre-judgment interest to which the plaintiffs are entitled.

[49] If the parties are unable to agree upon one or more of the applicable interest rates and the amount of pre-judgment interest to which the plaintiffs are entitled, then the parties shall schedule a date for the continuation of the motion for summary judgment to address the outstanding issues related to interest. If the continuation of the motion is required, then the parties shall deliver their respective materials and upload their respective materials to Caselines – Case Center in accordance with the Rules and with the most recent notices to the profession.

[50] In addition, if the continuation of the motion is required, then the parties shall, no later than 4:00 p.m. on the date two days prior to the date on which the motion is scheduled to continue, upload to Caselines – Case Center an up-to-date costs outline. The court notes that the plaintiffs filed a bill of costs prior to the April 2024 return date for their motion. The document they were and remain required to file is a costs outline: r. 57.01(6).

[51] The parties shall, within 30 days of the date on which this ruling is released, inform the court whether they have resolved the issues related to pre-judgment and post-judgment interest or they require a date for the continuation of the motion. In the latter event, the parties shall, within 40 days of the date on which this ruling is released, take the steps necessary to schedule the continuation. For clarity, the court does not require that the continuation take place within that 40-day period—only that steps be taken within that period to schedule the continuation.

[52] The court reserves its decision on costs pending a resolution, by agreement or adjudication, of the plaintiffs’ claims for pre-judgment and post-judgment interest.

Madam Justice Sylvia Corthorn Released: October 18, 2024