COURT FILE NO.: CV-23-1678-0000

DATE: 2024 11 19

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Donald Edward Liddell and Margaret Anne Liddell

Plaintiffs

– and –

Maria Mousavi and RE/MAX Escarpment Realty Inc.

Defendants

Adam Ostermeier for the Plaintiffs

Gaurika Sharma for Maria Mousavi

HEARD: October 15, 2024

REASONS FOR JUDGMENT

coats j.

Nature of Motion:

[1] On October 15, 2024, I heard argument of the Plaintiffs’ motion for summary judgment as against the Defendant Maria Mousavi (“Mousavi”). The Defendant RE/MAX Escarpment Realty Inc. did not participate in the summary judgment motion as they are simply holding the deposit and will pay it out as the court orders. On October 15, 2024, I reserved my decision.

[2] The Plaintiffs are seeking damages from Mousavi as a result of an agreement of purchase and sale of a residential property entered into by the Plaintiffs as vendor and Mousavi as purchaser. This transaction did not close.

Basic Undisputed Facts:

[3] The Plaintiffs were the owners of a property municipally known as 6388 Cedar Springs Road, Burlington, Ontario, L7P 0K9 (the “Property”).

[4] On or about December 6, 2021, the Plaintiffs entered an agreement to list the Property for sale with Re/Max.

[5] In early 2022, the Plaintiffs were approached by Mousavi, through her real estate agent, with an interest in purchasing the property. On or about February 8, 2022, the Plaintiffs received two offers for the Property. Mousavi initially offered $1,270,000.00, while another prospective purchaser offered $1,360,000.00 for the Property, with a closing in May of 2022. Mousavi increased her offer to purchase the Property on the same day to $1,350,000.00, with an extended closing date. Mousavi’s offer had no conditions.

[6] On or about February 9, 2022, the Plaintiffs accepted Mousavi’s offer and entered into an Agreement of Purchase and Sale with Mousavi (the “APS”) regarding the Property. The APS included the following provisions:

i. the agreed upon purchase price was $1,350,000.00;

ii. Mousavi was to provide a total deposit of $50,000.00, $10,000.00 upon acceptance and $40,000.00 on February 28, 2022, that was to be held in trust by Re/Max until the closing;

iii. The closing date was to be July 22, 2022 (the “Closing Date”);

iv. Mousavi agreed to pay the balance of the purchase price, subject to adjustments, to the Plaintiffs, upon the closing, with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Large Value Transfer System;

v. Time in all respects was of the essence; and

vi. Mousavi was permitted to visit the Property twice before closing.

[7] The APS did not contain or include any conditions that needed to be waived, and in particular did not include a financing condition. The APS did not contain a force majeure provision.

[8] On or about July 7, 2022, during Mousavi’s first of her two visits to the Property, she verbally raised with the Plaintiff, Donald Liddell, her request for a three-month extension of the Closing Date. The Plaintiffs declined this request.

[9] On or about July 20, 2022, Mousavi attended the Property once again and attempted to obtain from the Plaintiffs an extension of the Closing Date. The Plaintiffs did not agree with this.

[10] On or about July 21, 2022, Mousavi’s real estate agent advised the Plaintiffs’ broker that Mousavi was in a desperate situation financially which prevented her from closing, and which necessitated her request for an extension.

[11] On the Closing Date, the Plaintiffs received correspondence from their lawyer handling the closing, that Mousavi had just retained a lawyer for the transaction, Mousavi was requesting a 45-day extension of the closing, and that without an extension Mousavi would not be able to close. The Plaintiffs declined the request for an extension.

[12] The Plaintiffs were ready and willing to close on the Closing Date. Mousavi did not complete the transaction. She did not deliver the balance of the purchase funds required on closing.

[13] On or about July 25, 2022, the Property was relisted for sale by the Plaintiffs.

[14] The Property was relisted for sale from July 25, 2022 through until January 16, 2023. The Plaintiff only received one offer. This was on November 29, 2022. The offer was for under $1,000,000.00, which offer the Plaintiffs rejected.

[15] In the period of January to March of 2023, the Plaintiffs exchanged offers with two potential buyers. The offers were in a range of $1,050,000.00 to $1,125,000.00. These offers did not lead to a binding agreement due to either a lack of agreement on price or because conditions were not waived.

[16] On or about March 18, 2023, the Plaintiffs entered into a new Agreement for Purchase and Sale with a potential buyer. On or about April 20, 2023, the sale was completed. The purchase price was $1,100,000.00.

Position of the Parties:

Plaintiffs:

[17] It is the Plaintiffs’ position that this is an appropriate case for summary judgment as the defence raises no genuine issue requiring a trial. The Court is in a position to make the necessary findings of fact and apply the legal principles based on the materials filed for the motion.

[18] Mousavi entered into an unconditional Agreement of Purchase and Sale for the Property. The sale was not completed because Mousavi did not have sufficient funds to complete the transaction. Mousavi breached the APS when she failed to tender the closing funds on the date of closing.

[19] It is the Plaintiffs’ position that they took immediate and reasonable steps to mitigate their damages and relisted the Property for sale. Due to a downturn in the market, it took them eight months to sell the Property for a reasonable price.

[20] The Plaintiffs seek damages in the amount of $250,000.00 based on the difference in the sale price in the APS with Mousavi and the ultimate sale price. They also seek $30,739.28 in carrying costs in regard to the Property between July 22, 2022 (the Closing Date) and the date of the ultimate sale. They seek the release of the deposit held by Re/Max to be applied to these damages.

[21] The Plaintiffs claim that Mousavi cannot rely on a force majeure argument, as the APS did not contain a force majeure provision. The Plaintiffs also submit that the APS was not frustrated by Mousavi’s inability to utilize funds held in the Afghanistan International Bank for the down payment. Lastly, with regard to mitigation, it is the Plaintiffs’ position that they had no obligation to grant Mousavi an extension of the closing.

Defendant’s Position:

[22] It is the Defendant’s position that this matter is not appropriate for summary judgment as the Court is required to consider the force majeure factors raised by Mousavi in her affidavit.

[23] It is the Defendant’s position that the Plaintiffs are not entitled to damages, and she requests an order that the deposit be returned to her.

[24] The Defendant claims that she should be relieved of her obligations under the APS pursuant to the doctrines of force majeure and/or frustration.

[25] Mousavi alleges that she intended to use funds held for her in the Afghanistan International Bank, in Afghanistan. She claims that as a result of the ongoing war/conflict in Afghanistan and the subsequent withdrawal of American forces, which created a power vacuum and led to Taliban control, the banking system was suspended. She was unable to get the funds, and this frustrated the APS as these events were out of Mousavi’s control.

[26] Mousavi states that she inherited $565,592.00 USD in Afghanistan. It was these funds she intended to bring to Canada to purchase the Property.

[27] The Defendant also claims that the APS was frustrated because an agreement of purchase and sale that she had entered into to sell another property, which she owned in Hamilton, fell through and she did not have money from that sale to close the APS in regard to the Property.

[28] Mousavi also claims that the Plaintiffs failed to mitigate as they did not agree to her request to extend the closing date so she could make alternative financial arrangements. She acknowledges that the Plaintiffs did agree to an extension but only with conditions that Mousavi states she could not fulfill.

[29] In regard to damages, the Defendant says the Plaintiffs resided at a rental premises during the period in which they tried to re-sell the Property, even though the Property was vacant.

Issues:

[30] The issues are as follows:

1. Is summary judgment appropriate in this case? Is the Court able to reach a fair and just determination on the merits of the summary judgment motion?

2. Does Mousavi’s Statement of Defence and evidence in response to the Plaintiffs’ motion raise a genuine issue for trial? This involves a consideration of the following:

a) Does the doctrine of force majeure apply to relieve Mousavi of her obligations under the APS?

b) Does the doctrine of frustration apply to relieve Mousavi of her obligations under the APS?

3. If there is no genuine issue for trial regarding Mousavi’s alleged breach of the APS, can damages be decided on this summary judgment motion? If so, did the Plaintiffs take reasonable steps to mitigate? What is the appropriate quantum of damages?

The Law:

A. Summary Judgment

[31] Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides for summary judgment motions. As set out in Rule 20.04(2)(a), the Court shall grant summary judgment “if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.”

[32] The approach to be taken on a motion for summary judgment is set out at para. 66 of Hryniak v. Mauldin, 2014 SCC 7:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[33] As set out at para. 50 of Hryniak, the issue is whether summary judgment will provide a fair and just adjudication:

These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.

[34] The parties on a summary judgment motion have an obligation to put their best foot forward: Colonna v. Fellin, 2024 ONCA 224, at para. 58.

[35] Rule 20.02 provides the following in regard to evidence on a summary judgment motion:

20.02 (1) An affidavit for use on a motion for summary judgment may be made on information and belief as provided in subrule 39.01(4) but, on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts.

B. Force Majeure

[36] In S.M. Waddams, The Law of Contracts, 8^th Edition, at para. 380 (pg. 262), the following describes force majeure clauses:

Parties frequently anticipate, in more or less general terms, the occurrence of events that will make performance more onerous than expected, and commonly in written contracts a clause is included designed to protect a promisor against such occurrences. Such clauses, usually drafted in general and archaic terms, are often called “force majeure” clauses and excuse performance in case of, for example, an act of God or of the Queen’s enemies, restraint of princes, riots, strikes and civil war. The construction of such clauses is not, of course, necessarily relevant to the resolution of disputes that might occur in the absence of an express provision. A party may by agreement reduce the scope of their promise, and if the agreement is not unconscionable it will be effective. However, as has been suggested elsewhere, the construction of documents cannot be considered in isolation, and the meaning given to a “force majeure” clause undoubtedly depends on wider considerations than a simple examination of the words used.

[37] This excerpt refers to a clause included in a written contract. The Parties agree that there was no such clause in the APS.

[38] Neither counsel provided me with any case where a force majeure clause was an implied term of a contract.

[39] In Consolidated Fastfrate Inc. v. 2516295 Ontario Ltd., 2023 ONSC 1005, A.J. Robinson determined that there is no common law right to claim relief from payment obligations by reason of force majeure and that it is a contractual remedy that turns on the specific wording of a contract. Paragraph 35 of Consolidated Fastfrate provides as follows:

This action concerns unpaid amounts owing to Fastfrate for services rendered. The defendants have tendered no case law supporting any common law right to claim relief from payment obligations by reason of force majeure. Rather, case law supports that, since “force majeure” has no set or specialized meaning and is not a term of art, force majeure is a contractual remedy that turns on the specific wording of a contract: Windsor-Essex Catholic District School Board v. 231846 Ontario Limited, 2021 ONSC 3040 at paras. 18-19 and 21. The credit agreement includes no force majeure clause.

C. Frustration

[40] The historic principle of frustration dates back to 1863, and arises where a supervening event renders a contract unable to be performed. It has long been held that to successfully raise a claim of frustration, a party must showcase that the condition incapable of performance was foundational to the contract: Taylor v. Caldwell (1863), 3 B. & S. 826, 122 ER 309, as cited in Stephen Waddams, Cases and Materials on Contracts, 6th ed. (Toronto: Emond, 2018), at p. 818-820.

[41] Canadian jurisprudence later found that the doctrine of frustration can apply to contracts for the sale of land. However, the Court of Appeal for Ontario found that a party will not be able to rely on the doctrine for such matters if the supervening event was the result of a voluntary act, or if the possibility of the event arising during the term of the contract was contemplated and provided for in the agreement: Capital Quality Homes Ltd. v. Colwyn Construction Ltd., (1976) 1975 CanLII 726 (ON CA), 9 O.R. (2d) 617, at para. 31.

[42] The doctrine of frustration in a contract for sale of property has more recently been interpreted in the case of FSC (Annex) Limited Partnership v. ADI 64 Prince Arthur L.P., 2020 ONSC 5055. Here the respondent and applicant had entered into a partnership to develop property. The respondent elected to purchase the applicant’s interest in the partnership but was not able to complete the transaction by the closing date. The respondent was unable to obtain financing for the transaction, and claimed to be frustrated by unforeseeable circumstances of the COVID-19 pandemic. In determining that the respondent could not rely on the doctrine of frustration, Koehnen J. stated at paras. 15-32:

[15] Adi submits that it has not breached the purchase agreement but that its ability to close was frustrated by COVID-19.

[16] Adi cites Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943, [2001] S.C.J. No. 56,2001 SCC 58, at para 53, for the proposition the doctrine of frustration relieves the parties of their bargain:

when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes a thing radically different from that which was undertaken by the contract.

[17] Adi points out that when it entered into the purchase agreement, market conditions were favourable and that the COVID-19 pandemic was an extraordinary event that had never occurred before in human history. It says the economic downturn as a result of COVID-19 was completely unforeseeable.

[18] I take a different view based both on the facts of this case and on the law of frustration.

[19] Turning first to the facts of the case. Adi accepted the obligation to purchase Forgestone's interest on January 9, 2020. The Government of Ontario did not declare a state of emergency until March 17, 2020. That gave Adi over three months to obtain financing. Within that three months it had not managed even to obtain a letter of intent.

[20] Adi's efforts to obtain financing could be described as somewhat relaxed.

[21] When Adi accepted the obligation to purchase, it did not have any financing available. There is no evidence that it made efforts to investigate financing before accepting the obligation to [page573] purchase. The obligation to purchase was unconditional and was not in any way associated with the ability to obtain financing.

[22] Before Adi advised on March 25, 2020 that it would not be closing on April 8, it had discussions with only a handful of potential financing sources. The more limited scope of those discussions had nothing to do with COVID-19. Rather, they were a deliberate choice made by Adi. As Mr. Adi testified during cross-examination:

We are a relationship-driven company. . .

We do not go out into the market and hop deals, so to speak. We have got deep, entrenched relationships that are built on trust and integrity, that trust in our ability to execute, understand our experience and track record as an operator that can execute on very large-scale projects. And generally, those relationships are all that is necessary to have discussions about a site like this.

[23] How broadly Adi wants to make inquiries about financing is a decision it is free to make. If, however, it chooses to limit itself to a narrow canvas of the market, it cannot later take the position that the contract has been frustrated simply because its narrow canvas has not resulted in financing.

[24] Adi decided to approach only a small number of potential lenders although it knew that the project had its challenges. Moreover, it sought funding for more than was required to buy out Forgestone. By way of example, Adi asked one potential lender, KingSett for $4 million more than was required to purchase Forgestone's interest. Even accepting the frustration argument for a moment, all this would demonstrate is that Adi was frustrated in its ability to obtain $4,000,000 more than required to buy out Forgestone, not that it was frustrated in its ability to obtain financing to buy out Forgestone.

[25] I also take a different view of the, "never before in human history" approach to the issue. While it may be that we have not experienced a pandemic of this proportion in our lifetimes, restrictions on the availability of credit are not uncommon. They occur regularly as part of the ebb and flow of economic cycles. Any decline in values of real estate is associated with more restrictive lending practices and reduced liquidity. There is nothing unusual about that. That is one of the risks entrepreneurs face. While there was no expert evidence led on the point, there does not appear to be any widespread freezing of liquidity in the marketplace as occurred for example in 2008-2010. Even if there were a general freezing of liquidity, that would also not constitute frustration because restrictive lending practices are not unforeseen and are a common feature of economic downturns. Moreover, it is also a risk against which a purchaser can protect itself by making the purchase conditional upon financing. [page574]

[26] Adi responds that it could not make the purchase conditional upon financing because a conditional purchase was not valid under the buy/sell provision. That misses the point. At its highest, that simply means that Adi did not have the financial wherewithal to exercise the purchase option and should not have done so. Adi must bear the risk of its choice.

[27] It would be entirely unfair to let Adi exercise the purchase option and then let it claim frustration when it could not obtain financing as a result of an economic downturn. The potential for an economic downturn is an inherent risk in any purchase decision and is not one from which a purchaser should be protected by the doctrine of frustration.

[28] If it were otherwise, purchasers would have the option to resile from contracts if economic circumstances took a turn for the worse between the date of the agreement of the date of closing. There are of common contractual provisions to cover that eventuality such as financing conditions, material adverse change clauses and material adverse event clauses. Adi employed none of them.

[29] The risk of committing to purchase under a buy/sell provision is well known. As the Alberta Court of Queen's Bench put it in Trimac Ltd. v. C-I-L Inc., [1987] A.J. No. 409, 1987 CanLII 3376 (AB QB), 52 Alta. L.R. (2d) 263, at para. 29:

A shotgun buy-sell is strong medicine. One takes it strictly and in accordance with the prescription or not at all.

Other courts have also held that economic downturns and lack of financing do not amount to frustration. In Bang v. Sebastian, [2018] O.J. No. 5388, 2018 ONSC 62264, the purchaser failed to close and argued that the decline in the value of real estate and the inability to obtain financing amounted to frustration. The court rejected the submission because neither event "radically altered" the purchaser's obligations. The court noted that, as is the case here, the defendant in Bang knew she would need financing when she entered into the agreement. A decline in the value of real estate did not "radically" change the defendant's obligations under the agreement to pay a specific amount on closing, regardless of whether she could obtain financing: see paras. 33 --34 and 37. The court in Paradise Homes North West Inc. v. Sidhu, [2019] O.J. No. 1255, 2019 ONSC 1600, came to a similar conclusion.

[30] The respondent places considerable weight on First Real Properties Limited v. Biogen Idec Canada Inc., [2013] O.J. No. 4906, 2013 ONSC 6281 in support of its argument with respect to frustration. Adi notes that in First Real Properties, a contract [page575] was found to be frustrated because the cost of performing it exceeded the expectations of the parties. The case is, however, more nuanced than that. In First Real Properties, a landlord had agreed to install windows along the wall of a building to accommodate a tenant's wishes. Both landlord and tenant thought the windows would cost approximately $48,000. The wall turned out to be loadbearing which increased the cost of installing the windows by a factor of ten. In that case, the court found that it was inappropriate to compel the tenant to take the premises without the windows and found that the contract was frustrated.

[31] In arriving at the conclusion of frustration, the court noted that businesspeople from both landlord and tenant felt they could not compel each other to perform. The court also cited authority that tied the doctrine frustration to that of mistake. In First Real Properties, both parties were mutually mistaken that the windows would cost $48,000. The court also tied the concept of frustration to that of equity with the underlying question being whether it was just to the parties or their bargain to hold that the contract was frustrated. In circumstances where the businesspeople of both sides agreed they could not hold each other to the bargain, both parties were under a mutual mistake and the where correct state of affairs increased the cost by tenfold, the court found that it was just to release the parties from their bargain.

[32] The facts of this case are quite different. There was no mutual mistake. The risk of economic downturn was well known and was one against which Adi could have, but did not, protect itself.

[43] The doctrine of frustration was considered in Paradise Homes North West Inc. v. Sidhu, 2019 ONSC 1600, at paras. 18-22 as follows:

[18] The law and the doctrine of frustration raised by a defaulting purchaser under an agreement of purchase and sale was recently summarized by this court in Bang v. Sebastian, 2018 ONSC 6226 as follows:

The doctrine of frustration operates to relieve parties of their bargain because a supervening event has occurred, without the fault of either party, which renders the performance of the contract substantially different than the parties had bargained for. This is seen in Naylor Group Inc. v Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para 53:

Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”: Peter Kiewit Sons Co. of Canada v. Eakins Construction Ltd., 1960 CanLII 37 (SCC), [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Farehan Urban District Council, [1956] A.C. 696 (U.K.H.L.), at p. 729.

The Supreme Court canvassed earlier cases of frustration that assessed the contractual obligations on an “implied term” theory, namely: “if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end”: Naylor Group at para. 54.

Both approaches, however, share a common element: there can be no frustration if the supervening event was contemplated by the parties at the time of contracting and was provided for or, as in the present case, deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1976), 1975 CanLII 726 (ON CA), 9 O.R. (2d) 617, at p. 626 (C.A.).

A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Gerstel v. Kelman, 2015 ONSC 978, 40 B.L.R. (5th) 314. I have determined that the purchaser defendant has failed to do so.

[19] In the case of Bang v. Sebastian, supra, the defaulting purchaser had claimed that the fall in the market and her inability to qualify for financing amounted to unforeseen and supervening events, i.e. frustration. This argument was rejected and Sanfilippo J. held that even had the purchaser adduced evidence of the fall in the market, it would not have been enough to establish frustration. He held as follows:

However, even if the purchaser defendant had established a fall in real estate values in Mississauga in the period from May to August 2017, this would still not have constituted an “unforeseen supervening event” of the nature required to invoke the doctrine of frustration in this case. Ms. Sebastian was the owner of real estate at the time that she offered to purchase the Glasshill Grove property. She had listed her property for sale in order to have sufficient capital on hand to purchase the Glasshill Grove property. She timed the sale of her property with the acquisition of a new property. She knew that property values could go up, and from this she knew that property values could go down. Ms. Sebastian deposed that the decrease in values was beyond her control and not what she expected would occur, but this does not make it “unforeseen”.

[20] Similarly, in this case, the fall in the market does not trigger the defence of frustration. The defendant did not provide any expert evidence as regards the fall in the markets.

[21] Further, even in the case of Folia v. Trelinski, supra, relied upon by the defendant, the defendant does not satisfy the five-part test set forth therein as regards frustration. The five-part test is as follows:

1. The event in question must have occurred after the formation of the contract and cannot be self-induced;

2. The contract must, as a result, be totally different from what the parties had intended;

3. The disruption must be permanent and not temporary or transient;

4. The change must totally affect the nature, meaning, purpose, effect, and consequences of the contract so far as concerns either or both parties; and

5. The act or event that brought about such radical change must not have been foreseeable.

[22] In this case, the defendant defaulted because he was not able to borrow the amount of money he required to close the deal. He only consulted one mortgage broker and no one else. While he states that he was unable to borrow the money because the market prices fell and that this was unforeseen and such a radical change that it completely changed the nature of the APS, I do not find that to be the case. The contract was not rendered totally different from what the parties had intended. The parties had intended that 10 Truro Circle would be sold by the plaintiff to the defendant for the agreed-upon amount of $819,990. The contract did not change and was not altered. The “change did not totally affect the nature, meaning, purpose, effect, and consequences of the contract”. The “disruption”, as used in the case of Folia v. Trelinski, supra, was not permanent. The event that brought the default was not unforeseen. Indeed, I find it difficult to accept that it was unforeseen by Mr. Sidhu, given that he had graduated with a post-secondary business diploma. The reason that he defaulted was that he was unable to borrow a sufficient amount to close the deal. This does not amount to frustration as set forth in Bang v. Sebastian, supra.

[44] A party claiming that a contract has been frustrated has the onus of establishing that performance of the contract, as originally agreed, would be impossible: Gerstel v. Kelman, 2015 ONSC 978, at para. 46.

D. Duty to Mitigate and Quantum of Damages

[45] The measure of damages with regard to an agreement of purchase and sale that did not close and the obligation to mitigate are described at paras. 26-33 of Paradise Homes:

[26] The plaintiff seeks the damages set forth at para. [9], above, in the total amount of $82,059.50. The general principle underlying the damages to which Paradise Homes is entitled is summarized as follows by Victor DiCastri, Q.C. in The Law of Vendor and Purchaser, 3rd ed. (Carswell: 1989) (loose-leaf revision), at para. 889:

The measure of damages is the difference between the contract price and the resale price together with any actual costs incurred as a result of the breach. Absent resale, the measure, basically, is the difference between the contract price and the market value at the date of the breach; normally, this is the completion date. Reasonable steps must have been taken to mitigate damages. The deposit must be taken into account. Additional amounts, such as a second real estate commission, have to be justified. To be recoverable, damages must be reasonably foreseeable.

[27] The most general principle relating to the assessment of the damages is that the plaintiff is entitled to be put in the position it would have been in if the contract had been performed so far as money can do it: DiCastri, The Law of Vendor and Purchaser, supra.

[28] In this case, based on all the evidence before the Court, I am satisfied that the damages, as set forth above, are reasonable, justified, and reasonably foreseeable. As regards Mr. Sidhu’s deposits, if an agreement of purchase and sale is not completed as a result of the default of the purchaser, the deposit, being a guarantee of performance, becomes the property of the vendor: CXL Universal Holdings Inc. v. Century 21 Harvest Realty Ltd., 2007 CanLII 2356 (Ont. S.C.), at paras. 26 and 28.

[29] It is the position of the defendant that the plaintiff failed to mitigate its damages by not assigning the APS to his relatives in September 2017.

[30] This Supreme Court of Canada in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, summarized the principles underlying mitigation of damages as follows:

In British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74, at para. 176, the Court explained that “[l]osses that could reasonably have been avoided are, in effect, caused by the plaintiff’s inaction, rather than the defendant’s wrong.” As a general rule, a plaintiff will not be able to recover for those losses which he could have avoided by taking reasonable steps. Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible (Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324; Asamera; Evans v. Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 S.C.R. 661, at para. 30).

[31] On the other hand, a plaintiff who does take reasonable steps to mitigate loss may recover, as damages, the costs and expenses incurred in taking those reasonable steps, provided that the costs and expenses are reasonable and were truly incurred in mitigation of damages (see P. Bates, “Mitigation of Damages: a Matter of Commercial Common Sense” (1992) 13 Advocates’ Q. 273). The valuation of damages is therefore a balancing process as the Federal Court of Appeal stated in Redpath Industries Ltd. v .Cisco (The), 1993 CanLII 3025 (FCA), [1994] 2 F.C. 279, leave to appeal to S.C.C. refused, 24006 (13 October 1994), at p. 302: “The court must make sure that the victim is compensated for his loss; but it must at the same time make sure that the wrongdoer is not abused.” Mitigation is a doctrine based on fairness and common sense, which seeks to do justice between the parties in the particular circumstances of the case.

[32] While the onus was on Mr. Sidhu to show that Paradise Homes failed to make reasonable efforts to mitigate and that mitigation was possible, he failed to put forward any evidence that Paradise Homes’ efforts in relisting the property in the spring, when prices would be better, were not reasonable. Nor did he provide any evidence that the commissions and costs incurred by Paradise Homes were not patently fair and reasonable. Further, Mr. Sidhu has put forward no evidence that his proposed assignees were capable of closing the transaction. They themselves submitted no offer to Paradise Homes. Moreover, Mr. Sidhu failed to offer any expert evidence that Paradise Homes could have sold the property for more than it did. I find, as regards the above, that Mr. Sidhu did not meet his onus to prove his mitigation defence.

[33] Based on all of the foregoing, I find that there is no genuine issue for trial. I grant Paradise Homes summary judgment.

[46] The Defendant referred to a case where the court on an application determined that an agreement of purchase and sale was binding, that the respondent breached the agreement, and that the respondent was liable for damages. The application judge ordered that the quantification of damages proceed to trial (see Shaghayagh Chiti Zadeh v. Alireza Khaibari also known as Alireza Khibari And Homelife Landmark Realty Inc., Brokerage, 2018 ONSC 4667). Paragraphs 48-50 of Zadeh provide as follows:

48. Having breached the APS, the respondent is liable to the applicant for damages she suffered as a result of his breach. The applicant is entitled to be placed, so far as money can do it, in the same position as she would have been had the contracted been performed.

49. The amount of damages can only be determined in a forum in which all issues relevant to quantifying the damages may be addressed on the basis of a proper record. The applicant acknowledges that the record is insufficient to comprehensively quantify the damages suffered, and the respondent has not addressed submissions to this aspect of the matter. In her Notice of Application, the applicant seeks an order “directing a reference to the Court for a determination of the damages suffered by the Applicant, or alternatively, damages in the sum of $750,000.00 for breach of the agreement.” This highlights the uncertain nature, at this point in time, of the damages sustained by the applicant.

50. The appropriate forum in which to quantify damages, unless there is no dispute about the material facts, is in an action. Therefore, it is ordered that the issue of the quantum of damages proceed to trial and that this proceeding by treated as an action in respect of that issue. This action is to be consolidated with Court File No. CV-17-582242, the action and counter-claim also pending in relation to this matter.

[47] The Defendant also referred to portions of 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 OR (2d) 401 (ONCA). The relevant portions are from pages 33 and 34 (pages and paragraphs are not numbered):

With respect, I do not think that this statement reflects a correct assessment of the facts of this case. The basic principle is that the onus is on the plaintiff to prove its damages on a reasonable preponderance of credible evidence. Its damages are that sum of money which would put it in the same position as if the defendant had performed. The well-established method for determining this is to give the difference between the contract price and the market value. It is basic that the plaintiff cannot have the contract price and the land. Thus, I do not think that the plaintiff has proven its case by merely proving the contract price and then the defendant’s breach, in the expectation that he will recover the full price unless the defendant proves that “the property could be sold to someone else without loss to the plaintiff”. I would construe these words of the trial judge as also meaning “in reduction of the plaintiff’s loss.

As I have said, with respect to the issue of mitigation, the onus is on the defendant. However, the onus on the defendant to prove failure to mitigate does not relieve the plaintiff from proving an obvious element in the calculation of his damages. McGregor on Damages, supra, in para. 212 p. 149, puts the matter this way:

The onus of proof on the issue of mitigation is on the defendant. If he fails to show that the plaintiff ought reasonably to have taken certain mitigating steps, then the normal measure will apply.

Including in the “normal measure” is the difference between the contract price and the market price. Thus, I think that the proper course is for the plaintiff, in presenting its case, to adduce evidence of the contract price and of the market price or resale price upon which he relies in establishing the loss of bargain. The onus is then on the defendant to show, if he can, that if the plaintiff had taken certain reasonable mitigating steps the damages would be lower. Judson J., in Dobson v. Winton & Robbins Ltd., 1959 CanLII 19 (SCC), [1959] S.C.R. 775 at p.783, 20 D.L.R. (2d) 164 at pp.169-170, said:

It is difficult to understand what more the plaintiff could have done in this case and he did adduce a considerable volume of evidence showing a reasonable attempt to mitigate his damages and, having done so, it is for the defendant to show that those steps were not such as a reasonable man would have taken in mitigating his damages and in disposing of the property: (Mayne on Damages, 11th ed., p. 150).

[48] The Court of Appeal has found that where a prospective buyer is unable to close a transaction for the sale of land and seeks an extension because they are unable to obtain financing, the seller is entitled to refuse an extension of time to close the transaction: Nguyen v. Zaza, 2023 ONCA 34, at para. 16:

[16] The motion judge correctly held that a seller is entitled to refuse an extension of time to close where a buyer seeks an extension because they do not have financing: 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, 438 D.L.R. (4th) 566; Domicile Developments Inc. v. MacTavish (1999), 1999 CanLII 3738 (ON CA), 175 D.L.R. (4th) 334 (Ont. C.A.). She also correctly relied on well-established law that in the absence of a specific term in the agreement of purchase and sale for the disposition of the deposit, the deposit is intended as security for the buyer’s performance of the contract, and is forfeited to the seller if the buyer fails to close: Benedetto v. 2453913 Ontario Inc., 2019 ONCA 149, 86 B.L.R. (5th) 1, at paras. 5‑6.

Analysis:

A. Is summary judgment appropriate in this case?

[49] For the reasons set out below, I have determined that there is no genuine issue requiring a trial. The summary judgment process, particularly the affidavits filed on this motion, provide the evidence required to fairly and justly adjudicate the dispute. Most of the facts are undisputed. Where the facts were within the knowledge of one side, the other side has not filed any opposing evidence. I am able to find the necessary facts. The summary judgment process has provided an affordable and proportionate procedure for resolution of this case.

B. Does the doctrine of force majeure apply to relieve Mousavi of her obligations under the APS?

[50] There is no dispute that the parties entered into a binding APS and that Mousavi did not tender the funds to close on the Closing Date.

[51] I find that the doctrine of force majeure does not apply to relieve Mousavi of her obligations under the APS. It is uncontroverted that there is no force majeure clause in the APS in this case.

[52] Neither counsel provided me with any case where such a clause was an implied term of a contract. I agree with A.J. Robinson in Consolidated Fastfrate Inc. that force majeure is not a common law right and depends on the specific wording of a contract.

[53] In the absence of a force majeure clause in the APS, Mousavi cannot rely on this doctrine to be relieved of her obligations under the APS.

C. Does the doctrine of frustration apply to relieve Mousavi of her obligations under the APS?

[54] Mousavi claims that the doctrine of frustration applies in two ways:

1. She inherited the sum of $565,592.00 USD in Afghanistan. She intended to bring the funds to Canada and to use these funds to purchase the Property. She had obtained a mortgage pre-approval for $949,999. Mousavi alleges that during the same time period of the APS, the withdrawal of American forces led to the Taliban assuming control of Afghanistan, which resulted in restrictions on the transfer of funds within the banking system. As a result, Mousavi was unable to obtain funds from Afghanistan. Mousavi claims she failed to complete the APS as a result of unforeseen events of war, changes in power and unrest in Afghanistan.

2. Mousavi also attempted to sell another of her properties 137 Gladstone Ave., in Hamilton, Ontario. She entered into an agreement of purchase and sale to sell this property. The sale could not be completed

[55] It is clear in the case law that the doctrine of frustration can apply to a contract for the sale of land. However, for the following reasons I have determined that it does not apply in this case to relieve Mousavi from her obligations under the APS:

1. Mousavi’s obligation to purchase the Property was unconditional and was in no way associated with her ability to get money from Afghanistan or to complete the sale of her Hamilton property. Mousavi knew at the time of execution of the APS that the money was not in Canada and the sale of her other property was not yet completed. She chose not to provide for same in the contract.

2. When Mousavi entered into the unconditional APS she did not have the money in Canada from Afghanistan and the sale of the Hamilton property was not completed. The money not being in Canada and the Hamilton property not being sold, were not supervening events. That was the state of affairs for Mousavi when she entered into the APS.

3. These two events did not render the APS “a thing radically different from what was undertaken by the contract.” The APS was not rendered totally different than what the parties intended. The parties intended that the Property would be sold by the Plaintiffs to the Defendants for the agreed upon amount. The contract did not change and was not altered. The nature, meaning, purpose, effect and consequences of the APS did not change.

[56] Further, the party claiming that the contract was frustrated has the onus of proving the constituent elements necessary to establish frustration. Mousavi has not done this. In this regard, I have considered the following, in the context that in a summary judgment motion a party has an obligation to put their best foot forward:

1. Mousavi produced a document from the Afghanistan International Bank (AIB) for the period of July 1 to July 30, 2022. It does not establish that this money was in the account prior to Mousavi entering into the APS.

2. The bank statement has the name of the account holder marked out. It does not indicate in any way that it is Mousavi’s money. In her Affidavit, Mousavi indicates her cousin was going to send her the money. There is no Affidavit from her cousin that they were unable to send the money. There is no evidence provided by Mousavi that she requested the money or that the cousin attempted unsuccessfully to send it.

3. Mousavi attaches to her affidavit an article from 2023 about the situation in Afghanistan. The veracity of the information in the article is unknown. It was the year following the APS. It refers to a different bank than where Mousavi alleges the funds were held. It is not clear that the situation in Afghanistan changed between the execution of the APS and the Closing Date. In summary, there is no proof that Mousavi was entitled to the money in Afghanistan, that she made a request for same and that any such request could not be complied with.

4. With respect to the potential sale of the Hamilton property, the release was signed, ending the agreement of purchase and sale, on February 12, 2022. There is no evidence of Mousavi’s efforts to sell the Hamilton property between February 12, 2022 and the Closing Date.

E. Damages:

[57] There was a binding APS. Mousavi breached the APS when she did not close the transaction. The Plaintiffs are entitled to damages.

[58] The onus is on Mousavi to demonstrate that the Plaintiffs failed to mitigate. Mousavi has not pointed to anything that she says the Plaintiffs ought reasonably to have done to mitigate, except for their not accepting her request for an extension.

[59] I am satisfied that the Plaintiffs made all reasonable efforts to mitigate. Their efforts are detailed in the Affidavit of Donald Liddell sworn February 9, 2024. They relisted the Property within three days of the Closing Date. They considered one offer in November of 2022 and explain why they were unable to conclude an agreement. They considered two offers in March of 2023 and these offers failed to end in a binding agreement.

[60] Mousavi argues that the Plaintiffs’ failed to mitigate as they refused to agree to her request to extend the closing date. As set out in Nguyen, the seller is entitled to refuse an extension of time to close. Further, the Plaintiffs did agree to an extension, with conditions, that I find were reasonable in the circumstances. Mousavi would not agree to these conditions.

[61] The Plaintiffs are entitled to the “normal measure” of damages which is the difference between the contract price and the resale price – in this case $250,000.00.

[62] The Plaintiffs have claimed additional damages in the total amount of $30,739.28 which are additional expenses the Plaintiffs incurred to carry the Property in the eight months it took to sell the Property after the Closing Date. The Plaintiffs have provided supporting invoices and proof of payments. These expenses are detailed at paragraph 21 of Donald Liddell’s Affidavit sworn February 9, 2024. Mousavi did not question any of these expenses save to argue that it was unreasonable for the Plaintiffs to move out when the Property did not close. I accept the evidence of the Plaintiffs. They rented a place to live anticipating the sale of the Property. The Property therefore was vacant between the Closing Date and the ultimate sale. The expenses they have claimed were in addition to their regular living costs, as they lived elsewhere. Therefore, I find that the Plaintiffs are entitled to these damages.

Conclusion and Costs Submissions:

[63] The Plaintiffs are entitled to summary judgment as follows:

1. The Defendant, Maria Mousavi, shall pay to the Plaintiffs, the sum of $280,739.28 in damages.

2. The said Defendant shall pay to the Plaintiffs pre-judgment interest in accordance with the Courts of Justice Act, section 128.

3. The said Defendant shall pay to the Plaintiffs post-judgment interest in accordance with the Courts of Justice Act, section 129.

4. The Defendant RE/MAX Escarpment Realty Inc., shall pay, and are hereby directed to release and transfer, the $50,000.00 deposit being held in trust, to the Plaintiffs, which amount shall be applied against the judgment amount.

[64] The Parties are encouraged to settle the issue of costs. If they are unable to, the Plaintiff shall serve and file brief written submissions as to costs (2 pages, double spaced, with only a Bill of Costs and any offers attached) within 20 days of today. The Defendant shall serve and file brief written responding submissions as to costs (2 pages, double spaced, with only a Bill of Costs and any offers attached) within 40 days of today. There shall be no reply costs submissions.

Coats J.

Released: November 19, 2024