OSHAWA COURT FILE NO.: CV-22-1346 DATE: 20241217

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MARK REID and VIRGINIA LEE FOULDS Plaintiffs

– and –

IBUKUN ABASS aka IBUKUN MOBOLUWADURO ABASS and OMALARA IBUKUN-ABASS Defendants

COUNSEL: Robert G. Zochodne, for the Plaintiffs Basil Khan, for the Defendants

HEARD: December 6, 2024

REASONS FOR DECISION

CHARNEY J.:

[1] This is a motion for summary judgment under Rule 20.01(3) of the Rules of Civil Procedure brought by the Plaintiffs, Mark Reid and Virginia Foulds, for judgment against the Defendants, Ibukun Abass and Omalara Ibukun-Abass, in the amount of $149,000. The motion relates to the Plaintiffs’ action for damages arising out of the Defendant Ibukun Abass’ failure to close the purchase of a property pursuant to an Agreement of Purchase and Sale (APS) dated February 24, 2022.

[2] The Plaintiffs seek damages in the amount of the difference between the agreed purchase price ($999,000) and the price at which the property was subsequently sold ($850,000).

[3] What makes this case unusual is that the property was subsequently sold to the Defendants, Ibukun Abass and Omalara Ibukun-Abass, following a further agreement between the parties dated July 7, 2022 (the July 7, 2022 Extension Agreement).

[4] The issue on this summary judgment motion relates to the interpretation of the July 7, 2022 Extension Agreement and its effect on the right of the Plaintiffs to sue the Defendants for damages for breach of the February 24, 2022 APS.

Facts

Breach of the February 24, 2022 Agreement of Purchase and Sale

[5] On February 24, 2022, the Plaintiffs entered into an APS with Mr. Abass in which Mr. Abass agreed to purchase their home for $999,000. Mr. Abass was to pay an initial deposit of $80,000, to be held in trust, and the closing was scheduled for July 4, 2022.

[6] On February 25, 2022, an amendment was made to the Agreement for Mr. Abass to pay a supplementary deposit of $6,000.00. The additional deposit was paid because Mr. Abass had failed to pay the initial $80,000.00 in accordance with the APS. Ultimately, $86,000.00 was paid as a deposit.

[7] On April 6, 2022, a second amendment was made to the APS to change the closing date from July 4, 2022 to June 27, 2022.

[8] On June 21, 2022, Mr. Abass’ lawyer wrote to the Plaintiffs’ lawyer to request a reduction of the purchase price from $999,000 to $850,000. He explained that his client was in a “tough situation” because the appraisal report for the property valued the property at only $795,000, and his client could not obtain financing for the APS amount of $999,000. He also asked to amend the closing date to July 18, 2022, to provide his client time to obtain the financing from the bank. The letter stated:

My client is a first-time home buyer and has no additional funds available to him to complete the transaction at the purchase price of $999,000. My client has no other assets that he can use to obtain additional financing. If we cannot obtain a price adjustment on this purchase than this transaction will end up in litigation.

[9] The Plaintiffs’ lawyer rejected the proposed price reduction, and took the position that Mr. Abass’ lawyer’s letter was an anticipatory breach. She responded on June 22, 2022:

You have advised that your client is unable to complete the transaction without the amendments you have requested. Consequently, your client is in anticipatory breach of the agreement of purchase and sale and my clients are relieved of their obligation to tender upon you…. Consequently, my clients will be noting your client in default of the agreement and relisting the property in order to mitigate their damages, unless your client provides proof that he has obtained the financial resources necessary to complete the transaction by 5:00 p.m. today. My clients will be holding your client liable for any and all damages they suffer as a result of your client’s failure to complete the transaction.

[10] When 5:00 p.m. came and went without any reply from Mr. Abass’ lawyer, the Plaintiffs’ lawyer wrote to Mr. Abass’ lawyer again to advise:

My clients are relieved from their obligation to tender upon your client due to your client’s anticipatory breach by admission. My clients are proceeding to relist the property forthwith to mitigate their damages and will bring an action to hold your client liable for any all damages flowing from their breach of contract.

[11] On June 27, 2022, the scheduled closing date, Mr. Abass did not deliver closing funds or documents. The transaction did not close as scheduled.

The Legal Positions as of June 27, 2022

[12] I will pause my summary of the facts to address the legal positions of the parties as of June 27, 2022.

[13] I agree with the Plaintiffs that Mr. Abass’ lawyer’s letter of June 21, 2022 was a repudiation of the APS and indicated an intention not to close on June 27, 2022. It is clear from the Plaintiffs’ lawyer’s reply on June 22, 2022, that they interpreted the June 21, 2022 letter as a repudiation of the APS. Mr. Abass’ lawyer was given an opportunity to clarify if this was not his position, and he did not do so.

[14] The law relating to anticipatory breach of contract was summarized by the Ontario Court of Appeal in Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., 2008 ONCA 92, at para. 37:

An anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due. See Pompeani v. Bonik Inc. (1997), 35 O.R. (3d) 417, [1997] O.J. No. 4174 (C.A.). To assess whether the party in breach has evinced such an intention, the court is to ask whether a reasonable person would conclude that the breaching party no longer intends to be bound by it. See McCallum v. Zivojinovic (1977), 16 O.R. (2d) 721, [1977] O.J. No. 2341 (C.A.). …[I]n determining whether the party in breach had repudiated or shown an intention not to be bound by the contract before performance is due, the court asks whether the breach deprives the innocent party of substantially the whole benefit of the contract.

[15] See also: Remedy Drug Store Co. Inc. v. Farnham, 2015 ONCA 576, at para. 47.

[16] Thus, as of June 22, 2022, and certainly no later than the scheduled closing date of June 27, 2022, the Defendant was in breach of the APS. At that point, the Plaintiffs were presumptively entitled to retain the $86,000 deposit, re-list the property for sale, and sue Mr. Abass for the difference between the sale price agreed to in the APS and the final sale price, less the deposit. In these circumstances, the vendor has no obligation to accept the lower price offered by the defaulting purchaser in an effort to mitigate damages.

[17] In Azzarello v. Shawqi, 2019 ONCA 820, the Court of Appeal held that it was not a failure to mitigate when an innocent vendor refuses the defaulting purchaser’s revised terms to purchase the property at a lower price. The Court of Appeal stated at paras. 37-40:

However, even if the appellant had made an offer to pay 10% less for the property and not be released from his obligation under the agreement of purchase and sale, I would reject the suggestion that the duty to mitigate obliges a vendor to accept an offer from the defaulting purchaser for less than the agreed price and then to have to sue the purchaser for the difference from the original agreed price.

While a vendor may choose to accept such an offer, for example in a declining market, the vendor cannot be obliged to do so.

The duty to mitigate is derived from the proposition that the wronged party cannot recover from the defaulting party for losses that could reasonably have been avoided: S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017), at p. 529. It cannot be reasonable for a vendor to be obliged to reduce the loss it claims from the defaulting party by reselling the property to that party, then suing him or her for the difference. This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way. Yet the defaulting party would secure a significant tactical and procedural advantage over the innocent vendor.

The effect of endorsing the proposition advanced by the appellant would be to undermine the sanctity of the bargain by encouraging purchasers to default, particularly in a falling market, and to offer a lower price for the same property, leaving vendors with the risk and expense of recovering the balance of the original contract price in an action. The duty to mitigate does not go that far.

[18] See also: Bang v. Sebastian, 2019 ONCA 501, at para. 5: “The duty to mitigate does not compel the seller of residential property to abandon a perfectly valid agreement and accept a substantially reduced price just because the purchaser decides to abort the valid agreement because of a falling real estate market”.

[19] I also note that Mr. Abass’ wife, the Defendant Omalara Ibukun-Abass, was not a party to the APS, and, as such, could have no liability for breaching the APS.

June 29, 2022 Offer

[20] On June 29, 2022, the Plaintiffs’ lawyer wrote to the Defendant’s lawyer to advise that the Plaintiffs were prepared to relist the property and pursue Mr. Abass for damages, but he would make “one final offer”. His letter stated:

My clients are willing to make one final offer to your client to revive the agreement of purchase and sale and complete the transaction. Listed below are my clients’ terms for a revival:

1. The purchase price is amended to $850,000.
2. The completion date is amended to July 8, 2022.
3. Your client will make an additional deposit of $10,000 to my firm, in trust, by 5:00 p.m. tomorrow.
4. Your client provides a signed direction to be provided by our firm by 5:00 p.m. tomorrow authorizing the release of the additional deposit to my clients upon receipt, and the original deposit on July 8, 2022 if your client is unable to close.
5. No additional requisitions may be raised by your client.

All other terms of the original agreement continue in full force and effect and my clients will not be waiving their right to damages flowing from your client’s breach of the original agreement. [Emphasis added.]

[21] The Defendant’s lawyer signed the offer on the Defendant’s behalf, but amended the completion date (clause 2) to read July 28, 2022. This amendment was not acceptable to the Plaintiffs, so the June 29, 2022 offer did not become the agreement.

[22] On its face, the terms of the June 29, 2022 Offer meant that the Plaintiffs were offering to sell the property to Mr. Abass for $850,000, but they reserved the right to sue Mr. Abass for the difference between the new price and the original price. In other words, the property would still cost Mr. Abass $999,000. As the Court of Appeal pointed out in Azzarello: “This would offer no financial advantage to the defaulting party as that party would be obliged to pay the same amount, either way.”

July 7, 2022 Extension Agreement

[23] Further negotiations continued, with proposals going back and forth in June and July.

[24] Finally, on July 7, 2022, the Plaintiffs’ lawyer made the following offer which, with one minor correction, was agreed to by Mr. Abass:

I confirm my clients are willing to extend this transaction only until July 28, 2022, at 5:00 PM provided your clients agree to the following:

1. The purchase price shall be $850,000.
2. Adjustments shall be made as of the original closing date except as noted herein;
3. Your clients to pay for utilities and property taxes from the original closing date and provide evidence by July 8, 2022 at 5:00 PM that utilities have been transferred into your clients’ names;
4. All deposits paid to date by your clients are non-refundable and shall be released immediately to my clients. To this end, enclosed is an Irrevocable Direction that must be signed by your clients as part of the terms of this extension;
5. Your clients to pay $5,000 to my clients to cover their expenses and carrying costs for the extension of the closing date.
6. Your clients agree to pay $500 plus HST for my legal fee as a result of your clients’ extension request;
7. All funds payable which are specified by amount in these extension terms are to be paid by certified cheque or bank draft made payable to WOITZIK…In TRUST and deposited into our trust account by 5:00 PM on June 30, 2022;
8. No further requisitions will be submitted which could have been submitted prior to the original closing date in the agreement of purchase and sale;
9. Your clients hereby waive tender from my client in the event your clients are unable to close this transaction by the extended closing date;
10. My clients reserve the right to bring an action against your clients for your clients’ failure to close on the scheduled closing date and for the originally agreed-upon amount and for all damages flowing therefrom; and
11. Time shall remain of the essence of this agreement and shall remain of the essence of the original agreement of purchase and sale. Except as amended herein, all other terms and conditions of the agreement of purchase and sale shall remain in full force and effect.

The terms of this extension are not negotiable. Anything but the acceptance of this letter in full will be treated as anticipatory breach of contract by your clients...

[Emphasis added.]

[25] Attached to the July 7 letter was the “Irrevocable Direction” referenced at clause 4. That Direction, which by the terms of clause 4 was “part of the terms of this extension”, provided:

As per the terms and conditions of an extension agreement dated July 7/20/22 between the parties, this is to irrevocably direct both the Vendors and Purchasers Brokerages (and shall constitute the Purchasers good and sufficient and irrevocable authority) to immediately release the $86,000 deposit held by the Vendors Brokerage to the Vendors, and the Purchasers hereby forever releases indemnifies and saves harmless the Vendor, Vendor’s Brokerage and the Vendor’s Solicitors with respect to any and all liability concerning same. The Purchasers acknowledge and agree that the forfeiture of the above deposit to the Vendor shall in no way preclude the vendor from suing the Purchasers for any and all damages that they will incur in relation to the Purchasers not being in a position to close the subject transaction on July 28, 2022. [Emphasis added.]

[26] Mr. Abass signed both the July 7, 2022 offer and the Irrevocable Direction on July 7, 2022, correcting only the reference to “June 30, 2022”, in clause 7, which was changed to July 8, 2022, since June 30 had already past.

[27] There is no dispute between the parties that the July 7, 2022 offer and the Irrevocable Direction are, together, the terms of their agreement (the July 7, 2022 Extension Agreement). To the extent that the July 7, 2022 Extension Agreement referentially incorporates the APS (see clause 11), the APS continued as part of the agreement.

[28] On July 19, 2022, an amendment was made to the Extension Agreement to reflect the following: (a) the buyers were to be Ibukun and Omalara collectively; (b) Ibukun and Omalara collectively acknowledged the terms of the Extension Agreement and agreed to be bound by those terms; (c) other than the amendments made by the Extension Agreement and this amendment, the parties agreed that all terms of the original Agreement were to remain in effect; and (d) time was to remain of the essence.

Analysis

Summary Judgment

[29] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides: “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.”

[30] In the present case, both parties agree that this dispute is amenable to a motion for summary judgment and that the legal issues can be resolved without a trial. There are no relevant facts in dispute. The dispute in this case comes down to the interpretation of clause 10 of the July 7 Extension Agreement, and, in particular, the phrase “failure to close on the scheduled closing date”.

[31] On a motion for summary judgment, the judge may grant judgment in favour of a responding party, even in the absence of a cross-motion for such relief, so long as it is within the scope of the motion: Singh v. Trump, 2016 ONCA 747, at para. 147 and cases cited therein.

[32] Accordingly, I agree with both parties that this is an appropriate case for summary judgment.

Position of the Parties

[33] The Plaintiffs take the position that the phrase “failure to close on the scheduled closing date” is a reference to the original closing date in the APS, ie. June 27, 2022. This means that even though they agreed to sell the house to Mr. Abass for $850,000, they reserved the right to sue Mr. Abass [^1] for the difference between the new price and the original price.

[34] The Plaintiffs rely on para. 36 of the Court of Appeal’s decision in Azzarello v. Shawqi, 2019 ONCA 820, where the Court explained that, even if the vendor agreed to pay the reduced price, the purchaser would still be liable to the vendor for the difference unless the vendor released the purchaser from their obligation under the original APS: “Unless the respondents [vendors] agreed to sell to the appellant [purchasers] for a 10% reduction, and at the same time released him from his obligation to pay the original price, the respondents could still sue the appellant for the difference”.

[35] In the present case, the Plaintiffs argue that they did not release Mr. Abass from his obligations under the APS. To the contrary, they expressly reserved the right to bring an action for damages.

[36] The Defendants take the position that, reading the contract as a whole, the phrase “failure to close on the scheduled closing date” refers to the extended closing date in the July 7, 2022 Extension Agreement, ie. July 28, 2022. Thus, if the Defendants failed to close on July 28, 2022, the Plaintiffs could still sue Mr. Abass for the “originally agreed-upon amount”, but if they did close on July 28, 2022, Mr. Abass would not be liable for damages under the original APS.

Analysis

[37] When interpreting any contract, the “overriding concern is to determine the intent of the parties and the scope of their understanding”: by reading “the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 47. The primary object of contract interpretation is to give effect to the intention of the parties at the time of contract formation: Bhasin v. Hrynew, 2014 SCC 71, at para. 45.

[38] In Plan Group v. Bell Canada, 2009 ONCA 548, 96 O.R. (3d) 81, at para. 37, the Court of Appeal for Ontario held that a commercial contract should be interpreted: (i) as a whole, by giving meaning to all the terms of a contract to avoid an interpretation that would render any term ineffective; (ii) by determining the intention of the parties with reference to the words used in the contract; (iii) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to subjective intention; and (iv) to the extent that there is any ambiguity in the contract, in a fashion that accords with sound commercial principles and good business sense and that avoids a commercial absurdity.

[39] The Court of Appeal has cautioned against looking to negotiations to interpret a contract. The basic principles of commercial contract interpretation were summarized in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, 268 O.A.C. 279. At para. 16:

When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties.

[40] See also: Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 SCR 129, at paras. 54-55; The Canada Trust Company v. Browne, 2012 ONCA 862, 115 O.R. (3d) 287, at para. 71.

[41] In Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, the Court stated, at para. 112:

Canadian common law generally treats evidence of the parties’ specific negotiations as inadmissible for purposes of interpreting a contract … evidence of the factual matrix cannot operate as a kind of alternate means by which an adjudicator constructs a narrative about what the parties must have discussed or intended in their negotiations. In other words, evidence of the factual matrix cannot be used to do indirectly that which the principles of contract interpretation do not permit doing directly. [Emphasis in original; citations omitted.]

[42] This principle was also affirmed by the Supreme Court of Canada in Sattva Capital Corp., at paras. 57 and 59, where the Court explained the limitation of “surrounding circumstances” as an aid to contractual interpretation:

While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement... The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract... While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. [Citations omitted.]

[43] In analysing this case, I do not doubt that the parties had entirely different subjective intentions. The issue is whether that intention is reflected in “the contract as a whole, giving the words used their ordinary and grammatical meaning”.

[44] Looking at the contract as a whole, I accept the interpretation advanced by the Defendants.

[45] Firstly, I start with clauses 2, 5 and 8 of the July 7, 2022 Extension Agreement, all of which refer to the “original closing date”. This suggests that where the Extension Agreement intends to reference the June 27, 2022 closing date, it references the “original closing date”.

[46] In contrast, clause 5 refers to “the closing date”, and it is irrefutable that this refers to the July 28, 2022 closing date.

[47] Clause 9 introduces another term, the “extended closing date”, which, like clause 5, means the July 28, 2022 closing date.

[48] The clause at issue - clause 10 - does not refer to either the “original closing date” or the “extended closing date”, but refers to the “scheduled closing date”. As of July 7, 2022, the “scheduled closing date” was July 28, 2022.

[49] This interpretation is reinforced by placing clause 10 immediately after clause 9. Clause 9 imposes a consequence on the purchaser “in the event your clients are unable to close this transaction by the extended closing date.” Clause 10 appears to impose a second consequence “for your clients’ failure to close on the scheduled closing date”. Reading clauses 9 and 10 together, I would interpret them as referring to the same closing date, ie. the extended closing date of July 28, 2022. I would not interpret clause 10 as referring back to the “original closing date” referenced in clauses 2, 5 and 8.

[50] This interpretation is further reinforced by the “Irrevocable Direction”, which was incorporated as “part of the terms of this extension” by clause 4 of the July 7, 2022 Extension Agreement. The last sentence of the “Irrevocable Direction” states: “The Purchasers acknowledge and agree that the forfeiture of the above deposit to the Vendor shall in no way preclude the vendor from suing the Purchasers for any and all damages that they will incur in relation to the Purchasers not being in a position to close the subject transaction on July 28, 2022.” [Emphasis added.] Reading this sentence together with clause 10, I would interpret both clauses as referring to the same closing date, and the Purchaser being liable “for any and all damages” if the Purchaser failed to close on that date. Otherwise, the last sentence of the “Irrevocable Direction” makes no sense, because, if the Plaintiff’s interpretation is accepted, Mr. Abass remained liable for “any and all damages” even if he did close on July 28, 2022.

[51] Finally, to the extent that the term “scheduled closing date” is ambiguous, it is the language chosen by the Plaintiffs’ lawyer, who drafted the July 7, 2022 offer, and should be interpreted contra proferentum. The Plaintiffs’ lawyer could have easily avoided any ambiguity by using the same term used in clauses 2, 5, and 8: “original closing date”.

Conclusion

[52] Accordingly, I accept the interpretation advanced by the Defendants in this case: reading the July 7, 2022 Extension Agreement, “as a whole, giving the words used their ordinary and grammatical meaning”, Mr. Abass was released from his obligation to pay the originally agreed-upon amount if he closed the transaction for the lower amount by the extended closing date of July 28, 2022.

[53] The Plaintiffs’ motion for summary judgment is therefore dismissed, and summary judgment is granted in favour of the Defendants.

[54] If the parties are not able to agree on costs, the Defendants may serve and file costs submissions not to exceed three pages, plus costs outline and any offers to settle, within 20 days of the release of this decision, and the Plaintiffs may serve and file responding costs submissions on the same terms within a further 15 days.

Justice R.E. Charney

Released: December 17, 2024

[^1]: While both Mr. Abass and Omalara Ibukun-Abass have been named as Defendants, only Mr. Abass can be liable for breaching the original APS because he was the only purchaser named on that agreement. Omalara Ibukun-Abass was not a party to the original APS and cannot be liable for its breach.